REG - DCC PLC - Results for the six months ended 30 September 2016 <Origin Href="QuoteRef">DCC.L</Origin> - Part 1
RNS Number : 0347PDCC PLC14 November 201614 November 2016
DCC Reports Very Strong First Half Performance and
New Acquisitions
DCC, the international sales, marketing, distribution and business support services group, today announced its results for the six months ended 30 September 2016.
Highlights
2016
2015
% change
DCC Energy volumes (billion litres)
6.595bn
5.818bn
+13.3%
Revenue (excl. DCC Energy)
1.478bn
1.407bn
+5.1%
Operating profit1
117.8m
88.4m
+33.3%
Adjusted earnings per share1
92.1p
70.3p
+31.1%
Interim dividend
37.17p
33.04p
+12.5%
Operating cash flow
141.0m
120.7m
Very strong first half performance with Group operating profit increasing by 33.3% (up 26.5% on a constant currency basis) to 117.8 million, with all divisions recording growth on the prior year.
Adjusted earnings per share up 31.1% (24.7% ahead on a constant currency basis) to 92.1 pence.
Interim dividend increased by 12.5% to 37.17 pence per share.
Continued very strong cash flow performance.
The Group continues to be very active from a development perspective and, including those acquisitions announced today, has committed 181 million in acquisition spend in the period.
As separately announced today, DCC Energy has agreed to acquire Gaz Europen, a leading French natural gas retail and marketing business, for an initial enterprise value of 110 million (96 million). In addition, DCC Healthcare has agreed to acquire Medisource, a pharmaceutical procurement, sales and marketing business in Ireland for an initial enterprise value of 32 million (27 million). The acquisition of Dansk Fuels in Denmark by DCC Energy, announced on 23 March 2016, was completed ahead of schedule.
The Group expects that both operating profit and adjusted earnings per share for the year ending 31 March 2017 will be significantly ahead of the prior year and ahead of current market consensus expectations.
1Excluding net exceptionals and amortisation of intangible assets
Commenting on the results, Tommy Breen, Chief Executive, said:
"I am very pleased to report that the first half of the year has been another very active and successful period for DCC. The results reflect continued execution of our strategy to grow the business organically, deliver a very strong cash flow performance and redeploy capital at attractive rates of return. The Group continues to have the ambition and capacity for further development and importantly, as DCC increases in scale and geographic reach, also has the opportunity to build substantial market positions in its chosen sectors. The Group expects that both operating profit and adjusted earnings per share for the year ending 31 March 2017 will be significantly ahead of the prior year and ahead of current market consensus expectations."
Presentation of results and dial-in / webcast facility
There will be a presentation of these results to analysts and fund managers at 9.00 am today in the London Stock Exchange. The slides for this presentation can be downloaded from DCC's website, www.dcc.ie.
There will also be audio conference access to, and a live webcast of, the presentation. The access details for the presentation are:
Ireland: 1800 937 656
UK / International: +44 (0) 203 427 1916
Passcode: 7675960
Webcast Link: http://edge.media-server.com/m/p/uoim6u9i
This report, the webcast of the presentation and further information on DCC is available at www.dcc.ie.
For reference, please contact:
Tommy Breen, Chief Executive
Tel: +353 1 2799 400
Fergal O'Dwyer, Chief Financial Officer
Email: investorrelations@dcc.ie
Kevin Lucey, Head of Group Finance & Investor Relations
Web: www.dcc.ie
For media enquiries: Powerscourt (Lisa Kavanagh)
Tel: +44 207 250 1446
Group Results
A summary of the Group's results for the six months ended 30 September 2016 is as follows:
2016
'm
2015
'm
% change
Revenue
5,597
5,066
+10.5%
Operating profit1
DCC Energy
76.0
52.9
+43.8%
DCC Healthcare
19.8
18.4
+7.0%
DCC Technology
11.3
8.6
+31.9%
DCC Environmental
10.7
8.5
+26.7%
Group operating profit1
117.8
88.4
+33.3%
Finance costs (net) and other
(16.4)
(14.4)
Profit before net exceptionals, amortisation of intangible assets and tax
101.4
74.0
+37.0%
Net exceptional charge before tax
(2.5)
(9.7)
Amortisation of intangible assets
(18.3)
(11.8)
Profit before tax
80.6
52.5
+53.7%
Taxation
(13.0)
(10.3)
Profit after tax
67.6
42.2
Non-controlling interests
(2.0)
(0.9)
Attributable profit
65.6
41.3
Adjusted earnings per share1
92.1 pence
70.3 pence
+31.1%
Dividend per share
37.17 pence
33.04 pence
+12.5%
Operating cash flow
141.0
120.7
Net (debt) / cash at 30 September
(112.2)
153.4
1Excluding net exceptionals and amortisation of intangible assets
Group revenue
Overall, Group revenue increased by 10.5% (5.8% ahead on a constant currency basis) to 5.6 billion.
Volumes in DCC Energy increased by 13.3% to 6.6 billion litres, driven principally by acquisitions completed during the prior year. On an organic basis volumes were modestly ahead of the prior year, with good growth in Retail & Fuelcard volumes and continuing organic growth in LPG volumes, particularly with industrial and commercial customers and oil to LPG conversions. Reflecting lower oil prices, DCC Energy's revenue increased by 12.5% (up 7.3% on a constant currency basis) with average selling prices per litre reducing by 5.4% on a constant currency basis.
Revenue excluding DCC Energy increased by 5.1% (up 1.8% on a constant currency basis) to 1.5 billion.
Group operating profit
Group operating profit increased by 33.3% to 117.8 million (26.5% ahead on a constant currency basis), in the seasonally less significant first half. The average sterling/euro translation rate for the six months ended 30 September 2016 of 1.2364 was 11.1% weaker than the average of 1.3902 in the comparative period. Approximately one third of the constant currency operating profit growth was organic.
Operating profit in DCC Energy, the Group's largest division, was 43.8% ahead of the prior year (33.1% ahead on a constant currency basis), driven principally by the two large acquisitions in France completed in the prior year, which continue to perform strongly. The division also recorded strong organic profit growth in its LPG and Retail & Fuelcard businesses.
Operating profit in DCC Healthcare was 7.0% ahead of the prior year (7.7% ahead on a constant currency basis). The division again benefited from another strong performance in DCC Health & Beauty Solutions.
Operating profit in DCC Technology increased by 31.9% (27.5% ahead on a constant currency basis) in the seasonally less significant first half. The UK business performed in line with expectations and recorded good organic profit growth, assisted by cost reductions implemented during the prior year.
DCC Environmental generated excellent organic growth, with operating profit increasing to 10.7 million, 26.7% ahead of the prior year.
Finance costs (net)
Net finance costs increased to 16.6 million (2015: 14.6 million) primarily due to the non-cash partial unwind of discounted acquisition related liabilities acquired in the Butagaz transaction. The underlying finance costs of the Group were broadly in line with the prior year as they are largely driven by the level of the Group's gross private placement debt, which remained largely unchanged. Average net debt during the period was 262 million compared to 60 million during the six months ended 30 September 2015.
Profit before net exceptional items, amortisation of intangible assets and tax
Profit before net exceptional items, amortisation of intangible assets and tax increased by 37.0% (30.0% ahead on a constant currency basis) to 101.4 million.
Net exceptional charge and amortisation of intangible assets
The Group incurred a net exceptional charge before tax of 2.5 million in the first six months of the year. The net charge principally reflects acquisition and restructuring costs, offset somewhat by a gain in respect of the IAS 39 treatment of the Group's private placement debt and related hedging instruments.
Acquisition related costs amounted to 1.4 million and restructuring costs amounted to 2.3 million. Acquisition costs include the professional fees and tax costs (such as stamp duty) relating to the evaluation and completion of acquisition opportunities.
Most of the Group's debt has been raised in the US private placement market and swapped, using long term interest, currency 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, together with gains or losses arising from marking to market swaps not designated as hedges, offset by foreign exchange translation gains or losses on the related fixed rate debt, is charged or credited as an exceptional item. In the six months ended 30 September 2016, this amounted to an exceptional gain of 1.9 million. The exceptional gains and losses on the Group's private placement debt and related hedging instruments will net to zero on a cumulative basis over their term.
The remaining exceptional charge of 0.7 million principally represents the impairment in value of freehold properties which are no longer in use.
The charge for the amortisation of acquisition related intangible assets increased to 18.3 million from 11.8 million in the prior year, with the increase principally reflecting the substantial acquisitions completed in the prior year.
