REG-DCC PLC Interim Results - Part 1
Released: 10/11/2009
http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20091110:RnsJ2355C
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RNS Number : 2355C
DCC PLC
09 November 2009
10 November 2009
Interim Results for the Six Months ended 30 September 2009
RESULTS HIGHLIGHTS
E Change on prior year
Reported Constant currency+
Revenue 2,808.8m -11.6% -4.3%
Operating profit* 56.6m -6.7% +0.9%
Profit before net exceptional items, amortisation of +9.6%
intangible assets and tax 51.4m +1.6%
Adjusted earnings per share* 50.07 cent -8.7% -1.4%
Dividend per share 23.74 cent +5.0%
Free cash flow** 70.5m (2008: E67.7m)
Net debt 87.7m (2008: E193.2m)
+all constant currency figures quoted in this report are based on retranslating 2009/10 figures at prior year
translation rates
* excluding net exceptionals and amortisation of intangible assets
** after interest and tax payments
DCC, the business support services group, today announced its results for the
six months ended 30 September 2009.
Commenting on the results, Tommy Breen, Chief Executive said:
"DCC's operating profit increased by 0.9% on a constant currency basis and
profit before exceptional items, amortisation of intangible assets and tax
increased by 9.6%, also on a constant currency basis. This was achieved against
a backdrop of difficult economic and trading conditions and a comparative period
last year in which the Group achieved exceptionally strong operating profit
growth of 30.3% on a constant currency basis.
DCC Energy, DCC's largest division, achieved excellent operating profit growth
reflecting the successful integration of a number of recent acquisitions and
good cost management. DCC SerCom performed strongly driven by excellent results
in both its Retail and Reseller distribution businesses in Britain.
Cash generation in the Group was again very strong and helped drive a
significant reduction in net finance costs. As anticipated the Group's
effective tax rate has increased and adjusted earnings per share declined by
1.4% on a constant currency basis.
While the business environment remains uncertain, the Group now expects that
both operating profit and adjusted earnings per share, on a constant currency
basis, for the year to 31 March 2010 will be broadly in line with last year,
which is a modest improvement in the Group's expectation from the time of the
Interim Management Statement on 17 July 2009. However, the impact of the
translation into euro of the significant proportion of DCC's profit which is
earned in sterling at an average exchange rate of Stg£0.90 = E1 (compared to an
average translation rate last year of Stg£0.8262 = E1) would still result in
both reported operating profit and reported adjusted earnings per share being in
the range of 5% to 10% behind last year, which is in line with market
expectations.
DCC's continuing strong financial position, excellent cash generation and strong
market positions in its key developmental areas leave the Group well placed to
benefit from an increasing number of potential acquisition opportunities. In
particular, the scale of DCC's Energy distribution business and its strong
relationships with oil majors are providing a growing number of acquisition
opportunities, as evidenced by the acquisition of Shell's downstream oil
distribution business in Austria, announced today."
For reference, please contact:
Tommy Breen, Chief Executive Tel: +353 1 2799 400
Fergal O'Dwyer, Chief Financial Officer Email: investorrelations@dcc.ie
Conor Murphy, Investor Relations Manager www.dcc.ie
Interim Management Report
Results
A summary of the results for the six months ended 30 September 2009 is as
follows:
E'm Change on prior year
Constant
Reported currency+
2,808.8 -11.6% -4.3%
Revenue
Operating profit*
DCC Energy 25.2 +11.0% +22.9%
DCC SerCom 13.7 +1.5% +8.5%
DCC Healthcare 8.7 -11.7% -8.0%
DCC Environmental 4.7 -35.7% -28.9%
DCC Food & Beverage 4.3 -41.2% -40.6%
Group operating profit* 56.6 -6.7% +0.9%
Finance costs (net) (5.2) -49.1% -44.2%
Profit before net exceptionals, amortisation of intangible 51.4 +1.6% +9.6%
assets and tax
Exceptional charge (4.5)
Amortisation of intangible assets (2.6)
Profit before tax 44.3
Taxation (9.2)
Profit after tax 35.1
Adjusted earnings per share* 50.07 cent -8.7% -1.4%
Dividend per share 23.74 cent +5.0%
Operating cash flow 102.1m (2008: E110.7m)
Free cash flow** 70.5m (2008: E67.7m)
Net debt at 30 September 2009 87.7m (2008: E193.2m)
+ all constant currency figures quoted in this report are based on retranslating 2009/10 figures at prior year
translation rates
* excluding net exceptionals and amortisation of intangible assets
** after interest and tax payments
Revenue
Group revenue declined by 4.3% on a constant currency basis as a result of lower
underlying oil prices compared to the prior year, despite a 15% increase in
sales volumes in DCC Energy. Excluding DCC Energy, Group revenue was in line
with the prior year on a constant currency basis.
