Good morning, and welcome to today's DCC plc Healthcare Webcast for September 2022. My name is Bailey, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to our host, Donal Murphy. Please go ahead when you're ready. Thank you, Bailey. Good morning and welcome. I'm Donal Murphy, Chief Executive of DCC. I'm joined on the call this morning by Kevin Lucey, our CFO, and by Conor Costigan, Managing Director of our healthcare division. Thank you for joining us this morning on this very exciting day for DCC as we announce the significant expansion of DCC Healthcare in the medical devices sector through the acquisition of Medi-Globe Group. This is DCC Healthcare's largest acquisition to date and creates a scale platform in the European medical devices sector. Thankfully, I don't have to read the disclaimer this morning. Firstly, let me give you a quick reminder of our group strategy and our capital allocation priorities. DCC is a purpose-led organization, and we are focused on the value we create for all our stakeholders. We focus on creating sustainable growth and superior value over the long- term. We achieve this through a consistent strategic objective to build a growing, sustainable and cash generative business, which consistently provides returns on capital employed significantly ahead of our cost of capital. We take a long-term, sustainable view of value creation, which ensures our commercial strategies prioritize growth and create value-adding strategic positions in our chosen markets. Conor will outline later how Medi-Globe fits with this objective. Our focus on capital allocation ensures our ability to reinvest into growth trends, and our capital allocation priorities are aligned with the growth trajectories of the sectors we operate in. Medi-Globe provides us with a strong position in a high-growth sector of the health care market. While organic growth is always our number one growth objective, acquisitions are also a key pillar of DCC's growth strategy. Over the last two y ears, we have committed circa GBP 1 billion on acquisitions, with the majority of the spend in the technology and healthcare divisions. We have created significant new synergistic platforms for growth across the energy, healthcare and technology sectors in recent years. We have built a scale business and a material platform for further growth in North America in just four years. We believe that our capital deployment priorities will deliver substantial growth and are aligned with our growth trends in our chosen sectors and our target to achieve net zero by 2050 or sooner. We allocate capital to M&A, where we see opportunity to bring good businesses into the group and improve them further or improve our group capability by bringing them in. We focus on delivering sustainable returns on capital well in excess of our cost of capital. Our capital deployment priorities are aligned with the growth trajectories of the sectors that we operate in. With healthcare as our highest growth sector and our top priority for capital deployment. Throughout the rest of this presentation, you will hear why we believe that Medi-Globe is an excellent strategic fit for DCC. The acquisition of Medi-Globe, DCC Healthcare's largest acquisition to date, creates a scale platform for DCC in the European medical devices sector. Medi-Globe is focused on single-use medical devices used in minimally invasive diagnostic and therapeutic procedures, mainly in gastroenterology and urology. It represents a further material expansion of DCC Vital's presence in the European healthcare market, following on our expansion in the European primary care market through the acquisition of Wörner. The acquisition is based on an enterprise value of approximately EUR 245 million on a cash-free, debt-free basis. Together with DCC Vital's existing own brand medical device activities, the acquisition of Medi-Globe creates an international platform of scale in single-use devices, which Conor will outline to you shortly. The acquisition also creates meaningful synergy opportunities, in particular through leveraging DCC Vital and Medi-Globe's respective product portfolios and commercial infrastructures. Conor will now provide you with more details on the Medi-Globe business and its strategic fit for DCC Healthcare. Kevin will then take you through the attractive financial profile of the transaction, and we will then open up to Q&A on this acquisition. Conor. Thank you, Donal, and good morning, everyone. We're delighted to be here to talk about this very important acquisition for DCC Healthcare. It's our largest acquisition to date. We're very excited about Medi-Globe joining the Healthcare group. I suppose the key attractions of this business for us are its high-quality portfolio focused on single-use devices for endoscopy in the gastroenterology and urology market segments. Its strong market positions, particularly strong positions in Germany and France, but you know additional direct operations in Austria, the Netherlands, Czech Republic, Brazil, and then a very strong network of international distributors. Another key attraction for us is the product development and innovation capability of the business and the pipeline of products coming down the track, which will feed into the growth over the coming years. The business has a super management team, very experienced, who have really led very strong growth and strengthening of the business strategic focus over the last number of years. I suppose all of those ingredients, you know, create a very strong platform for future growth, and we'll come on and talk about the synergy opportunities as well. The business is focused on growth markets, gastroenterology and urology. You know, those markets combined globally are worth approximately EUR 3 billion today. Both of those sectors are growing ahead of the medical devices market generally, projected growth rates of 6%-7%. That's all underpinned by, you know, key kind of macro trends, demographic trends that people will be familiar with, but also the increased screening, increased diagnostic procedures, and also a