Ladies and gentlemen, thank you for standing by, and welcome to the DCC full year results call. At this time, all participants are in a listen-only mode. After the speaker presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one on your telephone. You can register your interest to ask a question at any point during the presentation. I'd like to remind you that questions can only be asked on the conference call and not through the webcast. I must advise you that the conference call is being recorded today. I would now like to hand over to your speaker, Donal Murphy, Chief Executive of DCC to start today's conference call. Please go ahead, sir.
Thanks, Jordan. Good morning, everybody, and welcome to DCC's results presentation for the year end of March 31, 2022. I'm Donal Murphy, Chief Executive of DCC, and I'm joined here today by Kevin Lucey, our Chief Financial Officer. Thankfully, I don't have to read the disclaimer. They're for your benefit. I'm gonna cover off the highlights of the year and what a year it has been. Kevin will take you through the business and financial review. I'll give you an update on what has been another strong year of development activity for the group. I'll then give you an overview of our energy event, which is scheduled for later today, and I hope all of you can join us later today for what I think will be a very insightful event into our energy business.
After a summary and our outlook, we'll open up the session for questions as usual. I'm delighted to report another year of very strong growth and development for DCC despite the very challenging macro environment. Group adjusted operating profit increased by 11.1% to GBP 589.2 million. 15.1% on a constant currency basis, clearly constant currency being the underlying performance of the business. Adjusted earnings per share increased by 11.2%, 15.2% on the constant currency basis. With profit growth across all of our four divisions, I was particularly pleased with the excellent organic profit growth during the year of 6.1%. I've been in the group now for over 24 years, and I've never experienced a more volatile or challenging macro environment.
We've seen dramatic volatility in energy prices, significant challenges in supply chains, rampant inflation, labor availability issues, and COVID has not gone away, and it continues to impact our operations. Despite all these challenges, the group performed very strongly, demonstrating the resilience in DCC's business model, the benefits of our diverse sectors of energy, healthcare, and technology, and most importantly, the essential nature of the products and services that DCC provides to its customers. The board proposed to increase the total dividend for the year by 10%. This will be DCC's 28th consecutive year of dividend growth. We've continued momentum and acquisition activity. During the period, we committed approximately GBP 600 million to acquisitions across North America and Europe. We had acquisitions across all four divisions, but the highlight of the year was DCC's largest acquisition to date, Almo Corporation.
Almo is one of the largest specialist pro AV businesses in the U.S. and is a leading national distributor of consumer appliances, consumer electronics, and lifestyle products. More about Almo a little bit later. We continue to build our capabilities in energy transition with the acquisition of Naturgy expanding our renewable offerings in the Irish market. Again, we'll be talking lots more about the energy sector later on in the day. DCC's purpose is to enable people and businesses to grow and progress. During the year, our people, our greatest asset, yet again demonstrated our purpose in action. The strong performance in the year was a result of the phenomenal capability, agility, and commitment of our 15,400 colleagues who work across the 21 countries that DCC operates in.
I'd like to say a big thank you to all my colleagues for delivering such a wonderful year's performance in a most challenging macro environment. They live their core values of safety, integrity, partnership, and excellence every day. They always put the customer first to ensure our customers received the essential products and services that they required. They navigated the challenging supply chain issues to ensure our suppliers were able to get their products to market and innovated to bring further low carbon solutions to our customers. You'll hear lots more on this topic in our energy event later today. Despite the challenging environment, we made great strides in delivering for all our stakeholders, as outlined here on this slide. DCC is a purpose-led organization, and we are focused on value creation for all our stakeholders. We achieve this by building impactful connections.
As a distributor, we're at the heart of the supply chain, connecting the producers of products with consumers. We're a trusted provider building long-term and deeply embedded partnerships with our customers and our suppliers. 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 to 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. You will see later how Almo, our largest acquisition to date, 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 our sectors.
Finally, sustainability is core to everything we do across the group, and we are making really great progress on our sustainability agenda, including our journey to net zero. You'll hear lots more about this later in the day. I'll hand you over now to Kevin, who'll take you through the business and financial highlights.