Profit before tax
Profit before tax increased by 53.7% to 80.6 million.
Taxation
The effective tax rate for the Group in the first half of the year of 17.5% is based on the anticipated mix of profits for the full year. This rate compares to a full year effective tax rate in the prior year of 16.0%. The increase is primarily due to an increase in the proportion of profits generated in Continental Europe.
Adjusted earnings per shareAdjusted earnings per share increased by 31.1% (24.7% ahead on a constant currency basis) to 92.1 pence.
Dividend
The Board has decided to pay an interim dividend of 37.17 pence per share, which represents a 12.5% increase on the prior year interim dividend of 33.04 pence per share. This dividend will be paid on 12 December 2016 to shareholders on the register at the close of business on 25 November 2016.
Cash flow
As with its operating profit, the Group's operating cash flow is significantly weighted towards the second half of the year. The cash flow of the Group for the six months ended 30 September 2016 can be summarised as follows:
Six months ended 30 September
2016
'm
2015
'm
Operating profit
117.8
88.4
Increase in working capital
(17.0)
(4.4)
Depreciation and other
40.2
36.7
Operating cash flow
141.0
120.7
Capital expenditure (net)
(59.8)
(51.3)
Free cash flow
81.2
69.4
Net interest and tax paid and other
(42.1)
(29.8)
Free cash flow after interest and tax
39.1
39.6
Acquisitions
(32.8)
(134.2)
Disposals
-
2.3
Dividends
(55.7)
(49.9)
Dividends paid to non-controlling interests
(5.1)
-
Exceptional items (net)
(8.8)
(10.4)
Share issues
2.1
194.0
Net (outflow) / inflow
(61.2)
41.4
Opening net (debt) / cash
(54.5)
30.0
Translation and other
3.5
(7.8)
Cash acquired - Butagaz
-
89.8
Closing net (debt) / cash
(112.2)
153.4
Operating cash flow in the six months ended 30 September 2016 of 141.0 million compares to 120.7 million in the prior year. Working capital increased by 17.0 million over the six month period from 31 March 2016, reflecting seasonal requirements, although on a like for like basis the value of working capital was 25.0 million lower than that at 30 September 2015. As a result, overall working capital days at 30 September 2016 improved on the prior year by 0.6 days to a negative 2.9 days sales.
Acquisition and capital expenditure committed
Committed acquisition and capital expenditure in the current period amounted to 240.3 million as follows:
Acquisitions
Capex
Total
'm
'm
'm
DCC Energy
100.0
36.1
136.1
DCC Healthcare
27.4
4.3
31.7
DCC Technology
53.1
16.5
69.6
DCC Environmental
-
2.9
2.9
Total
180.5
59.8
240.3
Acquisition activity
Committed acquisition expenditure amounted to 180.5 million.
DCC Energy
Gaz Europen
As announced separately today, DCC Energy has agreed to acquire Gaz Europen Holdings SAS ("Gaz Europen"), a natural gas retail and marketing business which supplies business and public sector customers in France. DCC has agreed to acquire 97% of the share capital of Gaz Europen on completion, based on an initial enterprise value of 110 million (96 million). The remaining shares, which are held by members of Gaz Europen's management team, will be acquired based onGaz Europen's results for the three years ending 31 March 2021, 2022 and 2023.All of the consideration will be satisfied in cash. The acquisition is conditional, inter alia, on clearance from the French Competition Authority and is expected to complete in the first calendar quarter of 2017.
Gaz Europen was founded in 2005, when the French natural gas market was first deregulated and opened to competition. The company is a specialist retailer of natural gas and focuses on supplying energy management companies, apartment blocks (with collective heating systems), public authorities and the service sector in France. In its financial year ended 31 December 2015, the company supplied c. 5.1 TWh of natural gas (equivalent to approximately 390,000 tonnes of LPG) and currently supplies c. 10,000 sites. The company is headquartered in Paris and employs 31 staff; it has an experienced and ambitious management team with a track record of delivering strong growth. In its financial year ended 31 December 2015, Gaz Europen generated revenue of 205 million (178 million) and normalised operating profit of 15.7 million (13.7 million).
DCC Energy has, for some time, been developing its presence in natural gas organically in selected geographies as it believes that there is a significant opportunity to leverage its sales and marketing expertise, customer reach and brand recognition in the LPG and oil distribution markets into complementary adjacencies, including the natural gas sector. Gaz Europen will be DCC Energy's first major acquisition in natural gas and will complement Butagaz's leading position in LPG. One of the key strengths identified during the acquisition of Butagaz was its brand recognition amongst French gas consumers generally. The combination of Butagaz's marketing and brand strength and Gaz Europen's expertise in the natural gas market will provide an excellent platform for growth in the French natural gas market.
Dansk Fuels
In the prior financial year, DCC agreed to acquire Dansk Fuels, a commercial, aviation and retail fuels business in Denmark, formerly owned by Shell. Following receipt of competition clearance from the European Commission the acquisition was completed, ahead of schedule, on 31 October 2016.
Dansk Fuels comprises Shell's previous commercial and aviation distribution business in Denmark and a retail petrol station network of 139 sites (comprising 95 manned and 44 unmanned sites) together with contracts to supply 66 dealers. DCC has entered into a long-term brand partnership with Shell to operate the network under the Shell brand. The transaction will involve a total investment by DCC of approximately DKK300 million (35 million). The business will be merged with DCC's existing oil distribution business in Denmark and will leverage DCC Energy's recently developed retail operating platform. The acquired business will have total incremental volumes of approximately 0.9 billion litres and is expected to generate an initial return on invested capital commensurate with DCC Energy's existing returns.
DCC Healthcare
Medisource
In November 2016 DCC Healthcare strengthened its position in the procurement, sales and marketing of pharmaceutical products in Ireland through its agreement to acquire Medisource Ireland Limited ("Medisource") for an initial enterprise valuation of 31.5 million (27.4 million). The acquisition, which is subject to competition clearance, is expected to complete in the first calendar quarter of 2017.
Medisource is a specialist in the procurement and sale of Exempt Medicinal Products ("EMPs"). EMPs are pharmaceutical products which are imported into a market with the authorisation of the relevant regulatory authority (the Health Products Regulatory Authority in Ireland), in order to meet requirements of specific patients where no suitable licenced product is available in that market. The products are typically licenced in another jurisdiction. Medisource has a market leadership position in EMPs in Ireland based on excellent customer service and a strong network of international suppliers. The acquisition complements DCC Vital's current pharma product offering, strengthens DCC Vital's access to the hospital and retail pharmacy channel and will provide further insight into potential pharma product development opportunities. DCC Healthcare expects to generate a return on its investment in Medisource in line with the divisional return on capital employed in its first full year of ownership.
DCC Technology
Medium
In November 2016, DCC Technology acquired Medium (U.K.) Limited ("Medium"), a distributor of professional audio visual equipment to resellers in the UK. Medium, which partners with a number of leading brands in the market including CTouch, LG, NEC and Samsung, is complementary to DCC Technology's developing position in professional audio visual in the UK market. The consideration for the acquisition was based on an enterprise valuation of 8.3 million and was satisfied in cash at completion.
Hammer
As announced on 14 October 2016, DCC Technology has agreed to acquire Hammer Consolidated Holdings Limited ("Hammer"), a specialist distributor of server and storage solutions to resellers in the UK and Continental Europe. Employing 165 people and based in Basingstoke, Hampshire, Hammer distributes products for a range of leading suppliers and also provides product design and build solutions tailored to the requirements of customers in specific industries. The business is complementary to DCC Technology's existing server and storage business and will add almost 1,000 reseller customers. In its most recent financial year Hammer recorded sales of 155.0 million and operating profit of 6.3 million. The acquisition is based on an initial enterprise value of 38.3 million and is structured as an initial payment at completion, followed by earn out payments over three years based on Hammer's future trading results. The acquisition, which is subject to competition clearance from the European Commission, is expected to complete by the end of December 2016.
Total cash spend on acquisitions in the six months ended 30 September 2016
The total cash spend on acquisitions in the six months ended 30 September 2016 was 32.8 million. This included the payment of deferred and contingent acquisition consideration previously provided of 26.2 million and the completion of a number of small acquisitions for a total consideration of 6.6 million.
Capital expenditure
Net capital expenditure for the six months of 59.8 million (2015: 51.3 million) compares to a depreciation charge of 42.9 million (2015: 32.5 million).
