RNS Number : 4873Z
DCC PLC
16 May 2023
 


16 May 2023

Preliminary statement of results for the year ended 31 March 2023

DCC Delivers Strong Growth, Continued Development and Progress in Sustainability

· Strong growth in adjusted operating profit, up 11.3% (7.8% on a constant currency basis), ahead of market consensus expectations. Growth driven by DCC Energy and acquisitions completed in the current and prior year

· Free cash flow conversion of 87%, another year of very strong cash generation

· Propose to increase the total dividend for the year by 6.5%, DCC's 29th consecutive year of dividend growth

· Increased share of services and renewable operating profit within DCC Energy from 22% to 28% and reduced Scope 3 carbon emissions by 5.0%

· Committed £360 million to 19 acquisitions during the period, including DCC Healthcare's acquisition of Medi-Globe and DCC Energy's acquisition of PVO

· Notwithstanding the uncertain economic environment, DCC expects that the year ending 31 March 2024 will be another year of operating profit growth and continued development activity

Donal Murphy, Chief Executive, commented:

"DCC delivered strong growth in a volatile macro environment, demonstrating the resilience of our diverse business and the commitment of our teams throughout the Group. In line with our capital allocation priorities, we committed £360 million to new acquisitions during the period, bringing our spend in the last three years to £1.3 billion. This has increased our scale and geographic reach in the healthcare and technology sectors. We also accelerated DCC Energy's services and renewable offering through 10 acquisitions since we launched our 'Leading with Energy' strategy a year ago, complementing our organic initiatives to bring cleaner energy to our customers. We have exciting growth platforms to invest in what the world needs: cleaner and reliable energy, lifelong health and progressive technology."

Financial Highlights

2023

2022

% change

% change CC1

Revenue

£22.205bn

£17.732bn

+25.2%

+23.2%

Adjusted operating profit2

£655.7m

£589.2m

+11.3%

+7.8%

DCC Energy

£457.8m

£407.1m

+12.4%

+10.0%

DCC Healthcare

£91.8m

£100.4m

-8.6%

-11.1%

DCC Technology

£106.1m

£81.7m

+29.9%

+19.7%

Adjusted earnings per share2

456.3p

430.1p

+6.1%

+3.0%

Dividend per share

187.21p

175.78p

+6.5%

 

Free cash flow3

£570.4m

£382.6m


 

Return on capital employed4

15.1%

16.5%


 


Constant currency ('CC') represents the retranslation of foreign denominated current year results at prior year exchange rates

2 Excluding net exceptionals and amortisation of intangible assets

3 After net working capital and net capital expenditure and before net exceptionals, interest and tax payments

4 Excluding the impact of IFRS 16 Leases. Current year ROCE including the impact of IFRS 16 Leases is 14.2%

Contact information

Investor enquiries:


Kevin Lucey, Chief Financial Officer

Tel: +353 1 2799 400

Rossa White, Head of Group Investor Relations

Email: investorrelations@dcc.ie

Media enquiries:


Powerscourt (Eavan Gannon/Genevieve Ryan)

Tel: +44 20 7250 1446


Email: DCC@powerscourt-group.com

Presentation of results - video webcast and conference call details

Group and divisional management will host an in-person analyst presentation at the London Stock Exchange at 10.00 a.m. BST today. The presentation will also be made available via live video webcast and conference call. The access details are as follows:

Ireland:                +353 (0) 1 691 7842

UK:                       +44 (0) 20 3936 2999

International:     +44 (0) 20 3936 2999

Passcode:           684408 

Webcast link:     https://www.investis-live.com/dcc/642ec59263f9f8130091a0c1/tqiu

This report, presentation slides and a recording of the webcast will be made available at www.dcc.ie.

About DCC plc

DCC is a leading international sales, marketing and support services group. We provide solutions the world needs across three transformative sectors: energy, healthcare and technology; where we acquire, improve and grow diverse businesses. We bring our growth mindset to our businesses in 22 countries across four continents, empowering our 16,000 employees to create long term value - for our shareholders, customers, society and the planet.

 

Headquartered in Dublin, DCC plc is listed on the London Stock Exchange and is a constituent of the FTSE 100. In our financial year ended 31 March 2023, DCC generated revenues of £22.2 billion and adjusted operating profit of £655.7 million. DCC has an excellent record, delivering compound annual growth of 14% in adjusted operating profit and generating an average return on capital employed of approximately 19% over 29 years as a public company.

Follow us on LinkedIn, Twitter.

www.dcc.ie

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 & DIVISIONAL PERFORMANCE Review

A summary of the Group's results for the year ended 31 March 2023 is as follows:


 2023

£'m

 2022

£'m

 

% change

Revenue

22,205

17,732

+25.2%

Adjusted operating profit1




DCC Energy

457.8

407.1

+12.4%

DCC Healthcare

91.8

100.4

-8.6%

DCC Technology

106.1

81.7

+29.9%

Group adjusted operating profit1

655.7

589.2

+11.3%

Finance costs (net) and other

(81.4)

(53.8)


Profit before net exceptionals, amortisation of intangible assets and tax

574.3

535.4

+7.3%

Net exceptional charge before tax and non-controlling interests

(31.6)

(45.3)


Amortisation of intangible assets

(111.1)

(84.4)


Profit before tax

431.6

405.7

+6.4%

Taxation

(84.8)

(79.7)


Profit after tax

346.8

326.0


Non-controlling interests

(12.8)

(13.6)


Attributable profit

334.0

312.4


Adjusted earnings per share1

456.3p

430.1p

+6.1%

Dividend per share

187.21p

175.78p

+6.5%

Operating cash flow

785.5

560.6


Free cash flow2

570.4

382.6


Net debt at 31 March (excl. lease creditors)

(767.3)

(419.9)


Lease creditors

(346.6)

(336.7)


Net debt at 31 March (including lease creditors)

(1,113.9)

(756.6)


Total equity at 31 March

3,058.3

2,970.6


Return on capital employed (excl. IFRS 16)

15.1%

16.5%


Return on capital employed (incl. IFRS 16)

14.2%

15.3%



1 Excluding net exceptionals and amortisation of intangible assets

2 After net working capital and net capital expenditure and before net exceptionals, interest and tax payments


Income Statement Review

Group revenue

Group revenue increased by 25.2% (23.2% on a constant currency basis) to £22.2 billion, driven by the higher energy commodity prices that prevailed during the year and the impact that this had on DCC Energy's revenues.

Revenue in DCC Energy was £16.1 billion, an increase of 30.8% (29.8% on a constant currency basis). With like-for-like volumes modestly behind the prior year, the significant increase in revenue was as a result of the higher wholesale cost of energy commodities during the year.

DCC Healthcare recorded revenues of £821.5m, an increase of 7.4% (4.3% on a constant currency basis). The constant currency growth was driven by the acquisition of Medi-Globe during the second half of the year and organically revenues declined by 2.2%.

Revenue in DCC Technology was £5.3 billion, an increase of 13.3% (8.5% on a constant currency basis). The increase was driven by the acquisition of Almo which completed in December 2021. Organically revenue declined by 5.1%, reflecting weaker demand for consumer products in Europe.

Group adjusted operating profit

Group adjusted operating profit increased by 11.3% to £655.7 million. The impact on reported Group adjusted operating profit of foreign exchange (FX) translation, M&A growth and organic growth was as follows:

Period

FX translation

M&A

Organic

Reported growth

2023

+3.5%

+7.6%

+0.2%

11.3%

2022

-4.0%

+9.0%

+6.1%

11.1%

5-year average

-0.2%

+8.5%

+3.4%

11.8%

 

Average sterling exchange rates weakened against most relevant currencies during the year, including the US dollar and euro, a reversal of what was experienced in the prior year. The net impact of currency translation in the current year was a benefit of 3.5%, or £20.7 million, in the reported growth in adjusted operating profit.

Acquisitions completed in the prior year (most materially Almo) and in the current year (principally Medi-Globe and PVO) contributed 7.6% of the reported operating profit growth.

Set against very strong prior year comparatives, organic operating profit growth was modest, and was driven by the strong organic performance of DCC Energy. As reported during the year, DCC Healthcare and DCC Technology experienced more difficult market conditions and declined organically. The inflationary environment was a significant feature of the year across each division, with the overall organic profit growth achieved despite the 8.0% (or £130.2 million) increase in the Group's like for like overhead cost base. Further commentary on the trading performances of each of the three divisions is detailed below.



 

Divisional Performance Reviews

DCC Energy

2023

2022

% change

% change CC

Volumes (billion litre equivalent)1

15.5bn

15.9bn

-2.1%

 

Gross profit

£1.566bn

£1.356bn

+15.5%

+13.5%

Operating profit

£457.8m

£407.1m

+12.4%

+10.0%

Operating profit per litre

2.95ppl

2.57ppl


 

Return on capital employed excl. IFRS 16

19.0%

18.6%


 

Return on capital employed incl. IFRS 16

17.6%

17.1%


 

 

· Excellent trading performance, with operating profit increasing by 12.4% (10.0% constant currency). Both our Solutions and Mobility businesses recorded strong growth. Organic operating profit grew 8.3% and ROCE increased to 19.0%.

· Announced and implemented our 'Leading with Energy' strategy during the year. Fabian Ziegler joined as CEO on 1 November 2022 and new divisional and regional management organisation established.

· Completed 18 acquisitions during the period, most of which broaden our service and renewable offering for customers in line with strategy. Increased share of operating profit from Services and Renewables to 28%, up from 22% in the prior year, as a result of very strong organic profit growth and acquisition activity. Increased our operating profit to carbon emissions ratio by 18%, while lowering our Scope 3 customer emissions by 5.0%.