Thanks, Donal, and good morning, everyone. My first slide here looks at some very high-level financial metrics for the year end of March 31, 2022. I'll focus more on the items that Donal didn't mention earlier, but it goes without saying we're very pleased with the continued successful execution of our strategy during the year. That resulted in 11.1% reported operating profit growth, 15.1% on a constant currency basis. EPS was up marginally ahead of operating profit at 11.2% and 15.2% on a constant currency basis. I have a slide on free cash flow later, so we'll touch on that then. In terms of returns, really another strong performance with return on capital employed of 16.5%. Down modestly on prior year, with pretty much all of the reduction explained by the impact of acquisitions during the year.
Organically, returns were in line with the prior year. We spent GBP 720 million on acquisitions during the year, which included the commitments we've made this year of the GBP 600 million and the carryover of acquisitions such as Wörner, which were reported in last year's results but are in this year's cash flow. Net debt excluding IFRS 16, notwithstanding the significant acquisition spend of a GBP 1 billion in the last two years, is at approximately 0.5x net debt EBITDA. A very strong position to enable the continued growth of the group. Before we get into a bit more detail by division, we just look at the performance in overall terms. I mean, the first thing to say here is that there's obviously very good constant currency growth across all divisions.
You'll have noted our separate announcement this morning in terms of our energy businesses, and DCC Energy delivered GBP 407 million of operating profit. We'll get into more detail on that, as Donal mentioned, later on this afternoon. In terms of the shape of the group, you'll see that the two energy divisions accounted for 69% of profits. Pro forma, should I say, for Almo, that's approximately 64%. The other notable point on this slide really is the geographical split, where you'll see the continued growth of the group into North America, means that the U.K. now represents 26% of profits, 42% in continental Europe, and now 24% in the rest of the world, which is principally North America and also our more modest positions in the Middle East and Asia.
Looking at each of the divisions in a little more detail, and as always, we have more details on each division in both our results announcements and the appendix to this presentation. Just to say as well, all growth numbers that we quote here are in constant currency terms. In LPG, we had profit growth of 6.7%. We're very pleased with that performance, considering both the volatility and in particular, the significantly increased cost of product our teams had to deal with during the year. The average cost of product in the year was almost double that of the prior year. Our teams have had to be very vigilant in terms of pricing over the course of the year, and by and large, we managed this very well.
Clearly, we had a strong bounce back in volumes in commercial customers, which tend to be lower margin and also, you know, driven by acquisitions. The operating profit per ton came in at approximately GBP 90 per ton, very much in line with the expectations we would have had through the year. Our retail and oil business, again, performed very well during the year and delivered 20.1% profit growth. Again, here, we had a very strong recovery in volumes, and we continue to make progress in building our range of services which assist in terms of the profit mix. In DCC Healthcare, it was another very strong year on the back of a particularly strong prior year also. We had excellent organic growth in DCC Vital, and we also benefited from the inclusion of Wörner , which has performed well since acquisition.
On the health and beauty side, the performance was very solid. We had more impact here from COVID in terms of supply chain disruption and labor availability in particular. Overall, the team again delivered a good result against a difficult backdrop. Donal will talk later about some of the new capability we're adding here also, which sets us up well to deliver growth into this market. In DCC Technology, clearly, the acquisition of Almo was the most notable event during the year, but we had very strong growth in North America, with the B2B side of the business performing particularly well. As you know, businesses reopened and consumer demand remained robust. U.K. was weaker, with proportionately probably the most supply chain disruption in terms of supply, labor availability, and freight challenges that we saw across the division.
We're also not helped by the warehouse system upgrade earlier in the year, which we, you know, reduced volumes for a period, and that impacted into the busier time of the year in October and November. That implementation is now complete, and so we'd be expecting to build from here in terms of the opportunity in the U.K. In Europe, the business also delivered very good growth, with again, good growth in the B2B side of the business in particular. I know this is quite a simple slide in terms of waterfall but just highlights the various components of growth during the year. As you can see, FX translation cost us 4%, so more than GBP 20 million in profit terms. We then added 9% growth through acquisitions, and then as Donal referenced earlier, an excellent 6.1% organic growth performance.
