DCC plc (DCC) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the DCC preliminary results call. [Operator Instructions] I must advise you that this conference call is being recorded today. I would now like to hand the conference over to your speaker, Donal Murphy, CEO of DCC, to start today's conference call. Please go ahead, sir.

Thank you very much, and thank you for the introduction. And good morning, ladies and gentlemen, and welcome to DCC's results presentation for the year ended 31 March 2020. We're all living in unprecedented and very challenging times at the moment due to the COVID-19 pandemic. And one manifestation of that is that we can't be together in the London Stock Exchange this morning to present our results. So we are doing our first virtual DCC results presentation today. So I'm delighted to be joined by Fergal O'Dwyer, our Chief Financial Officer, and you've got myself, Donal Murphy. We'll run through our results presentation over the next 25 minutes or so and then open it up for questions and answers. So thankfully, I don't have to read our disclaimer to you. It's there just to give the legal details. I'm going to cover off the results, highlights and the introduction. Fergal is going to take you through the business and financial review. And then we come back and update you on current trading and the impact of COVID-19 on DCC's business. So despite the very challenging macroeconomic environment, the uncertainty surrounding Brexit and the onset of the COVID-19 pandemic in our final quarter, it's been an early year of strong growth and development for DCC. Group operating profit increased by 7.3% to GBP 494.3 million. The strong performance demonstrates the resilience in DCC's business model and the phenomenal capability, agility and commitment of all 13,200 colleagues, who work across the 20 countries that DCC operates in. Pleasingly, all 4 of our divisions achieved operating profit growth over the prior year. We continued our trend of generating very strong free cash flow with an excellent 100% [Technical Difficulty]

Sir, you are now back live in the call.

Okay. Thank you.

Sorry about that. I think the call is off there for a couple of minutes. Maybe if I just go back to talking about the highlights of the year. So as I say, our strong operating performance, our profitability, up 7.3% to GBP 494.3 million, demonstrates the resilience in DCC's business model and the phenomenal capability, agility and commitment of all 13,200 colleagues, who work across the 20 countries that DCC operates in. Pleasingly, all 4 of our divisions achieved operating profit growth over the prior year. We continued our trend of very strong free cash flow conversion with an excellent 100% conversion of operating profit to cash during the year. It's really a stellar performance when you consider that many of the markets that DCC operates within were in lockdown in the run-up to our year-end due to the COVID-19 pandemic. DCC's return on capital employed, our key operating metric, was strong at 16.5%. A key element of DCC's strategy has been the maintenance of a strong and liquid balance sheet. And at the 31st of March 2020, DCC had very modest levels of net debt of GBP 60 million net of lease creditors and had cash on its balance sheet of GBP 1.7 billion and committed credit facilities of GBP 350 million. Our extremely strong financial position leaves the group very well placed to navigate this period of unprecedented uncertainty and to continue our long track record of growth and development in the years to come. It was another very active year from a development perspective with GBP 170 million of capital committed to acquisitions. The highlight of the year were the acquisitions of our nutritional businesses in the U.S., the acquisition of Ion Labs in November 2019 and Amerilab Technologies in March 2020, adding both new customer relationships and enhancing our product format capabilities in the U.S. market. We now have a substantial presence in the U.S. market. It's the world's largest health supplement and nutritional products market, and we're well-positioned to continue to grow in this market due to the fragmented nature of the market. We also completed a number of other bolt-on acquisitions across each of our divisions. I'm very pleased, even in the heights of the lockdown, to announce that we completed the acquisition of a small gas and power business here in Ireland recently -- very recently and completed a bolt-on acquisition in our propane business in the U.S. The COVID-19 crisis presents significant challenges to society and the economies in which we operate in. As I say, we're operating in unprecedented times, like nothing that we have seen certainly in our lifetimes before. Thankfully, all DCC businesses have continued to operate effectively as we quickly moved to implementing our business continuity plans across the 20 countries we operate in. We are continuing to supply all the essential products and services that our customers require. Our first priority has always been the health, safety and well-being of our people, and we implemented our business continuity plans with most of our sales, marketing, support services people working from home and our frontline workers continuing to deliver our products and services to our customers. While demand has been impacted by the lockdowns in most of the markets that DCC operates in, our businesses continue to trade robustly and are significantly profitable, albeit behind the prior year. I'll just hand over to Fergal now, who will take you through the highlights for 2020 and our business overview.

Thanks, Donal. I suppose, for the year just ended, any of the challenges we've talked, we have to face up to it, be it Brexit or... [Technical Difficulty]

You are live in the call.