1 Billion litres equivalent provides a standard metric for the different products and solutions that DCC Energy sells. Metric tonnes and kilowatts of power are converted to litres. Separately, much of the services and renewables that DCC Energy provides do not have associated volumes such as solar installations, heat pump solutions, fleet services, energy efficiency services, lubricants and refrigerants.

DCC Energy Solutions

2023

2022

% change

% change CC

Volumes (billion litre equivalent)

10.9bn

11.2bn

-2.3%

 

Operating profit

£335.7m

£305.9m

+9.7%

+6.7%

Operating profit per litre

3.07ppl

2.74ppl


 

 

DCC Energy Solutions performed very well during the year and grew operating profit by 9.7% (6.7% constant currency). Half of the operating profit growth was organic, despite the pervasive inflationary cost pressures and the milder than average winter conditions, which impacted demand. There are four operating regions within DCC Energy Solutions: continental Europe, UK & Ireland, North America and the Nordic region. All regions performed strongly during the year.

In continental Europe, we recorded good profit growth and experienced robust demand from customers, despite high and volatile wholesale energy prices and the headwind of milder weather. Government efforts across the region to lower energy consumption, given energy security concerns, also influenced demand. In France, our business performed strongly, albeit it saw lower demand for lower carbon LPG, natural gas and power given the headwinds mentioned above. The business saw strong demand for solar solutions and completed further bolt-on acquisitions which have broadened regional coverage. The wholesale cost of natural gas and power was very volatile and made for a challenging trading environment in this segment, but the business managed this challenge very well. The Austrian business had an excellent year, where it benefited from good demand and our strong supply position.

We also delivered strong growth in the UK & Ireland. With weaker demand for traditional fuel products, the profit growth in the year was driven by good demand for our energy services and renewables (particularly in Ireland), as well as good demand for lower carbon products, such as LPG. We rolled out Hydrotreated Vegetable Oil (HVO) biofuel across our UK & Ireland fuel network and we are using the fuel to power our own truck fleet. This creates strong visibility with our own customers. Demand increased for HVO from customers across the UK & Ireland, including from large commercial customers such as data centres.

In North America we achieved strong profit growth during the year, despite the weather being warmer than average. We continued to invest in the operating and management infrastructure in the region. This will provide the capacity to further develop our presence in the region in the future.

In the Nordics, our business recorded good growth, driven by the provision of solutions to commercial and industrial customers. We delivered renewable Dimetyl Ether (rDME, a drop-in renewable replacement for LPG) to our first customers in the region during the year and our aviation business recovered as travel resumed. We continue to lead in the region in sustainable aviation fuel initiatives. 

DCC Energy Mobility

2023

2022

% change

% change CC

Volumes (billion litre equivalent)

4.6bn

4.7bn

-1.8%

 

Operating profit

£122.1m

£101.2m

+20.6%

+20.1%

Operating profit per litre

2.65ppl

2.16ppl


 

 

DCC Energy Mobility grew operating profit by 20.6% (20.1% constant currency), almost all of which was organic. There was significant volatility in the wholesale price of fuels in all markets during the year. We experienced supply disruption due to the energy crisis and industrial action at various refineries in France. Against this backdrop we continued to make good progress in adding further capability to the business, increasing our offerings in renewable fuels and fleet solutions and investing in locations where we see an EV charging opportunity.

In France, our business recorded strong profit growth. Volumes were robust, despite the market experiencing supply disruption through the year due to industrial unrest. We also fully integrated the adjacent Luxembourg network which has brought a strong convenience capability. Our business also had a very strong year in the UK market. We saw strong growth in demand for our range of HGV services, where we continue to expand our truck-stop network and grew our tech-enabled parking and services offering for customers. The company-owned and operated retail network in the UK also performed strongly and saw good growth in non-fuel income. In Scandinavia, we delivered a robust performance. Operating profit declined in Sweden, following a very strong performance in the prior year, but we saw good growth in Norway and a robust performance in Denmark. 

We continued our focus on organic development during the year to improve our offering to our retail and fleet customers. Our locations offering EV charging increased from 55 to 98. We continued to roll out biofuel at the pump for HGVs in the Nordics and we opened our first purpose-built mobility hub at Mandal in southern Norway.   

 

DCC Healthcare

2023

2022

% change

% change CC

Revenue

£821.5m

£765.2m

+7.4%

+4.3%

Gross profit

£220.3m

£207.0m

+6.4%

+3.8%

Operating profit

£91.8m

£100.4m

-8.6%

-11.1%

Operating margin

11.2%

13.1%



Return on capital employed excl. IFRS 16

13.0%

20.5%



Return on capital employed incl. IFRS 16

12.5%

19.2%



 

· Following excellent performance in recent years, more challenging year for DCC Healthcare. Operating profit declined by 8.6% (11.1% constant currency).

· Driven by significant customer and retailer destocking in DCC Health & Beauty Solutions, operating profit declined 18.7% organically. DCC Vital traded modestly ahead of expectations. DCC Healthcare operating profit was 11.3% ahead of FY20 organically.  

· Continued to make significant strategic progress during the year. DCC Vital's acquisition of Medi-Globe was the highlight and the division's largest to date. We also invested to grow organically across gummy and effervescent formats in DCC Health & Beauty Solutions. We are well positioned to resume our track record of growth. 

Divisional revenue

DCC Healthcare recorded revenues of £821.5 million, up 7.4% (4.3% constant currency). The constant currency growth was driven by the acquisition of Medi-Globe which completed in October 2022. Revenues declined by 2.2% organically, principally due to less demand for Covid related products in DCC Vital and lower demand from customers in DCC Health & Beauty Solutions. 

DCC Vital

DCC Vital performed robustly and in line with expectations during the year. The anticipated reduction in Covid-related sales was offset by a good trading performance across the business, particularly in our British medical devices and primary care operations. We ensured that rising product costs were recovered in the market.

Primary care recorded strong revenue and profit growth in both Britain and Germany. While patient visits to surgeries remain below pre-pandemic levels, activity continues to improve. In medical devices, underlying trading in recurring product sales was strong despite activity levels in the UK and Irish healthcare systems being constrained by staffing challenges. As expected, in medical devices we experienced less demand for Covid-related products. Following the expansion of our primary care business into continental Europe in 2020 through the acquisition of Wörner, our medical devices platform completed the material acquisition of Medi-Globe. Medi-Globe, headquartered in Germany, has a strong position in minimally invasive devices for gastroenterology and urology. It has performed in line with expectations since acquisition and the integration of the business is progressing well.

DCC Health & Beauty Solutions

DCC Health & Beauty Solutions experienced a very challenging year, following record organic growth in recent years. We entered the year with strong demand from customers, while managing labour and supply chain challenges. As the year progressed, demand from customers weakened substantially and our order books declined in the US and particularly in Europe. This was driven by destocking throughout the supply chain, with retailers and our customers seeking to reduce inventory levels, as experienced by the broader market. Despite this we recorded good sales growth in effervescent products for leading US nutritional brands. In recent months we have seen order books stabilise and expect that order books will grow as destocking unwinds during the year.

The nutrition market has been a long-term growth market and is projected to grow strongly in the future, benefiting from the secular trend of increasing consumer interest in improving health and wellbeing. We continue to invest in growing our capacity and capability and will have our gummy production commercialised in the US and Europe in the coming year. We are also expanding capacity in our effervescent facility, to ensure we can meet increasing customer demand for this product format. 

 

DCC Technology

2023

2022

% change

% change CC

Revenue

£5.264bn

£4.644bn

+13.3%

+8.5%

Gross profit

£618.4m

£474.5m

+30.3%

+24.9%

Operating profit

£106.1m

£81.7m

+29.9%

+19.7%

Operating margin

2.0%

1.8%


 

Return on capital employed excl. IFRS 16

8.7%

9.1%



Return on capital employed incl. IFRS 16

8.3%

8.5%



 

· Operating profit increased by 29.9% (19.7% constant currency), driven by the prior year acquisition of Almo. Almo performed in line with expectations in the second half of the year.

· Organic operating profit declined by 16.9%, driven by weak demand for consumer technology products, particularly in Europe. Demand for B2B technology products was generally robust. UK performance improved following a difficult prior year.

· North American Pro Tech (Pro Audio and AV) performed strongly. Successful integration in first quarter of recently acquired Almo's AV business with our existing US AV business has created the largest specialist AV distributor in the region.

Divisional revenue

DCC Technology recorded revenues of £5.264 billion, up 13.3% (8.5% constant currency), with the growth driven by the acquisition of Almo. Organically, revenues declined by 5.1% due to weak demand in Europe, including in the UK.

North America

In North America, we have a leading market position across the sales, marketing and distribution of 'Pro Tech' and 'Life Tech' technology products.

Our North American Pro Tech (Pro Audio and AV) operations grew strongly during the year. Business investment and demand for these products held up well, despite the inflationary environment and higher interest rates. We saw strong performances from the hospitality and entertainment sectors in particular. We integrated Almo's AV business with our existing business in the first quarter of FY23 without disruption to create the region's largest specialist distributor of AV equipment.

Performance of our Life Tech (lifestyle and home comfort technology) operations in the region was mixed. Premium appliance categories performed well, with good underlying demand. Consumers in this segment are less impacted by cost of living pressures. Demand for appliances, music and consumer products weakened as the year progressed, with softer consumer confidence impacting demand and dealers cautious with regards to their inventory holding. As previously reported, our online fulfilment segment within Almo, which provides Life Tech products to etailers and online services for traditional retailers, experienced reduced demand for air conditioning and other home comfort equipment during the first half of the financial year. We are focused on delivering increased contribution from this segment going forward. 

Europe

As in North America, performance in Europe was mixed. Our consumer-focused businesses in continental Europe experienced very weak demand during the year. The rise in the cost of living impacted consumer demand for technology products. As a result, we recorded revenue and operating profit declines. Conversely, our Pro Tech businesses in Europe performed well. There was good post-Covid recovery in our continental European AV business, with good growth in Germany and Italy and general B2B demand was robust.

