DCC plc (DCC) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the DCC interim results call. [Operator Instructions] I must advise 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, and good morning, and welcome to DCC's interim results presentation for the 6 months ended 30th September 2020. I'm Donal Murphy, Chief Executive of DCC; and I'm joined by Kevin Lucey, Chief Financial Officer. We're all living in unprecedented and very challenging times due to the COVID-19 pandemic and unfortunately, we can't all be together as usual for this presentation in the London Stock Exchange, so welcome to DCC's second virtual presentation. Thankfully, I don't have to read the disclaimer. So I'll take it as read. I'm going to cover off the introduction and the highlights of the performance for the first 6 months. Kevin will give you a little bit more detail on the financial and divisional performance for the 6 months. I'll then give you an update on our recent development activity, which we're very pleased about. And I'll then give you an overview of the session we are planning on the 18th of November on how we see DCC enabling energy transition. And then we'll open up to questions. So despite the very challenging and uncertain environment created by the COVID-19 pandemic, DCC delivered a very robust trading performance in the first half of the year. We had strong growth in group adjusted operating profit increasing by 8.3% to GBP 176 million in the seasonally less significant first half. The strong performance demonstrates the resilience in DCC's business model, the essential nature of the products and services that DCC provides to its customers and the phenomenal capability, agility and commitment of all 13,000 colleagues who work across the group. Adjusted earnings per share were up 7% to GBP 1.179. We had an excellent free cash flow generation, driven by a strong working capital performance. The interim dividend was increased by 5% to GBP 0.5195 per share. And despite the lockdowns and travel restrictions, we committed approximately GBP 90 million on a number of acquisitions in Europe and North America across 3 of our 4 divisions, and we remain very active on the development front. A key element of DCC's strategy is the maintenance of a strong and liquid balance sheet. At the 30th of September 2020, DCC had net debt of GBP 137 million, and cash on the balance sheet of approximately GBP 1.5 billion. We committed credit facilities of another GBP 400 million. Our extremely strong financial position leaves the group 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. Just looking briefly at the divisional performance. DCC LPG traded robustly in the first half, with operating profit back 7.4% on a constant currency basis. With a very strong performance in our Retail & Oil division, operating profit up 10.1% on a constant currency basis. DCC Technology traded resiliently with operating profit 1% ahead of the prior year on a constant currency basis. And finally, DCC Healthcare had a really excellent first half with operating profit 65.9% ahead of the prior year on a continuing basis, adjusting for the sale of the generic pharma activities. Given the seasonal weighting of the group to the second half, and particularly in the LPG, the split of profits by division is less meaningful at the interim stage. For FY '20, LPG was 46% of group operating profit, Retail & Oil was 29% of operating profit, Technology 13% and Healthcare 12%. So the mix at the half year is a little bit different. Just looking at a little bit of the highlights for each of the divisions. DCC LPG traded robustly in a very difficult operating conditions, particularly in the first quarter of the year. The first half is more weighted to the commercial and industrial volumes, which were predominantly impacted in the first quarter by the lockdowns. The business also was impacted by warmer weather conditions. We were really pleased with the development activity during the period, but a little bit more about that later. In Retail & Oil, we had a very strong organic profit growth, benefiting from good demand in the domestic and agricultural sectors offsetting lower demand in commercial, industrial and transport fuels volumes. Our very agile business model enables us to flex our costs quickly to changing volume mix and this delivered a very strong profit performance. DCC Technology traded resiliently as it recovered through the first half to deliver modest operating profit growth, the business benefited from strong demand for consumer products, which more than offset a difficult environment for B2B products, and we're really well positioned in the online retail sector of the market, and we benefited from that during the first half. And finally, DCC Healthcare had a really strong first half, with operating profit up 65.9% on a continuing basis. We had really strong demand for nutritional products in our Health & Beauty business, across all the geographies, and our recent U.S. acquisitions have performed really well. And DCC Vital also traded very strongly during the first half. I'll now hand over to Kevin, who will give you a little bit more detail on our financial performance and on the divisional performance. Kevin?

