REG-DCC PLC Final Results - Part 1
Released: 19/05/2008
http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20080519:RnsS7225U
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RNS Number : 7225U
DCC PLC
19 May 2008
Preliminary Results for the Year Ended 31 March 2008
RESULTS HIGHLIGHTS
E Change on prior year
Reported Constant currency
Revenue 5,532.0m +36.7% +39.9%
Operating profit* 167.2m +19.3% +21.8%
Exceptional profit(net) 39.6m
Profit before tax 181.7m +12.3% +14.2%
Adjusted earnings per share* 165.06 cent +15.0%** +17.4%**
Dividend per share 56.67 cent +15.0%
all constant currency figures quoted in this report are based on retranslating
current year figures at prior year translation rates
* excluding net exceptionals and amortisation of intangible assets
** continuing activities (excluding the ManorParkHomebuilders contribution in the
prior year)
Commenting on the results, Jim Flavin, Executive Chairman said:
"These excellent results reflect strong organic growth and successful
acquisitions. DCC achieved accelerated operating profit growth of 20.1% (24.1%
constant currency) in the seasonally more significant second half.
DCC is budgeting for strong earnings growth in the range of 12% to 15%, on a
constant currency basis, in the current financial year. However, the impact of
the translation of the significant proportion of DCC's profits that are sterling
based into euro at the approximate current exchange rate of Stg£0.80 = E1 would
result in reported earnings growth in the range of 2% to 5%.
DCC has had an excellent start to the current financial year and continues to be
well positioned both commercially and financially to augment growth through
acquisition activity."
For reference, please contact:
Jim Flavin, Executive Chairman
Tommy Breen, Group Managing Director
Fergal O'Dwyer, Chief Financial Officer
Conor Murphy, Investor Relations Manager
Tel: +353 1 2799 400
Email: investorrelations@dcc.ie
www.dcc.ie
Results
A summary of the results for the year ended 31 March 2008 is as follows:
E'm Change on prior year
Constant currency
Reported
Revenue 5,532.0 +36.7% +39.9%
Operating profit*
DCC Energy 74.3 +25.0% +28.6%
DCC SerCom 40.1 +22.9% +24.7%
DCC Healthcare 23.5 +4.2% +5.6%
DCC Food & Beverage 15.3 +1.6% +1.7%
DCC Environmental 14.0 +34.4% +37.6%
Group operating profit* 167.2 +19.3% +21.8%
Share of associates' profit after tax 0.6
Finance costs (net) (17.8)
Profit before net exceptionals, amortisation of intangible
assets and tax 150.0 +4.2% +6.4%
Exceptional profit (net) 39.6
Amortisation of intangible assets (7.9)
Profit before tax 181.7 +12.3% +14.2%
Taxation (16.5)
Profit after tax 165.2 +17.1% +19.0%
Adjusted EPS* 165.06 cent +15.0%** +17.4%**
Dividend per share 56.67 cent +15.0%
Return on capital employed
- excluding intangible assets: 38.0% (38.9% in 2007)
- including intangible assets: 17.5% (17.9% in 2007)
all constant currency figures quoted in this report are based on retranslating current year figures at prior year
translationrates
*excluding net exceptionals and amortisation of intangible assets
** continuing activities (excluding the ManorParkHomebuilders contribution in the prior year)
Revenue
The substantial increase of 36.7% in sales revenue to E5.5 billion arose from
strong organic growth, the increase in energy prices and acquisitions.
Operating profit
DCC achieved excellent growth in operating profit of 19.3% for the year.