Our business in Ireland performed well and recorded another year of good profit growth. In the UK we delivered an improved performance this year. Although the technology market in the UK was difficult, driven by a weak economic outlook and our UK revenues declined, the operational and cost performance of the business was much improved year on year following a very difficult prior year. Our UK business, which operates predominantly in the high volume, lower margin 'Info Tech' market, is well placed to continue to improve and is a key focus to drive an improvement in divisional return on capital employed (ROCE).  

 

Finance costs (net) and other

Net finance costs and other, which includes the Group's net financing costs, lease interest and the share of profit/loss of associated businesses, increased to £81.4 million (2022: £53.8 million). The increase in the year primarily reflects increased net financing costs due to higher average gross debt and the increasing interest rate environment.  

The Group's average gross debt (including private placement notes and the Group's revolving credit facility), increased versus the prior year, reflecting the substantial acquisition activity of the Group in the current and prior year and the weakening of sterling against the euro and US dollar. This accounted for approximately £11 million of the cost increase in the year.

The substantial change in the global interest rate environment from summer 2022 onwards impacted the cost of the floating rate element of the Group's gross debt, offset somewhat by an increased return on the Group's gross cash. During the year approximately 64% of the Group's gross debt was at floating rates. The net impact of the increased interest rate environment accounted for approximately £15 million. Presently, approximately 45% of the Group's gross debt is at floating rates.

Average net debt, excluding lease creditors, was £1.0 billion, compared to an average net debt of £428 million in the prior year, and reflects the very substantial acquisition activity during the prior and current years. Interest was covered 11.2 times1 by Group adjusted operating profit before depreciation and amortisation of intangible assets (2022: 16.1 times).

1 Using the definitions contained in the Group's lending agreements

Profit before net exceptional items, amortisation of intangible assets and tax

Profit before net exceptional items, amortisation of intangible assets and tax increased by 7.3% to £574.3 million. 

Net exceptional charge and amortisation of intangible assets 

The Group incurred a net exceptional charge after tax and non-controlling interests of £28.7 million (2022: net exceptional charge of £43.8 million) as follows:


£'m

Adjustments to contingent acquisition consideration

(8.5)

Restructuring and integration costs and other

(13.4)

Acquisition and related costs

(10.6)

IAS 39 mark-to-market gain

0.9

 

(31.6)

Tax and non-controlling interest attaching to exceptional items

2.9

Net exceptional charge

(28.7)

 

There was a net cash outflow of £23.8 million relating to exceptional items.

Adjustments to contingent acquisition consideration of £8.5 million reflects movements in provisions associated with the expected earn-out or other deferred arrangements that arise through the Group's corporate development activity. The charge in the year primarily reflects an increase in contingent consideration payable in respect of an acquisition in DCC Energy where the trading performance has been very strong and ahead of expectations.

Restructuring and integration costs and other of £13.4 million relates to the restructuring and integration of operations across a number of businesses and acquisitions. The significant items during the year were primarily within DCC Energy and include costs related to a realignment of the organisation structures in the UK and France to reflect acquisitions and the changing operational environment.

Acquisition and related costs include the professional fees and tax costs relating to the evaluation and completion of acquisition opportunities and amounted to £10.6 million.

The level of ineffectiveness calculated under IAS 39 on the hedging instruments related to the Group's US private placement debt is charged or credited as an exceptional item. In the year ended 31 March 2023, this amounted to an exceptional non-cash gain of £0.9 million. The cumulative net exceptional credit taken in respect IAS 39 ineffectiveness is £1.4 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 charge for the amortisation of acquisition-related intangible assets increased to £111.1 million from £84.4 million in the prior year reflecting acquisitions completed during the second half of the prior year and in the current year.

Profit before tax

Profit before tax increased by 6.4% to £431.6 million.

Taxation

The effective tax rate for the Group increased to 19.3% (2022: 18.3%). The Group's effective tax rate is influenced by the geographical mix of profits arising in any year and the tax rates attributable to the individual territories. The increase in the year was driven by the expansion of the Group in recent years into certain higher tax geographies and the increasing corporate tax rate environment generally. 

Adjusted earnings per share

Adjusted earnings per share increased by 6.1% (3.0% on a constant currency basis) to 456.3 pence, reflecting the increase in profit before exceptional items and goodwill amortisation.

Dividend

The Board is proposing a 6.0% increase in the final dividend to 127.17 pence per share, which, when added to the interim dividend of 60.04 pence per share, gives a total dividend for the year of 187.21 pence per share. This represents a 6.5% increase over the total prior year dividend of 175.78 pence per share. The dividend is covered 2.4 times by adjusted earnings per share (2022: 2.4 times). It is proposed to pay the final dividend on 20 July 2023 to shareholders on the register at the close of business on 26 May 2023. 

Over its 29 years as a listed company, DCC has an unbroken record of dividend growth at a compound annual rate of 13.5%.

Cash Flow, CAPITAL DEPLOYMENT & RETURNS AND CAPITAL EMPLOYED ("RocE")

Cash flow

The Group generated very strong operating and free cash flow during the year as set out below:

 

Year ended 31 March

2023

£'m

2022

£'m

Group operating profit

655.7

589.2

Increase in working capital

(14.0)

(168.7)

Depreciation (excluding ROU leased assets) and other

143.8

140.1

Operating cash flow (pre add-back for depreciation on ROU leased assets)

785.5

560.6

Capital expenditure (net)

(206.6)

(170.8)


578.9

389.8

Depreciation on ROU leased assets

75.2

67.8

Repayment of lease creditors

(83.7)

(75.0)

Free cash flow

570.4

382.6

Interest and tax paid, net of dividend from equity accounted investments

(155.0)

(114.2)

Free cash flow (after interest and tax)

415.4

268.4

Acquisitions

(340.5)

(720.1)

Dividends

(178.0)

(167.5)

Exceptional items/disposals

(23.8)

(29.5)

Share issues

0.3 

0.4 

Net outflow

(126.6)

(648.3)

 


 

Opening net debt

(756.6)

(150.2)

Translation and other

(230.7)

41.9

Closing net debt (including lease creditors)

(1,113.9)

(756.6)

 


 

Analysis of closing net debt (including lease creditors):


 

Net debt at 31 March (excluding lease creditors)

(767.3)

(419.9)

Lease creditors at 31 March

(346.6)

(336.7)

 

(1,113.9)

(756.6)





Free cash flow generation and conversion

The Group's free cash flow amounted to £570.4 million versus £382.6 million in the prior year. The conversion of adjusted operating profit into free cash flow was strong at 87%.

The material components of the conversion of adjusted operating profit to free cash flow are set out below.

Working Capital

There was a modest increase in working capital during the year of £14.0 million (2022: £168.7 million), a strong performance given the continued volatile supply chain environment. Working capital decreased in DCC Technology driven by a focus on reducing inventory levels through the year. This strong working capital performance in DCC Technology was achieved despite a decrease in the utilisation of supply chain financing as set out below. There was a net investment in working capital across both DCC Healthcare and DCC Energy. The prior year-end saw energy prices at an elevated position following the beginning of the conflict in Ukraine and so the fall in energy prices towards the end of this financial year led to an increase in working capital in DCC Energy as the division has a negative working capital profile.

DCC Technology selectively uses supply chain financing solutions to sell, on a non-recourse basis, a portion of its receivables relating to certain higher volume supply chain/sales and marketing activities. The level of supply chain financing at 31 March 2023 decreased by £16.9 million to £151.1 million (2022: £168.0 million). Supply chain financing had a positive impact on Group working capital days of 2.3 days (31 March 2022: 2.3 days).

The absolute value of working capital in the Group at 31 March 2023 was £274.4 million. Overall working capital days were 4.1 days sales, compared to 2.8 days sales in the prior year, reflecting the mix impact of acquisition activity during the year in DCC Energy and DCC Healthcare.

Net capital expenditure

As illustrated in the table below, net capital expenditure amounted to £206.6 million for the year (2022: £170.9 million) and was net of disposal proceeds of £22.6 million (2022: £23.5 million). The level of net capital expenditure reflects continued investment in organic initiatives across the Group, supporting the Group's continued growth and development. Net capital expenditure for the Group exceeded the depreciation charge of £144.4 million (excluding right-of-use leased assets) in the period by £62.1 million.



2023

£'m

2022

£'m

DCC Energy


173.1

135.8

DCC Healthcare


24.6

24.3

DCC Technology


8.9

10.8

Total


206.6

170.9

 

Capital expenditure in DCC Energy primarily comprised expenditure on tanks, cylinders, depot infrastructure and installations and the continued rollout of 'Click and Collect' services, supporting new and existing customers in Energy Solutions. There was also continued development spend in relation to the Avonmouth LPG storage facility in the UK which is now substantially complete and will be operational in the coming months. In Mobility, there was investment in retail sites and upgrades across the business, including adding further lower emission product capability such as EV fast charging and related services in the Nordics.

In DCC Healthcare, the capital expenditure primarily related to increased manufacturing capability and capacity across DCC Health & Beauty Solutions. The business has been investing in adding gummy capability in Europe and the US and will have commercial production in both regions in the coming financial year. In addition, the business has also been investing to increase capacity at its effervescent facility in Minnesota.

Capital expenditure in DCC Technology included a new fleet of electric forklift trucks in North America along with warehouse and IT developments across the division as part of the programme of continuous system improvement.

Total cash spend on acquisitions for the year ended 31 March 2023

The total cash spend on acquisitions in the year was £318.5 million. The spend primarily reflects acquisitions committed to and completed during the current year, but also includes DCC Energy's investment in Frijsenborg Biogas in Denmark and a small DCC Healthcare bolt-on in Germany which were announced in the prior year Results Announcement in May 2022. Payment of deferred and contingent acquisition consideration previously provided amounted to £22.0 million.