Thanks very much, Donal. So for the next few minutes, we'll just take you through the performance in the first half in a little more detail. We'll begin with a look at the group performance. So Donal has already mentioned that group adjusted operating profit was up 8.3%. Currency was not a material influence in the first half of the year with constant currency growth of 8.6%, so just a modest headwind from currency translation in the first half. Approximately half of our operating profit growth was organic, driven by the very strong organic profit growth in DCC Healthcare and DCC Retail & Oil. You'll see that revenues in the period were back almost 19%. This reflects, obviously, the lower volumes in the Energy businesses, but also the impact of the lower oil and commodity prices in the first half versus the prior year. So revenues in the Tech and Healthcare businesses combined, where revenues are more representative, were up 10%. EPS, up 7%, as Donal mentioned, and the Board have decided to pay an interim dividend of GBP 0.5195 per share, which is an increase of 5% on the prior year. I guess we are very pleased with the working capital performance and the related free cash flow performance in the first half. As you will all know, probably on this call that DCC typically has a working capital outflow in the first half of its financial year, which we again saw in the current year, so an outflow of GBP 28 million since March. However, the levels of working capital in the business reduced by GBP 100 million from September 2019 and that's GBP 120 million on a like-for-like basis, so excluding acquired working capital, which is a very good result really given the uncertain environment and actually the challenge of lower energy volumes and product cost versus the prior year in our negative working capital energy businesses. So that very good working capital performance drove the very strong free cash flow performance with free cash flow up GBP 90 million on the prior year. And finally, just again, to reiterate a key point that Donal has already mentioned, and our philosophy around financial strength in DCC, the net debt at the 30th of September, excluding IFRS 16 lease creditors was GBP 137 million, GBP 1.5 billion of cash on the balance sheet and undrawn committed bank facilities of GBP 400 million. So GBP 1.9 billion of liquidity available to DCC for its growth and development. Net debt including lease creditors was about GBP 440 million, again, a reduction of GBP 90 million on the prior year. So moving into the divisional performances and beginning with DCC LPG. So our LPG division delivered a very robust performance in the first half, given the difficult trading environment. So clearly, the first half in LPG is seasonally much less significant, and we typically have a much greater weighting to commercial and industrial volumes in the first half than the second half. So in that context, and also, if you remember, in particular, in the early part of lockdown that the weather was extremely mild, we are pleased with the performance in the first half. Volumes were back 9% and profits back less than that at 7%. Operating profit per ton increased modestly reflecting a good cost performance and the increased weighting in the current year to the domestic and cylinder volumes during the first half. So geographically, I mean, the French business performed resiliently as we expected, given the weighting in that business to the domestic and cylinder volumes, notwithstanding the warmer weather conditions. Pleasingly, we continue to develop our B2B offerings in natural gas and power, increasing customer numbers during the period, albeit that volumes were lower, given the nature of the restrictions and the weather conditions in France. In Britain and Ireland, we do have that greater weighting to commercial and industrial volumes. So whilst volumes were back, we remain encouraged by the pipeline of opportunities that we have in Oil2LPG conversions, where businesses continue to be very interested in lowering their carbon footprint and getting a cost-competitive solution. The Budget Energy business we bought just at the start of the financial year in Ireland is integrated well, and again, is increasing its customer numbers and performing well. So similar themes coming across both in Hong Kong and in Germany, lots of interruptions during the periods to our commercial and industrial customers, some manufacturing, hospitality and leisure, similar business areas, that would have suffered a little, but with very resilient performances coming through from our domestic or cylinder segments. And then finally, just to finish, our U.S. business, again, performed well in the period with good organic volume and profit growth. So as you know, across 3 of our 4 divisions, we are building material positions in North America now, and Donal will cover off a little later some of the progress we are making in building out our LPG business in the U.S. So on to DCC Retail & Oil. So DCC Retail & Oil recorded an excellent trading performance in the first half. Our business demonstrated great agility and resilience. Despite the very material disruption in certain areas, the business recorded 9.2% growth in operating profit, over 10% on a constant currency basis, despite the volumes being back almost 18%. There's obviously a couple of key reasons for being able to deliver that profit growth. Firstly, the diversity in the business meant that it was well placed to capitalize on the increased demand coming from the domestic and agri sector. And also, the business delivered a very strong cost performance. Finally, a couple of sectors on the commercial side, such as aviation, are in general lower margin and so the fact that they saw severe volume declines did not reflect itself as materially at a contribution level. Obviously, we saw quite different trends during the first half. But during the first quarter, transport fuel volumes and commercial and industrial volumes were significantly impacted and then began to recover through Q2. At certain points during April, volumes in certain of our retail markets were back maybe 70%, but that depended on the severity of the restrictions. So in Scandinavia generally, although it was materially impacted, the restrictions were less than they were in U.K. and Ireland or in France, where there was a very severe lockdown early in Q1. Aviation was impacted throughout the first half really, and volumes, excluding aviation, were back 14.6%. So during the first half, certain parts of the business continued to perform very resiliently. Certain parts of the transport fuels market into HGVs, for example, and the domestic customers and agricultural customers also still needed products. We continue to make good progress during the first half in increasing the penetration of premium, cleaner fields across the business, particularly