REG - DCC PLC - Results for the year ended 31 March 2018
RNS Number : 0389ODCC PLC15 May 2018
15 May 2018
DCC Reports Strong Growth and Record Development Spend
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: investorrelations@dcc.ie
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.
Dividend
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%.
Cash flow
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.
Annual Report and Annual General Meeting
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 RNSThe company news service from the London Stock ExchangeENDFR ZMGMKRDGGRZM
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