The construction of DCC Technology's new, purpose built, 450,000 sq.ft. UK national distribution centre in the north of England is progressing well and the relocation to the new facility will take place on a staged basis, beginning towards the end of the current financial year.
Financial strength
An integral part of the Group's strategy is the maintenance of a strong and liquid balance sheet to enable it to take advantage of development opportunities as they arise. At 30 September 2016, the Group had net debt of 112 million, total equity of 1.4 billion, cash resources, net of overdrafts, of 1.0 billion and a further 400 million of undrawn committed debt facilities. The Group's outstanding term debt at 30 September 2016 had an average maturity of 5.8 years. Substantially all of the Group's debt has been raised in the US Private Placement market with an average credit margin of 1.69% over floating Euribor/Libor.
Outlook
The Group expects that both operating profit and adjusted earnings per share for the year ending 31 March 2017 will be significantly ahead of the prior year and ahead of current market consensus expectations.
Performance Review - Divisional Analysis
DCC Energy
2016
2015
% change
Volumes (litres)
6.595b
5.818b
+13.3%
Revenue
4.119b
3.660b
+12.5%
Operating profit
76.0m
52.9m
+43.8%
DCC Energy had an excellent first half of the financial year with operating profit increasing by 43.8% to 76.0 million, benefiting from acquisitions completed in the prior year and very strong performances fromitsLPG and Retail & Fuel Card businesses. DCC Energy sold 6.6 billion litres of product, an increase of 13.3% over the prior year. Volumes were 0.4% ahead on a like-for-like basis.
The LPG business had an excellent first half, with volumes 38.3% ahead of the prior year and 1.3% ahead on an organic basis.The business continued to drive sales growth in the commercial and industrial sector and also benefited from oil to LPG conversions.
Butagaz has continued to perform very strongly since acquisition in September 2015 and will be significantly enhanced by the acquisition of Gaz Europen, which was announced separately today. Gaz Europen is a specialist retailer of natural gas to business customers, principally co-ownership housing, in France.In itsfinancial year ended 31 December 2015 the company supplied c. 5.1 TWhof natural gas (equivalent to approximately 390,000 tonnes of LPG) and currently supplies c. 10,000 sites. In recent years DCC Energy has developed modest natural gas businesses organically in a number of European markets. Gaz Europen will beDCC Energy's first major acquisition in natural gas and will complement Butagaz's leading position in LPG in France.
The Retail & Fuel Card business achieved an excellent result with goodorganic volume growth in existing markets, complemented by a strong performance in the Esso retail petrol station business in France acquired in June 2015. Thebusiness in Sweden also performed strongly and the scale of the Retail business was further increasedthrough the acquisition of the Shell retail petrol station network in Denmark, which completed recently. DCC Energy now operates 838 retail sites across five countries and is well positioned to leverage its operating platform to drive further growth. The Fuel Card business again recorded strong organic growth and continued to grow its market share in Britain.
The Oil business experienced more challenging conditions in Britain; however the business in Denmark performed strongly, particularly in the agricultural sector, where it benefited from the acquisition of the DLG business in the prior year. The Danish business was further expanded through the recent completion of the acquisition of Shell's commercial and aviation fuels business. The Oil business continues to make good progress in expanding its activities into adjacent areas such as lubricants and aviation fuels.
DCC Energy now has leadership positions in 10 countries across Europe in its chosen sectors of LPG, Retail & Fuel Card and Oil. DCC Energy continues to be well positioned to grow its business in both existing and new geographies, particularly in light of the continuing divestment programmes of the major oil and gas companies.
DCC Healthcare
2016
2015
% change
Revenue
244.3m
239.1m
+2.2%
Operating profit
19.8m
18.4m
+7.0%
Operating margin
8.1%
7.7%
DCC Healthcare recorded a good performance in the first half of the financial year, generating operating profit growth of 7.0%, approximately half of which was organic. DCC Vital performed satisfactorily, growing its profits despite the trading headwind of weaker sterling. DCC Health & Beauty Solutions continued its track record of very strong organic profit growth and benefited from the contribution from Design Plus, which has performed well since its acquisition in September 2015.
DCC Vital, which is focused on the sales, marketing and distribution of pharmaceuticals and medical devices across all channels of the healthcare market in Britain and Ireland, recorded a satisfactory performance. The first half results reflect the actions taken in the prior year to streamline its product portfolio and activities, as it continues to increase its focus on the sales and marketing of its own products. This streamlining included the reconfiguration and consolidation of its warehousing and distribution activities in Britain and the business incurred some additional cost as part of this process. Although margins were impacted somewhat due to sterling weakness, DCC Vital generated good sales growth in the GP and hospital sectors in Britain,especially in disposable products used by GPs, hospital injectable pharmaceuticals and in its Skintact medical products range, which holds a market leadership position in electrodesanddiathermy consumables.
In Ireland, the business generated good sales and profit growth across its product portfolio, particularly in hospital pharmaceuticals. The proposed acquisition of Medisource, announced today, will further enhance DCC Vital's position in the procurement, sales and marketing of pharmaceuticals in Ireland.
DCC Health & Beauty Solutions, which provides outsourced solutions to international nutrition and beauty brand owners, again generated very strong organic operating profit growth.In the nutritional sector, the business benefited from its increasing focuson and its technical expertise in developing and producing more complex, higher margin products and from good cost control. The integration of Design Plus, the market leader in Britain in sachet filling for health and beauty brand owners, has extended DCC Health & Beauty Solutions' service offering to brand owners, provided access to new customers and opened up a range of additional growth opportunities, including in the US market. DCC Health & Beauty Solutions is continuing to invest in its high quality, GMP certified, manufacturing and packing facilities in Britain to expand capacity to meet increasing demand for its services and to enhance its operational capability and efficiency.
DCC Technology
2016
2015
% change
Revenue
1.144b
1.089b
+5.1%
Operating profit
11.3m
8.6m
+31.9%
Operating margin
1.0%
0.8%
DCC Technology, which trades as Exertis, achieved strong growth in the first half of the financial year, reflecting good organic profit growth and the benefit of the CUC acquisition completed in December 2015.
The business in the UK delivered very strong growth, despite continued weak market conditions in the computing and smartphone market, as the business achieved growth in areas such as professional audio visual, supplies, and smart home technologies. The growth in these areas, together with the benefit of cost reductions implemented in the prior year, resulted in an improvement in operating margin.
The UK business has continued to invest in the infrastructure and technologies that will drive and support future growth. The business has signed new suppliers to take advantage of the burgeoning market for virtual and augmented reality, expanded its capability in wireless networking and, most significantly, recently announced the acquisition of Hammer, which will materially enhance DCC Technology's position in the server and storage market and provide an excellent platform to further develop its enterprise solutions business. The acquisition is expected to complete before the end of the calendar year. In addition, the new national distribution centre in Lancashire will be commissioned on schedule in early 2017.
The business in Continental Europe achieved strong growth. In France, the CUC business, acquired in December 2015, achieved good organic profit growth, although the retail business was impacted by weak demand and margin pressure. The business in the Nordics achieved excellent organic profit growth, reflecting continued development of its professional audio visual capability and of its retail offering in both Sweden and Norway.
In Ireland, DCC Technology achieved strong growth, reflecting good business development activity, particularly in services for large mobile operators and retailers, as well as growth in security and networking products.
Over the past year, DCC Technology has developed a presence in the United Arab Emirates, initially servicing airport retail stores and more recently broadening its footprint into general retail stores in the Gulf region. Although modest, the business has developed quickly and contributed to the organic profit growth achieved.
The Supply Chain Services business traded in line with expectations in the first half of the year.
DCC Technology is well positioned to benefit from new consumer and enterprise technologies and to expand its service portfolio, while driving operational efficiencies.
DCC Environmental
2016
2015
% change
Revenue
89.3m
78.3m
+13.9%
Operating profit
10.7m
8.5m
+26.7%
Operating margin
12.0%
10.8%
DCC Environmental delivered an excellent performance in the first half of the financial year and increased its operating profit by 26.7% to 10.7 million, continuing the trend of improved profitability and returns on capital employed in recent years. The growth in operating profit, all of which was organic, was broadly based and reflects good business development activity and the continuing focus on operating efficiency.
In Britain, the business performed strongly and benefited from a very strong result in hazardous waste, where the business has continued to expand its service offering, particularly in waste oil recovery and services to the water industry. The non-hazardous business also increased its profits, whilst continuing to invest in process improvement and efficiency measures.
The Irish business delivered an excellent performance as it grew its market share in its core market and also further developed its capabilities in adjacent hazardous and organic waste services.
