Interim Results
DCC PLC
08 November 2004
Interim Results for the Six Months ended 30 September 2004
% change on prior year
------------------------
€ Reported Constant
currency*
Sales 1,149.0 m +17.8% +15.0%
Operating profit 46.0 m +11.8% +13.5%
Profit before net exceptional items,
goodwill amortisation and tax 43.8 m +13.0% +14.8%
Profit before tax 37.9 m +21.4% +23.7%
Adjusted earnings per share** 47.44 cent +17.7% +19.6%
Dividend per share 13.51 cent +15.0%
Net debt at 30 September 2004 24.9 m
* all constant currency figures quoted in this report are based on
retranslating current year figures at prior year translation rates
** excluding net exceptional items and goodwill amortisation
DCC, the business support services group, today announced its results for the
six months ended 30 September 2004.
Commenting on the results, DCC's Chief Executive/Deputy Chairman, Jim Flavin,
said:
'DCC achieved an excellent result in the first six months. Profit before
tax increased by 21.4% (up 23.7% on a constant currency basis). Profit
before net exceptional items, goodwill amortisation and tax increased by
13.0% (up 14.8% on a constant currency basis) driven by strong organic
profit growth in IT, Healthcare, Environmental and Homebuilding, and
acquisition growth in Food & Beverage. The Energy division experienced good
sales volume growth but the impact of increasing product prices had a short
term adverse impact on profitability. Benefiting from share buybacks,
adjusted earnings per share grew at a faster rate of 17.7% (up 19.6% on a
constant currency basis).
DCC's business is significantly second-half weighted and the Group expects
good profit growth for the year as a whole.'
For reference, please contact:
Jim Flavin, Chief Executive/Deputy Chairman Tel: +353 1 2799 400
Fergal O'Dwyer, Chief Financial Officer Email: investorrelations@dcc.ie
Kieran Conlon, Investor Relations Manager Web: www.dcc.ie
Excellent first-half growth
DCC achieved an excellent result in the first six months. Profit before tax
increased by 21.4% (up 23.7% on a constant currency basis). Profit before net
exceptional items, goodwill amortisation and tax increased by 13.0% (up 14.8% on
a constant currency basis) driven by strong organic profit growth in IT,
Healthcare, Environmental and Homebuilding, and acquisition growth in Food &
Beverage. The Energy division experienced good sales volume growth but the
impact of increasing product prices had a short term adverse impact on
profitability. Benefiting from share buybacks, adjusted earnings per share grew
at a faster rate of 17.7% (up 19.6% on a constant currency basis).
Divisional operating profit was as follows:
% change on prior year
-----------------------
€'m Reported Constant
currency*
Energy 10.2 -5.4% -3.6%
IT 13.0 +12.5% +15.5%
Healthcare 7.1 +10.0% +11.1%
Food & Beverage 5.8 +16.6% +17.3%
Environmental 2.7 +16.4% +19.1%
Other (Homebuilding and Supply Chain Management) 7.2 +41.3% +41.3%
------ ------ ------
Total 46.0 +11.8% +13.5%
------ ------ ------
The net interest charge for the period amounted to €2.2 million (2003: €2.4
million).
Acquisitions and Development
Acquisition and development expenditure in the period amounted to €81.0 million
of which €17.1 million related to capital expenditure. DCC's ongoing acquisition
programme has resulted in a number of acquisitions at a total committed cost of
€63.9 million. The cash impact of acquisitions in the period was €36.6 million.
As announced to the Stock Exchange on 1 November 2004, DCC's Energy division
completed the acquisition of the business of Shell Direct UK. The business
supplies heating oils and transport fuels to domestic, agricultural and small
commercial and industrial customers. While DCC anticipates that the business
will be modestly profitable in the first full year of ownership, it is expected
that the profit contribution from the business will significantly increase as
the benefits of DCC's specialist skills and experience in the oil marketing and
distribution sector flow through. The acquisition of Shell Direct UK extends
DCC's reach throughout Britain in the fragmented oil sales and marketing
business and provides an excellent infrastructure onto which DCC can add
complementary bolt-on acquisitions in the future. DCC is now the largest
independent oil marketing and distribution business in the British market.
DCC's Food & Beverage division completed the acquisition of Bottle Green
Limited, a UK based wine sales and marketing business with a 5% volume share of
the UK off trade wine market, and increased its shareholding from 51.5% to 100%
in Allied Foods Limited, a leading player in the Irish chilled and frozen
distribution market.
