DCC plc (DCC) Earnings Call Transcript & Summary

Hello, and welcome to the DCC plc Interim Results September 30, 2023. My name is Elliot, and I will be coordinating your call today. [Operator Instructions]. I would now like to hand over to Donal Murphy, Chief Executive. Floor is yours. Please go ahead.

Thank you, Elliot. Good morning, and welcome to DCC's interim results presentation for the 6 months ended 30th of September 2023. I'm Donal Murphy, Chief Executive of DCC, and I'm delighted to be joined by Kevin Lucey, our Chief Financial Officer. Here's our standard disclaimer. Thankfully, I don't have to read it. It's there for your notice. Our agenda for today, I'll cover off the highlights of the first half of the year, which was another period of strong growth and development activity for the group. Kevin will take you through the performance review. I'll give you an update on our strategy and our development activity, and we'll finish with our outlook statement and a summary before we open up the session for questions. So let's get started with the highlights for H1 FY '24. It was an excellent start to the year strong growth in operating profit for the group and an excellent period of acquisition activity. On our financial performance, we delivered strong growth in the seasonally less significant first half of our financial year to the 30th of September 2023. We were really pleased with the performance given the ongoing challenges in the macroeconomic environment. Group adjusted operating profit increased by 12% to GBP 247.6 million driven by an excellent performance in DCC Energy and partially offset, as anticipated, by a decline in both DCC Healthcare and DCC Technology. We were particularly pleased with our organic growth of 4.4% during the period. The Board proposes to increase the interim dividend by 5% to 63.04p per share. The strong performance of the group during the period yet again demonstrates the resilience in DCC's business model, the benefit of our diverse sectors of energy, health care and technology and our strong market positions, and most importantly, that we invest in, what the world needs every day. From a development perspective, we made really good progress in delivering on our strategy. Since our results in May 2023, DCC has committed approximately GBP 310 million to new acquisitions in DCC Energy, including, as announced separately this morning, the synergistic acquisition of Progas for GBP 140 million, a nationwide distributor of LPG in Germany, Europe's largest energy market. The acquisition is subject to competition clearance. And the acquisition of 5 energy management services businesses further expanding our offering in this high-growth sector. These acquisitions demonstrate the progress we are making on the execution of our Cleaner Energy in Your Power strategy, and more about this later. We enable people and businesses to grow and progress and we are future focused. We are embedding our strategic and sustainability agendas across the group. At our Energy Insights event on the 6th of September, we publicly set our ambition to reduce our Scope 3 emissions by 50% by 2030 and to net zero across Scope 1, 2 and 3 by 2050 or sooner, and we are well on track to achieving these goals. We announced today that for the first time in our history, DCC has been issued with a credit rating by S&P Global Ratings and Fitch. We have been rated BBB, a solid investment-grade rating. Finally, our preparations are well in hand for CSRD. I'll hand you over to Kevin now, who will take you through the performance review. Kevin.