Thank you. And again, sorry about this, apologies. Technology is not our friend this morning, okay? I had opened up by saying just any of the challenges we talked, we had to face up to it, the year just gone by, we had Brexit, uncertain economic environment, while they paled in insignificance with the emergence of COVID-19 late in our financial year and the devastating impact it's had on society and the global economy. We will be talking, obviously, in some detail about COVID-19. But firstly, our 2020 results were very strong with some notable positive features. We push ourselves every year to achieve good profit growth to convert all of those profits into cash, which, in turn, drives strong returns in our capital. It also provides the firepower for continued acquisition and development activity. And we do this while trying to retain a very strong, well-funded and liquid balance sheet. Notwithstanding the challenges that were there, we managed to do a lot of these things well in the year just ended. And I suppose it is the drive and commitment of our 13,200 colleagues throughout the group that has continued to deliver. Just moving on to the financial summary. Our revenue number gets dominated by the underlying price of a barrel of oil, which obviously has been declining. Excluding the energy businesses, revenue was up 6.7%. We saw a strong growth in our operating profits, up 7.3%, roughly half of this was organic. Our finance costs are up purely because of a technical IFRS 6 adjustment. Adjusted earnings per share up 1.3%. That's after a near 5% dilution from the extra weighting of the shares -- half year weighting of the shares following our equity issue back in September 2018. We are increasing the final dividend by 2.6% to give a total dividend increase for the year of 5%. We're really pleased with the free cash flow during the year. 100% conversion to get GBP 192 million of free cash flow. And our balance sheet metrics remain strong. We'll talk about them in a minute, but net debt of only GBP 60 million, net debt-to-EBITDA of 0.1x. And again, our returns on capital employed excellent at 16.5%, well ahead of our cost of capital. A quick look at our division results, all ahead of the prior year, strong organic growths in LPG, Retail & Oil and an underlying organic increase within Healthcare, when you adjust for the disposal of our U.K. pharma business and related Irish manufacturing facility. Technology was, although showing growth, was held back organically by more difficult trading conditions in the U.K., which were mainly Brexit and COVID-19-related. Then just maybe talk a bit -- in a bit more detail about the divisions. Within LPG, strong growth of 13.1%, roughly 3/4 of this was organic. We saw good volume growth continuing, with continuing oil to LPG conversions, where we help our customers not only save their energy builds, but also reduce their carbon footprint at the same time. Customer wins in the B2B natural gas space and strong procurement and cost control also helped the underlying profit performance for the LPG division. The standout performances were in Britain, Ireland and the U.S. In Retail & Oil, profits were up nearly 6% on a constant currency basis. Roughly half of this is organic. We saw increased penetration of value-added products and services and a strong cost control as well as continued expansion of our retail and HGV networks. There are good overall performances in Britain, Ireland, Denmark and France. In DCC Technology, as I already referenced, we were held back by difficult trading conditions in the U.K. driven where revenues and operating profits declined. That was mainly Brexit and COVID-19-related. We did see good growth in North America and Continental Europe. Healthcare, underlying operating profit growth was in excess of 8% on continuing activities, 1/3 of which was organic. And we're really excited about the acquisitions of Health & Beauty Solutions of the 2 U.S. acquisitions, Ion Labs and Amerilab, both 30 days and both are performing well. Last but not least, we move on to our cash flow. [Technical Difficulty]

Sorry, apologies about this. Again, we've -- we're clearly having some technology glitches on the line. Fergal will just finish off. I think we're on the cash flow slide.

Well, thank you. And again, apologies. Look, the numbers speak for themselves. Operating cash flow, up 10% on the previous year at GBP 666 million. Really, really pleased with the capital -- the working capital inflow of GBP 49 million despite the negative impact of a lower oil price. Free cash flow, GBP 492 million, 100% conversion of profit into cash. This is on par with our 26th year record, which we show on the right-hand [ column ] since we floated as a public company, and that's 101%. Our closing net debt, excluding the IFRS 16 leases, is GBP 60 million, a very strong, well-funded liquid balance sheet. Within that, there are cash balances of GBP 1.7 billion. We also, in addition, have committed facilities of GBP 350 million. So we have available liquidity on the balance sheet of around GBP 2 billion. Our net -- our debt has an average maturity of 6.1 years. This extremely strong, well-funded and highly liquid balance sheet leaves us well placed to navigate the uncertainty of -- created by COVID-19 and to continue to grow and develop into the future. So thank you. Back to you, Donal.