Committed acquisitions

DCC has committed £361.7 million to new acquisitions since the prior year Results Announcement. An analysis of these commitments by division is set out below:



2023

£'m

2022

£'m

DCC Energy


137.3

93.0

DCC Healthcare


224.4

10.1

DCC Technology


-

500.3

Total


361.7

603.4

 

As can be seen from the table above, DCC continues to be very active from a development perspective, committing approximately £360 million to 19 new acquisitions during the period. Recent acquisition activity of the Group includes:

DCC Healthcare

Medi-Globe

In October 2022, DCC Healthcare completed the acquisition of Medi-Globe Technologies GmbH ("Medi-Globe"), an international medical devices business focused on minimally invasive procedures. The acquisition was based on an enterprise value of approximately €245 million (£213 million) on a cash-free, debt-free basis.

Medi-Globe, founded in 1990, is involved in the development, manufacture and distribution of single-use devices for endoscopy in diagnostic and therapeutic procedures. The business has grown organically and through bolt-on acquisitions to become a leading global player in its focus areas of gastroenterology and urology. These are large and growing therapeutic areas, benefiting from strong demographic and treatment trends. Medi-Globe has revenues of approximately €120 million (£104 million) and employs approximately 600 people. Its products are sold to hospitals and procurement organisations in over 120 countries through direct sales operations in Germany, France, Austria, Netherlands, Czechia and Brazil, and an international network of distributors.

 

DCC Energy

Accelerating cleaner energy offerings

As set out in its 'Leading with Energy' strategy, DCC Energy has been adding complementary capabilities to accelerate the decarbonisation offering it has for customers. During the period DCC Energy completed 10 transactions which have contributed to this enhanced service offering and contribute to the increasing share of the division's profits which come from non-fossil energy products and services. The largest of these transactions was the acquisition of PVO, which is set out in further detail below. In addition, the division completed the following acquisitions: 

 

· In May 2023, DCC Energy completed the acquisitions of AEI, a leading solar installation and services business in Ireland, and Hafod Renewables, a supplier and installer of renewable energy sources in the UK and O'sitoit, a solar installer in central and eastern France.

· In February 2023, DCC Energy completed the acquisition of Søberg Energi in Denmark, a nationwide energy services business.

·  DCC Energy acquired solar installer Sys EnR in France in January 2023. Sys EnR provides design, construction and maintenance services for solar panel and solar thermal installations. 

·  In October 2022, DCC Energy completed the acquisition of Freedom Heat Pumps, a distributor of air source heat pumps and accessories in the UK.

·  In June 2022, DCC Energy acquired Protech Group, which provides a range of renewable and energy efficient heating solutions to commercial and industrial customers across the UK.

PVO

In November 2022, DCC completed the acquisition of PVO International BV ("PVO"), a leading distributor of solar panels, invertors, batteries and accessories used in the commercial, industrial and domestic energy sectors across continental Europe. PVO was established in 2014 and has grown rapidly to become one of the leading solar solutions suppliers in Europe, with a market-leading position in the Benelux, and growing positions in eight other European countries including Germany, Poland and Finland. The business is headquartered in Rosmalen, the Netherlands, and employs approximately 50 people. PVO is an excellent strategic fit for DCC. It will leverage PVO's established market position in the fast-growing solar PV market and DCC Energy's knowledge and experience in transitioning customers to cleaner energy products and services including solar solutions. The majority of the consideration for PVO was payable in cash on completion, followed by earn out payments over three years based on PVO's future trading.

 DCC Energy bolt-ons

DCC Energy also completed a number of small complementary bolt-on acquisitions in the period in Norway, Denmark, Germany and Sweden as well as a lubricants business in Ireland.

 

Return on capital employed

The creation of shareholder value through the delivery of consistent, sustainable 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:


2023

excl. IFRS 16

2022

excl. IFRS 16

2023

incl. IFRS 16

2022

incl. IFRS 16


DCC Energy

19.0%

18.6%

17.6%

17.1%

DCC Healthcare

13.0%

20.5%

12.5%

19.2%

DCC Technology

8.7%

9.1%

8.3%

8.5%

Group

15.1%

16.5%

14.2%

15.3%

 

The Group continued to generate strong returns on capital employed, notwithstanding the substantial increase in the scale of the Group in recent years. The decrease in return on capital employed versus the prior year primarily reflects the substantial acquisition spend during the prior and current years of a cumulative £1.1 billion, primarily in DCC Healthcare and DCC Technology, which had a dilutive impact on Group returns. In the current year it also reflects the organic decline in operating profit in DCC Healthcare and DCC Technology, which we expect will recover in the coming years.

Financial strength

DCC has always maintained a strong balance sheet and it remains an important enabler of the Group's strategy. A strong balance sheet provides many strategic and commercial benefits, including enabling DCC to take advantage of acquisitive or organic development opportunities as they arise. At 31 March 2023, the Group had net debt (including lease creditors) of £1.1 billion, net debt (excluding lease creditors) of £767.3 million, cash resources (net of overdrafts) of £1.4 billion and total equity of £3.1 billion.

Substantially all of the Group's term debt has been raised in the US private placement market and has an average maturity of 5.0 years. Post the year-end, in April 2023, DCC repaid £223.3 million of maturing US private placement notes.

Sustainability

DCC's ambition is to reduce the carbon intensity of the Group and to make progress across four sustainability pillars: climate change and energy transition, safety and environmental protection, people and social, and governance and compliance.  

Last year, the Group set a revised increased target to reduce Scope 1 and 2 carbon emissions by 50% by 2030, having achieved the previous interim target ahead of expectations. During the current year DCC lowered its Scope 1 and 2 emissions by 9.3%.  

The vast majority of the Group's Scope 3 carbon emissions derive from DCC Energy's sales of products to customers. In the year, DCC Energy reduced these emissions by 5.0%. DCC's progress towards net zero has been rewarded by CDP with an improved B rating for the Group.

Related to Scope 3, the Group increased the renewable content of energy supplied to customers (in GigaJoules (GJ)) to 6.3%, up from 4.0% in 2022 and 3.2% in 2019. This figure is a subset of the very low or zero carbon sales of the Group.

DCC Energy's operating profit share of services and renewables (with less than 10kg of CO2e per GJ sold) increased by six percentage points to 28% from 22% in 2022. This broader category adds operating profit from services such as solar installations and other very low or zero carbon services to DCC Energy's profit from sales of renewable energy (viz. 6.3% GJ share above). Due to strong growth in operating profit and the 5.0% decline in Scope 3 carbon emissions, DCC Energy's operating profit to carbon ratio increased by 18%.

Looking at sustainability beyond climate change and energy transition, DCC retained an AAA rating from MSCI, remaining among the top 10% of peer companies.


 

2023

 

2022

%

change

% change vs.

2019 baseline

Scope 1 & 2 carbon emissions

(mtCO2e, Group)

0.078

0.086

-9.3%

-32.8%

Customer Scope 3 carbon emissions

(mtCO2e, DCC Energy)

39.1

41.2

-5.0%

-5.9%

Renewable share of energy sold (GJ)

6.3%

4.0%



Annual General Meeting

The Company's Annual General Meeting will be held at 2.00pm on Thursday 13 July 2023 at the Powerscourt Hotel, Powerscourt Estate, Enniskerry, Co. Wicklow, A98 DR12.

 



Group Income Statement

For the year ended 31 March 2023

 


 


2023




2022


 


 

Pre

Exceptionals



Pre

Exceptionals


 


 

exceptionals

(note 5)

Total


exceptionals

(note 5)

Total

 


Note

£'000

£'000

£'000


£'000

£'000

£'000

 

Revenue 

       4

     22,204,846

-

22,204,846


17,732,020

-

17,732,020

 

Cost of sales


(19,800,114)

-

(19,800,114)


(15,694,347)

-

(15,694,347)

 

Gross profit


2,404,732

-

2,404,732


2,037,673

-

2,037,673

 

Administration expenses


(629,510)

-

(629,510)


(517,128)

-

(517,128)

 

Selling and distribution expenses

(1,157,642)

-

(1,157,642)


(965,489)

-

(965,489)

 

Other operating income/(expenses)

38,082

(32,528)

5,554


34,178

(46,534)

(12,356)

 

Adjusted operating profit

655,662

(32,528)

623,134


589,234

(46,534)

542,700

 

Amortisation of intangible assets

(111,146)

-

(111,146)


(84,340)

-

(84,340)

 

Operating profit

4

544,516

(32,528)

511,988


504,894

(46,534)

458,360

 

Finance costs


(96,735)

-

(96,735)


(77,205)

-

(77,205)

 

Finance income


16,111

892

17,003


23,075

1,192

24,267

 

Share of equity accounted investments' (loss)/profit after tax

 

(692)

 

-

 

(692)


 

314

 

-

 

314

 

Profit before tax


463,200

(31,636)

431,564


451,078

(45,342)

405,736

 

Income tax expense


(87,526)

2,764

(84,762)


(81,235)

1,501

(79,734)

 

Profit after tax for the financial year


 

375,674

 

(28,872)

 

346,802


 

369,843

 

(43,841)

 

326,002

 










 

Profit attributable to:









 

Owners of the Parent


362,683

(28,661)

334,022


356,214

(43,841)

312,373

 

Non-controlling interests


12,991

(211)

12,780


13,629

-

13,629

 



375,674

(28,872)

346,802


369,843

(43,841)

326,002

 

 

Earnings per ordinary share








 

Basic earnings per share

6



338.40p




316.78p

 

Diluted earnings per share

6



338.04p




316.36p

 