Operating profit performance
Group operating profit, on a constant currency basis, increased by 0.9%. This
was achieved against a backdrop of difficult economic and trading conditions and
a comparative period last year in which the Group achieved exceptionally strong
operating profit growth of 30.3% on a constant currency basis. DCC Energy,
DCC's largest division, achieved excellent operating profit growth reflecting
the successful integration of a number of recent acquisitions and good operating
cost management. DCC SerCom performed strongly, driven by excellent results in
both its Retail and Reseller distribution businesses in Britain. As
anticipated, DCC Healthcare, DCC Environmental and DCC Food & Beverage
experienced difficult trading conditions and, as a result, operating profit in
each of these businesses declined in the period.
The Group's focus on achieving cost efficiencies across all parts of its
operations has resulted in operating costs being 7% lower than in the six months
to 30 September 2008 (on a constant currency basis and adjusted for the impact
of acquisitions).
Approximately 73% of the Group's operating profit in the period was denominated
in sterling. The average exchange rate at which sterling profits were translated
during the period was Stg£0.8809 = E1, compared to an average translation rate
of Stg£0.7930 = E1 for the same period in the prior year, an adverse movement of
10%. The adverse translation impact on Group operating profit was E4.6 million,
resulting in an operating profit decline of 6.7% on a reported basis.
Finance costs (net)
Net finance costs for the period decreased significantly to E5.2 million (2008:
E10.2 million) primarily as a result of lower average net debt levels. The
Group's net debt averaged E118 million during the period, significantly lower
than the average of E238 million during the six months ended 30 September 2008.
Profit before net exceptionals, amortisation of intangible assets and tax
Profit before net exceptionals, amortisation of intangible assets and tax of
E51.4 million increased by 9.6% on a constant currency basis (an increase of
1.6% on a reported basis).
Exceptional charge and amortisation of intangible assets
The Group incurred a net exceptional charge before tax of E4.5 million, of which
approximately E2.4 million was incurred in relation to restructuring costs as a
result of the integration of recently acquired businesses and the implementation
of cost reduction programmes across the Group.
The charge for the amortisation of intangible assets decreased to E2.6 million
from E3.2 million.
Taxation
As anticipated, the effective tax rate for the Group increased and was 19%
compared to 11% for the six months ended 30 September 2008 and 13% for the full
year ended 31 March 2009. The increase is primarily due to lower available
interest deductions against the Group's taxable profits in the UK.
Adjusted earnings per share
Adjusted earnings per share decreased by 1.4% on a constant currency basis (a
decrease of 8.7% on a reported basis).
Interim dividend increase of 5.0%
The Board has decided to increase the interim dividend by 5.0% to 23.74 cent per
share. This dividend will be paid on 4 December 2009 to shareholders on the
register at the close of business on 20 November 2009.
Cash flow
The free cash flow of E70.5 million generated by the Group for the six months
ended 30 September 2009 can be summarised as follows:
2009 2009 2008 2008
E'm E'm E'm E'm
Operating profit 56.6 60.6
Decrease/(increase) in working capital
DCC Energy 42.9 45.6
DCC SerCom (25.1) (8.8)
DCC Healthcare (2.1) (9.2)
DCC Environmental (0.5) 3.0
DCC Food & Beverage 5.7 20.9 (1.5) 29.1
Depreciation and other 24.6 21.0
Operating cash flow 102.1 110.7
Capital expenditure (net) (19.1) (29.8)
Interest and tax paid (12.5) (13.2)
Free cash flow 70.5 67.7
Working capital days reduced to 10.0 from 11.9 at 31 March 2009 (13.6 at 30
September 2008). This decrease was driven by a reduction in debtor days to 36.8
from 41.3 at 31 March 2009.
Acquisition and Capital Expenditure
Acquisition and capital expenditure amounted to E38.7 million, as follows:
Acquisitions Capex Total
E'm E'm E'm
DCC Energy 16.6 8.9 25.5
DCC SerCom 2.5 2.5 5.0
DCC Healthcare 0.5 5.7 6.2
DCC Environmental - 1.7 1.7
DCC Food & Beverage - 0.3 0.3
Total 19.6 19.1 38.7
On 4 August 2009 DCC Energy expanded its oil distribution business into mainland
Europe through the completion of the acquisition (conditionally announced in May
2009) of Shell's oil distribution business in Denmark for a consideration of
E14.0 million. The business distributes heating oils and transport fuels to
domestic and small commercial and industrial customers throughout that country.