The Group is actively pursuing further acquisitions with a range of companies in
each of its divisions.
Share buybacks
DCC bought back a further 2,065,000 of its own shares (2.53% of listed share
capital) on 17 May 2004 at a price of €12.80 per share and at a total cost of
€26.8 million. DCC has bought back a total of 10.45% of its issued share capital
since July 2000 at an average price per share of €10.48 and at a total cost of
€97.7 million.
Financial strength
At 30 September 2004, the Group had net debt of €24.9 million and shareholders'
funds of €459.3 million. In line with normal seasonal trends, working capital
increased by €39.1 million since 31 March 2004 to €114.1 million, which equates
to 15.5 days sales and compares favourably with 17.0 days at 30 September 2003.
DCC's strong financial position leaves the Group well placed to pursue its
organic and acquisition growth objectives.
Dividend increase of 15%
The Board has decided to increase the interim dividend by 15% to 13.51 cent per
share. This dividend will be paid on 1 December 2004 to shareholders on the
register at the close of business on 19 November 2004.
Developments in Fyffes and Pihsiang legal actions
Following DCC's application to the High Court in Dublin in July 2004 to expedite
the hearing of the legal action against DCC and others initiated by Fyffes plc
in January 2002, the action is scheduled to be heard in the High Court in Dublin
commencing on 2 December 2004. The Board of DCC plc reiterates its view that the
legal action by Fyffes is wholly unjustified, totally inconsistent and utterly
without merit and it will be vigorously rebutted.
In October 2004 the Court of Appeal in London struck out the appeal by Pihsiang
Machinery Manufacturing Company, Donald Wu, its Chairman and major shareholder,
and Jenny Wu, his wife and Director (the Defendants), in relation to the London
High Court Judgment of 29 January 2004. The Defendants were held jointly and
severally liable for the payment to DCC's British based subsidiary, DMA, of
Stg£10.2 million in damages and interim costs of Stg£2.0 million. These amounts,
together with court awarded interest of 8% per annum, amount to Stg£13.0 million
(€18.6 million). Payment is still outstanding from the Defendants and DCC is
pursuing collection of all outstanding amounts by applying to the Taiwanese
courts for enforcement of the London High Court judgment.
During the period non-operating exceptional items comprising costs in relation
to these legal actions totalled €1.4 million. DCC has not recognised the
Pihsiang award in its accounts pending collection of the outstanding amount.
Outlook
DCC's business is significantly second-half weighted and the Group expects good
profit growth for the year as a whole.
Operating review
Energy % change
----------------------
Constant
2004 2003 Reported currency
Sales €461.7m €361.9m +27.6% +24.2%
Operating profit €10.2m €10.7m -5.4% -3.6%
DCC's Energy business achieved good sales volume growth in the seasonally
quieter first half. During the first half crude oil prices increased by 47% and
increased product costs had a short term adverse impact on profitability.
Good growth in LPG sales volumes was offset by reduced margins as sale price
increases lagged increasing product prices. In the oil business good sales and
profit growth was achieved.
DCC Energy is well placed to achieve a good result in the seasonally more
important second half.
IT % change
----------------------
Constant
2004 2003 Reported currency
Sales €412.4m €378.6m +8.9% +5.6%
Operating profit €13.0m €11.6m +12.5% +15.5%
Operating margin 3.2% 3.1%
DCC's IT business achieved an excellent first half result in a market that was
very challenging. The business recorded strong sales volume growth and, after
the impact of product sales price deflation, sales revenues grew by 5.6% on a
constant currency basis. Operating profit increased by 15.5% on a constant
currency basis benefiting from an improvement in the operating margin.
DCC's UK hardware distribution business performed well in the first half of the
year, driven by strong sales growth in digital imaging products and PCs.
DCC's UK software distribution business had an excellent first half performance,
with particularly strong growth in sales of security software and peripheral
products into the major retailers. The leisure business performed well, despite
the fact that there were no new major games releases in the period. The business
continued to broaden its product range in line with its strategy to be a
specialist distributor to the retail channel of software, peripherals and
consumer electronics.
DCC's Irish IT distribution business had a satisfactory first half performance
by leveraging its position as Ireland's leading IT distributor and its broad
range of suppliers and customers.
DCC's Continental European IT distribution business had a challenging first
half, particularly in the Spanish market. The European enterprise infrastructure
market was highly competitive. Strong volume growth was more than offset by
severe price deflation which, along with changes in the trading terms set by
some key suppliers, will have a more significant impact in the second half.