Operating profit growth on a constant currency basis was 21.8%, of which
approximately 8% was organic. The growth momentum achieved in the first half of
the year accelerated in the seasonally more significant second half. A summary
of the second half and first half operating profit by division is set out
hereunder:
Second half Change on First half Change on
prior year prior year
Eā m Reported Constant Currency Eā m Reported Constant Currency
Operating profit*
DCC Energy 59.8 +25.2% +30.1% 14.5 +23.9% +22.4%
DCC SerCom 27.6 +24.8% +27.9% 12.5 +18.8% +18.0%
DCC Healthcare 13.1 +2.5% +5.4% 10.4 +6.5% +5.9%
DCC Food & Beverage 8.3 +7.1% +7.5% 7.0 -4.3% -4.4%
DCC Environmental 6.8 +16.7% +23.8% 7.2 +56.7% +54.9%
Group operating profit 115.6 +20.1% +24.1% 51.6 +17.6% +16.7%
* excluding net exceptionals and amortisation of intangible assets
Finance costs (net)
Net finance costs for the year increased by E6.9 million to E17.8 million (E10.9
million in 2007) primarily due to the increase in interest rates. There was a
slight increase in the Group's net debt levels which averaged E242 million
during the year compared to E233 million in the prior year.
Exceptional profit (net)
As DCC announced on 19 December 2007, the dividend received from Manor Park
Homebuilders and the subsequent sale of the shareholding gave rise to a profit
on cost of E180 million and an exceptional profit on carrying value of E94.7
million. This exceptional profit, less the exceptional charge of E50 million
for the settlement and costs of the Fyffes action, announced on 14 April 2008,
and other net exceptional charges of E5.1 million, resulted in a net exceptional
profit before tax in the year of E39.6 million.
Taxation
Excluding the tax charge on the net exceptional profit, the effective tax rate
for the Group (excluding associates) was 11.0%, the same as in the prior year.
Excellent growth in adjusted EPS
There was excellent growth of 15.0% (17.4% on a constant currency basis) in
adjusted earnings per share from DCC's continuing activities (excluding the
contribution from Manor Park Homebuilders in the prior year).
Dividend increase of 15%
The Directors are recommending a final dividend of 36.12 cent per share which,
when added to the interim dividend of 20.55 cent per share, gives a total
dividend of 56.67 cent per share for the year, a 15% increase over the prior
year dividend of 49.28 cent per share. The dividend is covered 2.9 times by
adjusted earnings per share (3.2 times in 2007). It is proposed to pay the final
dividend on 24 July 2008 to shareholders on the register at the close of
business on 30 May 2008.
Acquisition and organic development expenditure
Acquisition and organic development expenditure, including additional working
capital investment in the year, amounted to E351.6 million as follows:
Acquisitions Capex Working Capital Total
E'm E'm E'm E'm
DCC Energy 105.2 38.2 101.6 245.0
DCC SerCom 50.5 3.2 (20.5) 33.2
DCC Healthcare 21.8 15.1 6.3 43.2
DCC Food & Beverage - 17.1 (5.2) 11.9
DCC Environmental 2.1 14.0 2.2 18.3
Total 179.6 87.6 84.4 351.6
DCC Energy continued to enhance its oil distribution network in Britain through
the acquisitions of CPL Petroleum Limited (announced on 20 July 2007) and
Southern Counties Fuel Holdings Limited (announced on 7 March 2008). DCC Energy
also completed seven smaller acquisitions during the year.
DCC SerCom acquired Banque Magnetique SAS (announced on 12 November 2007), a
leading Paris based distributor of consumer electronics and IT peripherals to a
broad range of French retail customers. DCC SerCom also made a number of
smaller acquisitions during the year.
DCC Healthcare acquired Squadron Medical Limited (announced on 23 November
2007), a British based value added distributor of medical and surgical products
on a just in time basis to point of use within hospitals.
The capital expenditure in the year of E87.6 million was spent on facilities and
equipment across the Group to support future growth.
The net increase in working capital in the Group was E84.4 million. The increase
in working capital in DCC Energy resulted primarily from the higher cost of oil.
DCC SerCom's working capital was reduced by E20.5 million.
Cash flow from operations was slightly ahead of the prior year at E129.0 million
(E127.4 million: 2007), despite the increased working capital impact of the
exceptionally strong growth in sales revenue. Working capital days at the end
of March 2008 were 16.4 days revenue compared to 14.0 days revenue at 31 March
2007.
DCC is continuing to pursue further acquisition and development opportunities in
its core business areas.