Thank you all. And now to just give you an overview of how DCC is responding to the COVID-19 pandemic, an update on current trading. And then I want to take you through just a couple of the wonderful things that DCC businesses are doing to play their part in the battle against COVID-19. With the onset of the COVID-19 pandemic in the final quarter of financial year, we took swift and decisive action to ensure the health, safety and well-being of the 13,200 people that work across the 20 countries and 3 continents that DCC operates in and to ensure that our customers receive the essential products and services that DCC provides. As restrictions were put in place by governments to prevent the spread of the virus, we triggered our business continuity plans. All DCC businesses remain operational with appropriate measures put in place to protect our people. The vast majority of our sales, marketing and support functions move to working from home, including ourselves. This is my first day in the office in over 7 weeks. We have seen significant change in demand patterns across the markets we operate within, with increased demand for heating-related products, health care products, particularly PPE, and other COVID-related products, and the technologies necessary to support people working from home. As markets went into lockdown, we've seen demand for transport fuels and consumer technologies being negatively impacted. We have been actively managing our cost base and resources. All discretionary and nonessential expenditure has been curtailed, and capital expenditure has been limited to essential maintenance and HSE-related spend. As we discussed earlier, though, we have continued to be active on the development front and very pleased to have completed a couple of acquisitions. Thankfully, all DCC businesses are operating effectively and trading robustly, albeit behind the prior year in the seasonally less significant period of the year. To give you a flavor by division, in LPG, we've had good domestic and cylinder demand across France, Britain and the U.S. despite warmer weather conditions during April and so far in May. We've had strong cost control across the businesses, mitigating somewhat the impact of lower industrial and commercial demand, as businesses have been closed during the year -- during the pandemic. Operating profit is behind the prior year, reflecting the lower commercial volumes within our business. In our Retail & Oil business, we've had strong demand from domestic and agricultural customers. Transport fuels, as I mentioned earlier, has declined significantly during the second half of March and into April, as many of our markets went into lockdown. However, volumes are starting to increase in May as restrictions ease. Operating profit in our Retail & Oil division is only modestly behind the prior year due to the strong demand from domestic and agricultural customers. In our Technology business, we've seen strong consumer and retail demand, particularly in working-from-home products and products actually to -- like lower-end mobile phones and gaming products to keep people occupied while working from home or locked down in their homes. Products in the Pro AV and other B2B categories have been impacted, as installations of enterprise technology has been difficult due to the lockdown. Relative performance to the prior year has improved in the second half of April and into May, although operating profit is behind the prior year. And finally, in Healthcare, as you will probably expect, we've had a very strong performance in the first 6 weeks of the year, well ahead of the prior year. We've had good demand for nutritional products as consumers are focused on strengthening their immune system, coupled with the benefit of the recent acquisitions of Ion Labs and Amerilab. We've had strong demand in DCC Vital for COVID-19-related products, PPE and other related products, more than offsetting the reduced demand for elective procedures and elective surgeries. And our primary care business has performed very well. So overall, DCC is coping extremely well with the challenges presented by the COVID-19 pandemic. We're really proud of how DCC's people have responded to the challenges presented by the COVID-19 pandemic. They have demonstrated their capabilities, their agility and the phenomenal commitment in ensuring that our customers continue to receive the essential products and services that DCC provides. But we've also been playing our part in the battle against the virus, and I'd like to give you a couple of examples of how our divisions are dealing with and providing support to our customers and our partners to help the fight against the COVID-19 virus. Firstly, in our LPG business, DCC propane in the U.S. rapidly provided propane to heat the outdoor temporary testing facilities that were being [ erected ] through the rollout of propane solutions and heating solutions into our customers. This one in the picture is in Washington State. DCC Retail & Oil, partnering with BP, are providing free fuel to the emergency services and NHS Trusts using our fuel card products, and we're also providing free hot drinks to the NHS and emergency services workers at our retail petrol stations. In DCC Technology, working with one of our resellers, we rapidly rolled out the IT infrastructure to support the NHS frontline workers, including the technology necessary to get the Nightingale Hospital up and running in a very short period of time. Finally, in DCC Healthcare, we donated raspberry-colored scrubs to the Royal Glamorgan Hospital to distinguish between the COVID-19 department and the rest of the hospital, thus ensuring the safety of the workers. We've also been producing hand sanitizer in our Health & Beauty business. These are just a few examples of what DCC businesses are doing to help the fight against the virus. So in summary, DCC's businesses are performing very, very well. It's been the year to -- the end of March 2020 has been a year of strong growth for the group. We've had an excellent cash flow performance and continuing our development activity. We're really proud of the way the DCC people across all the markets that we operate within have responded to the challenges presented by the COVID-19 crisis. And while it has impacted on demand across our businesses, the essential nature of our products and services means that DCC's businesses are performing robustly, albeit behind the current year. And with the strong liquidity position that Fergal talked about earlier, DCC has the platforms, the opportunities, the capabilities that we've built over many years to continue the growth and development of the group in the long term. DCC is very well-positioned in the current market environment to continue that long track record of growth and development. We leave you with our favorite slide, which just shows the continued success of the group over our 26 years as a public company with our strong operating profit growth of -- at 14.5%, our dividends increasing year-on-year and, as we mentioned earlier, the Board proposing a 5% increase in the dividend for the year, DCC's 26th consecutive year of dividend growth. Our strong free cash flow conversion of over 100% over that 26-year period, we've had one of the highest total shareholder returns on the FTSE and with that strategy and with the liquidity of our business, we're well positioned to continue that growth development in the long term. So we'll hand it over to questions. And again, apologies for the glitches in the technology. Hopefully, it didn't disrupt the presentation too much.