in the U.K. and Austria. In the U.K., the business benefited from its increasing diversity with a good performance from the services businesses where we provide roadside or truck stop services or also our lubricants business, where we continue to make good progress. In Ireland, we completed the rebranding and have now fully integrated the 22 former Tesco retail sites, further expanding our presence in the Irish markets. As mentioned earlier, we had a strong performance in Scandinavia, where we had a good performance with domestic and agri customers, but the retail business has also performed well. It was less impacted than other geographies. Again, we made good progress in developing the business, adding further digital capability in connecting with our customers, developing our carwash offering and also increasing our investments in our EV supercharging infrastructure. Finally, the French business performed very resiliently, notwithstanding the very difficult start of the year, which I mentioned earlier. Our unmanned network really performed well. And certainly, in the COVID environment seems to win a preference from consumers for its lower cost and pay-at-the-pump local model outperforming. So on to DCC Technology, DCC Technology recovered throughout the first half to record modest operating profit growth despite all of the disruption is experienced during the first quarter, in particular. So as with the energy businesses, you'll know that DCC Technology is seasonally weighted to the second half. The DCC Technology, again, is a good example of the great agility and diversity we have in DCC, so even though part of DCC Technology experienced very significant reduced demand, in particular for B2B products, the fact that the business was able to meet the very strong demand for consumer and working-from-home products meant that the business traded very resiliently through the first half and recovered throughout the period. We also delivered a good cost performance in DCC Technology, which again was an important contributor in the first half. Organically, operating profit was broadly in line with the prior year. In the U.K. and Ireland, revenues were well up, driven by the very strong demand from e-tailers, grocers and nontraditional retailers. For consumer products, albeit that they're lower margin and higher volume products in the B2B areas such as enterprise or Pro AV, unsurprisingly, these were much weaker, and the products -- these products tend to be higher margin, albeit lower volume. So that mix impact drove the decline in operating profit. We did reach a very important milestone during the first half in our U.K. business where we went live during the working-from-home environment with our significantly enhanced ERP solution. So that was a significant achievement for the business in that environment. And now our focus will move on to leveraging the benefits it can bring over time, particularly in helping to drive our engagement with customers through an enhanced web offering for the B2B channel. In North America, we delivered very good revenue and operating profit growth. Once again, we saw weakness in B2B products, with Pro AV in particular, impact us with conferences, conference centers and event centers, hospitality and such like postponing investments, consumer and working-from-home demands was very, very strong. These at-home product categories, such as consumer electronics, music, audiovisual, even pro audio, became must have, essential at-home products during the last down period. In Europe, again, good growth overall in the seasonally less significant first half with the same general themes being relevant in the DACH region, so Germany and related, we were impacted by B2B weakness given our focus on Pro AV in that market in particular. In France and Scandinavia, where we have more consumer products and relationships with the large e-tailers and retailers, we improved relative to the prior year in those markets. Finally, no means least, DCC Healthcare, which obviously, performed very strongly in recent years. It again delivered an excellent performance in the first half. So DCC Healthcare delivered reported operating profit growth of 39.7%. And as you'll see on the slide, this is even higher after the prior year is adjusted for the disposal in the prior year of our U.K. generic pharma operations. DCC Healthcare delivered operating profit growth of 65.9% on a continuing basis. Approximately half of that growth was organic. The division generated very good revenue growth of 24.5%. This enabled good operating leverage, and thus, together with the evolving mix of the business, with now over 50% of the revenues being in Health & Beauty Solutions, resulted in a higher operating margin profile for the division. So both parts of DCC Healthcare really delivered strongly during the first half. Firstly, DCC Health & Beauty Solutions, as Donal mentioned earlier, delivered excellent profit growth, benefiting from our prior year acquisitions of Ion Labs and Amerilab Technologies in the U.S. So those businesses, together with our existing business in the U.S., that enlarged business really performed well, and we're making good progress on cross-selling our products and services to that enlarged customer base in the U.S. In Europe, again, we saw very good growth with the same structural drivers helping really where people are spending more money on looking and feeling good. In addition, the emergence of the pandemic definitely helped to raise awareness around immunity nutrition, which accelerated some of that growth. The Beauty sector also delivered during the first half, with the business benefiting from a continued evolution of the service offering to more complex products for larger international brand owners. DCC Vital delivered both revenue and operating profit growth in what was a very disruptive first half of the year. As no doubt you can imagine, the health care systems of both U.K. and Ireland experienced unprecedented event during this period, but our business responded excellently to the challenge posed by the pandemic. The very robust supply chain of DCC Vital and the capability of our teams ensures that the business really delivers for our customers during this period when it really matters. So while there was a dramatic slowdown in routine surgery or medical and GP consultations during the first half, and in particular, during the first quarter, that slowdown was more than offset by the business responding to meet the needs, the new needs, I guess, of the health services in terms of products relevant to COVID-19, PPE or other necessary products. The business also benefited modestly from 2 smaller bolt-on acquisitions we completed in the prior year. So with that, that takes us through all of the divisions, and I'll hand you back to Donal, who will run through the rest of the presentation.