Thanks, Donal, and good morning, everybody. So I'll run through the first half performance at a group and a divisional level. So as Donal mentioned, the first half in DCC is seasonally less significant from an activity and profitability perspective, typically accounting for about 35% of our profits on an annual basis. Notwithstanding that, it's good to be reporting strong growth in first half operating profits and in line with our expectations overall. So revenue was GBP 9.6 billion in the first half. And as you all know, revenue is not always the most relevant metric for DCC given the operating model in our Energy division. I'll talk through the divisional metrics in a few moments. But at a group level, the revenue delta the prior year was substantially driven by the lower cost of energy commodities during the first half. And you'll remember that the comparative periods, so really elevated prices due to the energy security concerns at the time. So as Donal mentioned, group adjusted operating profit was GBP 247.6 million, 12% ahead of the prior year and a modest constant currency headwind, so 12.2% ahead on a constant currency basis. We'll come back and talk about the divisional contributions to that. But with a strong organic performance in Energy, operating profit was organically up 4.4%. Adjusted EPS growth was 1.9% with the delta to operating profit growth being driven by a modestly higher effective tax rate of 20.3%. This reflects our expectation for the full year and is a little higher than prior year as the group grows internationally. And obviously, we've also seen a number of jurisdictions increased corporation tax rates over the last 12 months. And as expected, our increased interest costs accounted for the majority of the delta. Clearly, the interest rate environment has changed materially versus the prior -- first half of the prior year, and we saw that come through very much in H2 last year. And so H1 this year has also seen it. Interest costs were modestly higher than H2 of the prior year. The Board has increased the interim dividend by 5%, which again will hopefully be welcomed by shareholders this morning. In terms of balance sheet and cash flow, working capital was in line with expectations in the prior year at GBP 440 million. So we saw our typical seasonal outflow in working capital. On a like-for-like basis, the utilization of supply chain financing in DCC Technology was lower than the prior year by about $35 million. So we're pleased with the performance from a working capital perspective generally. And on a rolling 12-month basis, the free cash flow conversion of the group remains very strong at 86%. Net debt excluding leases was approximately GBP 1 billion. The increase in prior year is really all due to acquisition activity. Most of the prior year acquisition activity from a cash flow perspective was in the second half of the year. We spent GBP 300 million in H2 of the prior year with GBP 150 million in H1 this year. So GBP 450 million in acquisition spend since this point last year. A couple of other quick points on the balance sheet. So I suppose we set out a number of years ago to improve the efficiency of the balance sheet and to also add to our funding options over time. During H1, we repaid GBP 235 million in private placement notes from cash resources. We're holding about 50% less cash relative to our EBITDA than we did 3 years ago. Just under 60% of our debt is now at fixed rates. This has increased from about 30% 4 years ago. We've had great support from the private debt market since 1996, and we continue to enjoy their support today. Strong investment-grade credit ratings from S&P and Fitch that Donal mentioned earlier provides us with further optionality in terms of group financing into the future. We would expect the acquisition of Progas to close before the end of the financial year following the competition process, but we expect that to be late in the financial year. So we're not expecting much, if any, of a profit contribution until FY '25. And we'd expect to finish the year on the basis of the announced acquisition activity today with about 1x net debt to EBITDA, pretty similar to prior year. I won't dwell on this slide for too long as we get into the detail of each division in a moment. But as you can see on the right-hand side, DCC Energy accounted for 69% of operating profit in H1 with DCC Technology and DCC Healthcare together accounting for 31%. Looking to the table on the left, you will see that at a group level, we had a very modest constant currency headwind of just 0.2% with reported growth of 12%. And given where currencies are today relative to the prior year, we continue to see an FX headwind of just over 1% to group operating profit for the year as a whole. So pretty much the same as we did in May when we were guiding. In terms of reported profits, DCC Technology declined by 15% to GBP 38.7 million. DCC Healthcare declined by 11.3% to GBP 38.3 million. And DCC Energy was up 28.9% to GBP 170.6 million. So now we look at what drove the performance across each of the divisions on the next couple of slides. Operating profit growth in DCC Energy increased by 28.9% to GBP 170.6 million, an excellent performance. Looking at the right-hand side of the slide, you will see that the Energy Solutions business represented 61% of profits in the first half with Mobility contributing 39%. And on a relative basis, solutions would contribute more to relative profits as usual in the second half. In terms of headlines, organic profit growth was just over 20% with M&A contributing almost 8%. The trajectory we've seen