Basic adjusted earnings per share

6



456.27p




430.11p

Diluted adjusted earnings per share

6



455.79p




429.55p

 





















 



 

Group Statement of Comprehensive Income

For the year ended 31 March 2023




2023

£'000


2022

£'000

Group profit for the financial year




346,802


326,002








Other comprehensive income:






Items that may be reclassified subsequently to profit or loss

Currency translation




43,280


26,549

Movements relating to cash flow hedges




(164,422)


88,776

Movement in deferred tax liability on cash flow hedges



30,374


(16,138)




(90,768)


99,187

Items that will not be reclassified to profit or loss






Group defined benefit pension obligations:






- remeasurements



2,811


(748)

- movement in deferred tax asset



(800)


210




2,011


(538)







Other comprehensive income for the financial year, net of tax


(88,757)


98,649








Total comprehensive income for the financial year




258,045


424,651








Attributable to:







Owners of the Parent




243,242


411,485

Non-controlling interests




14,803


13,166












258,045


424,651



Group Balance Sheet

As at 31 March 2023



Note


2023

£'000


2022

£'000

ASSETS







Non-current assets







Property, plant and equipment




1,354,806


1,253,349

Right-of-use leased assets




336,221


327,551

Intangible assets and goodwill




2,957,629


2,634,449

Equity accounted investments




47,789


26,843

Deferred income tax assets




69,053


54,494

Derivative financial instruments


9

 

89,199


118,578




 

4,854,697


4,415,264

Current assets



 




Inventories



 

1,192,803


1,133,666

Trade and other receivables



 

2,312,269


2,508,613

Derivative financial instruments


9

 

59,258


107,361

Cash and cash equivalents


9

 

1,421,749


1,394,272





4,986,079


5,143,912

Total assets




9,840,776


9,559,176








EQUITY







Capital and reserves attributable to owners of the Parent





Share capital




17,422

 

17,422

Share premium




883,669

 

883,321

Share based payment reserve


8


54,596

 

47,436

Cash flow hedge reserve


8


(48,280)

 

85,768

Foreign currency translation reserve


8


128,529

 

87,272

Other reserves


8


932

 

932

Retained earnings


 


1,941,223

 

1,783,033

Equity attributable to owners of the Parent


 


2,978,091

 

2,905,184

Non-controlling interests


 


80,219

 

65,379

Total equity


 


3,058,310

 

2,970,563



 





LIABILITIES


 





Non-current liabilities


 





Borrowings


9


1,933,759


1,933,482

Lease creditors


9


275,388


273,164

Derivative financial instruments


9


40,585


10,330

Deferred income tax liabilities


 


263,623


259,796

Post employment benefit obligations


10


(11,721)


(7,745)

Provisions for liabilities


 


301,067


284,191

Acquisition related liabilities


 


86,172


72,650

Government grants


 


446


356



 


2,889,319


2,826,224



 





Current liabilities


 





Trade and other payables


 


3,279,898


3,468,705

Current income tax liabilities


 


85,324


59,963

Borrowings


 


320,856


67,668

Lease creditors


9


71,158


63,538

Derivative financial instruments


9


42,341


28,634

Provisions for liabilities


 


52,349


50,279

Acquisition related liabilities


 


41,221


23,602



 


3,893,147


3,762,389

Total liabilities


 


6,782,466


6,588,613

Total equity and liabilities


 


9,840,776


9,559,176

 


 





Net debt included above (excluding lease creditors)


9


(767,335)


(419,903)



Group Statement of Changes in Equity

For the year ended 31 March 2023


Attributable to owners of the Parent




Share

capital

£'000

Share

premium

£'000

Retained

earnings

£'000

Other

reserves

(note 8)

£'000

Total

£'000

Non-

controlling

interests

£'000

Total

equity

£'000

At 1 April 2022

17,422

883,321

1,783,033

221,408

2,905,184

65,379

2,970,563

Profit for the financial year

-

-

334,022

-

334,022

12,780

346,802









Other comprehensive income:








Currency translation

-

-

-

41,257

41,257

2,023

43,280

Group defined benefit pension obligations:

   

   

   


   



- remeasurements

-

-

2,811

-

2,811

-

2,811

- movement in deferred tax asset

-

-

(800)

-

(800)

-

(800)

Movements relating to cash flow hedges

-

-

-

(164,422)

(164,422)

-

(164,422)

Movement in deferred tax liability on
cash flow hedges

-

-

-

30,374

30,374

-

30,374

Total comprehensive income

-

-

336,033

(92,791)

243,242

14,803

258,045









Re-issue of treasury shares

-

348

-

-

348

-

348

Share based payment

-

-

-

7,160

7,160

-

7,160

Dividends

-

-

(177,843)

-

(177,843)

(129)

(177,972)

Non-controlling interest arising on acquisition

    -

-

-

-

-

    166

    166









At 31 March 2023

17,422

883,669

1,941,223

135,777

2,978,091

80,219

3,058,310











 











 

Group Statement of Changes in Equity

For the year ended 31 March 2022


Attributable to owners of the Parent




Share

capital

£'000

Share

premium

£'000

Retained

earnings

£'000

Other

reserves

(note 8)

£'000

Total

£'000

Non-

controlling

interests

£'000

Total

equity

£'000

At 1 April 2021

17,422

882,924

1,631,797

115,291

2,647,434

58,210

2,705,644

Profit for the financial year

-

-

    312,373

    -

    312,373

    13,629

    326,002









Other comprehensive income:








Currency translation

    -

    -

-

    27,012

    27,012

    (463)

    26,549

Group defined benefit pension obligations:

   

   

   


   



- remeasurements

    -

-

    (748)

-

    (748)

-

    (748)

- movement in deferred tax asset

    -

-

    210

    -

    210

-

    210

Movements relating to cash flow hedges

    -

-

-

    88,776

    88,776

-

    88,776

Movement in deferred tax liability on
cash flow hedges

    -

-

-

    (16,138)

    (16,138)

-

    (16,138)

Total comprehensive income

    -

-

     311,835

    99,650

    411,485

    13,166

    424,651









Re-issue of treasury shares

    -

397

-

-

    397

-

    397

Share based payment

    -

-

-

    6,467

    6,467

-

    6,467

Dividends

    -

-

    (160,599)

-

    (160,599)

    (6,909)

(167,508)

Non-controlling interest arising on acquisition

    -

-

-

-

-

912

912









At 31 March 2022

17,422

883,321

1,783,033

221,408

2,905,184

65,379

2,970,563











 



 

Group Cash Flow Statement

For the year ended 31 March 2023





2023


2022



Note


£'000


£'000

Cash flows from operating activities







Profit for the financial year




346,802

 

326,002

Add back non-operating expenses/(income):





 


- tax




84,762

 

79,734

- share of equity accounted investments' loss/(profit)




692

 

(314)

- net operating exceptionals




32,528

 

46,534

- net finance costs




79,732

 

52,938

Group operating profit before exceptionals




544,516

 

504,894

Share-based payments expense




7,160

 

6,467

Depreciation (including right-of-use leased assets)




219,681

 

205,780

Amortisation of intangible assets




111,146

 

84,340

Profit on disposal of property, plant and equipment




(12,346)

 

(8,916)

Amortisation of government grants




(114)

 

(20)

Other




4,654

 

4,614

Increase in working capital




(13,951)

 

(168,726)

Cash generated from operations before exceptionals




860,746

 

628,433

Exceptionals




(23,780)

 

(30,270)

Cash generated from operations




836,966

 

598,163

Interest paid (including lease interest)




(82,576)

 

(70,103)

Income tax paid




(97,485)

 

(76,292)

Net cash flows from operating activities




656,905

 

451,768








Investing activities







Inflows:







Proceeds from disposal of property, plant and equipment




22,643

 

23,524

Government grants received in relation to property, plant and equipment


216

 

-

Disposal of equity accounted investments




-

 

772

Interest received




15,535

 

22,759





38,394

 

47,055

Outflows:







Purchase of property, plant and equipment




(229,440)

 

(194,353)

Acquisition of subsidiaries


11


(318,486)

 

(668,123)

Payment of accrued acquisition related liabilities




(21,987)

 

(52,006)





(569,913)

 

(914,482)

Net cash flows from investing activities




(531,519)

 

(867,427)








Financing activities







Inflows:







Proceeds from issue of shares




348

 

397

Net cash inflow on derivative financial instruments




-

 

30,936

Increase in interest-bearing loans and borrowings




603,054

 

372,426





603,402

 

403,759

Outflows:







Repayment of interest-bearing loans and borrowings




(393,469)

 

(149,182)

Net cash outflow on derivative financial instruments




(57,902)

 

-

Repayment of lease creditors




(74,219)

 

(65,580)

Dividends paid to owners of the Parent


7


(177,843)

 

(160,599)

Dividends paid to non-controlling interests




(129)

 

(6,909)





(703,562)

 

(382,270)

Net cash flows from financing activities




(100,160)

 

21,489






 


Change in cash and cash equivalents




25,226

 

(394,170)

Translation adjustment




19,376

 

3,878

Cash and cash equivalents at beginning of year




1,326,604

 

1,716,896

Cash and cash equivalents at end of year




1,371,206

 

1,326,604








Cash and cash equivalents consists of:







Cash and short-term bank deposits




1,421,749


1,394,272

Overdrafts




(50,543)


(67,668)





1,371,206


1,326,604



Notes to the Condensed Financial Statements

For the year ended 31 March 2023

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 2023 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 2023 and their report was unqualified. The financial information for the year ended 31 March 2022 represents an abbreviated 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 the year ended 31 March 2023.