[Operator Instructions] Your first question comes from the line of James Winckler, Jefferies.

So just wondering if -- obviously, you gave a bit of color for first 6 weeks of trading, which is greatly appreciated. I'm wondering if you can give any more detail in terms of volumes with respect to the energy division and how those have been trending out rather than just profitability within the first 6 weeks of trading, specifically. And then next one would be on in terms of impact of COVID, I mean, with the typical business, we tend to talk about negative drop-through. But obviously, the revenue, EBIT relationship is a bit different for your business. I'm wondering if you could give an insight on how to think about sort of the impact on the profitability of a decline in business in this year given the COVID headwinds.

Yes. No look, James, it's -- thanks for the questions. It's incredibly challenging times for all businesses to be trying to forecast. And we're clearly not giving guidance as part of our results. So I think we have -- which, again, we don't clearly do normally, we've given enough lot of detail in our trading statements of the trading performance over the last 6 weeks. And I think that just demonstrates the resilience in the business model that we've been trading so robustly and significantly profitable, albeit behind the prior year. And the first quarter is clearly a small part of DCC here. The first half of our year is about 30% of group profits. So it's only a proportion of that. So it's way too early to be making calls. I think we didn't and decided that we wouldn't give more details than the detail that's in that statement because, if we do, I think people will be trying to extrapolate that up on 6 weeks of trading in an unprecedented and very challenging environment. So from our own perspective, we're just very proud of how the group has responded to the crisis. We're delighted. I don't think we ever told we'd be talking so much about being in essential products and services. We're delighted that our businesses are trading, all of them, in essential products and services, and our business continue to operate. And look, demand is different from market to market, and we'll see, as I say, in the transport fuels, it's been well back in the market. So we're in very severe lockdowns and starting to ease as they come out of the lockdowns, but we're not going to give any more detail on that.

Okay. And then lastly, just curious if in terms of the increased demand in certain areas, for example, COVID-related products within Healthcare, is there any margin implications on that of taking lower margin due to pricing with this through pandemic? Or if that's been in line with what you would expect?

No. I think, again, they're actually -- the margin profile of products within the Healthcare business just varies dramatically. It's actually been very strong demand for COVID-related products. They're lower-margin products. Clearly, our focus hasn't been on margin management of those products. It's been on getting the products in and getting them to the frontline workers. So the team in our DCC Vital business have done a phenomenal job in sourcing product, linking up actually with our team in Shenzhen in China on the technology side to bring on board new suppliers and get those critical products into the market in both Britain and Ireland. So it's been about get the products and get them to the frontline workers and keep people safe.

And your next question comes from the line of Allan Smylie from Davy.

It's Allan over at Davy. I have three questions, please. The first one is backward-looking related to cash conversion, as you flagged a very strong number last year despite the fall in kind of oil prices from January and that accelerated in February. So if you could talk through some of the offsets or where things came through stronger than expected to offset some of those headwinds to start, would be great. And then, I guess, 2 kind of bigger-picture questions on M&A. Like, firstly, you obviously continued to close transactions, which is very positive. How should we think about your M&A process currently and your ability to transact medium and larger deals, just given the current global travel restrictions? And then kind of bigger picture in terms of the landscape and pipeline, while it's like very early days, is current disruption leading to any changes in kind of vendor pricing expectations and/or competition for assets?

Thanks, Allan. And Fergal might take the working capital and cash conversion piece.