in recent years of an increasing proportion of our profits coming from services, renewable and other products continued in H1, up 7% on the prior year to 46%. This metric is quite impacted by seasonality as most of our traditional heating business occurs in H2. But nonetheless, the direction of travel is instructive. We would expect the full year metric, which was 28% last year, to continue to move northwards. Overall, volumes were flat year-on-year. Profit growth was strong across the Energy Solutions business, 33.3% ahead of prior year. The strongest performing regions were Continental Europe and the Nordics. We had good organic growth across our SRO product offerings, and of course, most of our acquisition activity over the last 12 months also falls into that product category. Donal will pick up on that later in the presentation. The natural gas and power market was a drag on performance in the prior year, and we saw a good recovery in that area during the first half. Cost inflation continued to be a feature during H1, but the teams around the division did a very good job on ensuring that costs were minimized and recovered where necessary. The Mobility business also performed well in H1 with profits up 22.5%, all organic. We saw solid performances across all markets really, with the stronger regions being in the Nordics and the U.K. Our French business performed well in a challenging operating environment with some disruption from strikes early in the year and also difficult market conditions more recently. Our digital and fleet service business areas also performed well and delivered good growth. So albeit smaller seasonal numbers in H1, a very strong performance overall from DCC Energy. In DCC Healthcare, we had operating profits of GBP 38.3 million, 11.3% lower than prior year. DCC Vital delivered strong growth in H1. At a divisional level, the organic decline in profits was driven, as expected, by the fall in profitability in DCC Health & Beauty Solutions. The strong growth in DCC Vital included the benefit of the first-time contribution of Medi-Globe and good growth in Medical Devices and in Ireland. The integration of Medi-Globe has gone well and the business has also performed well. In primary care, performance was mixed with a good performance in the DACH region. But we experienced weaker demand in the U.K., where there was some impact from funding constraints in the NHS. As expected, the health and beauty market was difficult. The last 12 months have been characterized by a significant element of destocking both in our brand owner customers in retail and at a consumer level. And as the producers of the product, this has been painful for the contract manufacturing sector generally. The trends globally have been consistent, and we have experienced similar market conditions in the U.K. and the U.S. It's fair to say that it was a little more difficult than we were expecting during H1 with lower customer demand. However, we have seen green shoots in more recent weeks. Our order intake has begun to pick up, order books are building, and the market statistics at a consumer level are improving now. We have not seen any material customer attrition during the period, and we are seeing increased interest from an engagement with our customers and new products. Given the difficult market conditions, we were obviously very focused on our cost base. We did consolidate manufacturing of 2 sites into 1 location in the U.S., reflecting that focus. We've also been investing in our infrastructure across the last couple of years, and this continued in H1. So while we were reducing costs where we could, costs were up due to inflation and the relatively higher fixed cost environment in the Health and Beauty segment, and most materially, the investments we are making in new capabilities such as in our new state-of-the-art gummy line in Florida. So just to summarize, strong performance in DCC Vital with the decline in Health & Beauty. In terms of the divisional operating margin, all of the decline was driven by the organic decline in Health & Beauty and the increased costs we saw there. But the investments we are making reflect our continued confidence in this long-term growth sector, and we believe it remains a very strong growth opportunity for the group. And finally, for this section of the presentation, DCC Technology. Operating profit declined by 15% or 13.4% organic constant currency to GBP 38.7 million. Revenues were back almost 10% organically, reflecting weaker demand for consumer technology. Again, our Pro Tech activities, where we have increased our presence in recent years, performed well with a particularly strong performance in Pro Audio products in North America. The weakest demand we experienced was really for consumer tech products, and that's relevant in our Info Tech and Life Tech channels in Continental Europe and the U.S. Despite the weaker demand experienced, our large U.K. business, which is in the Info Tech, performed well and delivered good growth. We've been very focused on this over the last 12 months, and it's pleasing to see some good operational improvements coming through now. Across DCC Technology, given the backdrop, we remain very focused on costs. Costs were flat across the first half, which reflected some good cost reductions and then inflationary impacts. So finally and to reiterate. Strong growth in profits overall in the seasonally less significant first half. There's clearly lots of macroeconomic uncertainty around, but DCC remains very well positioned to continue its growth and development. I'll hand back to Donal now.