Healthcare % change
----------------------
Constant
2004 2003 Reported currency
Sales €81.1m €76.6m +5.8% +3.9%
Operating profit €7.1m €6.5m +10.0% +11.1%
Operating margin 8.8% 8.4%
DCC's healthcare business achieved good sales and profit growth and
strengthened its operations in all areas of its activities.
Within DCC's hospital and community care activities, sales of pharmaceutical
products continued to show good growth and the new pharmaceutical compounding
facility in Ireland commenced trading during the first half, enhancing the
service DCC provides to acute care hospitals. DCC Healthcare also expanded its
Irish sales force, further strengthening its position as the leading company in
hospital and community care supplies in Ireland. Good sales penetration was
achieved by DCC's own Strider range of electrically powered scooters in Britain.
Strong organic sales growth drove excellent profit growth in DCC's
nutraceuticals business. Following on from good business development in export
markets last year, during the first half the business won a number of important
new customers with strong domestic brands.
Food & Beverage % change
----------------------
Constant
2004 2003 Reported currency
Sales €111.6m €84.7m +31.7% +30.7%
Operating profit €5.8m €5.0m +16.6% +17.3%
Operating margin 5.2% 5.9%
DCC's Food & Beverage division achieved strong sales and profit growth due to
acquisition activity in the first half. Having regard to the slowdown in demand
across the Irish grocery and foodservice sectors good organic sales growth was
achieved particularly in health foods, but margins were generally under
pressure.
Environmental % change
----------------------
Constant
2004 2003 Reported currency
Sales €13.3m €13.4m -0.9% -1.9%
Operating profit €2.7m €2.3m +16.4% +19.1%
Operating margin 20.4% 17.4%
DCC's environmental business continued to achieve strong profit growth during
the period with operating profit increasing by 16.4% to €2.7 million. Good
results were achieved across the waste water, chemical and oil treatment
sectors.
DCC provides a broad range of services to industrial and commercial customers in
Ireland and is seeking opportunities for development in the British market as
environmental legislation is implemented and enforced.
Other (Homebuilding & Supply Chain Management) % change
-----------------------
Constant
2004 2003 Reported currency
Sales €69.0m €59.8m +15.3% +15.3%
Operating profit €7.2m €5.1m +41.3% +41.3%
Manor Park Homebuilders (a 49% owned associate company), which is a leading
Irish homebuilding company, contributed operating profit of €8.2 million (2003:
€6.1 million) from house, apartment and commercial development sales.
SerCom Solutions, the supply chain management business, had a similar
performance to the first half last year recording an operating loss of €1.0
million (2003: €1.0 million). The business continues to be focused on broadening
its customer base into new sectors and into selective geographical regions.
During the period the company was successful in winning new business in the US
and in Poland.
Note: All constant currency figures quoted in this report are based on
retranslating current year figures at prior year translation rates.
This announcement and further information on DCC is available on the web
at www.dcc.ie
Summarised Consolidated Profit and Loss Account
for the six months ended 30 September 2004
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2004 2003 2004
Notes €'000 €'000 €'000
Turnover 2 1,149,038 975,122 2,197,965
Operating profit before
operating exceptional items 3 46,012 41,164 120,876
Operating exceptional items 4 - 95 (2,288)
Operating profit 46,012 41,259 118,588
Net interest payable (2,167) (2,357) (4,802)
Profit on ordinary activities
before goodwill amortisation and
non-operating net exceptional items 43,845 38,902 113,786
Goodwill amortisation (4,583) (3,959) (8,282)
Non-operating
net exceptional items 4 (1,376) (3,726) (5,897)
Profit on ordinary activities
before taxation 37,886 31,217 99,607
Taxation (5,481) (4,851) (14,509)
Profit after taxation 32,405 26,366 85,098
Minority interests (442) (241) (771)
Profit attributable to
Group shareholders 31,963 26,125 84,327
Dividends 5 (10,379) (9,823) (26,572)