2. Accounting Policies

The following changes to IFRS became effective for the Group during the year but did not result in material changes to the Group's consolidated financial statements:

· Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16

· Onerous Contracts - Cost of Fulfilling a Contract - Amendments to IAS 37

· Annual Improvements to IFRS Standards 2018-2020

· Reference to the Conceptual Framework - Amendments to IFRS 3

Standards, interpretations and amendments to published standards that are not yet effective

The Group has not applied certain new standards, amendments and interpretations to existing standards that have been issued but are not yet effective. These include:

· Presentation of Financial Statements - Disclosure of Accounting Policies (Amendments to IAS 1)

· Definition of Accounting Estimates (Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates & Errors)

· Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

· Leases - lease liability in a sale and leaseback (Amendments to IFRS 16)

· Initial Application of IFRS 17 and IFRS 9 (Amendments to IFRS 17 Insurance Contracts)

· IFRS 17 Insurance Contracts

The impact of these new standards is not expected to result in net 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


2023

Stg£1=

2022

Stg£1=

2023

Stg£1=

2022

Stg£1=

Euro

1.1597

1.1750

1.1374

1.1820

Danish krone

8.6304

8.7400

8.4719

8.7918

Swedish krona

12.4772

12.0190

12.8304

12.2187

Norwegian krone

11.8985

11.8654

12.9595

11.4787

US dollar

1.2101

1.3694

1.2369

1.3122

Hong Kong dollar

9.4837

10.6580

9.7096

10.2740

4. Segmental Reporting

DCC is an 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 ('CODM'). The CODM has been identified as Mr. Donal Murphy, Chief Executive and his executive management team.

As disclosed on pages 22 to 27 of the Group's 2022 Annual Report, the Group has organised all its energy activities (previously DCC LPG and DCC Retail & Oil) into one division, DCC Energy, with effect from 1 April 2022. The CODM assesses performance and makes decisions on the allocation of resources based on the financial information of DCC Energy which is considered to be one segment based on the Group's management structure and the internal reporting of financial information. Consequently, the Group now reports DCC Energy as a separate segment and comparative segmental data has been restated. The adjusted operating profit of Energy Solutions represents approximately 73% of the segment's adjusted operating profit in the current year and Energy Mobility represents approximately 27%.

The Group is organised into three operating segments (as identified under IFRS 8 Operating Segments) and generates revenue through the following activities:

DCC Energy comprises Energy Solutions and Energy Mobility. The Energy Solutions business is focused on reducing the complexity of energy transition and delivering affordable energy solutions. The Energy Mobility business is focused on developing multi-energy networks and services for people and businesses on the move. DCC Energy is accelerating the net zero journey of energy consumers by leading the sales, marketing and distribution of low carbon energy solutions.

DCC Healthcare is a leading healthcare business, providing products and services to health and beauty brand owners and healthcare providers.

DCC Technology is a leading route-to-market and supply chain partner for global technology brands and customers. DCC Technology provides a broad range of consumer, business and enterprise technology products and services to retailers, resellers and integrators and domestic appliances and lifestyle products to retailers and consumers.

The chief operating decision maker monitors the operating results of segments separately to allocate resources between segments and to assess performance. Segment performance is predominantly evaluated based on operating profit before amortisation of intangible assets and net operating exceptional items ('adjusted operating profit') and return on capital employed. 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. 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 2023


DCC

Energy

£'000

DCC

Healthcare

    £'000

DCC

Technology

£'000

Total

£'000

Segment revenue

16,119,452

821,527

5,263,867

22,204,846






Adjusted operating profit

457,815

91,742

106,105

655,662

Amortisation of intangible assets

(68,731)

(9,318)

(33,097)

(111,146)

Net operating exceptionals (note 5)

(21,603)

(4,367)

(6,558)

(32,528)

Operating profit

367,481

78,057

66,450

511,988

 


Year ended 31 March 2022 (Restated)


DCC

Energy

£'000

DCC

Healthcare

          £'000

DCC

Technology

£'000

Total

£'000

Segment revenue

    12,322,589

    765,213

4,644,218

17,732,020






Adjusted operating profit

407,132

    100,415

81,687

    589,234

Amortisation of intangible assets

(55,667)

    (6,092)

(22,581)

    (84,340)

Net operating exceptionals (note 5)

(16,687)

    (6,540)

(23,307)

    (46,534)

Operating profit

334,778

    87,783

35,799

    458,360

 

(b) By geography

The Group has a presence in 22 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 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*


 

2023

£'000

2022

£'000


2023

£'000

2022

£'000



Republic of Ireland

2,255,595

1,609,797

 

230,304

254,453

 

United Kingdom

7,562,103

6,632,084

 

1,319,398

1,264,586

 

France

3,706,272

3,251,238

 

981,757

950,929

 

United States

2,189,358

1,301,893

 

939,232

871,143

 

Rest of World

6,491,518

4,937,008

 

1,225,754

901,081

 


22,204,846

17,732,020

 

4,696,445

4,242,192

 

* Non-current assets comprise property, plant and equipment, right-of-use leased assets, intangible assets and goodwill and equity accounted investments

Disaggregation of revenue

The following table disaggregates revenue by primary geographical market, major revenue lines and timing of revenue recognition. The use of revenue as a metric of performance in the Group's Energy segment is of limited relevance due to the influence of changes in underlying energy product costs on absolute revenues. Whilst changes in underlying energy product costs will change percentage operating margins, this has little relevance in the downstream energy distribution market in which this segment operates where profitability is driven by absolute contribution per tonne/litre of product sold, and not a percentage margin. Accordingly, management review geographic volume performance rather than geographic revenue performance for this segment as country-specific GDP and weather patterns can influence volumes. The disaggregated revenue information presented below for DCC Healthcare and Technology, which can also be influenced by country-specific GDP movements, is consistent with how revenue is reported and reviewed internally.

As mentioned above, the Group has organised all of its energy activities (previously DCC LPG and DCC Retail & Oil) into one reportable segment, DCC Energy, with effect from 1 April 2022. The Group will now report disaggregated revenue across DCC Energy's two major revenue lines, energy solutions and energy mobility. Comparative data has been restated accordingly.


Year ended 31 March 2023


DCC

Energy

£'000

DCC

Healthcare

    £'000

DCC

Technology

£'000

Total

£'000

Republic of Ireland (country of domicile)

1,688,901

110,766

455,928

2,255,595

United Kingdom

5,358,282

399,599

1,804,222

7,562,103

France

3,360,372

24,173

321,727

3,706,272

North America

311,521

175,757

1,875,842

2,363,120

Rest of World

5,400,376

111,232

806,148

6,317,756

Revenue

16,119,452

821,527

5,263,867

22,204,846






Products transferred at point in time

16,119,452

821,527

5,263,867

22,204,846






Energy solutions products and services

9,996,896

-

-

9,996,896

Energy mobility products and services

6,122,556

-

-

6,122,556

Medical and pharmaceutical products

-

448,931

-

448,931

Nutrition and health & beauty products

-

372,596

-

372,596

Technology products and services

-

-

5,263,867

5,263,867

Revenue

16,119,452

821,527

5,263,867

22,204,846




Year ended 31 March 2022 (Restated)


DCC

Energy

£'000

DCC

Healthcare

         £'000

DCC

Technology

£'000

Total

£'000

Republic of Ireland (country of domicile)

1,094,400

117,405

    397,992

    1,609,797

United Kingdom

4,229,986

419,088

    1,983,010

    6,632,084

France

2,900,787

-

    350,451

    3,251,238

North America

261,559

148,318

    1,035,055

    1,444,932

Rest of World

3,835,857

80,402

    877,710

    4,793,969

Revenue

12,322,589

765,213

    4,644,218

    17,732,020






Products transferred at point in time

12,322,589

765,213

    4,644,218

17,732,020






Energy solutions products and services (restated)

7,306,762

-

-

    7,306,762

Energy mobility products and services (restated)

5,015,827

-

-

    5,015,827

Medical and pharmaceutical products

-

407,672

-

    407,672

Nutrition and health & beauty products

-

357,541

-

    357,541

Technology products and services

-

-

    4,644,218

    4,644,218

Revenue

12,322,589

765,213

    4,644,218

    17,732,020







 

5. Exceptionals


2023

£'000

2022

£'000

Adjustments to contingent acquisition consideration

(8,523)

(19,864)

Restructuring and integration costs and other

(13,401)

(16,736)

Acquisition and related costs

(10,604)

(9,934)

Net operating exceptional items

(32,528)

(46,534)

Mark to market of swaps and related debt

892

1,192

Net exceptional items before taxation

(31,636)

(45,342)

Income tax credit attaching to exceptional items

2,764

1,501

Net exceptional items after taxation

(28,872)

(43,841)

Non-controlling interest share of net exceptional items after taxation

211

-

Net exceptional items attributable to owners of the Parent

(28,661)

(43,841)

 

Adjustments to contingent acquisition consideration of £8.523 million reflects movements in provisions associated with the expected earn-out or other deferred arrangements that arise through the Group's corporate development activity. The charge in the year primarily reflects an increase in contingent consideration payable in respect of an acquisition in DCC Energy where the trading performance has been very strong and ahead of expectations.

Restructuring and integration costs and other of £13.401 million relates to the restructuring and integration of operations across a number of businesses and acquisitions. The significant items during the year were primarily within DCC Energy and include costs related to a realignment of the organisation structures in the UK and France to reflect acquisitions and the changing operational environment.

Acquisition and related costs include the professional fees and tax costs relating to the evaluation and completion of acquisition opportunities and amounted to £10.604 million (2022: £9.934 million).

The level of ineffectiveness calculated under IAS 39 on the hedging instruments related to the Group's US private placement debt is charged or credited as an exceptional item. In the year ended 31 March 2023, this amounted to an exceptional non-cash gain of £0.892 million (2022: non-cash gain of £1.192 million). The cumulative net exceptional credit taken in respect IAS 39 ineffectiveness is £1.429 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.

