2 February 2021
Interim Management Statement
Strong Growth in Third Quarter Group Operating Profit
DCC plc, the leading international sales, marketing and support services group, is issuing this Interim Management Statement for the third quarter ended 31 December 2020.
Third quarter ended 31 December 2020
Group operating profit for the third quarter ended 31 December 2020 was strongly ahead of the prior year. Notwithstanding the disruption and uncertainty caused by the global pandemic, the Group recorded strong organic operating profit growth, whilst also benefiting from acquisitions completed in the prior year.
DCC LPG recorded good operating profit growth in the third quarter of the financial year. The business continued to experience reduced volume demand from commercial and industrial customers, reflecting the continuing impact of varying levels of restrictions in each market in which DCC LPG operates. However, cylinder and domestic demand remained robust and the favourable mix impact of this demand drove modest organic profit growth. The business also benefited from the first-time contribution from the acquisitions of NES Group in the US, completed in September 2020, and Budget Energy in Ireland, acquired in April 2020.
DCC Retail & Oil delivered good organic operating profit growth. Although volumes in the quarter continued to be impacted by lower commercial, industrial and transport demand due to Covid-19 restrictions, the impact was less severe than that experienced earlier in the financial year. The businesses in Britain and Scandinavia delivered strong performances in the quarter, benefiting from good procurement and cost control, as well as growth in non-fuel income, lubricants and roadside services.
DCC Technology recorded strong organic operating profit growth in the third quarter of the financial year. Trading conditions in the B2B sectors, such as the Pro AV category, remained challenging due to continued restrictions. However, working-from-home, consumer and audio products saw very strong demand across both the UK & Ireland and DCC Technology's international operations, in particular through the etail and non-traditional retail channels.
DCC Healthcare delivered an excellent performance, with operating profit well ahead of the prior year. DCC Health & Beauty Solutions continued to see very strong demand for nutritional products across all geographic markets, which drove strong organic growth. The business also benefited from the first-time contributions of the prior year acquisitions of Ion Labs and Amerilab Technologies in the US, which have continued to perform well. DCC Vital also generated very good organic profit growth. While elective medical procedures and consultations continue to be impacted by the pandemic, the business has continued to successfully respond to the changing product and service needs of the healthcare systems of Britain and Ireland.
Year ending 31 March 2021
The outlook for all economies in which the Group operates remains very uncertain, with restrictions generally now increasing again. However, DCC's diverse and resilient business model and the essential nature of the Group's products and services has seen it respond well to the challenges of the pandemic and trade robustly. Assuming normal weather conditions for the balance of the financial year, DCC expects that the year ending 31 March 2021 will be another year of development and good growth in operating profit, ahead of current market consensus expectations.
Throughout the year DCC has remained very active from a development perspective, notwithstanding the difficulties caused by the pandemic. Since our results announcement for the year ended 31 March 2020 in May 2020, DCC has committed approximately £230 million to new acquisitions across Europe and North America. The Group remains very active from a development perspective and continues to have the platforms, opportunities and capability to build the Group into a global leader in its chosen sectors. Recent acquisition activity of the Group includes:
United Propane Gas
DCC recently completed the acquisition of United Propane Gas ("UPG"), materially expanding its presence in the US LPG market. UPG is DCC LPG's largest acquisition since initially entering the US market in April 2018 and follows the material bolt-on acquisitions of NES Group in September 2020 and Pacific Coast Energy in April 2019. The acquisition has considerably expanded DCC LPG's geographic presence from 14 to 21 states and almost doubled its customer base to over 230,000 customers. DCC now is the sixth largest business in the highly fragmented US LPG market1. The integration of the acquisition is at an early stage and proceeding to plan and the business is trading in line with expectations.
Together with a smaller bolt-on acquisition completed in Colorado in December 2020, the combined enterprise value of the transactions was $145 million (£106 million). Further details on the acquisition can be found in DCC's stock exchange announcement of 5 January 2021.
DCC Retail & Oil
In December 2020, DCC Retail & Oil agreed to acquire Campus Oil Ireland ("Campus"), subject to competition authority approval. Campus distributes liquid fuels across domestic, agricultural, industrial, retail and wholesale customers in the Irish market. The acquisition of Campus is complementary to DCC's existing liquid fuels distribution business in Ireland. DCC Retail & Oil also recently completed the acquisition of a small bolt-on acquisition in the lubricants sector in the UK, building further scale in this growing business area and recently agreed to acquire a small portfolio of convenience service stations in the north of England.
DCC Technology recently agreed to acquire JB&A, a leading North American distributor of broadcast, post-production and Pro AV technologies, to system integrators and B2B resellers. Located in San Rafael, California, the business recorded revenues of $80 million in its most recent financial year and employs approximately 30 people.
The acquisition of JB&A continues DCC Technology's strategy of building a leading pro AV, pro audio and music value-added distribution business in North America, following the acquisitions of Stampede (2018), Jam (2018) and The Music People (2020).
DCC expects to announce its results for the year ending 31 March 2021 on 18 May 2021.
1 Based on volumes
Donal Murphy, Chief Executive
Kevin Lucey, Chief Financial Officer
Rossa White, Head of Group Investor Relations
Telephone: +353 1 2799400
Lisa Kavanagh / Victoria Palmer-Moore
Telephone: +44 20 7250 1446
About DCC plc
DCC is a leading international sales, marketing and support services group with a clear focus on performance and growth. It operates through four divisions: LPG, Retail & Oil, Healthcare and Technology.
DCC is an ambitious and entrepreneurial business operating in 20 countries, supplying products and services used by millions of people every day. Building strong routes to market, driving for results, focusing on cash conversion and generating superior sustainable returns on capital employed enable the Group to reinvest in its business, creating value for its stakeholders.
Headquartered in Dublin, employing approximately 13,500 people, DCC's four divisions are:
- DCC LPG - a leading LPG sales and marketing business with operations in Europe, the US and Asia and a developing business in the retailing of natural gas and electricity;
- DCC Retail & Oil - a leader in the sales, marketing and retailing of transport fuels and commercial fuels, heating oils and related products and services in Europe;
- DCC Technology - a leading route-to-market and supply chain partner for global technology brands and customers; and
- DCC Healthcare - a leading healthcare business, providing products and services to healthcare providers and health and beauty brand owners.
DCC plc is listed on the London Stock Exchange and is a constituent of the FTSE 100. In its financial year ended 31 March 2020, DCC generated revenue of £14.8 billion and operating profit of £494.3 million.
DCC has an excellent record, delivering compound annual growth of 14.5% in operating profit and generating an average return on capital employed of approximately 19% over 26 years as a public company.
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.