Yes. I mean, the working capital performance was good. You got to remember that we kind of went into full lockdown with about 10 days to go before the end of our financial year. So leaving aside the whole thing of trying to prepare a set of accounts and get them audited, the whole issue about your cash collection and so on was something that we have to be very alive to. So our people throughout the group just worked tirelessly with an increased focus on the whole area of working capital. The biggest most notable one that was probably in the area of inventories, which are down like-for-like significantly on the previous year. A lot of that is in the technology space, where some of it obviously is activity driven, but some of it is to do with increased levels of demand for enablers to homeworking and so on. So our inventories came off quite a bit. And so that was the main drivers. Our debtors and creditors movements were more or less [ a watch ].

Allan, just moving on to the M&A side, and it is, and we're delighted actually to have completed a couple of acquisitions. As I said, very interesting power business here in Ireland that supplies 80,000 customers, which we completed last Friday, and a bolt-on acquisition to DCC Propane in the U.S. And that just demonstrates that the DCC M&A machine continues to operate even in lockdown. Now clearly, it creates challenges, but we have over all our time really worked really hard on building long-term relationships with targets. So it's not as if you come at something new pretty quickly. So it's a long process. So we have plenty of things in our pipeline that we have relationships, know the business, have been to see businesses. So we'll continue working those. There's a lot of things, as Fergal said. We've managed to do our audit for the entire group virtually. So there's lots of the due diligence and in any of those processes that you can do well remotely. But ultimately, there has to be an impact on timing, but I think it's probably -- we're probably well positioned to keep managing that over the next number of weeks and months to come. I think one of the -- in the current environment, we don't like, in any way, talking about positives, but the strength of the balance sheet, the liquidity that we have and the challenges that the demand shock is placing on lots of businesses out there, undoubtedly, will create opportunities for DCC to deploy capital going forward. We have a very, as I say, active pipeline of opportunities that we work on. But the most important bit is the platforms that we've created across the 20 countries and 3 continents that we operate within for further growth. And if you look going back, it's only 2 years that -- just over 2 years ago that we made our first acquisition in the -- in North America. And now we have 18% of our capital employed in North America. We have 3 of our 4 divisions in North America. We have 1,800 people working for DCC in North America. And the great thing is we have very modest shares of very large markets. So we have plenty of opportunities for further capital deployment. So I think the challenge is that the current crisis presents will ultimately be beneficial to DCC down the road, but our focus is just navigating our way through the current environment and continuing to get those essential products and services to our customers.

And your next question comes from the line of Rory McKenzie, UBS.

It's Rory here. Firstly, I wanted to ask about the unit margins in Energy. And also your profit per tonne was up 8% in LPG and profit per liter up 10% in Retail & Oil. So could you first break that down in terms of the gross margin and the SG&A improvement? Or just the -- if you could give a sense within the 2 divisions? And then secondly, did you see any unusual buying in February or March materially boost that kind of unit margin in any divisions?

Okay. Well, I think, Rory, that the -- a couple of things, start with the Retail & Oil. So mix is really the biggest impact in the Retail & Oil businesses. There has obviously been a good cost performance across the businesses, but the -- we had, which we talked about before. So if you look at the volumes, the volumes are back in Retail & Oil, and that was a conscious decision to walk away from some very high-volume, low-margin business, particularly in the kind of aviation, marine and commercial sectors in the U.K., which, thankfully, we had walked away from. So that has -- with low-margin business, that clearly has boosted the margin. We've had strong performance, as Fergal talked about earlier, in our premium differentiated fuels, which is enhancing margin, and we've expanded out in higher-margin areas like the lubricants business and continued investment in our truck stop and other related services. So it's kind of mix. Cost control has been good, but the volume mix has been the driver of the margin improvement. In the LPG business, again, we've had that continued growth in the oil to LPG conversions. So we've had very good volume growth. The volume growth, we're getting leverage on that, which is improving the margin. And we've good cost control across the businesses a little bit, probably in our lead and lag effect on the product price, but nothing material in that. So it's really been mix and volume growth in LPG. I don't know, Fergal, if you want to add anything.

No, the gross margins, we'll give you them on Slide 21. On Retail & Oil, 4.61p last year, 4.87p per liter is the gross margin, up 5.6%, for all the reasons Don's talked about, mainly you're moving away from relatively less profitable business and our premiumization and so on. And then on LPG, it's a modest increase of just about 3% from GBP 297 per tonne to GBP 307 per tonne. So not a whole lot of move there, Rory.