The organic growth was particularly pleasing in the context of a pretty uncertain environment, and it was also significantly above our five-year average of about 3.2% since 2017. I guess to grow from about GBP 510 million in constant currency terms to almost GBP 590 million in the year, constant currency was pretty material. I'm sure most of you will know this already, but the excellent growth we had in the year was on the back of strong growth also last year, and DCC Group profits are now about 20% higher than they were before COVID, as we have grown organically and deployed capital into acquisition opportunities. Finally, for me, in terms of free cash flow conversion, we continue to deploy CapEx and excessive depreciation to support the organic development of the group.
Donal will again cover off on some of the initiatives there later. In terms of working capital, on this call last year, we highlighted that we had benefited from some timing benefits last year-end. As anticipated, we saw this reverse shortly post year-end last year. Excluding this, the free cash flow conversion moves from 65%- 79%. In terms of the other movements, we had some investment in working capital to support growth and a reduction in the utilization of supply chain financing within the technology division. Taken with the prior year, when you put the two years together, the free cash flow conversion across both years was an excellent 96%. Very, very strong cash flow across both years. With that, Donal, I'll hand back to you now, and thanks everyone for listening.
Thanks, Kevin. While organic growth is our number one growth objective, acquisitions are a key pillar of DCC's growth strategy, and FY 2022 was another strong year for development for the group. Despite the ongoing travel restrictions, DCC remained very active on the development front, with GBP 600 million committed to new acquisitions during the period. With acquisitions across each of our divisions and across nine different countries. We believe that our capital deployment priorities will deliver substantial growth and are aligned to the growth trends in our chosen sectors. You'll hear more about this later in the day, and it's building on the conversation we had on the back of the Almo acquisition last December. DCC has grown organically by an average of 3.2%, as Kevin called out, over the last four years, and pleasingly 6% in the year just gone.
We deployed CapEx to support the innovative business development plans we have across all of our businesses. We allocate capital to M&A, where we see the 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 employed well in excess of our cost of capital. We've deployed about GBP 1 billion on M&A over the last two years, and again, deliver that while navigating the pandemic. We have built significant new synergistic platforms in recent years and are very well positioned for continued capital deployment. Our capital deployment priorities are aligned with the growth trajectories of our sectors which we operate within. Just to pick a few highlights from our organic capital investments during the year.
The nutritional side of our health and beauty business is one of the highest organic growth sectors that DCC operates in, and one of the fastest-growing product formats in the nutritional sector is gummies. During the year, we added manufacturing capability in nutritional gummies in Britain, which is now in live production, and we have commenced the capital investment project in our facility in Florida to add gummies to our broad capability set in the U.S. market. We will talk in much more detail about the capability we're building in energy transition at our energy event later today, but just to highlight a few areas now. We rolled out our E85 biofuels across 60 sites in our French network. E85 reduces customers' carbon emissions by 60%. We continue to roll out EV fast chargers across our retail network in Europe.
We've launched an innovative energy management solution in our French business to support our customers reduce their carbon emissions. Finally, we've been deploying capital across the group to reduce our own carbon emissions, and we're making great progress in our own Scope 1 and Scope 2 reduction plans. During the year, we installed solar on our technology NDC in Britain, installed LED lighting across our manufacturing facilities, and successfully trialed HVO in our U.K. energy fleet. We have continued momentum and acquisition activity. During the period, we committed approximately GBP 600 million to acquisitions across Europe and North America. We had acquisitions across all four divisions in nine different countries. The highlight of the year was DCC's largest acquisition to date, Almo Corporation, which I'll come back and talk about in a minute.