Forward-looking statements
This announcement contains some forward-looking statements that represent DCC's expectations for its business, based on current expectations about future events, which by their nature involve risk and uncertainty. DCC believes that its expectations and assumptions with respect to these forward-looking statements are reasonable; however because they involve risk and uncertainty as to future circumstances, which are in many cases beyond DCC's control, actual results or performance may differ materially from those expressed in or implied by such forward-looking statements.
Principal risks and uncertainties
The Board of DCC is responsible for the Group's risk management and internal control systems, which are designed to identify, manage and mitigate potential material risks to the achievement of the Group's strategic and business objectives. The Board has approved a Risk Management Policy which sets out delegated responsibilities and procedures for the management of risk across the Group.
The principal risks and uncertainties facing the Group in the short to medium term, as set out on pages 15 to 17 of the 2016 Annual Report (together with the principal mitigation measures), continue to be the principal risks and uncertainties facing the Group for the remaining six months of the financial year.
This is not an exhaustive statement of all relevant risks and uncertainties. Matters which are not currently known to the Board or events which the Board considers to be of low likelihood could emerge and give rise to material consequences. The mitigation measures that are maintained in relation to these risks are designed to provide a reasonable and not an absolute level of protection against the impact of the events in question.
Group Income Statement
Unaudited 6 months ended
Unaudited 6 months ended
Audited year ended
30 September 2016
30 September 2015
31 March 2016
Pre exceptionals
Exceptionals
(note 6)
Total
Pre exceptionals
Exceptionals
Total
Pre exceptionals
Exceptionals
Total
Notes
'000
'000
'000
'000
'000
'000
'000
'000
'000
Revenue
5
5,596,544
-
5,596,544
5,066,240
-
5,066,240
10,601,085
-
10,601,085
Cost of sales
(5,024,491)
-
(5,024,491)
(4,638,535)
-
(4,638,535)
(9,545,194)
-
(9,545,194)
Gross profit
572,053
-
572,053
427,705
-
427,705
1,055,891
-
1,055,891
Administration expenses
(175,496)
-
(175,496)
(147,726)
-
(147,726)
(304,029)
-
(304,029)
Selling and distribution expenses
(283,105)
-
(283,105)
(194,441)
-
(194,441)
(463,877)
-
(463,877)
Other operating income
8,697
408
9,105
5,916
5,291
11,207
26,416
13,829
40,245
Other operating expenses
(4,326)
(4,824)
(9,150)
(3,067)
(11,154)
(14,221)
(13,878)
(28,469)
(42,347)
Operating profit before amortisation of intangible assets
117,823
(4,416)
113,407
88,387
(5,863)
82,524
300,523
(14,640)
285,883
Amortisation of intangible assets
(18,266)
-
(18,266)
(11,884)
-
(11,884)
(31,622)
-
(31,622)
Operating profit
5
99,557
(4,416)
95,141
76,503
(5,863)
70,640
268,901
(14,640)
254,261
Finance costs
(35,751)
-
(35,751)
(32,161)
(3,819)
(35,980)
(64,970)
(9,419)
(74,389)
Finance income
19,165
1,901
21,066
17,532
-
17,532
35,981
-
35,981
Equity accounted investments' profit after tax
182
-
182
279
-
279
504
-
504
Profit before tax
83,153
(2,515)
80,638
62,153
(9,682)
52,471
240,416
(24,059)
216,357
Income tax expense
7
(12,685)
(386)
(13,071)
(9,232)
(1,037)
(10,269)
(36,024)
710
(35,314)
Profit after tax for the financial period
70,468
(2,901)
67,567
52,921
(10,719)
42,202
204,392
(23,349)
181,043
Profit attributable to:
Owners of the Parent
65,588
41,270
178,031
Non-controlling interests
1,979
932
3,012
67,567
42,202
181,043
Earnings per ordinary share
Basic
8
73.95p
47.32p
202.64p
Diluted
8
73.42p
46.91p
201.02p
Adjusted earnings per ordinary share
Basic
8
92.14p
70.29p
257.14p
Diluted
8
91.48p
69.69p
255.07p
Group Statement of Comprehensive Income
Unaudited
Unaudited
Audited
6 months
6 months
year
ended
ended
ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Group profit for the period
67,567
42,202
181,043
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Currency translation
38,453
6,956
37,971
Movements relating to cash flow hedges
9,409
(3,881)
2,230
Movement in deferred tax liability on cash flow hedges
(1,504)
1,337
120
46,358
4,412
40,321
Items that will not be reclassified to profit or loss
Group defined benefit pension obligations:
- remeasurements
(8,014)
8,041
4,894
- movement in deferred tax asset
1,227
(1,132)
(570)
(6,787)
6,909
4,324
Other comprehensive income for the period, net of tax
39,571
11,321
44,645
Total comprehensive income for the period
107,138
53,523
225,688
Attributable to:
Owners of the Parent
102,678
51,996
220,411
Non-controlling interests
4,460
1,527
5,277
107,138
53,523
225,688
Group Balance Sheet
Unaudited
Unaudited
Audited
30 Sept.
30 Sept.
31 March
2016
2015
2016
Notes
'000
'000
'000
ASSETS
Non-current assets
Property, plant and equipment
778,618
723,360
739,503
Intangible assets
1,345,082
1,115,861
1,297,065
Equity accounted investments
26,019
5,329
22,139
Deferred income tax assets
22,802
12,338
21,285
Derivative financial instruments
271,609
194,133
209,518
2,444,130
2,051,021
2,289,510
Current assets
Inventories
435,716
402,658
393,948
Trade and other receivables
997,017
898,780
916,069
Derivative financial instruments
37,132
5,900
15,915
Cash and cash equivalents
1,138,953
1,458,748
1,182,034
2,608,818
2,766,086
2,507,966
Total assets
5,052,948
4,817,107
4,797,476
EQUITY
Capital and reserves attributable to owners of the Parent
Share capital
15,455
15,443
15,455
Share premium
277,211
274,339
277,211
Share based payment reserve
10
16,369
13,623
14,954
Cash flow hedge reserve
10
(207)
(13,006)
(8,112)
Foreign currency translation reserve
10
106,859
39,044
70,887
Other reserves
10
932
932
932
Retained earnings
953,462
849,323
948,316
Equity attributable to owners of the Parent
1,370,081
1,179,698
1,319,643
Non-controlling interests
30,238
24,314
30,833
Total equity
1,400,319
1,204,012
1,350,476
LIABILITIES
Non-current liabilities
Borrowings
1,385,011
1,285,721
1,260,421
Derivative financial instruments
-
1,083
343
Deferred income tax liabilities
140,811
75,060
133,646
Post employment benefit obligations
12
7,045
(79)
347
Provisions for liabilities
233,079
220,531
213,115
Acquisition related liabilities
80,548
40,319
81,411
Government grants
752
1,098
904
1,847,246
1,623,733
1,690,187
Current liabilities
Trade and other payables
1,536,255
1,383,587
1,437,832
Current income tax liabilities
26,187
27,952
45,172
Borrowings
172,274
199,657
192,804
Derivative financial instruments
2,574
18,891
8,401
Provisions for liabilities
33,860
24,799
31,373
Acquisition related liabilities
34,233
334,476
41,231
1,805,383
1,989,362
1,756,813
Total liabilities
3,652,629
3,613,095
3,447,000
Total equity and liabilities
5,052,948
4,817,107
4,797,476
Net (debt)/cash included above
11
(112,165)
153,429
(54,502)
Group Statement of Changes in Equity
For the six months ended 30 September 2016
Attributable to owners of the Parent
Other
Non-
Share
Share
Retained
reserves
controlling
Total
capital
premium
earnings
(note 10)
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 period
-
-
65,588
-
65,588
1,979
67,567
Currency translation
-
-
-
35,972
35,972
2,481
38,453
Group defined benefit pension obligations:
- remeasurements
-
-
(8,014)
-
(8,014)
-
(8,014)
- movement in deferred tax asset
-
-
1,227
-
1,227
-
1,227
Movements relating to cash flow hedges
-
-
-
9,409
9,409
-
9,409
Movement in deferred tax liability on cash flow hedges
-
-
-
(1,504)
(1,504)
-
(1,504)
Total comprehensive income
-
-
58,801
43,877
102,678
4,460
107,138
Re-issue of treasury shares
-
-
2,065
-
2,065
-
2,065
Share based payment
-
-
-
1,415
1,415
-
1,415
Dividends
-
-
(55,720)
-
(55,720)
(5,055)
(60,775)
At 30 September 2016
