DCC Healthcare is a broadly based healthcare products and services business
focused on:

•	Sales and marketing of healthcare products and provision of services to the hospital sector in Ireland and Britain;
•	Provision of outsourced product development, manufacturing and packing services to the health and beauty industry in Europe;
•	Sales and marketing of mobility and rehabilitation products in Britain, Ireland, Australia, New Zealand and other markets.

 

DCC Healthcare currently employs 1,350 people.

			Change on prior year
	2009	2008	Reported	Constant Currency
Revenue	€331.2m	€286.8m	+15.5%	+27.9%
Operating profit	€17.3m	€23.5m	-26.2%	-20.5%
Operating margin	5.2%	8.2%

Business and Markets
Hospital Supplies & Services
In Ireland, DCC’s subsidiary, Fannin, is the market leader in sales and marketing of healthcare products to the hospital sector – intravenous (IV) pharmaceuticals, medical, surgical and laboratory products – and also provides a range of complementary value added services. Fannin markets and sells a broad range of leading brands – including Cardinal, Grifols, Molnlycke, Oxoid and Synthes – through its extensive field sales force of highly trained professionals. Products are typically single use/consumable in nature. Fannin is increasingly focused on developing its range of value-added services; for example, it has built a growing business in the provision of IV pharmaceutical compounding services to Irish hospitals. The compounding activities involve the aseptic filling of oncology, pain management, antibiotic and paediatric nutrition products into patient ready dosage forms, i.e. syringes or IV bags, within a licensed facility.

 

In Britain, following the acquisition of Squadron Medical and TPS Healthcare in the last eighteen months, DCC is building a growth platform in the provision of value added distribution services to British hospitals and leading healthcare brand owners. This is a developing sector as British acute care hospitals increasingly look for customised just-in-time distribution solutions to deliver cost savings, free up space currently occupied by stores and ultimately to contribute to the delivery of better service levels to their patients.

 

Health & Beauty Solutions
DCC Health & Beauty Solutions is a leading provider of “source to shelf” outsourced solutions to the health and beauty industry, principally in the areas of nutraceuticals (vitamin and health supplements), skin care and hair care. Customers include leading premium brand owners, mail order companies, specialist health and beauty retailers and private label suppliers in Britain, continental Europe and other markets. DCC provides a wide range of product formats (tablets, soft gel and hard shell capsules, creams and liquids), packing and other services from its three MHRA licensed facilities in Britain. The quality of these facilities, together with the strength and depth of DCC’s business development and technical resources, enables DCC to assist its customers in rapidly bringing new products from marketing concept through to finished, shelf-ready product. DCC’s key strength is the highly responsive and flexible service it provides to its customers. This service typically involves product development, formulation, stability and other testing and regulatory compliance, as well as manufacturing and packing.

 

Mobility & Rehab
DCC Mobility & Rehab is involved in the design, development, procurement, sales and marketing of mobility and rehabilitation products with operations in Britain, Ireland, Australia, and New Zealand as well as a network of international distributors. DCC is the market leader in the physiotherapy product sector in Britain, Australia and New Zealand. DCC has a broad product portfolio principally marketed under its own Days Healthcare, Physio-Med and Metron brands, along with leading third party international physiotherapy brands including Thera-Band, Biofreeze and Chattanooga. Own brand products are designed and developed in-house, with manufacturing mainly outsourced to partners in Asia, who are managed by DCC’s procurement and quality control team based in Shenzhen, China. DCC Mobility & Rehab’s extensive customer base of hospitals, community loan stores, specialist retailers, private practitioners and nursing homes is serviced through field and telesales teams and supported by a range of product catalogues and websites.

Performance Management - key performance indicators	2009	2008
Revenue growth (constant currency)	+27.9%	+24.5%
Revenue per employee (constant currency)	€272k	€247k
Operating cash flow	€23.3m	€22.4m
Working capital	39.8 days	47.4 days
ROCE incl. intangible assets	9.4%	13.9%
ROCE excl. intangible assets	31.9%	48.8%
10 year CAGR	6.8%	13.2%

 

Performance for the Year Ended 31 March 2009
DCC Healthcare’s constant currency operating profits declined by 20.5% due to the impact of difficult trading conditions across its businesses.

 

DCC’s Hospital Supplies & Services business had a challenging year. The Irish Health Service Executive’s budgetary constraints have significantly reduced demand in the marketplace. This has led to a more competitive operating environment for the business with sales in the non-acute sector particularly impacted. Significant headcount reductions were implemented over the course of the year to address this. DCC achieved continued good growth in the provision of intravenous pharma compounding services to Irish hospitals. DCC’s value added distribution services business in Britain grew its sales strongly and invested in its operational infrastructure, leaving it well placed in this developing sector of the British market.

 

DCC Health & Beauty Solutions’ profits declined due to a reduction in contribution from the beauty sector. While strong growth in sales into the sector was achieved, margins were impacted by a lag in the recovery of significant input cost increases (raw materials and currency). Sales price increases were achieved in the last quarter of the financial year. In the nutraceuticals sector, good sales and profit growth was achieved and operational capability was further enhanced by the expansion of DCC’s tabletting facility and by the development of new products, which have resulted in a number of material new business wins for the current year.

 

DCC Mobility & Rehab suffered from a deterioration in the trading environment in each of its geographic markets. This was most pronounced in the German market and led to DCC Healthcare taking the decision to close its German subsidiary. Margins in all areas were significantly impacted by unfavourable currency movements and price increases from Far Eastern suppliers. Sales price increases, sourcing of product from alternate suppliers and cost price reductions have now been achieved in order to recover margins.

 

Strategy and Development
DCC Healthcare’s strategy is to build a substantial, broadly based, healthcare business focused on the sales and marketing of healthcare products and the provision of value added services to the healthcare industry, including the health & beauty sector.

 

DCC Healthcare is increasingly focusing on developing its activities in the value-added services area. In the markets in which DCC Healthcare operates, healthcare provision is primarily funded by governments. As fiscal budgets tighten and the burden of ageing populations increases, public healthcare systems are increasingly looking to the private sector for cost effective value added solutions. In addition, individual hospitals and hospital trusts are reviewing their activities and increasingly outsourcing those activities deemed to be non-core. DCC Healthcare is working to meet this demand by providing a range of value added services to hospitals, including IV pharmaceutical compounding services and distribution services.

 

Similar outsourcing trends are visible in the health and beauty sector, where brand owners are increasingly outsourcing more of their non-sales and marketing activities (including product development) and streamlining their supply chains. With its high quality licensed facilities and its technical, regulatory and financial strengths, DCC Health & Beauty Solutions is well positioned to capitalise on these trends.

 

DCC Healthcare’s primary focus is the generation of strong organic profit growth and superior returns in its existing businesses by continually developing and expanding its product and service offering through more effective development, sourcing and procurement. In addition to driving continuing growth through existing channels to market, the business is also focused on growing in new and developing channels, leveraging the expertise of its sales teams and the reach of its comprehensive product catalogues.

 

Outlook
The trading environment for DCC Healthcare remains challenging given that the majority of its revenues are derived from public healthcare spending in Ireland and Britain. However the unprecedented changes in input costs which impacted results in the year under review are not expected to recur. As a result, DCC Healthcare anticipates a strong recovery in constant currency operating profit in the year to 31 March 2010.