Thanks, Kevin. At DCC, we invest in what the world needs, and now I'll give you an update on our strategy and development activity and the progress we are making with the implementation of our Cleaner Energy in Your Power strategy. DCC is always focused on building a growing, sustainable and cash-generative business, which consistently produces returns on capital employed well in excess of our cost of capital. This has been successful over many years because we always look to the future for growth opportunities. We seek out the growth potential in our sectors. We operate our business as well and help them to grow and progress, and we allocate capital across our sectors to improve and scale our businesses. We invest and reinvest in essential solutions, solutions the world needs today and into the future. which underpins our sustainable growth and supports our purpose of enabling people and businesses to grow and progress. We invest to grow our businesses organically. We invest in our sectors through M&A which strengthens and scales our businesses. And we invest in our people to enable them to grow and progress. We operate and invest in sectors where we can see a very clear purpose, solving real needs and with macro trends that provide us with growth opportunities. In the energy sector, we believe there is a real need for progress to cleaner energy solutions that are secure, affordable and sustainable. In health care, we see the world's necessity for people to live longer and healthier lives. And in technology, we bring to market the products and services to make a progressive world a reality. By pursuing our group strategy and deploying capital in the higher growth segments of our sectors, the size and shape of DCC will be very different by 2030. By 2030, we will have more than doubled the size of the group, and approximately 70% to 75% of our profitability will come from energy services and renewables, health care and technology. We are making really good progress against this objective. And to demonstrate this, I'd like to pick out a few of the developments from H1 FY '24. In DCC Energy, at our Energy Insights Day on the sixth of September, we outlined in detail how we will double our profits while halving carbon emissions by 2030 through the implementation of our Cleaner Energy in Your Power strategy. We doubled the sales of HVO biofuel volume to just under 50 million liters. We expanded our energy management services business through 5 acquisitions and organically. And we completed the development of our Avonmouth LPG storage facility. In DCC Healthcare, in order to drive greater operational efficiencies, we consolidated 2 of our U.S. nutritional contract manufacturing facilities. We completed a state-of-the-art gummy line in the U.S. and are now manufacturing for our first customer in this high-growth innovative format. We've made really good progress with the integration of Medi-Globe, and we continue to invest in the technology and digital platforms in primary care to accelerate our growth. Finally, in DCC Technology, we are really pleased with the progress we are making in the operational improvement projects in our U.K. Info Tech business, and we have invested in and improved our online marketing in our Life Tech fulfillment business in the U.S. If you didn't have the opportunity to join us for our Energy Insights Day on the 6th of September or to listen to the recording of the event yet, I would encourage you to do so. The recording of the event can be accessed on our website, www.dcc.ie. I'd just like to briefly summarize our energy strategy and highlight some of the progress we have made during the first half of the year. The world needs cleaner energy for everyone that is secure, affordable and sustainable, and our Cleaner Energy in Your Power strategy will deliver this for our customers. Our vision is to double our profits while halving emissions by 2030. We will do this by: firstly, reducing the carbon intensity of the essential liquid fuels we supply to our customers, our molecules business; and secondly, by building a complementary decentralized electron-based business to enable our customers to self generate electricity from renewable sources. To deliver on our objective in our molecules business, we will become a leader in biofuels. We will accelerate the growth of LPG as a transition fuel while increasing the percentage of renewable LPG in our mix. We will minimize our activities in high-carbon intensity products, and we will maximize the returns from our Mobility business. To deliver on our objective in our electrons business, we will continue to consolidate the highly fragmented solar installation market, becoming a pan-European leader in solar solutions. We will buy and build an energy management and services business, providing a broad range of recurring revenue energy management services to our customers. And we will continue to expand our services offerings, including heat pump and hybrid solutions. Our customers are at the heart of our strategy. And by implementing our strategy, we will expand the range of products and services we are providing to our existing 1.7 million direct energy solutions customers to support them on their journey to net zero. We will also acquire new customers as we continue to consolidate the LPG market, the highly fragmented solar and energy management services sectors. And with our combined offering, we will accelerate organic customer growth. The net result of this is that we will grow our direct solution customers to more than 2 million by 2030 and we will increase the lifetime value of our customers by 1.4x to 4x as we go forward. This is why we are so convinced that Cleaner Energy in Your Power is a winning strategy both commercially and for the planet. Here is our bridge to 2030, outlining the material steps in how we will double our profits to GBP 830 million from 2022. We made great progress during the first half of the year. In LPG, not only do we drive strong organic profit growth, but we also acquired 2 LPG businesses: a synergistic bolt-on in the U.S. and the strategically important acquisition of Progas in Germany, a leading distributor of LPG in the German market, for an enterprise value of GBP 140 million. The acquisition is subject to competition clearance. The synergistic acquisition of DCC Energy's largest to date in Germany, Europe's largest energy market, and considerably expands DCC Energy's customer base in the market to over 100,000 customers. DCC Energy will now accelerate its Cleaner Energy in Your Power strategy for German customers by selling additional solutions into the future. In biofuels, we increased our sales of HVO in H1 '24 to 48 million liters from 27 million liters in the prior year. And finally, in H1 '24, we acquired 5 energy management and services businesses, including Centreco, the leading solar PV installer in the commercial and industrial sector in Britain; Solcellekraft, a leading solar PV installer in Norway; Isolatiespecialist, a leading provider of energy efficiency and installation services in the Netherlands. We now have leadership positions in solar in 5 countries in Europe. So just before we open up to Q&A, our outlook for FY '24. DCC continues to expect that the year ending March 31 2024 will be another year of operating profit growth in line with our expectations and continued development activity. In summary, DCC delivered strong growth in operating profit in the seasonally less significant first half of FY '24. We had excellent acquisition activity with GBP 310 million committed to acquisitions in DCC Energy. And we continue to be focused on the future, executing our strategy and embedding sustainability across the group. Thank you all for listening, and we look forward to answering your questions.