preference for minimally invasive procedures such as endoscopy. In terms of just to give people a flavor for the types of products we're involved in. I don't know if people know what endoscopy is. It's a minimally invasive procedure which involves examining the inside of the body, mainly digestive tract, stomach, kidney, ureter, with an instrument called an endoscope. Medi-Globe is not involved in the capital equipment side of that, so not involved in the vision systems. The business is involved in the devices that are inserted into the instrument port, which perform the diagnostic or therapeutic procedure. On the gastroenterology side, we have, you know, products like guidewires, biopsy needles, catheters, you know, typically used, for example, to take samples using fine needle biopsy needles from difficult to access parts of the body, such as the gallbladder or the pancreas. On the urology side, you know, one of the key areas of focus is stone management, so kidney stone, for example. Again, the product range would include guidewires, stone baskets, catheters, stents, cannulas. So all single-use products not on the capital side. I suppose, you know, this is a material step forward for DCC Vital's medical devices activities. As watchers of DCC Healthcare will know, over the last number of years, we've really sharpened up the focus of DCC Vital to focus on building international growth platforms in primary care supplies. Obviously, we had the acquisition of Wörner in May 2021, which together with our existing market leadership position in Britain has given us a very strong platform in the primary care supplies and services area. The acquisition of Medi-Globe, in combination with our existing medical device activities, will give us a very strong platform in our own brand medical devices activities. This, I suppose, combining the two entities, you know, creates an international devices business of real scale. You know, there are five big markets in Europe. We will have strong presences in three of them. We've got an enlarged product portfolio that obviously encompasses the gastro and uro areas within Medi-Globe, and then also obviously the areas that we're already involved in terms of theater consumables, cardiac monitoring, anesthesia, IV giving sets, et cetera. Combining, I suppose, the strength that we have in the British and Irish markets with the strength that Medi-Globe has, both in terms of its direct presence and its international distributor network, really creates a lot of synergy opportunities where we can cross-sell each other's products through our distribution networks. Obviously, we'll be a more attractive partner for our distribution partners in the indirect markets. I think equally importantly is just the expanded capability we'll have in the business in terms of the management team, the quality of the management team on a combined basis, the product development and regulatory capability that we have, and obviously the commercial infrastructure. A lot of synergy opportunities which we'll be working hard to exploit over the next number of years. On top of that, you know, clearly having that strengthened platform will bring increased acquisition opportunities and capability to integrate acquisitions. I'll just hand over to Kevin now to talk about the financial profile of the acquisition. Thanks, Conor. I think this is our final slide before we open up the call to Q&A. Just to recap briefly on some of the financial characteristics and other considerations. Clearly this is a scale platform for us in healthcare and in medical devices in particular, and it follows on from our expansion in the primary care sector into Europe, a couple of years ago. Those of you who know us well, and Conor mentioned this earlier, will know that we set out our stall in DCC Vital a number of years ago following the exit of some of our activities to really expand into continental Europe. We were looking for scale businesses with good infrastructure and good management teams, and we're very happy that we have that now with this Medi-Globe acquisition. We expect the transaction to complete before the end of the calendar year, so clearly we will have the business in the group for just one quarter this year. It'll be FY 2024 before we see the full impact of the transaction. The business should contribute revenues of approximately EUR 120 million in its first full year. Reflecting the quality of the business, the products and the own brand nature of the products, the operating margin will be accretive to our current healthcare divisional margins. We expect the transaction to generate a ROCE of around 10% initially, and we expect that the returns will grow from there, really reflecting the organic growth that the business is delivering today. Further new product additions to the lineup. The commercial synergies in particular that Conor mentioned earlier. Obviously then it also gives us capability to look at further bolt-on acquisitions as we add more scale into the business over time. We expect the returns from the business to increase over time and be generating a mid-teen ROCE in about three years. We'll open the call up now to take any questions you might have regarding the acquisition. Bailey, if you wouldn't mind. Thanks, Kevin. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, it is star followed by one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question today comes from the line of Colin Grant from Davy. Please go ahead. Your line is now open. Good morning, everybody, and thanks very much for doing the call and taking questions. Just initially on synergies, I wonder if you could just give us a bit more color on how this would fit in, both in terms of product side with the existing DCC Vital businesses. You obviously do an acquisition of Wörner in 2021, and just how that fits in with that business and others. Then on the distribution side, how, you know, the new distribution platform you get with this Medi-Globe Group, the ability to leverage that in terms of selling products in the future, you know, how you see that playing out and the benefits you might get from that. Maybe start with that, please. Super. Thanks, Colin, for the question and I'll hand it over to Conor to take you through the detail. As I said earlier, this is actually bang in the sweet spot for DCC in terms of our acquisition criteria, because it does really two things for us. One, it brings us into a high growth segment of the healthcare market, so you know, which is gonna drive obviously returns accretion. It also is materially synergistic for us. You know, when Conor and the team were out looking for opportunities, I think this business you know ticked all the boxes for us. Conor, you want to talk a bit more about the synergies? Yeah. I mean, obviously our existing medical device business is very much focused on the British and Irish markets. We have an international distributor network as well, but the vast majority of our sales are in Britain and Ireland, where we have you know very deep market penetration very strong market coverage. You know, obviously Medi-Globe isn't directly present in those markets. That represents an opportunity. Similarly, on the flip side, you know, Medi-Globe has you know has about 150 customer-facing people, sales reps, customer service people. You know, the majority of those are focused on its two large markets of Germany and France. We don't currently in DCC Vital medical devices have direct presence in those markets. Again, leveraging that commercial infrastructure creates significant opportunity. The vast majority of what we're doing in Vital today is around the area of consumables for minimally invasive surgery, which obviously fits very well with is very complementary to the activities of Medi-Globe. There's a nice complementarity about the portfolio and then significant market coverage complementarity, which can be exploited as well. In terms of you know, you referenced the Wörner acquisition and you know, obviously we'll have two material businesses based in Germany when this deal closes. That's, you know, while there won't be a huge commercial overlap because they're addressing different parts of the healthcare market, it does give us a very strong position in the German healthcare market, covering both primary care and acute care. There will be opportunities coming out of that. Thanks, Conor. Next question. Thank you. The next question today comes from the line of Oscar Val-Mas from J.P. Morgan. Please go ahead. Your line is now open. Yes. Good morning, Donal, Conor and Kevin. I have a couple questions. The first one is really a bit more detail on Medi-Globe. Could you comment on how much of the revenue is kind of own brand manufacturing versus external distribution? That's really the first question. The second question, going back on the earlier question on synergies, could you give a bit more detail on, I guess, the path from 10% to mid-teens, and if that's really mostly cost synergies or revenue synergies? The final question is around the contract, the type of contracts you have in Medi-Globe. If you have a lot of government contracts in terms of selling into hospitals and healthcare providers, do you have a sense of how can they? If they can pass through inflation on the products? Is it very different to the other, to the Wörner business or to the other businesses you operate? Okay. Thanks, Oscar. Conor might take question one and question three, and Kevin might deal with the synergy piece. Yeah. In terms of the own brand versus distribution, I mean, approximately 2/3 of the revenues are own brand products where Medi-Globe owns the IP in the products. There is the small element of distribution, which is mainly actually in the French market. About half the revenues come from the in-house manufacturing facility in the Czech Republic. Maybe just to keep going on, from a contract point of view, you know, obviously we've a lot of experience in the British market of working with the NHS, which has, you know, quite a sophisticated centralized procurement system through NHS Supply Chain. In Germany and France, you know, there are general procurement organizations, which fulfill the same function in a more fragmented way, if you like. There are important GPOs, and Medi-Globe has strong relationships with all of those. There are no big dependencies, you know. Obviously, one of the key things we've been focused on over the due diligence process has been their ability to pass through price increases. You know, we're very pleased with how the business has dealt with those challenges over the last 12 months. Very good. Kevin? Yeah. Thanks, Oscar. I mean, I suppose first thing to say is that the existing DCC Vital business and Medi-Globe clearly operates in different geographic sectors. Okay? Just as an overall context, when you think about, you know, where synergies can be identified, you know, we operate different sales forces in different markets. The strategic rationale to the transaction is not one at all of driving cost synergy out of the business. The Medi-Globe business is very well invested. Okay? I think the key point for us really when looking at this and thinking about returns progression going forward is that, you know, the organic growth that we can deliver out of Medi-Globe will be accretive to returns on capital if the business is well invested. While we need to invest in working capital to grow all of that, organic growth, even with the working capital investments, would be at strong returns. That really is the first point. Then I suppose really the key point for us is about leveraging the commercial operations of both businesses to drive, you know, DCC Vital products through the Medi-Globe infrastructure and vice versa. That is again, really about, you know, getting the businesses working together and joined up and creating similar product lineup. Of course, Oscar, there will be things that we'll be looking at around procurement and new product developments to ensure that we're being as efficient across both businesses as possible. You know, we will be looking at that to make sure that, you know, there's obviously no areas of