Thanks, Kevin. So despite the lockdowns and travel restrictions, it was a very active period for development for DCC, and we're really pleased with our development activity in the first half of the year. During the period, DCC committed approximately GBP 90 million to acquisitions across Europe and North America. We're really pleased with the continued expansion of our LPG division. In the U.S., we completed the acquisition of NES Group in September. This is DCC's second material bolt-on acquisition in the U.S. since acquiring DCC Propane. NES market sells and delivers propane and related products and services to 22,000 customers in Connecticut, Rhode Island and Massachusetts. It is DCC's first acquisition in the Northeast region of the U.S. and will provide a platform for further acquisitions in this attractive region for propane. Following the acquisition, DCC now has operations in 14 states in the U.S. and is very well positioned for growth in the future. During the period, we also completed a number of small bolt-ons to the U.S. business, increasing our strength in regional areas. In September, we also reached agreement subject to competition authority approval to acquire Primagaz from SHV Energy. The business is highly complementary to our existing business in the Benelux region, and serves approximately 10,000 customers in the bulk and cylinder sectors of the market. The acquisition of Budget Energy announced in May, which significantly strengthened DCC's position in the renewable electricity market here in Ireland, was successfully integrated and is performing very well. DCC Technology, very recently, last Friday, completed the acquisition of The Music People in the U.S. The business is highly complementary to our current pro audio offering in North America and will be fully integrated with the Jam business. And finally, in DCC Retail & Oil, we acquired a small bolt-on [ SixSight ] retail network in Austria. So good development activity across 3 of the 4 divisions in the first half of the year. And as Kevin said earlier, we had very good performance from the acquisitions of both Amerilab and Ion Lab, which were acquired right towards the end of the last financial year. So despite the challenges presented by the COVID-19 pandemic, DCC remains very active on the development front, and we are very confident that we will continue to deploy capital across all 4 of our divisions. Now, just a couple of words on our session next Wednesday, the 18th, on enabling energy transition. The impact of energy transition on DCC has been a key part of our strategy for a number of years. We had planned on holding a capital market session on this topic earlier this year, but we decided to defer it due to the COVID-19 pandemic. DCC is very well positioned to enable energy transition. And support our customers on their energy transition journey, and this is something we are actively doing every day. On our webcast on the 18th of November, we cover our group purpose, our strategy and our current position within the energy markets. We'll outline DCC's opportunity in enabling energy transition. We'll demonstrate how our business is growing and evolving its product and service offering to support our customers on their energy transition journey. And we will also outline how we are leading by example, and reducing our carbon emissions in our own operations. The webcast will begin at 2:00 p.m. GMT, and you can register on www.dcc.ie. So in summary, we had a really strong performance in the seasonally less significant first half of the year, despite the unprecedented difficulty and uncertain trading environment we all operated within. Our diversity, our agility, again demonstrated that DCC can deliver through all conditions. We had an excellent cash flow performance, and the balance sheet remains extremely strong and liquid. And despite the lockdowns and travel restrictions, DCC remained very active on the development front. And finally, our outlook statement. With COVID-19 related restrictions now increasing again, generally, the outlook for all economies in which DCC operates remains very uncertain. However, DCC's diverse and resilient business model, the essential nature of the group's products and services and its extremely strong balance sheet ensure that the DCC group is well placed to navigate this ongoing uncertainty and continue its growth and development into the future. So we leave here with our favorite slide to highlight DCC's strategy continues to deliver. This strategy, over our 26 years as a public company, has delivered a consistent track record of growth, with operating profit growing 14.5% CAGR, earnings per share growing 12.1% CAGR, and unbroken growth in dividends increasing 14% CAGR, free cash flow conversion of 101%, consistently higher returns on capital employed significantly ahead of our cost of capital. Our strategy delivers, and we're confident that our strategy will continue to deliver. Thank you for listening, and we look forward to your questions.