Profit retained for the period 21,584 16,302 57,755
Earnings per ordinary share
- basic (cent) 6 39.99c 31.24c 101.98c
- diluted (cent) 6 39.15c 30.87c 100.42c
Adjusted earnings per ordinary share
- basic (cent) 6 47.44c 40.32c 121.89c
- diluted (cent) 6 46.45c 39.84c 120.03c
Dividend per ordinary share (cent) 5 13.51c 11.75c 32.40c
Consolidated Balance Sheet
as at 30 September 2004
Unaudited Unaudited Audited
30 Sept. 30 Sept. 31 March
2004 2003 2004
Note €'000 €'000 €'000
Fixed Assets
Intangible assets - goodwill 164,506 130,543 129,566
Tangible fixed assets 222,952 205,152 212,252
Financial assets
- associated undertakings 53,686 44,329 53,780
441,144 380,024 395,598
Current Assets
Stocks 126,552 113,224 110,577
Debtors 358,428 286,636 330,385
Cash and term deposits 325,037 203,120 320,616
810,017 602,980 761,578
Creditors: Amounts falling due within
one year
Bank and other debt 28,222 58,653 143,732
Trade and other creditors 377,858 309,487 362,688
Corporation tax 36,611 30,102 36,077
Proposed dividend 10,802 9,823 16,824
453,493 408,065 559,321
Net Current Assets 356,524 194,915 202,257
Total Assets less Current Liabilities 797,668 574,939 597,855
FINANCED BY:
Creditors: Amounts falling due after
more than one year
Bank and other debt 16,254 19,310 16,555
Unsecured Notes due 2008/11/14/16 305,436 93,043 97,612
Deferred acquisition consideration 9,549 11,991 6,799
Capital grants 1,039 1,269 1,112
332,278 125,613 122,078
Provisions for Liabilities and Charges 1,932 2,518 2,084
334,210 128,131 124,162
Capital and Reserves
Equity share capital and share premium 146,473 146,479 146,473
Reserves 312,817 296,569 323,139
Equity Shareholders' Funds 459,290 443,048 469,612
Minority interests 4,168 3,760 4,081
463,458 446,808 473,693
797,668 574,939 597,855
Net (debt)/cash 7 (24,875) 32,114 62,717
Reconciliation of Movements in Equity Shareholders' Funds
for the six months ended 30 September 2004
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2004 2003 2004
€'000 €'000 €'000
Profit attributable to Group shareholders 31,963 26,125 84,327
Dividends (10,379) (9,823) (26,572)
Profit retained for the period 21,584 16,302 57,755
Share buyback (inclusive of costs) (26,762) (405) (24,986)
Equity share capital issued
(net of expenses) 3,842 119 1,122
Exchange adjustments (8,986) (2,247) 6,442
Net movement in shareholders' funds (10,322) 13,769 40,333
Opening shareholders' funds 469,612 429,279 429,279
Closing shareholders' funds 459,290 443,048 469,612
Consolidated Cash Flow Statement
for the six months ended 30 September 2004
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2004 2003 2004
Note €'000 €'000 €'000
Inflows
Operating cash flow (see below) 11,108 47,918 141,246
Share issues (net) 3,842 119 1,122
14,950 48,037 142,368
Outflows
Capital expenditure (net) 15,403 12,043 28,092
Acquisitions 36,614 4,452 14,308
Share buyback 26,762 405 24,986
Interest paid 832 1,924 3,609
Tax paid 3,845 2,452 5,295
Dividends paid 16,401 15,017 24,765
99,857 36,293 101,055
Net cash (outflow)/inflow (84,907) 11,744 41,313
Translation adjustment (2,685) 311 1,345
Movement in net cash for the period (87,592) 12,055 42,658
Opening net cash 62,717 20,059 20,059
Closing net (debt)/cash 7 (24,875) 32,114 62,717
Operating Cash Flow
for the six months ended 30 September 2004
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2004 2003 2004
€'000 €'000 €'000
Group operating profit 46,012 41,164 120,876
Operating profit of associated undertakings (9,486) (7,922) (19,201)
Dividends received from associated 428 2,442 3,094
undertakings
Depreciation of tangible fixed assets 15,507 14,358 29,401
(Increase)/decrease in working capital (39,089) 4,010 20,606
Other (1,743) (1,152) (2,860)
Operating cash flow before
exceptional costs 11,629 52,900 151,916
Exceptional redundancy and net
restructuring costs (521) (4,982) (10,670)
Operating cash flow after
exceptional costs 11,108 47,918 141,246
Notes to the Interim Results
for the six months ended 30 September 2004
1. Basis of Preparation
The interim financial statements for the six months ended 30 September 2004
have been prepared in accordance with the accounting policies set out in the
financial statements for the year ended 31 March 2004.