15,455
277,211
953,462
123,953
1,370,081
30,238
1,400,319
For the six months ended 30 September 2015
Attributable to owners of the Parent
Other
Non-
Share
Share
Retained
reserves
controlling
Total
capital
premium
earnings
(note 10)
Total
interests
equity
'000
'000
'000
'000
'000
'000
'000
At 1 April 2015
14,688
83,032
849,119
35,909
982,748
4,245
986,993
Profit for the period
-
-
41,270
-
41,270
932
42,202
Currency translation
-
-
-
6,361
6,361
595
6,956
Group defined benefit pension obligations:
- remeasurements
-
-
8,041
-
8,041
-
8,041
- movement in deferred tax asset
-
-
(1,132)
-
(1,132)
-
(1,132)
Movements relating to cash flow hedges
-
-
-
(3,881)
(3,881)
-
(3,881)
Movement in deferred tax liability on cash flow hedges
-
-
-
1,337
1,337
-
1,337
Total comprehensive income
-
-
48,179
3,817
51,996
1,527
53,523
Issue of share capital (net of expenses)
755
191,307
-
-
192,062
-
192,062
Re-issue of treasury shares
-
-
1,922
-
1,922
-
1,922
Share based payment
-
-
-
867
867
-
867
Dividends
-
-
(49,897)
-
(49,897)
-
(49,897)
Non-controlling interests arising on acquisition
-
-
-
-
-
18,542
18,542
At 30 September 2015
15,443
274,339
849,323
40,593
1,179,698
24,314
1,204,012
For the year ended 31 March 2016
Attributable to owners of the Parent
Other
Non-
Share
Share
Retained
reserves
controlling
Total
capital
premium
earnings
(note 10)
Total
interests
equity
'000
'000
'000
'000
'000
'000
'000
At 1 April 2015
14,688
83,032
849,119
35,909
982,748
4,245
986,993
Profit for the financial year
-
-
178,031
-
178,031
3,012
181,043
Currency translation
-
-
-
35,706
35,706
2,265
37,971
Group defined benefit pension obligations:
- remeasurements
-
-
4,894
-
4,894
-
4,894
- movement in deferred tax asset
-
-
(570)
-
(570)
-
(570)
Movements relating to cash flow hedges
-
-
-
2,230
2,230
-
2,230
Movement in deferred tax liability on cash flow hedges
-
-
-
120
120
-
120
Total comprehensive income
-
-
182,355
38,056
220,411
5,277
225,688
Issue of share capital (net of expenses)
767
194,179
-
-
194,946
-
194,946
Re-issue of treasury shares
-
-
2,781
-
2,781
-
2,781
Share based payment
-
-
-
2,198
2,198
-
2,198
Dividends
-
-
(80,938)
-
(80,938)
-
(80,938)
Non-controlling interests arising on acquisition
-
-
(5,001)
2,498
(2,503)
21,311
18,808
At 31 March 2016
15,455
277,211
948,316
78,661
1,319,643
30,833
1,350,476
Group Cash Flow Statement
Unaudited
Unaudited
Audited
6 months
6 months
year
ended
ended
ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Cash flows from operating activities
Profit for the period
67,567
42,202
181,043
Add back non-operating expenses/(income)
- tax
13,071
10,269
35,314
- share of equity accounted investments' profit
(182)
(279)
(504)
- net operating exceptionals
4,416
5,863
14,640
- net finance costs
14,685
18,448
38,408
Group operating profit before exceptionals
99,557
76,503
268,901
Share-based payments expense
1,415
867
2,198
Depreciation
42,913
32,534
74,822
Amortisation of intangible assets
18,266
11,884
31,622
Loss on disposal of property, plant and equipment
369
208
415
Amortisation of government grants
(101)
(176)
(419)
Other
(4,334)
3,346
(3,412)
(Increase)/decrease in working capital
(17,046)
(4,427)
37,585
Cash generated from operations before exceptionals
141,039
120,739
411,712
Exceptionals
(8,752)
(10,386)
(19,567)
Cash generated from operations
132,287
110,353
392,145
Interest paid
(33,313)
(31,348)
(64,432)
Income tax paid
(28,122)
(15,927)
(35,346)
Net cash flows from operating activities
70,852
63,078
292,367
Investing activities
Inflows:
Proceeds from disposal of property, plant and equipment
6,076
3,439
13,523
Dividends received from equity accounted investments
121
-
365
Disposal of subsidiaries and equity accounted investments
-
2,296
4,173
Interest received
19,191
17,479
36,004
25,388
23,214
54,065
Outflows:
Purchase of property, plant and equipment
(65,878)
(54,695)
(134,172)
Acquisition of subsidiaries
(6,609)
(43,315)
(390,042)
Payment of accrued acquisition related liabilities
(26,200)
(1,059)
(3,913)
(98,687)
(99,069)
(528,127)
Net cash flows from investing activities
(73,299)
(75,855)
(474,062)
Financing activities
Inflows:
Proceeds from issue of shares
2,065
193,984
197,727
Net cash inflow on derivative financial instruments
1,002
-
1,953
Increase in finance lease liabilities
-
68
59
3,067
194,052
199,739
Outflows:
Repayment of interest-bearing loans and borrowings
(29,895)
-
(14,832)
Repayment of finance lease liabilities
(79)
(83)
(151)
Dividends paid to owners of the Parent
(55,720)
(49,897)
(80,938)
Dividends paid to non-controlling interests
(5,055)
-
-
(90,749)
(49,980)
(95,921)
Net cash flows from financing activities
(87,682)
144,072
103,818
Change in cash and cash equivalents
(90,129)
131,295
(77,877)
Translation adjustment
43,894
13,322
38,249
Cash and cash equivalents at beginning of period
1,090,037
1,129,665
1,129,665
Cash and cash equivalents at end of period
1,043,802
1,274,282
1,090,037
Cash and cash equivalents consists of:
Cash and short term bank deposits
1,138,953
1,458,748
1,182,034
Overdrafts
(95,151)
(184,466)
(91,997)
1,043,802
1,274,282
1,090,037
Notes to the Condensed Financial Statements
for the six months ended 30 September 2016
1. Basis of Preparation
The Group condensed interim financial statements which should be read in conjunction with the annual financial statements for the year ended 31 March 2016 have been prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency rules of the Irish Financial Services Regulatory Authority and in accordance with International Accounting Standard 34, Interim Financial Reporting (IAS 34) as adopted by the European Union.
The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of certain assets, liabilities, revenues and expenses together with disclosure of contingent assets and liabilities. Estimates and underlying assumptions are reviewed on an ongoing basis.
These condensed interim financial statements for the six months ended 30 September 2016 and the comparative figures for the six months ended 30 September 2015 are unaudited and have not been reviewed by the Auditors. The summary financial statements for the year ended 31 March 2016 represent an abbreviated version of the Group's full accounts for that year, on which the Auditors issued an unqualified audit report and which have been filed with the Registrar of Companies.
2. Accounting Policies
The accounting policies and methods of computation adopted in the preparation of the Group condensed interim financial statements are consistent with those applied in the Annual Report for the financial year ended 31 March 2016 and are described in those financial statements on pages 185 to 192.
The Group has adopted the following amendments to existing standards during the period which did not result in a material change to the Group's consolidated financial statements:
Annual Improvements 2012-2014 Cycle;
Amendments to IAS 1 Disclosure Initiative;
Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations; and
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation.
There were a number of other amendments to existing standards which became effective for the Group for the first time from 1 April 2016. None of these had a material impact on the Group.
3. Going Concern
Having reassessed the principal risks facing the Group (as detailed on pages 15 to 17 of the Annual Report for the year ended 31 March 2016), the Directors believe that the Group is well placed to manage these risks successfully.
The Directors have a reasonable expectation that DCC plc, and the Group as a whole, has adequate resources to continue in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report. For this reason, the Directors continue to adopt the going concern basis of accounting in preparing the condensed interim financial statements.