[Operator Instructions] The first question came from the line of Alan Smylie from Davy.

It's Alan over at Davy. Congrats on a really strong first half. I have a few Energy-related questions, just to start. So first, with respect to LPG and Retail & Oil, and obviously, we don't want to over-interpret a seasonally less relevant half, especially LPG. But if you could give us some color on the volume trajectory through the half and through October, severe lockdowns impacts eased, that could help us frame our thinking of volume perspective for the second half, that would be helpful. Secondly, just a bigger picture question on Retail & Oil. So clearly, some of the all majors are now suggesting a greater downstream investment, in particular, and petrol stations will form part of their energy transition strategy. So I'd be interested in your take in that. And if it changes your thinking with respect to M&A in the sector? And then just the last one for me on the NES acquisition, to the extent you can comment, if you could talk through the acquisition process for that asset, specifically how competitive was the process?

Yes, and thanks, Alan. And maybe just taking the volume piece initially. So there was a number of elements from a volume perspective. So clearly, and we kind of -- we called out in May, and then we called out again at the AGM time. We've seen strong enough demand in the domestic sector, so people kind of lockdown working from home, there was a little bit in our Retail & Oil business, in particular, probably a little bit of panic buying, people wanting to ensure that they had sufficient product. So that benefited in the first quarter. Commercial and industrial, and particularly in the height of lockdown, commercial and industrial was much more significantly impacted and transport fuels very significantly impacted, particularly in markets with very severe lockdowns. So like the France, where it was -- you almost had to get a letter from the government to get out to buy your baguette. So there was significant impact in the first quarter. As the lockdowns eased, we saw decent recovery in volumes, and particularly on the transport fuel side. And indeed, through the summer, with people holidaying at home, we saw good demand actually on the retail side in most of the markets that we operate within. So that trajectory, Alan, of -- very difficult in the first quarter and then recovering throughout, we saw within both commercial and industrial and indeed within the transport fuel side of the market. So volumes are broadly where we'd expect them to be at the moment. The retail question, like that's -- retail, we have we've invested clearly over the last number of years in building out our retail presence, similar to everyone, I think, within the energy sector that operates within retail. The retail models are evolving. We have been -- we're lucky in some respects that we have a presence in the Norwegian market, which is one of the most advanced markets in terms of energy transition. And we're learning every day in terms of our ability to grow and develop our business in that environment. Over the period, we've rolled out over 108 fast chargers across our retail network. And we see very good opportunities to continue to grow and develop our business within the retail sector. As you quite rightly pointed out, there's a lot of interest in acquiring retail assets and we are measured, as you know, in terms of our focus on the returns that we generate on any investment across the group. So we've probably been less active in this area over the last period of time. Our Energy businesses generally are very diverse. In terms of the product offerings, in terms of the customer mix, they're evolving significantly. We talked about the investments earlier in natural gas and electricity, the renewable electricity business here in Ireland. So we have a very diverse range of activities within our Energy business, and we continue to invest in a broad range of activity. So it's not just focused on 1 area. And NES, like that's been a very important acquisition for us. We have, for some time, looked to the northeast of the U.S., it's a very attractive market from a propane perspective. We had no presence there in the various acquisitions we've done since acquiring DCC Propane. So we have been talking to the NES Group for some time. It was a competitive process. There's a number of active competitors for assets within the U.S. market. But we've built a strong -- which is typical DCC style over a period of time, we've built a strong relationship with the team there, and we became their preferred partner for the business going forward. So delighted to have them onboard. And really, the important part of not only are we buying a really attractive business in NES, but it gives us a platform in that region for further acquisitions. And as we know, in the -- in any of the energy sectors, but particularly in the LPG business, where you have a presence in a region, then further acquisitions are very synergistic. So that was a very important acquisition for us. And we completed 2 other acquisitions, strengthening our regional performance in a couple of other regions.

The next question came from the line of Sam Bland from JPMorgan.