There was a related income tax credit of £2.764 million and non-controlling interest credit of £0.211 million in relation to certain exceptional charges.

 

6. Earnings per Ordinary Share


2023

£'000

2022

£'000

Profit attributable to owners of the Parent

334,022

312,373

Amortisation of intangible assets after tax

87,690

67,919

Exceptionals after tax (note 5)

28,661

43,841

Adjusted profit after taxation and non-controlling interests

450,373

424,133

 

Basic earnings per ordinary share

2023

pence

2022

pence

 

Basic earnings per ordinary share

338.40p

316.78p

 

Amortisation of intangible assets after tax

88.84p

68.88p

 

Exceptionals after tax

29.03p

44.45p

Adjusted basic earnings per ordinary share

456.27p

430.11p

Weighted average number of ordinary shares in issue (thousands)

98,707

98,610

 

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.

Diluted earnings per ordinary share

2023

pence

2022

pence

 

Diluted earnings per ordinary share

338.04p

316.36p

 

Amortisation of intangible assets after tax

88.74p

68.79p

 

Exceptionals after tax

29.01p

44.40p

Adjusted diluted earnings per ordinary share

455.79p

429.55p

Weighted average number of ordinary shares in issue (thousands)

98,811

98,739

 

The earnings used for the purposes of the diluted earnings per ordinary share calculations were £334.022 million (2022: £312.373 million) and £450.373 million (2022: £424.133 million) for the purposes of the 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 2023 was 98.811 million (2022: 98.739 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:


2023

'000

2022

'000

Weighted average number of ordinary shares in issue

98,707

98,610

Dilutive effect of options and awards

104

129

Weighted average number of ordinary shares for diluted earnings per share

98,811

98,739

 

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. 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.

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.

7. Dividends

Dividends paid per ordinary share are as follows:

2023

£'000

2022

£'000

Final - paid 119.93 pence per share on 21 July 2022
(2022: paid 107.85 pence per share on 22 July 2021)

118,715

105,417

Interim - paid 60.04 pence per share on 9 December 2022
(2022: paid 55.85 pence per share on 10 December 2021)

59,128

55,182


177,843

160,599

 

The Directors are proposing a final dividend in respect of the year ended 31 March 2023 of 127.17 pence per ordinary share (£125.577 million). This proposed dividend is subject to approval by the shareholders at the Annual General Meeting.

8. Other Reserves

For the year ended 31 March 2023


Share based payment
reserve
£'000

Cash flow
hedge
reserve
£'000

Foreign
currency translation reserve
£'000

Other
reserves
£'000

Total
£'000

At 1 April 2022

47,436

85,768

87,272

932

221,408

Currency translation

-

-

41,257

-

41,257

Movements relating to cash flow hedges

-

(164,422)

-

-

(164,422)

Movement in deferred tax liability on cash flow hedges

-

30,374

-

-

30,374

Share based payment

7,160

-

-

-

7,160

At 31 March 2023

54,596

(48,280)

128,529

932

135,777













For the year ended 31 March 2022


Share based payment
reserve
£'000

Cash flow
hedge
reserve
£'000

Foreign
currency translation reserve
£'000

Other
reserves
£'000

Total
£'000

At 1 April 2021

40,969

13,130

60,260

932

115,291

Currency translation

-

-

27,012

-

27,012

Movements relating to cash flow hedges

-

88,776

-

-

88,776

Movement in deferred tax liability on cash flow hedges

-

(16,138)

-

-

(16,138)

Share based payment

6,467

-

-

-

6,467

At 31 March 2022

47,436

85,768

87,272

932

221,408













 

9. Analysis of Net Debt


2023

£'000

2022

£'000

Non-current assets



Derivative financial instruments

89,199

118,578




Current assets



Derivative financial instruments

59,258

107,361

Cash and cash equivalents

1,421,749

1,394,272


1,481,007

1,501,633

Non-current liabilities



Derivative financial instruments

(40,585)

(10,330)

Bank borrowings

(35,168)

(388,660)

Unsecured Notes

(1,898,591)

(1,544,822)


(1,974,344)

(1,943,812)

Current liabilities



Bank borrowings

(50,543)

(67,668)

Derivative financial instruments

(42,341)

(28,634)

Unsecured Notes

(270,313)

-


(363,197)

(96,302)




Net debt (excluding lease creditors)

(767,335)

(419,903)




Lease creditors (non-current)

(275,388)

(273,164)

Lease creditors (current)

(71,158)

(63,538)

Total lease creditors

(346,546)

(336,702)




Net debt (including lease creditors)

(1,113,881)

(756,605)

 


An analysis of the maturity profile of the Group's net cash/(debt) (including lease creditors) at 31 March 2023 is as follows:

As 31 March 2023

Less than
1 year
£'000

Between
1 and 2
years
£'000

Between
2 and 5
years
£'000

Over
5 years

£'000

Total
£'000

Cash and short-term deposits

1,421,749

-

-

-

1,421,749

Overdrafts

(50,543)

-

-

-

(50,543)

Cash and cash equivalents

1,371,206

-

-

-

1,371,206

Bank borrowings

-

-

(35,168)

-

(35,168)

Unsecured Notes

(270,313)

(333,207)

(616,508)

(948,876)

(2,168,904)

Derivative financial instruments - Unsecured Notes

 

47,032

 

39,761

 

13,500

 

(569)

 

99,724

Derivative financial instruments - other

(30,115)

(4,078)

-

-

(34,193)


1,117,810

(297,524)

(638,176)

(949,445)

(767,335)

Lease creditors

(71,158)

(57,675)

(103,126)

(114,587)

(346,546)

Net debt (including lease creditors)

1,046,652

(355,199)

(741,302)

(1,064,032)

(1,113,881)

 


The Group's Unsecured Notes fall due between 25 April 2023 and 4 April 2034 with an average maturity of 5 years at 31 March 2023. The full fair value of a hedging derivative is allocated to the time period corresponding to the maturity of the hedged item.

10. Post Employment Benefit Obligations

The Group's defined benefit pension schemes' assets were measured at fair value at 31 March 2023. The defined benefit pension schemes' liabilities at 31 March 2023 were updated to reflect material movements in underlying assumptions. The Group's post employment benefit obligations moved from a net asset of £7.745 million at 31 March 2022 to a net asset of £11.721 million at 31 March 2023. The movement in the net asset position primarily reflects an actuarial gain on liabilities arising from an increase in the discount rates used to value these liabilities.

11. 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 period, together with percentages acquired, were as follows:

· The acquisition by DCC Healthcare in October 2022 of 100% of Medi-Globe Technologies GmbH ("Medi-Globe"), an international medical devices business focused on minimally invasive procedures. Medi-Globe, founded in 1990, is involved in the development, manufacture and distribution of single-use devices for endoscopy in diagnostic and therapeutic procedures. The business has grown organically and through bolt-on acquisitions to become a leading global player in its focus areas of gastroenterology and urology. These are large and growing therapeutic areas, benefiting from strong demographic and treatment trends. Its products are sold to hospitals and procurement organisations in over 120 countries through direct sales operations in Germany, France, Austria, Netherlands, Czechia and Brazil, and an international network of distributors; and

· The acquisition by DCC Energy in November 2022 of PVO International BV ("PVO"), a leading distributor of solar panels, invertors, batteries and accessories used in the commercial, industrial and domestic energy sectors across continental Europe. PVO was established in 2014 and has grown rapidly to become one of the leading solar solutions suppliers in Europe, with a market-leading position in the Benelux, and growing positions in eight other European countries including Germany, Poland and Finland. The business is headquartered in Rosmalen, the Netherlands, and employs approximately 50 people. PVO is an excellent strategic fit for DCC. It will leverage PVO's established market position in the fast-growing solar PV market and DCC Energy's knowledge and experience in transitioning customers to cleaner energy products and services including solar solutions.

DCC Energy also completed a number of small complementary bolt-on acquisitions in the period in the UK, France, Ireland, Norway, Denmark, Germany and Sweden.


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.

 

 










Total

2023

 £'000

Total

2022
£'000

Assets





Non-current assets





Property, plant and equipment



6,273

63,173

Right-of-use leased assets



5,856

32,060

Intangible assets



131,453

257,290

Equity accounted investments



18,909

-

Deferred income tax assets



2,291

15,644

Total non-current assets



164,782

368,167




Current assets





Inventories



53,329

254,522

Trade and other receivables



36,760

200,443

Total current assets



90,089

454,965




Liabilities





Non-current liabilities





Deferred income tax liabilities



(38,112)

(64,694)

Provisions for liabilities



(161)

(7,336)

Lease creditors



(3,933)

(24,255)

Total non-current liabilities



(42,206)

(96,285)




Current liabilities





Trade and other payables



(65,775)

(229,336)

Provisions for liabilities



(149)

(91)

Current income tax (liabilities)/assets



(10,023)

2,539

Lease creditors



(2,166)

(7,563)

Total current liabilities



(78,113)

(234,451)




Identifiable net assets acquired



134,552

492,396

Non-controlling interests arising on acquisition



(166)

(912)

Goodwill



230,754

224,020

Total consideration



365,140

715,504



Satisfied by:



 


Cash



319,463

681,456

Net cash and cash equivalents acquired



(977)

(13,333)

Net cash outflow



318,486

668,123

Acquisition related liabilities



46,654

47,381

Total consideration



365,140

715,504


None of the business combinations completed during the period were considered sufficiently material to warrant separate disclosure of the fair values attributable to those combinations. 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:

Total

Book

value
£'000

Fair value

adjustments

 £'000

Fair
value
£'000

Non-current assets (excluding goodwill)

31,696

133,086

164,782

Current assets

99,625

(9,536)

90,089

Non-current liabilities

(4,195)

(38,011)

(42,206)

Current liabilities

(75,941)

(2,172)

(78,113)

Identifiable net assets acquired

51,185

83,367

134,552

Non-controlling interest arising on acquisition

(166)

-

(166)

Goodwill arising on acquisition

314,121

(83,367)

230,754

Total consideration

365,140

-

365,140

 

The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of a number of the business combinations above given the timing of closure of these transactions. Any amendments to fair values within the twelve-month timeframe from the date of acquisition will be disclosable in the 2024 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.