Great. And then just to follow up on the last comments you made about the acquisitions. I guess -- on the outlook, rather. I guess after the last oil and gas downturn, you saw lots of great opportunities in Europe, effectively coming as majors exited downstream assets. Just thinking about the U.S. landscape and the fragmentation of ownership there, would you say it's unlikely that you'll see the same kind of wholesale change in landscape at such a short time frame? Or are there a chance that you do see kind of bigger steps forward quickly like you saw last time around?

Yes. I think it varies across the 2 divisions, Rory. So the LPG business, pretty much very few oil majors still owning LPG assets. So it's probably less of a feature in the LPG business. And our -- I suppose, our focus, our energy focus really in the U.S. is in the LPG sector, while we look in the Retail & Oil, but where we have the presence in the market is in the LPG sector. And that market is just very different. You've got a smaller number of large players that are -- would be -- would have plenty of leverage within the market. And then you have a very broad array of kind of mid- and small players within the market. So we've 4,000 LPG businesses in the U.S., so there's plenty of opportunities for growth, and we're actively looking for opportunities over there. I think the broader point on the oil majors is -- we've seen that in the past, where in periods of depressed oil prices, M&A has always been -- our portfolio activity is always a key part of their capital management and there've been periods where we benefited because there's more assets coming to the market. And with current oil prices, you'd have to assume that, that is likely to happen again. So we have strong relationships. We've become a bit of a partner of choice, and we'll work those relationships to try and find the right assets for DCC.

And your next question comes from the line of Sam Bland, JPMorgan.

Two questions from me, please. I think, in the results release, it says that trading in the first 6 weeks of this year has gone maybe a little bit better than initial expectations. Just wondered if you could give any color on sort of which bits have gone particularly better since your expectations at the beginning of April. And I guess coming back on this LPG piece. LPG's, certainly, volume and also the profitability was pretty strong performer last year. And you mentioned the oil to LPG conversion. I think that's been a theme that we talked about in previous years, but it looks as if it's kind of accelerated in the last 12 months. Is there any particular driver for why that rates of conversion has improved?

Yes. Well, I think if we look at the 6 weeks, Sam, as I said earlier, and not being evasive on it, we don't want to get into more details than we have talked about. But I think we have -- and I suppose just generally, and I'm sure all companies are the same, just given the challenges that are out there and you're trying to forecast, I think we would have been more conservative or measured when we started into April, and we were probably pleasantly enough surprised by the -- just the improvement in our forecast, as we went through the month and into May, and that probably goes across. Actually, each of the sectors maybe, we had -- probably with the exception of Healthcare, where we had seen a very strong demand and anticipated strong demand. I think the Retail & oil business, we call that out, has performed very well during that period. Some of that was demand, a bit of pent-up demand coming from the end of March into April, but it's a difficult environment to be calling numbers in. And you tend to be conservative. Maybe that kind of is really the nature of the comment that relative to where we start for the month. It has improved as we went through the period.

The LPG, oil and gas.

Yes. So on the oil and gas side, it sounds like -- and you're right, like that has been a feature for a while. I think the -- we have been just leading really in that area. And it's not only -- we talked about it before. We kind of started that as an energy transition or a green energy solution, helping customers reduce their carbon footprint. Then the dislocation between the oil and the LPG price not only made lower carbon, but lower-cost solutions we could give to the customers. So we've just been getting -- we're getting increased traction on that. And I think it's -- we're substantially reducing people's carbon footprint by giving them a more competitive solution. So it's a compelling proposition. And we think there's plenty of room for further growth there. We've also been growing strongly in our gas and power business, and that's, again, an area that we want to continue to deploy capital in.

Understood. If I may, one quick follow-up in the Technology business. I remember that there was sort of market weakness around in U.K., I think, around Christmas. And obviously, COVID more recently has caused some problems. Was there an improvement in Technology, sort of, in the interim? I don't know whether it was sort of January or February. Did it get much better? Or did it stay at a fairly depressed level?

No. Look, I think that Technology has been a story from last year. It was 2 parts. It was very difficult in the U.K. and on -- plus that was some uncertainty surrounding Brexit, which impacted on the enterprise and consumer products area. And that just remained tough. Some -- the international businesses, the European business performed strongly with the benefit of the Amacom and Comm-Tec acquisition and with strong growth in North America, Pro AV and pro audio and lighting and in consumer electronics products. So that had been the feature of last year. Clearly, there's been demand in most markets, but in the U.K. market, there was demand, significant demand for working-from-home technologies that I talked about earlier. But on the other side of that, you have businesses in lockdown, so there's no installations of Pro AV systems of enterprise products or B2B products. So it's remained pretty challenging. But longer term, those things clearly come back. And technologies are enhancing. They're upgrading all the time. Security is getting more sophisticated. So those -- that demand will come as we come out of these lockdowns and into the future. So I think the business has been robust. A key feature and something that we specialize on is really selling into the online sector of the market, and we've been doing more and more of that. Cash flow out of our tech business has been very good as Fergal called out earlier as well. So it's okay.