4. Reporting Currency
The Group's financial statements are presented in sterling, denoted by the symbol ''. Results and cash flows of operations based in non-sterling countries have been translated into sterling at average rates for the period, and the related balance sheets have been translated at the rates of exchange ruling at the balance sheet date. The principal exchange rates used for translation of results and balance sheets into sterling were as follows:
Average rate
Closing rate
6 months
6 months
Year
6 months
6 months
Year
ended
ended
ended
ended
ended
ended
30 Sept.
30 Sept.
31 March
30 Sept.
30 Sept.
31 March
2016
2015
2016
2016
2015
2016
Stg1=
Stg1=
Stg1=
Stg1=
Stg1=
Stg1=
Euro
1.2364
1.3902
1.3697
1.1614
1.3541
1.2633
Swedish Krona
11.5928
13.0057
12.7937
11.1742
12.7397
11.6547
Danish Krone
9.2173
10.3763
10.2297
8.6542
10.1013
9.4134
Norwegian Krone
11.5655
12.2304
12.4995
10.4373
12.8971
11.8938
5. Segmental Reporting
DCC is a sales, marketing, distribution and business 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. Tommy Breen, Chief Executive and his executive management team. The Group is organised into four operating segments: DCC Energy, DCC Healthcare, DCC Technology and DCC Environmental.
DCC Energy markets and sells liquefied petroleum gas products and services for commercial/industrial, home heating, cooking/leisure and transport use in Europe. DCC Energy markets and sells oil products and services for similar uses, in addition to marine and aviation uses in Europe. DCC Energy also owns, operates and supplies unmanned and manned retail service stations in Europe.
DCC Healthcare sells, markets and distributes own and third party pharmaceuticals and medical products to healthcare providers across all sectors of the British and Irish healthcare markets. DCC Healthcare also provides outsourced product development, manufacturing, packaging and other services to health and beauty brand owners in Europe.
DCC Technology sells, markets and distributes a broad range of consumer and business technology products and services in Europe.
DCC Environmental provides a broad range of waste management and recycling services to the industrial, commercial, construction and public sectors in Britain and Ireland.
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.
The consolidated total assets of the Group as at 30 September 2016 of 5.053 billion were not materially different from the equivalent figure at 31 March 2016 and therefore the related segmental disclosure note has been omitted in accordance with IAS 34 Interim Financial Reporting.
Intersegment revenue is not material and thus not subject to separate disclosure.
An analysis of the Group's performance by segment and geographic location is as follows:
(a) By operating segment
Unaudited six months ended 30 September 2016
DCCDCC DCC DCC
Energy Healthcare Technology EnvironmentalTotal
'000
'000
'000
'000
'000
Segment revenue
4,118,774
244,283
1,144,229
89,258
5,596,544
Operating profit*
76,033
19,760
11,302
10,728
117,823
Amortisation of intangible assets
(13,390)
(3,307)
(1,481)
(88)
(18,266)
Net operating exceptionals (note 6)
(1,819)
(1,361)
(1,236)
-
(4,416)
Operating profit
60,824
15,092
8,585
10,640
95,141
Unaudited six months ended 30 September 2015
DCCDCC DCC DCC
Energy Healthcare Technology Environmental Total
'000
'000
'000
'000
'000
Segment revenue
3,659,729
239,120
1,089,055
78,336
5,066,240
Operating profit*
52,885
18,465
8,570
8,467
88,387
Amortisation of intangible assets
(7,246)
(3,307)
(1,092)
(239)
(11,884)
Net operating exceptionals (note 6)
(6,221)
3,586
(2,503)
(725)
(5,863)
Operating profit
39,418
18,744
4,975
7,503
70,640
Audited year ended 31 March 2016
DCC DCC DCC DCC
Energy Healthcare Technology Environmental Total
'000
'000
'000
'000
'000
Segment revenue
7,515,308
490,617
2,441,705
153,455
10,601,085
Operating profit*
205,181
45,039
35,125
15,178
300,523
Amortisation of intangible assets
(21,381)
(7,138)
(2,627)
(476)
(31,622)
Net operating exceptionals (note 6)
(9,057)
5,859
(10,454)
(988)
(14,640)
Operating profit
174,743
43,760
22,044
13,714
254,261
* Operating profit before amortisation of intangible assets and net operating exceptionals
(b) By geography
The Group has a presence in 15 countries worldwide. The following represents a geographical analysis about the country of domicile (Republic of Ireland) and countries with material revenue.
Unaudited
Unaudited
Audited
6 months
6 months
year
ended
ended
ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Republic of Ireland
339,219
318,768
659,723
United Kingdom
3,421,914
3,537,671
6,985,521
France
1,038,271
485,229
1,487,875
Other
797,140
724,572
1,467,966
5,596,544
5,066,240
10,601,085
6. Exceptionals
Unaudited
Unaudited
Audited
6 months
6 months
year
ended
ended
ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Restructuring costs
(2,280)
(6,458)
(16,517)
Acquisition and related costs
(1,374)
(4,633)
(7,478)
Impairment of property, plant and equipment
(684)
-
(947)
Adjustments to contingent acquisition consideration
73
-
6,290
Gain arising from legal case settlements
-
5,201
4,291
Legal and other operating exceptional items
(151)
27
(279)
Net operating exceptional items
(4,416)
(5,863)
(14,640)
Mark to market of swaps and related debt
1,901
(3,819)
(9,419)
Net exceptional items before taxation
(2,515)
(9,682)
(24,059)
Tax attributable to net exceptional items
(386)
(1,037)
710
Net exceptional items after taxation
(2,901)
(10,719)
(23,349)
Non-controlling interest share of net exceptional items after taxation
-
-
(323)
Net exceptional items
(2,901)
(10,719)
(23,672)
The analysis of the net operating exceptional items is as follows:
Unaudited
Unaudited
Audited
6 months
6 months
year
ended
ended
ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Exceptional operating income
408
5,291
13,829
Exceptional operating expense
(4,824)
(11,154)
(28,469)
(4,416)
(5,863)
(14,640)
Acquisition related costs amounted to 1.374 million and restructuring costs amounted to 2.280 million. Acquisition costs include the professional fees and tax costs (such as stamp duty) relating to the evaluation and completion of acquisition opportunities.
Most of the Group's debt has been raised in the US private placement market and swapped, using long term interest, currency 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, together with gains or losses arising from marking to market swaps not designated as hedges, offset by foreign exchange translation gains or losses on the related fixed rate debt, is charged or credited as an exceptional item. In the six months ended 30 September 2016 this amounted to an exceptional gain of 1.901 million. The exceptional gains and losses on the Group's private placement debt and related hedging instruments will net to zero on a cumulative basis over their lives.
There was a net tax charge of 0.386 million in relation to the above net exceptional items.
7. Taxation
The taxation expense for the interim period is based on management's best estimate of the weighted average tax rate that is expected to be applicable for the full year. The Group's effective tax rate for the period was 17.5% (six months ended 30 September 2015: 16.0% and year ended 31 March 2016: 16.0%).
8. Earnings per Ordinary Share
Unaudited
Unaudited
Audited
6 months
6 months
year
ended
ended
ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Profit attributable to owners of the Parent
65,588
41,270
178,031
Amortisation of intangible assets after tax
13,235
9,315
24,201
Exceptionals after tax (note 6)
2,901
10,719
23,672
Adjusted profit after taxation and non-controlling interests
81,724
61,304
225,904
Basic earnings per ordinary share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Parent by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Company and held as treasury shares.
The adjusted figures for basic earnings per ordinary share (a non-IFRS financial measure) are intended to demonstrate the results of the Group after eliminating the impact of amortisation of intangible assets and net exceptionals.
Unaudited
Unaudited
Audited
6 months
6 months
year
ended
ended
ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
pence
pence
pence
Basic earnings per ordinary share
73.95p
47.32p
202.64p
Amortisation of intangible assets after tax
14.92p
10.68p
27.55p
Exceptionals after tax (note 6)
3.27p
12.29p
26.95p
Adjusted basic earnings per ordinary share
92.14p
70.29p
257.14p
Weighted average number of ordinary shares in
issue (thousands)
88,691
87,216
87,854
Diluted earnings per ordinary share
Diluted earnings per 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 are intended to demonstrate the results of the Group after eliminating the impact of amortisation of intangible assets and net exceptionals.