On 1 October 2009 DCC Energy acquired the Bayford Oil distribution business,
which operates from 14 locations principally in the North of England, for a
consideration of E24.7 million.
Today, DCC Energy has announced that it has reached conditional agreement for
the acquisition of Shell Direct Austria ("SDA"). SDA sells approximately 630
million litres of transport fuels and heating oils to approximately 60,000
customers throughout Austria. The business operates from 18 locations and has a
fleet of 55 trucks. DCC's investment in SDA on a cash free/debt free basis, net
of an adjustment for working capital, will be E18.3 million.
Capital expenditure of E19.1 million (2008: E29.8 million) includes an amount of
E3.9 million in respect of capacity expansion at one of DCC Healthcare's Health
& Beauty manufacturing facilities and compares to a depreciation charge of E21.5
million.
Financial Strength
DCC's financial position remains very strong. At 30 September 2009 the Group had
net debt of E87.7 million and total equity of E744.4 million. DCC has
significant cash resources and relatively long term debt maturities.
The Group's strong funding and liquidity position at 30 September 2009 can be
summarised as follows:
E'm E'm
Cash and short term bank deposits 446.4
Overdrafts (41.8)
Cash and cash equivalents 404.6
Bank debt repayable within 1 year (68.4)
USPrivate Placement debt repayable:
Y/e 31/3/2012 (5.1)
Y/e 31/3/2014 (60.9)
Y/e 31/3/2015 (164.4)
Y/e 31/3/2016 (14.0)
Y/e 31/3/2017 (36.8)
Y/e 31/3/2018 (51.3)
Y/e 31/3/2020 (86.9)
Other debt (4.5)
Debt (492.3)
Net debt (87.7)
Approximately 85% of the Group's gross debt has been raised in the US private
placement market with long term maturities.
Outlook
While the business environment remains uncertain, the Group now expects that
operating profit and adjusted earnings per share, on a constant currency basis,
in the year to 31 March 2010 will be broadly in line with last year, which is a
modest improvement in the Group's expectation from the time of the Interim
Management Statement on 17 July 2009. However, the impact of the translation
into euro of the significant proportion of DCC's profit which is earned in
sterling at an average exchange rate of Stg£0.90 = E1 (compared to an average
translation rate last year of Stg£0.8262 = E1) would still result in both
reported operating profit and reported adjusted earnings per share being in the
range of 5% to 10% behind last year, which is in line with market expectations.
DCC's continuing strong financial position, excellent cash generation and strong
market positions in its key developmental areas leave the Group well placed to
benefit from an increasing number of potential acquisition opportunities. In
particular, the scale of DCC's Energy distribution business and its strong
relationships with oil majors are providing a growing number of acquisition
opportunities, as evidenced by the acquisition of Shell's downstream oil
distribution business in Austria, announced today."
Operating review
DCC Energy Change on prior year
2009 2008 Reported Constant Currency
Revenue E1,788.2m E2,095.8m -14.7% -6.3%
Operating profit E25.2m E22.8m +11.0% +22.9%
DCC Energy's operating profit was 22.9% ahead of the prior year on a constant
currency basis. This was an excellent result considering the exceptionally
strong first half performance in the prior year when operating profit grew by
82.3% on a constant currency basis. The business benefited from a strong
performance in its LPG activities, a first time contribution and integration
benefits from recent acquisitions and good operating cost management.
DCC Energy sold 2.5 billion litres of product during the period, an increase of
15.1% on the first half of the prior year. Volumes were 8.4% behind the prior
period on an organic basis as the business was impacted by the much milder
weather in April compared to 2008, weaker demand due to the difficult economic
environment and a more cautious approach by management towards the extension of
credit.
The oil distribution business had a satisfactory performance and in Britain
continued to benefit from the integration and optimisation of recent
acquisitions. The British business has been further strengthened by the
acquisition of Bayford Oil which was completed on 1 October 2009. DCC is the
clear market leader in oil distribution in Britain with a market share of
approximately 13%.