[Operator Instructions] The first question comes from Annelies Vermeulen with Morgan Stanley.

I have 3, please. So firstly, on your M&A pipeline into the second half. Clearly, with what you've spent already in the first half you've delivered most of your annual target already. Could you give us a bit of color on how the second half of the year you expect develop, whether you have more deals in the pipeline and whether we can expect further announcements before the end of your fiscal year. And then secondly, just on Technology. You've commented in Health & Beauty that you're seeing some green shoots improvement in volume. I'm just wondering if you're seeing any of that in consumer yet within the Technology business. I'm assuming not. But if you again have any insights on how and when you expect that to pick up, it would be great to hear them. And then lastly, just a quick one on Germany. With the acquisition even out today, can you comment on what that takes your market share to in Germany in LPG, and can we expect more deals here in German LPG as you continue to consolidate your position? And can we expect that you'll achieve comparable market share position as your other more mature LPG market? That's all.

Thanks, Annelies. Look, the M&A activity, as you say, in the first half of the year has been really strong. So GBP 310 million in a 6-month period is pretty good for DCC. We do have a very active pipeline. It's something we work on all the time. It's not about the deals that we've done but it's about the opportunities going forward. So we have opportunities to deploy capital across all our sectors. You never can call when M&A happens, but I think we've been pretty confident that there will be more deals to be done in the current year and a good pipeline going forward. I'm particularly pleased really with the activity and the growth in the services and renewables side of our business, and that's an area that we'll continue to build capability and capacity as we expand out into the European countries and take leadership positions in more markets. On Tech, I think you answered the question, Annelies, yourself, really, It's difficult to call the -- as Kevin said, our Pro business, our B2B business was pretty robust. The consumer side is more difficult. Spend is discretionary on the consumer side, and it's probably hard to see the consumer getting any easier certainly in the short term. But as you know, the peak kind of trading period is coming up now over the next number of weeks. And when we give our interim update in February, we'll obviously have better insight into where the consumer is and the Christmas trading period. So I think that's really the time for an update on Tech. And then I say, like the acquisition of Progas really, really important for us. We had a more modest business in LPG through our TEGA business, and it really puts us on the map with a nationwide business in Germany. We're now 1 of the top 5 players in the market, and it's a really good platform for us to build on. not only in further consolidation within the market but particularly to build out our energy management services offering within Germany going forward and to bring cleaner energy in our power to German customers.

Our next question comes from Colin Grant with Davy.

Just a couple of questions for me. Firstly, on SRO, obviously, very strong growth as you've outlined there. And within the, I suppose, the bridge that you gave on the 6th of September, you've been hoping to try and get to around GBP 100 million in services for SRO on a kind of recurring basis for fiscal 2030. And I'm just wondering if you can give an update on kind of you're seeing on the services part of the SRO in terms of recurring side of things. And then secondly, just on Energy Mobility, You mentioned in the press release there's been some competitor activity that had impacted and [indiscernible] out. I wonder if you could just give us a bit of color on what's impacting that.