Unaudited
Unaudited
Audited
6 months
6 months
year
ended
ended
ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
pence
pence
pence
Diluted earnings per ordinary share
73.42p
46.91p
201.02p
Amortisation of intangible assets after tax
14.81p
10.59p
27.32p
Exceptionals after tax (note 6)
3.25p
12.19p
26.73p
Adjusted diluted earnings per ordinary share
91.48p
69.69p
255.07p
Weighted average number of ordinary shares in
issue (thousands)
89,332
87,968
88,564
The weighted average number of ordinary shares used in calculating the diluted earnings per share for the six months ended 30 September 2016 was 89.332 million (six months ended 30 September 2015: 87.968 million). A reconciliation of the weighted average number of ordinary shares used for the purposes of calculating the diluted earnings per share amounts is as follows:
Unaudited
Unaudited
Audited
6 months
6 months
year
ended
ended
ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Weighted average number of ordinary shares in issue
88,691
87,216
87,854
Dilutive effect of options and awards
641
752
710
Weighted average number of ordinary shares in
issue (thousands)
89,332
87,968
88,564
9. Dividends
Unaudited
Unaudited
Audited
6 months
6 months
year
ended
ended
ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Interim - paid 33.04 pence per share on 7 December 2015
-
-
30,292
Final - paid 64.18 pence per share on 21 July 2016 (paid 55.81 pence per share on 23 July 2015)
55,720
49,897 50,646
55,720
49,897
80,938
On 11 November 2016, the Board approved an interim dividend of 37.17 pence per share (32.995 million). These condensed interim financial statements do not reflect this dividend payable.
10. Other Reserves
For the six months ended 30 September 2016
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
-
-
35,972
-
35,972
Movements relating to cash flow hedges
-
9,409
-
-
9,409
Movement in deferred tax liability on cash flow hedges -
(1,504)
-
-
(1,504)
Share based payment
1,415
-
-
-
1,415
At 30 September 2016
16,369
(207)
106,859
932
123,953
For the six months ended 30 September 2015
Foreign
Share based
Cash flow
currency
payment
hedge
translation
Other
reserve
reserve
reserve
reserves
Total
'000
'000
'000
'000
'000
At 1 April 2015
12,756
(10,462)
32,683
932
35,909
Currency translation
-
-
6,361
-
6,361
Movements relating to cash flow hedges
-
(3,881)
-
-
(3,881)
Movement in deferred tax liability on cash flow hedges -
1,337
-
-
1,337
Share based payment
867
-
-
-
867
At 30 September 2015
13,623
(13,006)
39,044
932
40,593
For the year ended 31 March 2016
Foreign
Share based
Cash flow
currency
payment
hedge
translation
Other
reserve
reserve
reserve
reserves
Total
'000
'000
'000
'000
'000
At 1 April 2015
12,756
(10,462)
32,683
932
35,909
Currency translation
-
-
35,706
-
35,706
Movements relating to cash flow hedges
-
2,230
-
-
2,230
Movement in deferred tax liability on cash flow hedges -
120
-
-
120
Transfer to non-controlling interests arising on acquisition
-
-
2,498
-
2,498
Share based payment
2,198
-
-
-
2,198
At 31 March 2016
14,954
(8,112)
70,887
932
78,661
11. Analysis of Net (Debt)/Cash
Unaudited
Unaudited
Audited
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Non-current assets:
Derivative financial instruments
271,609
194,133
209,518
Current assets:
Derivative financial instruments
37,132
5,900
15,915
Cash and cash equivalents
1,138,953
1,458,748
1,182,034
1,176,085
1,464,648
1,197,949
Non-current liabilities:
Finance leases
(131)
(199)
(127)
Derivative financial instruments
-
(1,083)
(343)
Unsecured Notes
(1,384,880)
(1,285,522)
(1,260,294)
(1,385,011)
(1,286,804)
(1,260,764)
Current liabilities:
Bank borrowings
(95,151)
(184,466)
(91,997)
Finance leases
(322)
(358)
(379)
Derivative financial instruments
(2,574)
(18,891)
(8,401)
Unsecured Notes
(76,801)
(14,833)
(100,428)
(174,848)
(218,548)
(201,205)
Net (debt)/cash
(112,165)
153,429
(54,502)
12. Post Employment Benefit Obligations
The Group's defined benefit pension schemes' assets were measured at fair value at 30 September 2016. The defined benefit pension schemes' liabilities at 30 September 2016 were updated to reflect material movements in underlying assumptions.
The net deficit on the Group's post employment benefit obligations increased from 0.347 million at 31 March 2016 to 7.045 million at 30 September 2016. The increase in the deficit was primarily driven by an actuarial loss on liabilities arising from a reduction in the discount rate used to value these liabilities. This actuarial loss was somewhat offset by contributions in excess of the current service cost.
The following actuarial assumptions have been made in determining the Group's retirement benefit obligation for the six months ended 30 September 2016:
Unaudited
Unaudited
Audited
6 months
6 months
year
ended
ended
ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
Discount rate
- Republic of Ireland
1.50%
2.50%
2.00%
- UK
2.45%
4.00%
3.60%
13. Business Combinations
A key strategy of the Group is to create and sustain market leadership positions through acquisitions in markets it currently operates in, together with extending the Group's footprint into new geographic markets. In line with this strategy, there were a number of relatively small acquisitions completed by the Group during the period.
The acquisition data presented below reflects the fair value of the identifiable net assets acquired (excluding net cash/debt acquired) in respect of acquisitions completed during the six months ended 30 September 2016, together with measurement period adjustments made to the provisional fair values in respect of the acquisition of Butagaz S.A.S. ('Butagaz') which was completed during the year ended 31 March 2016. These measurement period adjustments primarily comprised reclassifications between categories of assets and liabilities.
Butagaz
measurement
period
Acquisitions
adjustments
Total
Total
6 months
6 months
6 months
6 months
ended
ended
ended
ended
30 Sept.
30 Sept.
30 Sept.
30 Sept.
2016
2016
2016
2015
'000
'000
'000
'000
Assets
Non-current assets
Property, plant and equipment
68
(2,168)
(2,100)
235,743
Intangible assets - other intangible assets
-
-
-
120,453
Equity accounted investments
-
1,762
1,762
42
Total non-current assets
68
(406)
(338)
356,238
Current assets
Inventories
1,324
-
1,324
44,420
Trade and other receivables
3,252
472
3,724
88,896
Total current assets
4,576
472
5,048
133,316
Liabilities
Non-current liabilities
Deferred income tax liabilities
(13)
-
(13)
(44,441)
Provisions for liabilities and charges
-
-
-
(189,639)
Total non-current liabilities
(13)
-
(13)
(234,080)
Current liabilities
Trade and other payables
(2,517)
4,962
2,445
(75,365)
Provisions for liabilities and charges
-
(5,043)
(5,043)
(18,328)
Current income tax liability
(193)
8,672
8,479
(13,332)
Acquisition related liabilities
-
(9,717)
(9,717)
-
Total current liabilities
(2,710)
(1,126)
(3,836)
(107,025)
Identifiable net assets acquired
1,921
(1,060)
861
148,449
Non-controlling interest arising on acquisition
-
-
-
(18,542)
Intangible assets - goodwill
5,738
1,060
6,798
237,374
Total consideration
7,659
-
7,659
367,281
Satisfied by:
Cash
8,813
-
8,813
134,744
Cash and cash equivalents acquired
(2,204)
-
(2,204)
(91,429)
Net cash outflow
6,609
-
6,609
43,315
Acquisition related liabilities
1,050
-
1,050
323,966
Total consideration
7,659
-
7,659
367,281
None of the business combinations completed during the period were considered sufficiently material to warrant separate disclosure of the fair values attributable to those combinations.
There were no adjustments made to the carrying amounts of assets and liabilities acquired in arriving at their fair values. The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of a number of the business combinations above given the timing of closure of these transactions. Any amendments to these fair values within the twelve month timeframe from the date of acquisition will be disclosable in the Group's condensed interim financial statements for the six months ending 30 September 2017 as stipulated by IFRS 3.
The principal factors contributing to the recognition of goodwill on business combinations entered into by the Group are the expected profitability of the acquired business and the realisation of cost savings and synergies with existing Group entities.
Acquisition related costs included in other operating expenses in the Group Income Statement amounted to 1.374 million (six months ended 30 September 2015: 4.633 million).
No contingent liabilities were recognised on the acquisitions completed during the financial period or the prior financial years.
The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to 3.318 million. The fair value of these receivables is 3.252 million (all of which is expected to be recoverable) and is inclusive of an aggregate allowance for impairment of 0.066 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 period range from nil to 4.7 million.
The acquisitions during the period contributed 8.3 million to revenues and 0.7 million to profit after tax. The revenue and profit of the Group determined in accordance with IFRS for the period ended 30 September 2016 would not have been materially different than reported in the Income Statement if the acquisition date for all business combinations completed during the period had been as of the beginning of the period.
14. Seasonality of Operations
The Group's operations are significantly second-half weighted primarily due to a portion of the demand for DCC Energy's products being weather dependent and seasonal buying patterns in DCC Technology.