2 questions for me. Actually, both on energy again. I guess we saw within Retail & Oil and LPG improving unit margins. Just want to get a sense of is that mostly mix driven, where you've got a shift from commercial industrial to domestic? Or did you also see kind of higher unit margins within the specific categories, so within domestic or within transport fuels? If you could comment on that, it would be helpful. And the second question is, just get a bit of a sense on that stocking cycle within the Energy businesses going into the second half. I know you said there was some panic buying early on in Q1. Is your sense that customer inventories of product going into the winter period are now at kind of a normal level? Or they're holding a lot of inventory? Or just some thoughts on that would be helpful.

Thanks, Sam. The margin piece, I suppose in -- principally, there's a mix effect, which Kevin called out earlier in the first half. So the stronger on the Retail & Oil side, the strong demand on the domestic side. And domestic isn't a big part of the first half of the year, but that piece that we talked about in terms of a little bit of panic buying and people making sure they had product during that period was beneficial from a margin perspective. Similarly, we had a decent performance in the agricultural sector, which was beneficial from a margin performance perspective. We had areas like aviation, which is a high-volume but very low-margin part of our business, and it's a small part of our business. But again, that would have had a beneficial, if you like, the impact on that in terms of mix. I think 1 of the call outs and Samuel I've seen this in pretty much all the retail operators' numbers, whether it's the Shell, the Couche-Tard, the Applegreens calling out that margin on retail responded well during the heights of the lockdown. So with significant reduction in volume, the industry margins were strong. So that was that was clearly beneficial for us. But nothing kind of -- the major part was obviously on the mix side, and the cost control was really good. Kevin, I don't know if you want to add something?

Yes, I just -- yes, Sam, just to reiterate, for Donal as well, obviously, mix and margin are part of it, cost is also a big part of it. So we obviously got reasonably active from a cost perspective through the first half and all our teams delivered good initiatives right around the business, not just in the Energy businesses. But obviously, our 2 biggest divisions being the Energy businesses, clearly, a lot of the cost performance is driven out there, and on a group basis, our overheads are on a like-for-like basis probably GBP 35 million lower than they were in the prior year. So quite a good bit of cost activity in both the 2 energy businesses, helping to deliver thus kind of better leverage at the bottom line from an operating profit per liter or per tonne basis.

Yes. And one of the key factors, Sam, and you'll have heard us talk about this many times in the past on the Retail & Oil business, is the flexibility in our cost base. So while our volumes were back 17.8%, we really have flexibility to adjust our costs, and that came true in spades in the first half of the year. Look, the stocking of products, and that's pretty modest really in the overall scheme of things, but it's something that we were keen to call out because we've talked about it through the half. And customers have small tanks on, so it doesn't -- it's not that material in the overall scheme of things, but as we went into the winter months, certainly, their tank levels might be a little bit higher than normal, but nothing that is that material. Clearly, the big factor going forward now is the weather impact, obviously, for the next number of months. So we'll be less worried about COVID and more worried about what the weather conditions will do for us.

The next question came from the line of Kate Somerville from UBS.

So firstly, how do you expect the second lockdown to vary with the first and what's the impact on the different businesses, given it's more of a social lockdown rather than commercial lockdown? Then secondly, as we all go back to work and we've got this new way of working, do you expect and have you seen stronger demand for your Pro AV items, given we're probably going to have a more integrated way of working? And then finally, you spoke about Oil2LPG conversions, and that still remains strong. Do you expect that to accelerate or just to continue as already?