Financial strength
At 31 March 2008, DCC had net debt of E123.7 million (E100.5 million: 2007) and
total equity of E742.4 million (E687.7 million: 2007). DCC continues to be well
placed financially to pursue its organic and acquisition growth objectives.
Strategy Review
As previously announced, an important part of my responsibilities as Executive
Chairman is to lead a reappraisal of our overall strategic direction so that DCC
is best positioned for sustainable long-term growth. This process is ongoing and
I plan to put recommendations before the Board by the end of the current
financial year.
This reappraisal does not imply that DCC's strategy is in some way flawed.
Demonstrably, the strategy that DCC has pursued since it went public in 1994 has
delivered consistently good results. However, the diversity of DCC's business
model, while reducing risk, makes DCC more complex from a management perspective
and more difficult to explain to investors.
The highly profitable realisation of value by DCC of its 49% shareholding in
Manor Park Homebuilders last December was part of DCC's strategy to redeploy
capital into core business activities. Shareholders will be familiar with DCC's
market sector based divisions, DCC Energy, DCC SerCom, DCC Healthcare, DCC Food
& Beverage and DCC Environmental.
These five divisions have within them fourteen businesses with different
characteristics such as return on capital, growth records and opportunities,
competitors and management expertise.
DCC Energy has three businesses, oil distribution, LPG distribution and the fuel
card business.
DCC SerCom has four businesses, SerCom Solutions and three businesses within
SerCom Distribution, the sale of IT and entertainment products to the retail
market, to the reseller market and to the enterprise market.
DCC Healthcare has three businesses, the sale of products to the acute care
sector, contract services to the health and beauty industry and a mobility and
rehabilitation products business.
DCC Food & Beverage has three businesses, healthfoods, indulgence foods and
frozen and chilled foods logistics.
In DCC Environmental recycling is the predominant activity.
In the reappraisal of DCC's strategy, we will analyse the relative opportunity
to create shareholder value from each of DCC's fourteen business units listed
above. Shareholders should not anticipate any particular change in strategy at
this stage. The Board will come to a logical conclusion based on the completion
of the strategy reappraisal process and will continue to be mindful of the fact
that the management of diversity is a core competence of DCC. Our central
objective is to ensure that DCC continues to pursue a strategy which maximises
shareholder value on a consistent basis over the long term.
Corporate Governance - Fyffes
The Board of DCC has kept under continuous scrutiny the Fyffes litigation, which
was launched in January 2002, and has carefully considered whether any corporate
governance issues arose. The Directors have decided to address the matter
comprehensively in a statement to be included in the Corporate Governance
section of the Annual Report to be issued to shareholders in June 2008. It will
set out the factors which they have taken into account in their corporate
governance deliberations.
There has been substantial media coverage of the case. The true import of the
High Court and Supreme Court judgments has not always been fairly reflected.
Accordingly, the Directors have also decided to issue the statement by way of
Stock Exchange announcement this week, in advance of its publication in the
Annual Report. The Directors hope that shareholders, on reading the statement,
will have a better and more informed understanding of the Board's position.
Outlook
DCC is budgeting for strong earnings growth in the range of 12% to 15%, on a
constant currency basis, in the current financial year. However, the impact of
the translation of the significant proportion of DCC's profits that are sterling
based into euro at the approximate current exchange rate of Stg£0.80 = E1 would
result in reported earnings growth in the range of 2% to 5%.
DCC has had an excellent start to the current financial year and continues to be
well positioned both commercially and financially to augment growth through
acquisition activity.
Jim Flavin
Executive Chairman
19 May 2008
Operating review
DCC Energy
2008 2007 Change on prior year
Constant
Reported Currency
Revenue E3,420.0m E2,247.9m +52.1% +56.5%
Operating profit E74.3m E59.5m +25.0% +28.6%
Return on capital employed
- excluding intangible assets 45.8% 49.9%
- including intangible assets 20.6% 22.7%
DCC Energy achieved excellent growth in the year with operating profit 25.0%
ahead of the prior year. Operating profit growth on a constant currency basis
was 28.6%, of which organic growth was approximately 10%. This result was
particularly pleasing considering it was another year of above average
temperatures, albeit colder than the prior year. The business also had to deal
with the dramatic rise in the cost of product during the year.