15. Related Party Transactions
There have been no related party transactions or changes in the nature and scale of the related party transactions described in the Annual Report in respect of the year ended 31 March 2016 that could have had a material impact on the financial position or performance of the Group in the six months ended 30 September 2016.
16. Events after the Balance Sheet Date
Dansk Fuels
On 23 March 2016 DCC announced it had reached agreement to acquire Dansk Fuels, a commercial, aviation and retail fuels business in Denmark, formerly owned by Shell. Following receipt of competition clearance from the European Commission the acquisition was completed on 31 October 2016. The transaction requires a total investment by DCC of approximately DKK300 million (35 million). An initial assignment of fair values to identifiable net assets acquired has not been completed given the timing of the closure of the transaction.
Hammer
As announced on 14 October 2016, DCC Technology has agreed to acquire 100% of the issued share capital of Hammer Consolidated Holdings Limited ('Hammer'), a specialist distributor of server and storage solutions to resellers in the UK and Continental Europe. The acquisition is based on an initial enterprise value of 38.3 million. The consideration will be paid entirely in cash and is structured as an initial payment at completion, followed by earn out payments over three years based on Hammer's future trading results.
The acquisition, which is subject to competition clearance from the European Commission, is expected to complete by the end of December 2016. As such, an initial assignment of fair values to identifiable net assets acquired has not yet been performed.
Medium
In November 2016 DCC Technology acquired Medium (U.K.) Limited, a distributor of professional audio visual equipment to resellers in the UK. The consideration for the acquisition was based on an enterprise valuation of 8.3 million and was satisfied in cash at completion. An initial assignment of fair values to identifiable net assets acquired has not been completed given the timing of the closure of the transaction.
Gaz Europen
DCC Energy has agreed to acquire Gaz Europen Holdings SAS ('Gaz Europen'), a natural gas retail and marketing business which supplies business and public sector customers in France. DCC has agreed to acquire 97% of the share capital of Gaz Europen on completion, based on an initial enterprise value of 110 million (95.7 million). The remaining shares will be acquired based onGaz Europen's results for the three years ending 31 March 2021, 2022 and 2023. All of the consideration will be satisfied in cash.
The acquisition is conditional, inter alia, on clearance from the French Competition Authority and is expected to complete in the first calendar quarter of 2017. As such, an initial assignment of fair values to identifiable net assets acquired has not yet been performed.
Medisource
In November 2016, DCC Healthcare agreed to acquire Medisource Ireland Limited, a specialist in the procurement and sale of Exempt Medicinal Products, for an initial enterprise valuation of 31.5 million (27.4 million). The acquisition, which is subject to competition clearance, is expected to complete in the first calendar quarter of 2017. As such, an initial assignment of fair values to identifiable net assets acquired has not yet been performed.
17. Board Approval
This report was approved by the Board of Directors of DCC plc on 11 November 2016.
18. Distribution of Interim Report
This report and further information on DCC is available at the Company's website www.dcc.ie. A printed copy is available to the public at the Company's registered office at DCC House, Leopardstown Road, Foxrock, Dublin 18, Ireland.
Statement of Directors' Responsibilities
We confirm that to the best of our knowledge:
1. the condensed set of interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
2. the interim management report includes a fair review of the information required by:
Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
On behalf of the Board
John Moloney Tommy Breen
Chairman Chief Executive
11 November 2016
Supplementary Financial Information
Alternative Performance Measures
The Group reports certain financial measures that are not required under International Financial Reporting Standards ('IFRS') which represent the accounting principles under which the Group reports. The Group believes that the presentation of these non-IFRS measures 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 non-IFRS financial measures 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 non-IFRS measures should be considered as an alternative to financial measures derived in accordance with IFRS. The non-IFRS measures 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 IFRS.
The principal non-IFRS measures used by the Group, together with reconciliations where the non-IFRS measures are not readily identifiable from the financial statements, are as follows:
Operating profit before net exceptionals and amortisation of intangible assets ('EBITA')
Definition
This comprises operating profit as reported in the Group Income Statement before net operating exceptional items and amortisation of intangible assets.
6 months ended
6 months ended
Year ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Operating profit
95,141
70,640
254,261
Net operating exceptional items
4,416
5,863
14,640
Amortisation of intangible assets
18,266
11,884
31,622
Operating profit before net exceptionals and amortisation of intangible assets ('EBITA')
117,823
88,387
300,523
Net interest
Definition
The Group defines net interest as the net total of finance costs and finance income before interest related exceptional items as presented in the Group Income Statement.
6 months ended
6 months ended
Year ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Finance costs before exceptional items
(35,751)
(32,161)
(64,970)
Finance income before exceptional items
19,165
17,532
35,981
Net interest
(16,586)
(14,629)
(28,989)
Effective tax rate
Definition
The Group's effective tax rate expresses the income tax expense before exceptionals and deferred tax attaching to the amortisation of intangible assets as a percentage of EBITA less net interest.
6 months ended
6 months ended
Year ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
EBITA
117,823
88,387
300,523
Net interest
(16,586)
(14,629)
(28,989)
Earnings before taxation
101,237
73,758
271,534
Income tax expense
13,071
10,269
35,314
Income tax relating to exceptional items
(386)
(1,037)
710
Deferred tax attaching to amortisation of intangible assets
5,031
2,569
7,421
Income tax expense before exceptionals and deferred tax attaching to amortisation of intangible assets
17,716
11,801
43,445
Effective tax rate (%)
17.5%
16.0%
16.0%
Net capital expenditure
Definition
Net capital expenditure comprises purchases of property, plant and equipment, proceeds from the disposal of property, plant and equipment and government grants received in relation to property, plant and equipment.
6 months ended
6 months ended
Year ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Purchase of property, plant and equipment
65,878
54,695
134,172
Proceeds from disposal of property, plant and equipment
(6,076)
(3,439)
(13,523)
Net capital expenditure
59,802
51,256
120,649
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 interest paid, income tax paid, net capital expenditure, dividends received from equity accounted investments and interest received.
6 months ended
6 months ended
Year ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Cash generated from operations before exceptionals
141,039
120,739
411,712
Interest paid
(33,313)
(31,348)
(64,432)
Income tax paid
(28,122)
(15,927)
(35,346)
Net capital expenditure
(59,802)
(51,256)
(120,649)
Dividends received from equity accounted investments
121
-
365
Interest received
19,191
17,479
36,004
Free cash flow
39,114
39,687
227,654
Free cash flow (before interest and tax payments)
Definition
Free cash flow (before interest and tax payments) is defined by the Group as cash generated from operations before exceptional items as reported in the Group Cash Flow Statement after net capital expenditure.
6 months ended
6 months ended
Year ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Cash generated from operations before exceptionals
141,039
120,739
411,712
Net capital expenditure
(59,802)
(51,256)
(120,649)
Free cash flow (before interest and tax payments)
81,237
69,483
291,063
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.
6 months ended
6 months ended
Year ended
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Net cash outflow on acquisitions during the year
6,609
43,315
390,042
Acquisition related liabilities arising on acquisitions during the year
1,050
323,966
81,519
Net cash outflow on acquisitions committed to in the previous year
(6,609)
(24,425)
(351,045)
Acquisition related liabilities committed to in the previous year
(1,050)
(322,866)
(79,288)
Amounts committed in the current year
180,515
20,425
39,000
Committed acquisition expenditure
180,515
40,415
80,228
Net working capital
Definition
Net working capital represents the net total of inventories, trade and other receivables (excluding interest receivable), and trade and other payables (excluding interest payable, amounts due in respect of property, plant and equipment and current government grants).
As at
As at
As at
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Inventories
435,716
402,658
393,948
Trade and other receivables
997,017
898,780
916,069
Interest receivable included in trade and other receivables
(151)
(280)
(230)
Trade and other payables
(1,536,255)
(1,383,587)
(1,437,832)
Interest payable included in trade and other payables
5,342
5,252
3,967
Amounts due in respect of property, plant and equipment included in trade and other payables
228
752
2,967
Government grants included in trade and other payables
83
25
26
Net working capital
(98,020)
(76,400)
(121,085)
Working capital (days)
Definition
Working capital days measures how long it takes in days for the Group to convert working capital into revenue.
As at
As at
As at
30 Sept.
30 Sept.
31 March
2016
2015
2016
'000
'000
'000
Net working capital
(98,020)
(76,400)
(121,085)
September/March revenue
1,014,498
988,134
967,014
Working capital (days)
(2.9 days)
(2.3 days)
(3.9 days)
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