Great. Thanks, Kate. I suppose the second lockdown, we'd all prefer not to be back in lockdowns. But I think we've learned an awful lot of things. We've all learned an awful lot in terms of how we -- all of us operate even our own lives through the first one. And as you say, it's a little bit more of a social lockdown in ways than a commercial lockdown and there was just huge uncertainty during the initial lockdown. So we don't think it will be as dramatic an impact on the businesses. But there is areas like -- so if you look at transport fuels, there's -- depending on the market, like if you're here in Ireland, you can't travel more than 5 kilometers from your property. So there's impacts, and they'll vary. We'll see how governments implement the lockdowns going forward. We'll see how the virus response that left in. So I think our call out on it and it's really why we're not in a position to give guidance, and two, why maybe we sound cautious in terms of the second half of the year is it's just -- there's an awful lot of uncertainty out there, and we'll have to see how governments react, how the virus reacts to the level of lockdown, whether the more severe lockdowns will be put in place. But I think the really good thing from a DCC perspective is that we have proven through the most difficult of lockdowns that we had in the first quarter that our business is very resilient, that our business is very agile and that we can react pretty quickly to changes in the market. The Oil2LPG piece, I think that's -- Kate, that's something that we've been doing this. We've been talking about this for quite some time. Originally -- it originally started back with very blue-chip organizations, focused on reducing their carbon footprint. We create -- we put in the capability not just to sell LPG to those customers, but actually give them turnkey energy solutions to be able to convert their energy infrastructure across to burning LPG. And then -- and you've heard us talk about this before, the dislocation between the oil and the LPG price, not only is it very beneficial from a carbon reduction perspective, but it becomes much more cost-effective for the customer. So that has ramped up. We'll talk about that a fair bit next week on our enabling energy transition session. And that is -- there's a very big opportunity for us in that segment of the market. There's an awful lot of customers burning less carbon efficient products than the products that we provide. And we think we have a long way to go in converting customers across from Oil2LPG. Kevin?

Yes. And just finally, just to finish on the technology piece case. I guess, the reason we love the technology sector and the reason we love our technology business is that technology is pervasive, and it's increasing in importance for people in their lives, both at home or at work. And I guess, without getting too specific on what particular products or what particular supplier will win, we're reasonably agnostic when it comes to technology products. But what we're quite excited to see is actually that technology is important and its use is becoming more and more important. So there's no doubt that a new workplace emerging at the home, that's a good thing for the technology sector. That means most likely sale of more technology products. However, there will be parts of the market that are impacted by that. So you may have slightly less spend in the office. But I guess, for us, it's not about exactly where that spend goes, it's more about the fact that our business is very broadly based, plays in consumer technology and in B2B technology. And so we believe that our business is very well positioned to meet the increased demand for technology, no matter whether it's through the kind of the B2B channels or indeed through more consumer-related tech products being an opportunity for DCC. So that's sort of how we think about it.

And I think, Kate, if we think about it, just putting on the DCC hat for a minute and how we'll operate going forward, I've no doubt we won't go back to a way of operating like we were pre this crisis, that will be much more of a hybrid model across businesses. And one of the key things to enable that to happen is unified communication. So you're going to go to -- you'll go to a meeting or we'll be coming and we'll be having a call with investors or analysts, you won't know whether some of them are going to turn up physically in the office or some of them will be available online. But when you press the button and you go in, you want to have everyone available, be they physically there in the office or be they operating remotely. And the technology to enable all that to happen is there, and that will grow and that whole trend towards unified communication is an area that actually we've been investing in, in terms of building that capability through our Pro AV businesses. Now, while that might have been a little bit more difficult over the last 6 months, we see that as a real opportunity for growth going forward. And I think our business is just an example of how every business is going to do going forward. So I think we'll all have slightly different ways of working when all these vaccines come out, and we can get back into life somewhat as we knew it before the pandemic.

The next question came from the line of Annelies Vermeulen from Morgan Stanley.

Annelies Vermeulen from Morgan Stanley. I just have a couple of questions left, please. I just have a couple of questions left, please. So firstly, on the Healthcare division performing very, very strongly. You mentioned that the acquisitions that you made last year have performed stronger than expected. And you mentioned part of that was cross-selling opportunity. Could you give us some more color on particular end markets or products that really have driven that growth ahead of what you're expecting? And also on the strong demand, you flagged for the nutritional products. You mentioned some of this was accelerated by COVID. I'm just wondering if you have a sense of how much of it will be recurring do you think, and some of these, I suppose, new consumer habits will stay in place for longer? And then secondly, on the acquisition side. As a result of the pandemic, have you started to see more potential opportunities, perhaps more businesses wanting to sell or offload particular assets? And again, coming back to the -- obviously, the ongoing travel restrictions that you mentioned. I know you did some deals in September. To what extent were those done remotely, I suppose? And do the travel restrictions, that continue to be in place, impede your ability to integrate those acquisitions as effectively as you have done in the past?