DCC Energy sold 4.3 billion litres of product, an increase of 32.3% on the prior
year, further strengthening its position as the leading oil and LPG distributor
in Britain and Ireland.
It was an excellent year of growth and development for the oil business in
Britain. The business benefited from the acquisitions completed in the prior
year and first time contributions from acquisitions completed during the year.
The business achieved excellent organic growth from its extensive nationwide
infrastructure and from its focus on growing the proportion of its business in
the non heating dependent segments of the market.
The LPG business increased its sales volumes during the year, but the dramatic
rise in the price of propane resulted in a modest, short term reduction in
operating profit.
DCC's fuel card business had another year of excellent growth with the business
benefiting from the integration of an acquired fuel card business and strong
organic volume growth.
DCC Energy is budgeting for excellent constant currency operating profit growth
in the current financial year.
DCC SerCom
2008 2007 Change on prior year
Constant
Reported Currency
Revenue E1,423.4m E1,218.0m +16.9% +18.8%
Operating profit E40.1m E32.6m +22.9% +24.7%
Operating margin 2.8% 2.7%
Return on capital employed
- excluding intangible assets 24.2% 22.4%
- including intangible assets 15.3% 13.8%
DCC SerCom achieved excellent operating profit growth of 22.9% in the year. The
operating profit growth on a constant currency basis was 24.7%, of which organic
growth was approximately 13%.
SerCom Distribution's Retail focused business, comprising Gem, Pilton and Banque
Magnetique, which markets and sells consumer electronics, peripherals and home
entertainment products to retailers, e-tailers and catalogue resellers in
Britain, Ireland and France, had an excellent year. The business benefited from
the acquisition of Banque Magnetique and a favourable market environment for
games. The business increased its market share with key customers, broadened
its product portfolio and made significant progress developing DCC's own-brand
business.
SerCom Distribution's Reseller business, comprising Micro-P and Sharptext, which
markets and sells IT hardware and software products principally to the reseller
and dealer channel in Britain and Ireland, had a disappointing year. Despite
increased volumes, difficult market conditions and ongoing severe price
deflation in PCs and printers resulted in reduced profits for the year.
SerCom Distribution's Enterprise business, Distrilogie, which is a leading
European distributor of enterprise servers, storage and software to value added
resellers, large account resellers and independent software vendors, achieved
good profit growth. The business grew its market share and expanded its product
portfolio.
SerCom Solutions had an exceptional year, reflecting strong growth in demand for
its supply chain management services. During the year the business commenced
operations in the United States and made good progress in its procurement
initiatives in the Far East in co-operation with SerCom Distribution.
SerCom Distribution is budgeting for another year of strong constant currency
profit growth reflecting the development initiatives put in place in the last
financial year. SerCom Solutions' results will be significantly impacted by the
loss of a material element of its procurement business in Ireland, arising from
a change in strategy by a major customer. Overall, DCC SerCom is budgeting for
modest constant currency growth in operating profits in the current financial
year.
DCC Healthcare
2008 2007 Change on prior year
Constant
Reported Currency
Revenue E286.8m E234.3m +22.4% +24.5%
Operating profit E23.5m E22.5m +4.2% +5.6%
Operating margin 8.2% 9.6%
Return on capital employed
- excluding intangible assets 48.8% 57.3%
- including intangible assets 13.9% 15.6%
DCC Healthcare achieved strong profit growth in both the acute care and mobility
and rehabilitation sectors, but overall profit growth was moderated to 4.2% by a
weaker performance in DCC Health & Beauty Solutions. The operating profit growth
on a constant currency basis was 5.6%, driven by acquisition contribution and a
modest organic decline.