Thanks, Colin. Look, SRO is going really well and the services element of it in particular. So we've actually -- as we outlined and Kevin talked about earlier, like we had good growth in all parts of SRO in the first half of the year and with 46% of our contribution in the first half coming from SRO activities. But the services element is where we have been deploying the capital, Colin. And we're very pleased with the acquisitions, not just the 5 we announced in September, but the acquisitions from last year are all performing well. We now have leadership positions. When you look at it, we're the #1 player in solar installation in C&I in the U.K. We're the #2 player here in Ireland. We're the #1 player in Norway. We have a leading position in the Netherlands now and we're the largest player with a full nationwide coverage in France. Not bad in a couple of years of work. So we really see the growth in this area being accelerated over the coming years as we deploy more capital. So really, really pleased with the activity there. On the Mobility side, we're talking about the challenges in the French market. And in the first half of the year, we had some strikes, and the market is particularly competitive at the moment with some of the competition effectively setting kind of caps on their retail prices. And as the oil price has been rising, that has made it a little bit tricky. But we've been through those situations in the past and our team always find a way to win. So we're not in any way concerned about that. It's just to flag it as it was a factor in the first half of the year.

We now turn to David Brockton with Numis.

Two questions from me, please, based on Healthcare. You flagged sort of green shoots and sort of improving orders starting to come through in Health & Beauty. How long before those translate into profits and we start to see sort of the division returns to sort of its historical growth rate? That's the first. And then the second question related to HealthCare. I think you flagged there that obviously margins have been impacted by some of the investments you've made. Can you just talk about sort of the path to seeing an improved margin perspective there as sort of those initiatives bear fruit.

Yes. Look, David, and I think on the Health & Beauty side, and I think we're fed up talking about destocking but it has really been a feature of the industry over the last number actually of reporting periods. But we absolutely believe that, that has bottomed. So we won't be talking about destocking going forward. We're seeing our order books building, and that translates very quickly into profit growth. So we're confident as we go into the second half of this year. I think the investments that we've been making, and we have -- through the period, we've obviously managed our costs tightly. But we've also made significant investments, which obviously is impacting us on a leverage perspective at the moment. But we'll see the benefit of that flowing through, particularly as we get into FY '25 where we'd expect very strong growth within our Health & Beauty business. And I'm particularly pleased that we have the gummy capability now live and our first customer in production mode on that in the U.S. So a good forward outlook. And the macro trends in nutrition are obviously very positive. Kevin might talk about that.

Yes. The only other point I would add maybe, David, and it's more to kind of the '25 and beyond period is that I mentioned in my commentary earlier that the sector has been having a tough time because what we've experienced is not unique and it's kind of pervasive. And I think DCC, thankfully, is in a very, very strong and robust financial position. We have been able to make those investments through this cycle. And I think competitively, we have -- we see a lot of our -- a lot of leverage has probably gone into the sector through private equity activity over recent years. And I think our strategy has always been, Conor Costigan always talks about this, our strategy has always been to have well-invested facilities, to have best-in-class operations, and being able to invest in that is a differentiator for us. So I think if anything, through a period like this, which has been really tough and painful for our business and for our people, but actually coming out the other end of this with a lot of debt leverage in the sector and a lot of -- maybe a lot of distress, that feels like a pretty good position to be competitively. So I think that strategy of investing through cycles and continuing to build and doing the right thing whilst keeping an eye on the cost base but looking through the cycle, we'll bear fruit over the coming years, really. On the operating leverage point, David, obviously, it's been -- I think the second half, we should see an improvement in that clearly as volumes and profitability recovers. The cost base, eventually, we lapse some of those investments into next year as well. So I think as Donal outlined, I think second half, we see some improvement clearly in that as order books rebuild and we produce particularly in the fourth quarter of the year. And then into FY '25, we'd expect the operating margin in our Health & Beauty business to pick up substantially. And just to reiterate the point, the operating margin in DCC Vital was not a factor in the divisional performance at all. So DCC Vital performing very much in line with expectation and delivering operating margins in line with what it would have in the prior year.

[Operator Instructions] We now turn to Rory McKenzie with UBS.

I just want to ask 3 questions, please. And I appreciate it's the seasonally smaller half year and there's a lot of mix changes, but I wanted to ask what we can learn from the strong H1 Energy profits about the run rate into H2. So firstly, your Energy profit share of SRO being up 7 percentage points implies that absolute profits there are up 50% year-over-year, 5-0. So can you give us more detail on what's in that? And how to think about the seasonality in what's getting to be a much bigger business? And then secondly, in mobility, your operating profit pence per liter is up 33% in 2 years despite the comments around France. So can you help or comment on how much of that is gross margin versus operating efficiencies versus mix? And then I want to ask about Progas, but let's take those 2 first, please.