On 4 August 2009 DCC completed the acquisition of Shell's oil distribution
business in Denmark. This was an important though modest first step for DCC in
developing its oil distribution business in continental Europe. The business
has performed in line with expectations to date. Today, DCC Energy has announced
that it has reached conditional agreement for the acquisition of Shell Direct
Austria ("SDA"). SDA sells approximately 630 million litres of transport fuels
and heating oils to approximately 60,000 customers throughout Austria. The
business operates from 18 locations and has a fleet of 55 trucks. DCC's
investment in SDA on a cash free/debt free basis, net of an adjustment for
working capital, will be E18.3 million.
The LPG distribution business generated excellent operating profit growth
benefiting from a more favourable product pricing environment during the
period.
The fuel card business had an excellent first half with good organic volume
growth and the contribution from the Cooke Fuel Card business which was acquired
in January 2009.
As DCC Energy enters the seasonally more significant second half of the year, it
now expects to achieve modest constant currency operating profit growth for the
full year.
DCC SerCom Change on prior year
2009 2008 Reported Constant Currency
Revenue E665.1m E694.3m -4.2% +1.4%
Operating profit E13.7m E13.5m +1.5% +8.5%
Operating margin 2.1% 1.9%
DCC SerCom achieved strong constant currency operating profit growth of 8.5%,
driven by the performances of the Retail and Reseller distribution businesses in
Britain.
DCC SerCom's Retail distribution business had a strong first half achieving
excellent operating profit growth. The business performed well in Britain,
increasing its share of the games market, increasing business with e-tail
customers, broadening its reach into the supermarket customer base and
benefiting from ongoing development of its own brand product range. The French
business performed well despite a weak consumer market over the summer months.
The Irish business, while operating in a very difficult retail environment, has
continued to grow its market share.
DCC SerCom's Reseller distribution business had an excellent first half
achieving significant operating profit growth. The business performed very well
in Britain during the period with strong market share gains. In addition the
business has expanded its customer base by providing solutions to the mobile
phone sector.
DCC SerCom's Enterprise distribution business had a difficult first half and
experienced a decline in operating profit. While market share was maintained,
demand for certain enterprise products declined significantly, impacting
profitability.
Operating profit declined in DCC SerCom's Supply Chain Management business,
reflecting the anticipated change in a major customer's procurement strategy.
This was exacerbated by general market conditions which resulted in reduced
demand from key customers.
For the year to 31 March 2010, DCC SerCom continues to anticipate that operating
profit will be broadly in line with the prior year on a constant currency basis.
DCC Healthcare Change on prior year
2009 2008 Reported Constant Currency
Revenue E163.8m E172.7m -5.2% +1.9%
Operating profit E8.7m E9.8m -11.7% -8.0%
Operating margin 5.3% 5.7%
In DCC Healthcare, Hospital Supplies & Services and Health & Beauty Solutions
performed well, however overall profits were held back by weak trading in its
Mobility & Rehab business.
DCC's Hospital Supplies & Services business achieved good operating profit
growth in the first half and benefited from cost reductions implemented last
year. In Ireland, the trading environment remains challenging as the Health
Service Executive's budgetary constraints have reduced demand, resulting in a
more competitive market. In Britain, DCC's value added distribution services
business grew its sales strongly through a further roll out of its services
within key customers. This business is continuing to invest in its operational
infrastructure to strengthen its ability to exploit the developing opportunities
in this sector.
DCC Health & Beauty Solutions grew its sales and profits in the first half.
Continued good sales and profit growth was generated in the nutraceuticals
sector, leveraging the expanded capacity in its facilities and good progress has
been made in technological development in the soft gel capsule area. Operating
profit from the beauty sector benefited from the recovery of prior year
increases in input costs and improved operational efficiency.
DCC Mobility & Rehab was impacted by weak market demand in Britain, in
particular for higher value products. The weaker trading environment also slowed
the recovery of margins which had been significantly impacted last year by the
devaluation of sterling. By the end of the first half of the financial year,
margins were substantially restored to historic levels. As planned, DCC
Healthcare closed its German subsidiary in July.
The trading environment for DCC Healthcare remains challenging given that the
majority of its revenues derive from public healthcare spending in Ireland and
Britain. However DCC Healthcare is significantly better placed than at this
time last year and continues to anticipate a profit recovery in the second half,
which would result in strong constant currency operating profit growth for the
year ending 31 March 2010.
DCC Environmental Change on prior year
2009 2008 Reported Constant Currency
Revenue E36.0m E47.3m -23.8% -17.7%
Operating profit E4.7m E7.3m -35.7% -28.9%
Operating margin 13.0% 15.4%
As anticipated, operating profit declined in DCC Environmental as the business
continued to be impacted by the slowdown in activity levels which had affected
the division in the second half of last year. Operating profit in the British
based businesses was modestly behind last year, but the Irish business was
severely impacted by a particularly challenging operating environment.