And your next question comes from the line of Gerry Hennigan, Goodbody Stock.

Don, just a follow-up to that previous question. Obviously, your implied organic growth in LPG in the last year was particularly strong. One, do you think can you maintain that? And two, aside from oil to LPG conversions, has there been a sense here that you've picked some market share from some other players, whether it be in Europe or the U.S.?

Yes. No, thanks, Gerry. We have been growing our market share in LPG. And you've probably heard me talking many times about LPG being a kind of a creeping market share sector. And that's always been our focus to just to outperform the market and grow our share. So we have been -- we've continued to do that. As I say, we've kind of really focused over the last number of years in the commercial sector and the oil to LPG conversions and lower-carbon solutions for our customers. And that's been going well, and we think there's opportunity -- plenty of opportunity for further growth there. We've also been expanding out the business into the gas and power sector. And we had very -- actually strong growth in our B2B gas and power business in France, and the business in Ireland has performed very well in the last year. And as I say now, further strengthening it with the acquisition of Budget Energy. So that's an area that we see opportunity for further growth in. So the LPG business has been a very strong contributor over the last number of years and prospects for further growth. And you talked about the small market share we have in the U.S. market. And we went into the U.S. market, Gerry, to build a much bigger business. And hopefully, we'll do that over time.

Okay. Just one other thing, if I can, Don. Obviously, some parts of the business are doing better than others and it's reflection of what's happened since March and such. But where do you see the greatest challenges with business in the current environments and which side of the business and which particular elements?

Yes. And again, Gerry, I think for -- as you say, for every business, it's been incredibly challenging. We're very lucky in DCC that we are operating in essential products and services. So every business and every market that DCC operates in is up and running and supplying the products and services that our customers require. So we just say our #1 focus is making sure that we protect the health, safety and well-being of all the people across the organization. All of us on this call are working in different ways in the current environment. And that's been something that we've adapted to really well and the agility of our people to cope with all that. So look, the reason companies aren't and we are not giving guidance is because of the level of uncertainty that's out there. But I think we're pretty well placed. Really, our first 6 weeks, as we said, have been very robust, significantly profitable, albeit behind the prior year. And there will be plenty of challenges, I'm sure, as we go forward. Both the resilience in our business model, the diversity that we have, the geographic spread, all those things are really paying dividends at the moment.

And your next question comes from the line of George Gregory at BNP Paribas.

I had 3 questions, please. Firstly, just a point of clarification. And sorry if I missed this, but are you using any of the government's retention schemes or tax deferrals that have been offered? And if so, if you're able to provide any color on their impact? That would be helpful. Secondly, just in terms of the shape of the balance sheet. And obviously, a strong -- a very strong net position. But within that, you've got a large -- an even stronger gross cash position. I just wondered if you had any particular thoughts on the capital structure and the quantum of cash that you've got there. And finally, perhaps Donal, a lot of talk around the current challenges and risks and opportunities that have presented themselves in the near term. I just wondered if you had any thoughts as to the medium-term risk and opportunity set once, one would hope, that the current situation normalizes as you reflect on a post COVID-19 world?

Okay. And George, the first one, really, just very modest, actually, and it is called out in our statement. But we have, in some places, we have trying to ensure that we protect roles and working with the governments to do that. So we have kind of very modestly, relative to our cost base, taking some of that support, but it's really about protecting jobs in the current environment. So it's pretty modest. Fergal, on the...

On the balance sheet, George, I suppose, firstly, given the current sign of -- we're glad to have it. We're glad to have that liquidity, glad to have that very strong funded position. So if you break it down, I mean, we've always said that March is our best position. And we always look to our capital structure to be around and to push through the peak of our working capital requirements, which is October, November. So we would like going forward, as we always say, this is no different than what we said before, to spend whether it's around GBP 400 million a year, well in excess of our free cash flow on development activity. And then doing so, you'll see that capital structure change slightly over time. But a lot of times, we would like to keep at our peak net debt-to-EBITDA of less than 2x.