None 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 £10.604 million.

No contingent liabilities were recognised on the acquisitions completed during the year or the prior financial years.

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 nil to £91.1 million.

The business combinations completed during the year contributed £168.918 million to revenues and £8.874 million to profit after tax. Had all the business combinations effected during the year occurred at the beginning of the year, total Group revenue for the year ended 31 March 2023 would have been £22.409 billion and total Group profit after tax would have been £347.089 million.

12. Seasonality of Operations

The Group's operations are significantly second half weighted primarily due to a portion of the demand for DCC Energy's products being weather dependent and seasonal buying patterns in DCC Technology.

13. 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 2023 financial year.

14. Events after the Balance Sheet Date

There were no other material events subsequent to 31 March 2023 which would require disclosure in this Report.

15. Board Approval

This report was approved by the Board of Directors of DCC plc on 15 May 2023.



Supplementary Financial Information

For the year ended 31 March 2023

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

2023

£'000

2022

£'000

 

Operating profit

511,988

458,360

 

Net operating exceptional items

32,528

46,534

Amortisation of intangible assets

111,146

84,340

Adjusted operating profit ('EBITA')

655,662

589,234


Adjusted operating profit before depreciation ('EBITDA')

Definition

EBITDA represents earnings before net interest, tax, depreciation on property, plant and equipment, amortisation of intangible assets, share of equity accounted investments' profit after tax and net exceptional items. This metric is used to compare profitability between companies by eliminating the effects of financing, tax environments, asset bases and business combinations history. It is also utilised as a proxy for a company's cash flow.

Calculation

2023

£'000

2022

£'000

Adjusted operating profit ('EBITA')

655,662

589,234

Depreciation of property, plant and equipment

144,443

137,976

EBITDA

800,105

727,210

Net interest before exceptional items

Definition

The Group defines net interest before exceptional items as the net total of finance costs and finance income before interest related exceptional items as presented in the Group Income Statement.

Calculation

2023

£'000

2022

£'000

Finance costs before exceptional items

(96,735)

(77,205)

Finance income before exceptional items

16,111

23,075

Net interest before exceptional items

(80,624)

(54,130)

 

Interest cover - EBITDA Interest Cover

Definition

The EBITDA interest cover ratio measures the Group's ability to pay interest charges on debt from cash flows. To maintain comparability with the definitions contained in the Group's lending arrangements, EBITDA and net interest exclude the impact of IFRS 16.

Calculation

2023

£'000

2022

£'000

 

EBITDA

800,105

727,210

Less: impact of IFRS 16

(6,041)

(6,728)

EBITDA for covenant purposes

794,064

720,482

Net interest before exceptional items

(80,624)

(54,130)

Less: impact of IFRS 16

9,577

9,473

Net interest for covenant purposes

(71,047)

(44,657)

EBITDA interest cover (times)

11.2x

16.1x

 

 

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 adjusted operating profit less net interest before exceptional items.

Calculation

2023

£'000

2022

£'000

Adjusted operating profit

655,662

589,234

Net interest before exceptional items

(80,624)

(54,130)


575,038

535,104

Income tax expense

84,762

79,734

 

Income tax attaching to net exceptionals

2,764

1,501

Deferred tax attaching to amortisation of intangible assets

23,456

16,421

Total income tax expense before exceptionals and deferred tax attaching to

amortisation of intangible assets

110,982

97,656

Effective tax rate (%)

19.3%

18.3%

 

Dividend cover

Definition

The dividend cover ratio measures the Group's ability to pay dividends from earnings.

Calculation

2023

pence

2022

pence

 

Adjusted earnings per share

456.27

430.11

Dividend

187.21

175.78

Dividend cover (times)

2.4x

2.4x

 

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 (constant currency)

2023

£'000

2022

£'000

Revenue

22,204,846

17,732,020

Currency impact

(366,289)

-

Revenue (constant currency)

21,838,557

17,732,020


 


Adjusted operating profit (constant currency)

 


Adjusted operating profit

655,662

589,234

Currency impact

(20,746)

-

Adjusted operating profit (constant currency)

634,916

589,234


 


Adjusted earnings per share (constant currency)

 


Adjusted profit after taxation and non-controlling interests

450,373

424,133

Currency impact

(13,174)

-

Adjusted profit after taxation and non-controlling interests (constant currency)

437,199

424,133

Weighted average number of ordinary shares in issue ('000)

98,707

98,610

Adjusted earnings per share (constant currency)

442.93p

430.11p

 

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

2023

£'000

2022

£'000

Purchase of property, plant and equipment

229,440

194,353

Government grants received in relation to property, plant and equipment

(216)

-

Proceeds from disposal of property, plant and equipment

(22,643)

(23,524)

Net capital expenditure

206,581

170,829


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 repayment of lease creditors (including interest) and net capital expenditure.

Calculation

2023

£'000

2022

£'000

Cash generated from operations before exceptionals

860,746

628,433

Repayment of lease creditors

(83,796)

(75,053)

Net capital expenditure

(206,581)

(170,829)

Free cash flow

570,369

382,551

 

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 (excluding interest relating to lease creditors), income tax paid, dividends received from equity accounted investments and interest received. As noted in the definition of free cash flow, interest amounts relating to the repayment of lease creditors has been deducted in arriving at the Group's free cash flow and are therefore excluded from the interest paid figure in arriving at the Group's free cash flow (after interest and tax payments).

Calculation

2023

£'000

2022

£'000

Free cash flow

570,369

382,551

Interest paid (including interest relating to lease creditors)

(82,576)

(70,103)

Interest relating to lease creditors

9,577

9,473

Income tax paid

(97,485)

(76,292)

Interest received

15,535

22,759

Free cash flow (after interest and tax payments)

415,420

268,388

 

Cash conversion ratio

Definition

The cash conversion ratio expresses free cash flow as a percentage of adjusted operating profit.

Calculation

2023

£'000

2022

£'000

Free cash flow

570,369

382,551

Adjusted operating profit

655,662

589,234

Cash conversion ratio

87%

 65%


Return on capital employed ('ROCE')

Definition

ROCE represents adjusted operating profit expressed as a percentage of the average total capital employed.

The Group adopted IFRS 16 Leases on the transition date of 1 April 2019 using the modified retrospective approach, meaning that comparatives were not restated. To assist comparability with prior years, the Group presents ROCE excluding the impact of IFRS 16 ('ROCE excl. IFRS 16') as well as ROCE including the impact of IFRS 16 ('ROCE incl. IFRS 16'). Total capital employed (excl. IFRS 16) represents total equity adjusted for net debt/cash (including lease creditors), goodwill and intangibles written off, right-of-use leased assets, acquisition related liabilities and equity accounted investments whilst total capital employed (incl. IFRS 16) includes right-of-use leased assets.

Similarly, adjusted operating profit is presented both excluding and including the impact of IFRS 16. Net operating exceptional items and amortisation of intangible assets are excluded to assess the underlying performance of our operations. In addition, neither metric forms part of Director or management remuneration targets.

ROCE (excl. IFRS 16)

Calculation

2023

£'000

2022

£'000

Total equity

3,058,310

2,970,563

Net debt (including lease creditors)

1,113,881

756,605

Goodwill and intangibles written-off

657,959

546,813

Right-of-use leased assets

(336,221)

(327,551)

Equity accounted investments

(47,789)

(26,843)

Acquisition related liabilities (current and non-current)

127,393

96,252

Total capital employed (excl. IFRS 16)

4,573,533

4,015,839

Average total capital employed (excl. IFRS 16)

4,294,686

3,541,266




Adjusted operating profit

655,662

589,234

Less: impact of IFRS 16 on operating profit

(6,041)

(6,728)

Adjusted operating profit

649,621

582,506

Return on capital employed (excl. IFRS 16)

15.1%

16.5%

 

ROCE (incl. IFRS 16)

Calculation

2023

£'000

2022

£'000

Total capital employed

4,573,533

4,015,839

Right-of-use leased assets

336,221

327,551

Total capital employed (incl. IFRS 16)

4,909,754

4,343,390

Average total capital employed (incl. IFRS 16)

4,626,572

3,859,473


 


Adjusted operating profit

655,662

589,234

Return on capital employed (incl. IFRS 16)

14.2%

15.3%

 

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

2023

£'000

2022

£'000

Net cash outflow on acquisitions during the year

318,486

668,123

Cash outflow on acquisitions which were committed to in the previous year

(26,059)

(114,658)

Acquisition related liabilities arising on acquisitions during the year

46,654

47,381

Acquisition related liabilities which were committed to in the previous year

(431)

(21,510)

Amounts committed in the current year

23,060

24,100

Committed acquisition expenditure

361,710

603,436

 

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

2023

£'000

2022

£'000

Inventories

1,192,803

1,133,666

Trade and other receivables

2,312,269

2,508,613

Less: interest receivable

(558)

(170)

Trade and other payables

(3,279,898)

(3,468,705)

Less: interest payable

25,231

13,981

Less: amounts due in respect of property, plant and equipment

24,492

18,850

Less: government grants

31

16

Net working capital

274,370

206,251

 

Working capital (days)

Definition

Working capital days measures how long it takes in days for the Group to convert working capital into revenue.

Calculation

2023

£'000

2022

£'000

Net working capital

274,370

206,251

March revenue

2,068,648

2,267,233

Working capital (days)

4.1 days

 2.8 days

 

 

 

 

 









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