DCC's acute care business, Fannin, made good progress during the year generating
strong profit growth and significantly expanding its position in Britain. The
acquisition of Squadron Medical, based in Derbyshire, in November 2007, has been
followed by a bolt-on acquisition in April 2008 of a complementary Scottish
based company. These acquisitions have given Fannin a strong growth platform in
the provision of value added distribution services to British acute care
hospitals and leading healthcare brand owners. In Ireland, Fannin achieved
strong growth in intravenous pharmaceuticals through excellent organic growth in
its sales and marketing activities and its pharma compounding services.
DCC Health and Beauty Solutions achieved good sales growth but profits were
impacted by increased costs arising from planned capacity expansion and new
product development on behalf of customers.
DCC Mobility & Rehab generated excellent organic profit growth in physiotherapy
supplies in Britain, further strengthening its leadership in this market. Sales
of general rehabilitation products in Britain also showed good growth, while
Germany was impacted by weak market conditions. Ausmedic, acquired in March
2007, broadened its product range and market coverage in Australia through the
launch of the DCC Mobility & Rehab product range.
DCC Healthcare is budgeting to achieve excellent constant currency operating
profit growth in the current financial year.
DCC Food & Beverage
2008 2007 Change on prior year
Constant
Reported Currency
Revenue E310.1m E279.5m +11.0% +11.7%
Operating profit E15.3m E15.1m +1.6% +1.7%
Operating margin 4.9% 5.4%
Return on capital employed
- excluding intangible assets 51.2% 51.7%
- including intangible assets 18.6% 18.3%
DCC Food & Beverage achieved modest growth of 1.6% in the year. The operating
profit growth, which was organic, on a constant currency basis was 1.7%.
In Ireland, good growth was achieved in healthfoods, principally driven by the
increased investment in the Kelkin brand, new product development and growth in
agency brands. Very good growth was also achieved in indulgence foods across its
core categories of coffee, speciality teas, snackfoods, wine, cakes and
confectionery.
The frozen and chilled logistics business was impacted by the start up costs of
a significant new contract and associated investment in new facilities.
Kylemore Foods Group, in which DCC has a 50% joint venture shareholding,
significantly enhanced shareholder value over the past year.
DCC Food & Beverage is budgeting for modest constant currency operating profit
growth in the current financial year.
DCC Environmental
2008 2007 Change on prior year
Constant
Reported Currency
Revenue E91.7m E66.5m +37.9% +41.0%
Operating profit E14.0m E10.4m +34.4% +37.6%
Operating margin 15.3% 15.7%
Return on capital employed
- excluding intangible assets 40.4% 38.5%
- including intangible assets 17.4% 17.9%
DCC Environmental achieved excellent profit growth of 34.4%. The operating
profit growth on a constant currency basis was 37.6%, of which organic growth
was approximately 18%.
William Tracey, in which DCC has a 50% shareholding, recorded excellent organic
growth and has continued to build on its position as Scotland's leading waste
management and recycling business.
Wastecycle, based in Nottingham, also achieved excellent organic profit growth
across all parts of its business.
Both William Tracey and Wastecycle have benefited from a focus on the continuous
increase in the proportion of waste recycled.
Enva, DCC's Irish Environmental business, achieved modest profit growth in the
year.
DCC Environmental is well positioned within attractive growth markets and is
budgeting for excellent constant currency operating profit growth in the current
financial year.
Annual Report and Annual General Meeting
DCC's 2008 Annual Report is expected to be posted to shareholders by 16 June
2008. The Company's Annual General Meeting will be held at 11:00 am on Friday 18
July 2008 in The Four Seasons Hotel, Simmonscourt Road, Ballsbridge, Dublin 4,
Ireland.
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 risks and uncertainties. DCC believes that
its expectations and assumptions with respect to these forward-looking
statements are reasonable. However, because they involve risk and uncertainty,
which are in some cases beyond DCC's control, actual results or performance may
differ materially from those expressed or implied by such forward-looking
information.