The Progas say that again, Rory?

I'll come back on Progas.

You'll come back in Progas.

Do you want to just ask it, Rory? Because I think the way that the structure of the call works is that they'll probably...

Kill you.

Kill you after the question.

Okay. So on Progas, is that a pure LPG business or does it have a broader portfolio? I remember when you bought Progas, that came with I think some refrigerants. And also just wondering if they themselves have an energy management business or whether that's something you'll be developing.

Sure, sure. Good question. Okay. Well, look, let's through them all. I think on the services and renewables, Rory, like that has been -- it has your maths are absolutely right. It's been very strong growth in the first half of the year but a flow through from acquisition activity in the prior year and contribution from the 5 acquisitions that we acquired this year and announced in September. So there's a fair bit of acquisition activity within it, but there's really strong underlying organic growth within it as well. So...

Yes. And Rory, just for color for context. I mean, I suppose on the display, if you like, of the growth in SRO is kind of 1/3 acquisition, 2/3s organic. Most of that organic growth is obviously because it's positioned in a higher growth sector, Rory. There is a little bit of bounce back on the renewable power side. So within the product category there, you will have renewable electricity sales that we make to corporate customers. In particular, we help them with corporate power purchase agreements and things like that. So we would have seen some volatility in that area in H1 last year. So you see some normalization within the organic performance as well. So just to call that out. But very strong underlying organic growth, a little bit of bounce back on the renewable power side. And then as I said, 1/3 of the growth coming through from acquisition activity.

I think one of the important things, Rory, with this, and this is something that we've been focused on for many years within the energy business is to kind of get the weighting a little bit removed from being so second half weighted. And the good thing about the services and renewables business, many, many parts of that are very well spread throughout the year. In fact, some of the more installation-based activities are probably more skewed to the first half of the year when you have actually better weather conditions. So again, it gives us probably a better balance in the year. And you'll have seen that over the last couple of years in terms of just the split of our energy profit. So we see that being beneficial. When we look to the year as a whole, because it is skewed to the first half, that 46% from 39% last year, we certainly see it well north of 30% in the full year, up from 28% last year. So we're making really good progress in growth there. I think on the mobility side, there's lots of factors at play. It's been pretty noisy over the last couple of years because through COVID, we had obviously a lot of volume disruption on the retail side. And one of the really encouraging factors for our retail business is -- notwithstanding the volume going through the sites because everyone in the industry is focused on profitability at a site level. You drive your performance through your nonfuel activities and obviously through our fuel activities. And we have seen good margin performance across that business over the last couple of years. And that margin is coming not just from fuel, but it's coming from -- clearly coming from nonfuel services as well. So the resilience in the mobility business, I think, speaks for itself. And then we've been growing at a fair clip, which goes into that organic growth performance, our digitally based fleet services business, and that is a high-growth area for us and one that we have been investing in to improve the services. On Progas, this is, I think, the -- a really material -- it's not the most material clearly in terms of size acquisition, but it's a very material acquisition for us in terms of positioning within the German market. The German market is the largest energy market in Europe, and we had a relatively small share in the market. And you're absolutely right. when we bought TEGA, probably 50% of that business was in the refrigerant gas sector and 50% of it was in the LPG area, and our principal focus on acquiring that business was really the LPG activity. So Progas is 100% an LPG business. It has some but limited other services for its existing customer base. So when you combine our 2 businesses and then you bring our capability in the energy management services to it, we're really well positioned to bring our cleaner energy in our power solutions for German customers. So we see this as a material step forward for us in building a really scaled business in the largest energy market in Europe. So I think an important acquisition for us and one that we look forward to getting a part of the group. As Kevin id earlier, it is subject to competition clearance. So we don't see it in part of the group really or contributing to the group until into FY '25.

This concludes our Q&A. I'll now hand back to you, Donal Murphy, Chief Executive, closing remarks.

Super. Well, look, thank you, everyone, for joining us today. I think we're really pleased with the performance of the group in the first half of the year notwithstanding the pretty challenging macro environment that we're operating within. We have a really good and clear strategy, and we're well on track to deliver against that. So we look forward to seeing many of you over the coming days as we go through our road show. So thank you all for your time, and see you all soon. Bye-bye.

Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.