Great. Thanks, Annelies. The -- I think taking the Health & Beauty side of it first. Like the -- we've been in this business actually for quite some time, and it has been the highest organic growth business within DCC over a very long period of time, so -- and we've positioned ourselves with our partners. So we're -- we manufacture products on behalf of some of the world's leading brands in this area, where they're producing more complicated products, so hard-to-manufacture products. And that has been -- so people are getting more discerning on the health supplements that they're taking. They want to take more sophisticated products, and that plays very much into our sweet spot. So this is a market that kind of grows at 6% to 7% per annum. The business is both Ion Labs and Amerilabs and building on the Elite acquisition that we did a couple of years ago in the U.S., give us a very strong presence across all format of health supplements within the U.S. market. But we're particularly actually strong in the area of nutritional products that are focused on strengthening the immune system. And as you can imagine, people concerned during the pandemic, that has been driving very significant growth well ahead of that kind of 5% or 6% growth levels within the nutritional sector in those product areas and we're -- clearly, we've benefited from that. Will that continue long term? I think the projections are for that kind of mid- to higher kind of single-digit growth within that sector of the market. So it might taper off a little bit from that level, but it's going to be a high growth area, and we're very well positioned. And as Kevin said earlier, one of the key focuses that we have in building out that presence is that we have different product formats across our different facilities and the ability to cross-sell customers that we have a strong relationship, maybe on effervescence to sell them other product areas that go into there, the mix of products that they provide. So that has been a key driver. And again, I think a good demonstration of DCC's strategy in action. We've been working on that for some time to build out that business in the U.S. Maybe we got lucky in our timing now that we've hit a real sweet spot in the market, but I think there's really good long-term prognosis for that asset for that market. The acquisition -- this is this is, I suppose, key to the way DCC has always operated. We build long-term relationships with people. We're all the time virtually or physically knocking on doors to try and establish relationships. And in this environment, we're virtually knocking on doors to establish relationships, but lots of things. And a lot of those acquisitions, the one -- the NESs, the Budgets, we've been talking to those people for some period of time. But we've also actually completed acquisitions. Though, we haven't any relationship with kind of pre-COVID, pre-lockdown. There's a number of factors that come into it then. One, obviously, building relationships. Two, your ability to do due diligence. And we have teams of people, and we invested in the development capability in all the markets that we operate within. So while we might not be able to travel outside of Ireland, we have people that can go and visit, do our facility checks, build the relationships on the ground, do all that in a very socially distant way, clearly in a safe way. But we don't see -- just don't see any inhibitor to development growth during the crisis. Now, the next part is, what does it mean in terms of opportunity set. And we've -- lots of things that we're working on. We are very active on the development front. Is there an acceleration or a deceleration? That's hard to call. I think we're going through cycles. There's certainly some businesses that need capital, that will trigger maybe acquisition activity. And there's other businesses that strategically have decided to divest out of assets. And there's others that are the usual stuff, where people are coming up to retirement, there's generational changes, there's change in life plans, all those kind of things. And if we look at the range of acquisitions that we do or even the range of acquisitions that we did over the last 12 months, we have all of that in it. We've people coming to retirement, we've people change in circumstances, we've corporates selling assets that were less strategic to them and so on. So we have a mix of everything. But we feel really good about where we sit from a development perspective. And as Kevin called out earlier, we have a very strong balance sheet. So we have the capital to move quickly on things. And we're confident that we'll be deploying capital across each of our 4 divisions going forward.

And the next question came from the line of Jane Sparrow from Barclays.

Just a couple left for me. Just 1 on the cost side of things. Could you just let us know whether -- you've obviously had a strong performance there, just whether there's been any significant benefit from the use of various furlough schemes, just as we think about how much of that sort of cost reduction rolls over into next year? And then the second one was just on the technology business, the restructuring of the U.K. That's obviously been a multiyear project. And I see the exceptionals in the first half still had some running costs in there for the SAP implementation. Just wondering when we would expect those to disappear? Whether we'll get some more of that in the second half or whether that program is now complete?

Yes. Jane, certainly, the -- from a cost perspective, it's very much -- cost performance was -- work that we did within businesses, there was some element of furlough, but it was -- it's very modest in the overall scheme of our cost base. And that was particularly in the first quarter of the year where, obviously, there was a very significant demand disruption. So it's really been actions that we're taking within our business. And Kevin, you might like to talk about the cost programs within technology?

Yes. And obviously, Jane, you're aware, we've been working on developing the infrastructure in our U.K. and Ireland business, which is just a very significant business now for a number of years. That included reorganizing completely our warehousing infrastructure, which has been done for a little while now and obviously then the SAP upgrades or SAP implementation, should I say, which has now gone live, there's still a little bit of things to do, Jane, on that, but they are not anywhere near as material as the work that we've come through. So you should expect those costs to taper and obviously then to fall away entirely into next year.