duplication. You know, really the rationale around the increased returns over time is really about getting the two organizations together to create a really scaled business and platform. Obviously we'll then be looking at things like procurement. They are the lesser. They certainly are the lesser component. I think they have a strong distribution reach as well, which we'll be able to take, as you say, Kevin, our products through, which will open up markets that we're not probably participating in today as well from a Vital perspective. It's very much, you know, this is, as I said earlier, this is very much in the sweet spot of, where, one plus one definitely make way more than two. Thanks, Oscar. Thank you. Thank you. The next question today comes from the line of Kate Somerville from UBS. Please go ahead. Your line is now open. Morning, everyone, and thanks so much for taking my questions. Two from me, please. The first one is just about Medi-Globe's track record, particularly on organic growth. Just an idea of how high that's been and whether it's been above market. It obviously seems quite a high margin business. Just some color on why this is and why you're confident that that's sustainable, and how you're gonna improve it. The second question is just on how long the management lockup period is. Thanks. Sure. Okay. Well, Conor, all for you. Organic growth has been good and ahead of market rates. Obviously, you know, the last few years has been an unusual period for the healthcare market where, you know, you've had obviously PPE demand going through the roof and then kind of routine procedures obviously being held back by the challenges of COVID. You know, that would have been a key feature of our due diligence process. You know, the business was—Growth rates are modestly dampened by the impact of COVID and have been steadily recovering over the last 12 months. You know, we are very confident of ahead of market rate growth rates. I think I mentioned earlier, you know, market growth rates are in the kind of 6%-7% range. In terms of the margins, you know, the businesses has actually done a lot of good work over recent years, in part in preparation for the new regulatory regime in medical devices in Europe, where they've rationalized about 2,000 products out of their portfolio, and obviously that's been focused on lower margin products. There's been good improvement there, and there's been increased investment in innovation. Again, the pipeline of new products coming through, which will be, you know, will improve the mix and improve the margin profile. you know, our you know, we're confident about the continued progression of high margins in this business. Management team. Yeah, sorry. The management team, you know, I think we're buying this business from Duke Street, U.K. private equity firm that we know well. They did a super job putting together a strong team. The leadership team is a combination of people brought into the business over the last six years of Duke Street's ownership and some strong talent coming up through the business. All of that team is committed to staying on with the business. I mean, we obviously don't operate in a private equity lock-in style, but you know, there are incentive arrangements which, you know, together with the personal commitment of the management team, we're confident we're gonna have a stable and high-performing team there for the years to come. Thanks, Kate. Next question. Thank you. The next question today comes from the line of Anvesh Agrawal from Morgan Stanley. Please go ahead. Your line is now open. Yeah, good morning. I just got two questions. First, can you just comment on the dynamics of the German market? I mean, Medi-Globe obviously have quite a big business there. You acquired Wörner before, whose headquartered office out of Germany. Anything specific in that market that makes it more attractive and you're targeting? Then just sort of from a modeling perspective, if you can comment on what is the difference between the margins in an own-branded product versus the third party distributor product. Finally, like, what's the CapEx profile of this business? Because it's more on brand, is it higher CapEx or not really? Okay, thanks. Conor, do you want to- Yeah. I mean, the German healthcare market is probably one of the more attractive markets in medical devices. It has typically had better growth rates and projected to have better growth rates. Sort of the government's commitment to, you know, healthcare funding has been and continues to be strong. It's certainly an attractive market to build a presence in. In terms of the own brand, yeah, I mean, clearly the own brand side of the business is attractive from a gross margin point of view. Although, as with our own business, you know, it's not a—there's not a dramatic difference between, you know, the types of, you know, mid-tech, high quality agency products that we typically distribute on our own branded products. You know, finally on CapEx, you know, we don't expect significant investment requirements in CapEx. You know, it's a clean room environment, reasonably labor intensive, obviously in a lower cost economy in the Czech Republic. We don't see a huge requirement for CapEx. A big focus in the business on R&D investment, regulatory investment. It's more on from that perspective than big capital investments. Yeah. Super. Thanks, Anvesh. Next, question, please. Thank you. The next question comes from Christopher Bamberry from Peel Hunt. Please go ahead. Your line is now open. Morning, gents. Just some questions around market share. What's Medi-Globe's market share in the key geographies of Germany and France? What's their market positions there, and how fragmented are those overall markets? Thank you. Thanks, Chris. Sure. I mean, you know, these, the gastro and uro markets, as you might expect, you know, there are some big global players in there. Boston, Olympus, Cook would be the largest global players and, you know, probably have control, you know, 60%+ of the global market. Then, you know, when you look at individual countries, there