The interim financial statements for the six months ended 30 September 2004 and
the comparative figures for the six months ended 30 September 2003 are
unaudited. The summary financial statements for the year ended 31 March 2004
represent an abbreviated version of the Group's full accounts for that year, on
which the Auditors issued an unqualified audit report and which have been filed
with the Registrar of Companies.
The Group's financial statements are prepared in euro denoted by the symbol €.
The exchange rates used in translating sterling balance sheet and profit and
loss amounts were as follows:
6 months ended 6 months ended Year ended
30 Sept. 2004 30 Sept. 2003 31 March 2004
€1=Stg£ €1=Stg£ €1=Stg£
Balance sheet (closing rate) 0.687 0.699 0.666
Profit and loss (average rate)* 0.637 0.619 0.647
* Average exchange rate adjusted for the impact of profit and loss hedges
2. Turnover
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2004 2003 2004
€'000 €'000 €'000
Energy 461,661 361,895 841,344
IT 412,425 378,628 859,441
Healthcare 81,057 76,590 148,961
Food & Beverage 111,585 84,749 170,665
Environmental 13,322 13,438 24,131
Other (Homebuilding and Supply
Chain Management) 68,988 59,822 153,423
Turnover 1,149,038 975,122 2,197,965
Analysis of turnover by subsidiary
undertakings and associated undertakings:
Subsidiary undertakings 1,103,047 920,864 2,074,465
Associated undertakings 45,991 54,258 123,500
1,149,038 975,122 2,197,965
Of which acquisitions contributed 30,422 2,123 23,024
3. Operating Profit
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2004 2003 2004
€'000 €'000 €'000
Energy 10,110 10,684 45,791
IT 13,016 11,566 31,274
Healthcare 7,114 6,465 13,595
Food & Beverage 5,829 5,001 10,876
Environmental 2,716 2,333 5,044
Other (Homebuilding and Supply
Chain Management) 7,227 5,115 14,296
Group operating profit 46,012 41,164 120,876
Analysis of operating profit by subsidiary
undertakings and associated undertakings:
Subsidiary undertakings 36,526 33,242 101,675
Associated undertakings 9,486 7,922 19,201
Operating profit 46,012 41,164 120,876
Of which acquisitions contributed 1,319 - 168
4. Exceptional Items
Non-operating exceptional items totalled €1.376 million and relate to costs
incurred in respect of the Fyffes and Pihsiang legal actions.
5. Dividends
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2004 2003 2004
€'000 €'000 €'000
Interim dividend of 13.51 cent per share
(2003: 11.75 cent per share) 10,802 9,823 9,823
Proposed final dividend of 20.65
cent per share - - 16,824
Dividend attaching to shares
bought-back (423) - (75)
10,379 9,823 26,572
6. Earnings per Ordinary Share and Adjusted Earnings per Ordinary Share
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Sept. 30 Sept. 31 March
2004 2003 2004
€'000 €'000 €'000
Profit after taxation and minority
interests 31,963 26,125 84,327
Goodwill amortisation 4,583 3,959 8,282
Net exceptional items 1,376 3,631 8,185
Adjusted profit after taxation and
minority interests 37,922 33,715 100,794
Basic earnings per ordinary share cent cent cent
Basic earnings per ordinary share 39.99 31.24 101.98
Adjusted basic earnings per
ordinary share* 47.44 40.32 121.89
Weighted average number of ordinary shares
in issue during the period ('000) 79,932 83,618 82,690
Diluted earnings per ordinary share cent cent cent
Diluted earnings per ordinary share 39.15 30.87 100.42
Adjusted diluted earnings per
ordinary share* 46.45 39.84 120.03
Diluted weighted average number of
ordinary shares ('000) 81,635 84,627 83,974
*adjusted to exclude goodwill amortisation and net exceptional items.
7. Analysis of Net (Debt)/Cash
Unaudited Unaudited Audited
30 Sept. 30 Sept. 31 March
2004 2003 2004
€'000 €'000 €'000
Cash and term deposits 325,037 203,120 320,616
Bank and other debt repayable
within one year (28,222) (58,653) (143,732)
Bank and other debt repayable
after more than one year (16,254) (19,310) (16,555)
Unsecured Notes due 2008/11/14/16 (305,436) (93,043) (97,612)
Net (debt)/cash (24,875) 32,114 62,717
8. Distribution of Interim Report
This announcement and further information on DCC is available at the Company's
website at www.dcc.ie. A printed copy of this report is being posted to
shareholders and will be available to the public at the Company's registered
office at DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland.
This information is provided by RNS
The company news service from the London Stock Exchange
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