In Britain, whilst economic conditions remain challenging, the impact on the
business of the decline in waste volumes has been partially offset by attracting
new business and the investment in more efficient recycling technology, which
enabled the diversion of a greater proportion of waste from landfill.
In Ireland, the business experienced both a reduction in demand from customers
and considerable margin pressure. This is being addressed through a twin
approach of ongoing cost reductions and the development of innovative solutions
for hazardous waste management.
While trading is more difficult in Ireland than previously anticipated, trading
in Britain has been ahead of initial expectations. Although it is expected that
operating profit in the second half will be ahead of the same period last year,
DCC Environmental continues to anticipate a decline in constant currency
operating profit for the year to 31 March 2010.
DCC Food & Beverage Change on prior year
2009 2008 Reported Constant Currency
Revenue E155.7m E168.2m -7.5% -5.4%
Operating profit E4.3m E7.2m -41.2% -40.6%
Operating margin 2.7% 4.3%
As anticipated, operating profit in DCC Food & Beverage declined against a
backdrop of difficult economic and trading conditions in Ireland which have had
a significant impact on the business.
Consumers are spending less and seeking cheaper product offerings and this has
been exacerbated by the weakness in the sterling exchange rate which has led to
increased cross border shopping and the sourcing of product by a major retailer
directly from Britain. These factors have led to an increasingly competitive
trading environment, impacting both volumes and margin.
Cost reduction initiatives are being implemented across all areas but to date
these have only partly mitigated the impact of reduced sales and lower margins.
DCC Food & Beverage anticipates a continuation of the difficult trading
environment in the second half and a consequent decline in operating profit for
the year to 31 March 2010.
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.
Principal Risks and Uncertainties
The Board is responsible for the Group's risk management systems, which are
designed to identify, manage and mitigate potential material risks to the
achievement of the Group's strategic and business objectives. Details of the
principal strategic, operational, compliance and financial risks facing the
Group are set out on pages 46 to 47 of the 2009 Annual Report. These risks
continue to be the principal risks and uncertainties facing the Group for the
remaining six months of the financial year.
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: +1890 924780
International: +44 20 8974 7940
Passcode: 167 628
This announcement and further information on DCC is available at www.dcc.ie
Group Income Statement
Unaudited 6 months ended Unaudited 6 months ended Audited year ended
30 September 2009 30 September 2008 31 March 2009
Pre exceptionals Exceptionals Pre exceptionals Pre exceptionals
(note 5) Total Exceptionals Total Exceptionals Total
Notes E'000 E'000 E'000 E'000 E'000 E'000 E'000 E'000 E'000
Revenue 4 2,808,794 - 2,808,794 3,178,330 - 3,178,330 6,400,126 - 6,400,126
Cost of sales (2,522,068) - (2,522,068) (2,877,456) - (2,877,456) (5,735,419) - (5,735,419)
Gross profit 286,726 - 286,726 300,874 - 300,874 664,707 - 664,707
Administration expenses (114,487) - (114,487) (122,184) - (122,184) (244,227) - (244,227)
Selling and distribution expenses (118,208) - (118,208) (120,089) - (120,089) (252,307) - (252,307)
Other operating income 4,832 827 5,659 5,427 4,945 10,372 14,320 6,176 20,496
Other operating expenses (2,293) (3,272) (5,565) (3,424) (3,775) (7,199) (2,097) (26,015) (28,112)
Operating profit before amortisation of intangible assets
56,570 (2,445) 54,125 60,604 1,170 61,774 180,396 (19,839) 160,557
Amortisation of intangible assets (2,552) - (2,552) (3,245) - (3,245) (5,719) - (5,719)
Operating profit 4 54,018 (2,445) 51,573 57,359 1,170 58,529 174,677 (19,839) 154,838
Finance costs (9,203) (2,034) (11,237) (21,519) - (21,519) (41,262) - (41,262)
Finance income 4,019 - 4,019 11,328 - 11,328 20,152 3,919 24,071
Share of associates' (loss)/profit after tax (32) - (32) 127 - 127 168 - 168
Profit before tax 48,802 (4,479) 44,323 47,295 1,170 48,465 153,735 (15,920) 137,815
Income tax expense (9,253) - (9,253) (4,918) - (4,918) (19,436) (1,500) (20,936)
Profit after tax for
the financial period 39,549 (4,479) 35,070 42,377 1,170 43,547 134,299 (17,420) 116,879
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