are strong local champions if you like. And, you know, Medi-Globe is one of the few that has a strong presence across a number of jurisdictions. You know, market shares in Germany would be around about the 9% in both gastro, France around five percent. So, plenty of scope to develop. You know, obviously the business has been investing in direct presence in other jurisdictions. You know, we'll be bringing our direct presence in Britain and Ireland to the picture. You know, we'd expect to be able to build similar market positions in all of those direct markets. Thanks, Chris. Next question, please. Thank you. Next question today comes from the line of Daniel Cowan from HSBC. Please go ahead. Your line is now open. Good morning. First question, please, is there any particular competitive advantage that Medi-Globe products have over the incumbents or the standard products in the market? The other question I have is, I don't think you split out the difference between Vital and Health and Beauty return on capital employed. But I was just wondering how the Medi-Globe return on capital employed might compare with that of the Vital segment, please. Super. Thanks, Dan. Conor. I think you know, sort of in terms of the market positioning, the relative competitive positioning, you know, Medi-Globe is a very well-established credible player in the German and French markets. You know, Boston Scientific obviously is the global leader across the two sectors. Olympus probably has more of a focus on capital equipment. Cook Medical similar model to Boston, you know, maybe not as innovative. I think from Medi-Globe's point of view, as they were very well established in Germany and France, you know, a fast follower approach on innovation, and obviously a lot of ability to respond and agility as you would expect from a smaller business relative to those large competitors. You know, a broad portfolio of products, very good quality products and competitively priced. You know, we feel portfolio and the business is very, very well positioned relative to the competition. Yeah. Hey, Dan, it's Kevin, and thanks for the question. On returns, I suppose the healthcare return, as you know, overall is about 19%, but there's actually very little difference between both sides of the healthcare business, the health and beauty business and DCC Vital. The nature of the capital is quite different in that in DCC Health & Beauty Solutions, you have much more fixed capital investment. In DCC Vital, you know, a lot of the investment tends to be around working capital and related items. The capital base is different, but the returns are pretty similar across both sides of the division. As a result, clearly, when we bring Medi-Globe in or indeed we bring any acquisition into the DCC group, it tends to be dilutive initially to the divisional return. You know, we would expect clearly Medi-Globe's returns to grow over time. You know, the healthcare return today is a function of the good organic growth that the guys have been delivering, having deployed capital at very similar levels, actually. You know, all of our health and beauty acquisitions in the U.S., for example, would've started at a relatively similar return on capital employed, and the guys have just done a great job at leveraging the returns from there. I think we would expect, you know, sort of similar progression with this acquisition. Thanks, Kevin. We've time for one last question, I think. Perfect. The final question comes from the line of Gerry Hennigan from Goodbody Stockbrokers. Please go ahead. Your line is now open. Yeah, thanks, guys. Just in terms of the opportunities you see that may emerge from this deal, would you see it along similar lines to Medi-Globe in terms of additional medical devices? Or would you see maybe leveraging of some of the relationships they have to expand the primary care business into some of the markets that they're already in, but you're not necessarily in yourselves in terms of primary care? Yeah. I think both, Gerry, is the answer. Like, we clearly. You You know, it's a super business that has a very good growth trajectory in front of it. More products, you know, leveraging the own branded capability within the business, but also leveraging its distribution infrastructure. You know, Conor, you want to add? Yeah. I think I absolutely agree with Donal and I suppose you know particular focus obviously on the medical devices area. I think you know there's obviously the business and our strategy would be to have a direct presence in larger markets and you know so there's an opportunity to learn those markets through the distribution route and then look for acquisition opportunities. And that's already part of the focus of the Medi-Globe team. And then you know obviously filling out the portfolio further in the minimally invasive surgical area generally you know there'll be opportunities to bolt in complementary acquisitions in that respect. Thanks, Conor. Maybe I'll just sum up if that's okay. Just firstly, just to thank everyone for joining us this morning at relatively short notice. I hope you found the call very informative. You know, we're very excited about this opportunity. It is a material step forward for us in the growth and development of DCC Healthcare, bringing us in very strongly into the high growth medical device sector. It's bang in line with group strategy. It's the kind of business that we want to be acquiring and bringing into the group, leveraging synergies and leveraging those growth trajectories. We're really pleased to announce this acquisition today. We are over the next number of weeks doing lots of IR, so hopefully we'll get to meet lots of people that are on the call today face-to-face over the next couple of weeks. Again, happy if you want to get further details, just contact Holly or Rossa to set up some meetings, and look forward to seeing many of you soon. Thank you all for joining us this morning. Thank you Kevin and Conor for joining me here today. Have a good day, everyone. Cheers. That concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.