Presentation of results and dial-in facility
There will be a presentation of these results to analysts and investors/fund
managers in Dublin at 8:45 am today. The slides for this presentation can be
downloaded from DCC's website www.dcc.ie. A dial-in facility will be available
for this meeting:
Ireland: +353 1 242 1074
International: +44 20 8974 7940
Passcode: 132 043
This announcement and further information on DCC is available on the web at
www.dcc.ie
Group Income Statement
for the year ended 31 March 2008
2008 2007
Pre net exceptionals Net exceptionals Pre net exceptionals Net
(note 7) Total exceptionals Total
Notes E'000 E'000 E'000 E'000 E'000 E'000
Revenue 5 5,531,962 - 5,531,962 4,046,118 - 4,046,118
Cost of sales (4,940,247) - (4,940,247) (3,544,403) - (3,544,403)
Gross profit 591,715 - 591,715 501,715 - 501,715
Administration expenses (205,118) - (205,118) (181,363) - (181,363)
Selling and distribution expenses - (230,470) (186,599) - (186,599)
(230,470)
Other operating income 14,564 94,763 109,327 8,212 33,199 41,411
Other operating expenses (3,511) (55,158) (58,669) (1,881) (8,683) (10,564)
Operating profit before
amortisation of intangible assets 167,180 39,605 206,785 140,084 24,516 164,600
Amortisation of intangible assets (7,928) - (7,928) (6,660) - (6,660)
Operating profit 6 159,252 39,605 198,857 133,424 24,516 157,940
Finance costs (44,912) - (44,912) (31,338) - (31,338)
Finance income 27,120 - 27,120 20,488 - 20,488
Share of associates profit after tax - 639 14,710 - 14,710
639
Profit before tax 142,099 39,605 181,704 137,284 24,516 161,800
Income tax expense (14,774) (1,756) (16,530) (12,995) (7,700) (20,695)
Profit after tax for the financial year 127,325 37,849 165,174 124,289 16,816 141,105
Profit attributable to:
Equity holders of the Company 164,491 140,186
Minority interests 683 919
165,174 141,105
Earnings per ordinary share-
Basic 204.28c 174.59c
8
Diluted 8 200.31c 170.83c
Adjusted earnings per ordinary
share -
Basic 8 165.06c 160.02c
Diluted 8 161.85c 156.58c
Group Balance Sheet
as at 31 March 2008
2008 2007
Note E'000 E'000
ASSETS
Non-current assets
Property, plant and equipment 337,058 319,621
Intangible assets 416,883 321,369
Investments in associates 4,678 90,332
Deferred income tax assets 10,199 8,305
Derivative financial instruments 25,347 3,091
794,165 742,718
Current assets
Inventories 219,752 177,450
Trade and other receivables 807,433 597,257
Derivative financial instruments 1,523 51
Cash and cash equivalents 485,840 337,079
1,514,548 1,111,837
Total assets 2,308,713 1,854,555
EQUITY
Capital and reserves attributable to equity holders of the Company
Equity share capital 22,057 22,057
Share premium account 124,687 124,687
Other reserves - share options 6,651 4,807
Cash flow hedge reserve 222 (117)
Foreign currency translation reserve (67,224) (2,914)
Other reserves 1,400 1,400
Retained earnings 650,871 531,994
738,664 681,914
Minority interest 3,771 5,816
Total equity 10 742,435 687,730
LIABILITIES
Non-current liabilities
Borrowings 358,119 268,579
Derivative financial instruments 43,558 45,944
Deferred income tax liabilities 11,706 14,748
Retirement benefit obligations 21,851 16,372
Provisions for liabilities and charges 5,399 6,122
Deferred acquisition consideration 16,155 18,523
Government grants 1,941 2,393
Total non-current liabilities 458,729 372,681
Current liabilities
Trade and other payables 796,902 601,404
Current income tax liabilities 53,895 50,849
Borrowings 217,546 125,978
Derivative financial instruments 17,206 236
Provisions for liabilities and charges 7,964 4,807
Deferred acquisition consideration 14,036 10,870
Total current liabilities 1,107,549 794,144
Total liabilities 1,566,278 1,166,825
Total equity and liabilities 2,308,713 1,854,555
Net debt included above 11 (123,719) (100,516)
Group Cash Flow Statement
for the year ended 31 March 2008
2008 2007
More to follow, for following part double-click [nRn2S7225U]