So George, just the -- you talked about the medium term and beyond, like -- so like there's clearly incredible uncertainty out there as to -- hopefully, we'll start to see lockdowns ease in a number of the markets, but what's going to come after that, and will there be spikes in the virus again and will there be further lockdowns or whatever, like that uncertainty is -- just makes any of those calls in terms of timing difficult. But standing back from that, I think we have -- and there's nothing new in this. We've talked about this for some time. We've very clear strategies for each of our 4 divisions in terms of how we want to build and where we want to build those businesses. We have -- we've built those platforms. And there's no doubt that the opportunities will be there for us to deploy capital and build greater share in the markets we're in and, indeed, to enter into new markets over time. And I think the current environment is going to assist in that in the medium longer term and DCC's liquidity position and our focus on generating high returns on capital on our investments will position us well to continue that growth and development. Question, what medium-term in the current environment, we'll see, but I think we're -- yes, we're in a strong position.

[Operator Instructions] Your next question comes from the line of Rajesh Kumar from HSBC.

Thanks for your earlier thoughts on the capital allocation strategy. Just in terms of discussions with suppliers, what is the nature of discussion when you're talking about the next 3 to 6 months in terms of the bridge you draw over the COVID-19 disruption? Are the suppliers asking you to stock up more or provide additional services? Some color on that would be quite helpful. And second is I appreciate that most people don't want to sell their business when the world is in a turmoil. But in terms of M&A, how are you thinking for 2021?

Okay. Thanks, Rajesh. Well, look, on the supplier side, and clearly, that varies dramatically by division, so in our oil and gas businesses, we have -- we've very little stuff. We buy product from pretty much all the suppliers within the market and we've millions, thankfully, of end customers. So there's no difference there, and we keep very little stock in the business. So there's no opportunity, even if you wanted to stock up. So no change really on the oil and gas side. In the Healthcare side, again, it's -- clearly, it's been a period of unprecedented demand for PPE and other COVID-related products. And as I mentioned earlier, we mobilized our teams, including our team in our technology business, to make sure we could get those products into the markets in Britain and Ireland. There's clearly been a pretty substantial falloff in elective procedures and elective surgery, which will impact on demand for those products. But clearly, that will come back after the focus on COVID has eased a little bit and the health care systems start to get into other activity. So again, there's no change in terms of our suppliers. And no one is asking us to stock up or anything like that in the current environment. And then finally, within the tech side, and I think as Fergal mentioned earlier, actually, there's been some really good work done on the balance sheet management and reducing kind of staff positions. There was a little bit of challenge in terms of some of the supply chains, as China was struggling in the first quarter of the year, but there's nothing materially different, Rajesh, in our tech business either. So pretty much the same. I think the -- on the M&A front, and time is going to tell, but we have -- we will continue working on the opportunities that we have. Clearly, lockdowns and inability to travel makes it a little bit more difficult. But we have, say, we've demonstrated that we can complete M&A even in the height of lockdowns. And thankfully, lots of the things that we're looking at are in markets where we have teams of people on the ground. So that doesn't impact. We'll see for us -- it's difficult in this environment, it's difficult for us what numbers do you focus on and all those kind of things because the environment for everyone is challenging and different, but DCC has been in the M&A business for a very long period of time. We've spent GBP 3.3 billion on acquisitions and those 270 acquisitions. So I think that experience and scale and capability will benefit us, as we go forward.

We will now take our last question. And your last question comes from the line of Chris Bamberry from Peel Hunt.

Three brief questions, if I may. With regard to the technology supply chain, is that now approaching normal? And secondly, the exit from the low-margin products in Retail & Oil, is that now complete? And finally, could you give us an estimates of the weather impact on last year and the year-to-date?

Yes, thanks, Chris. The weather impact is in everything that's going on. It kind of -- it just seems like such a long time ago, but the weather impact wasn't material last year really, Chris, relative to the prior year, we had a little bit of event, but nothing too dramatic. The weather in -- and we kind of called it out really in April, had been particularly mild in some of the markets that impacted a bit on our LPG business, but it's -- you're not talking about material numbers in terms of our numbers for the year as a whole. The technology, supply chain piece, I think we're not -- and certainly, people aren't flagging any particular issues really at the moment from a supply chain perspective. And just what your last point, Chris?

Just the exit from the low-margin products in Retail & Oil, that's all complete?

Yes. That's all complete, and it kind of was really -- a lot of that was in the first half of the year. So you kind of called it out last November. I was just going to -- I was just going to say thank you to everyone for participating. Apologies again for the glitch in the technology. It possibly impacted us a little bit more than it impacted people on the call. So just apologies for that. It's -- we pride ourselves on excellence in this group, and we don't like things going wrong, but hopefully, it didn't disrupt the session too much. So thank you all for your time and attention. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.