In the energy sector, we acquired Naturgy Ireland, an energy solutions business for commercial and industrial customers. The business is a service-led supplier of electricity and gas to large B2B energy customers and also provides a range of value-added services, including demand-side management, lighting as a service, solar PV, biogas, and PPA management. The business strengthens DCC's presence in the Irish energy market as an important step in our strategy to expand our energy solutions offering. DCC acquired a synergistic convenience-led network of retail service stations in Luxembourg. The network has an excellent convenience offering under the leading Cactus Shoppi brand, which DCC operates. The network contains well-located urban sites suitable for investment in EV fast charging infrastructure into the future and builds that convenience capability into our retail operations.
During the year, DCC Healthcare acquired two bolt-ons in the primary care market in Germany, following fast on our initial entry into the market through the acquisition of Wörner in April 2021. The primary care market is highly fragmented in the DACH region, and although modest, the acquisition demonstrates that DCC is now well-positioned to consolidate this market. Now, Almo. The acquisition of Almo is a great example of DCC's M&A capability in action. Since our initial entry into the U.S. technology market in 2018, we have been building a strong relationship with the Chaiken family, which resulted in a bilateral transaction. Almo is one of the largest specialist pro AV businesses in the U. S. and is a leading national distributor of consumer appliances, consumer electronics, and lifestyle products, selling to integrators, resellers, dealers, retailers, and e-tailers nationwide.
The business is headquartered in Philadelphia and employs approximately 660 people across the U.S . In its most recent financial year, the business recorded revenues of approximately $1.3 billion and an underlying EBITA of approximately $75 million. Almo is a high-quality scale business. It's a major step in the continuing expansion of DCC Technology in North America. Since entering the market in 2018, DCC Technology has expanded significantly through strong organic growth and acquisition activity. Together with DCC Technology's existing platform, the acquisition of Almo will create the leading specialist Pro AV business in North America. It also provides the group with real scale across the e-commerce and consumer channels through our most significant presence in the growing lifestyle, consumer appliance and electronics markets.
The business is trading in line with our expectations, and the integration of the Pro AV activities has progressed very well. Just before our summary, I'd like to introduce our investor event later today, Leading with Energy. During the event, we'll outline the growth opportunities for DCC in the energy sector as we lead our customers in their energy transition to net zero. We'll outline a new strategy and structure for our energy business. We will provide detailed insights into the energy transition paths for our customer segments. You will hear from our teams, our customers and our partners highlighting new and innovative solutions. We will outline what the financial characteristics of the transition looks like and demonstrate to you how we will grow our profitability through the transition to net zero.
We will also cover our group strategy, outlining our growth ambition for the group, our capital allocation priorities, and a view of what DCC will look like in 2030 and beyond, and our new commitments in respect of carbon emissions. The virtual event will take place at 1:00 P.M. BST, and if you haven't already registered, you can do so on www.dcc.ie. I hope you can all join us later today for what I believe will be a very insightful event. In summary, we've had a really excellent performance despite the very challenging macro environment. We've delivered very strong profit growth with growth across all four divisions. The strength of the performance demonstrates the resilience and agility in DCC's business model. Our acquisition momentum continues. We've clear capital allocation priorities and delivering against these during the year with acquisitions across all four divisions.
Sustainability and energy transition is at the heart of everything we do, and we're making really good progress. Finally, our outlook statement. DCC expects that the year end of March 31, 2023 will be another year of profit growth and development, notwithstanding the challenging macro environment at present. We leave you now with our favorite slide to highlight DCC's strategy continuing to deliver. This strategy, over our 28 years as a public company, has delivered a consistent track record of growth with operating profit growing 14.1% CAGR, EPS growth 11.8% CAGR, an unbroken growth in dividends increasing 13.7% CAGR, free cash flow conversion of 100%, consistently high returns on capital, significantly ahead of cost of capital. Thank you for listening, and we look forward to taking your questions now.
As a reminder, if you'd like to register a question, please press star followed by one on your telephone keypad. If you change your mind at any time, please press star followed by two, and please ensure you're unmuted when speaking. Our first question comes from Kate Somerville with UBS. Kate, the line is yours.
Thank you very much for taking my questions. I have three, please, if I may. The first question is on healthcare. Just to help us understand the outlook for growth from here, you've obviously done incredibly strong organic growth over the last two years. Are you able to give an indication of the proportion to which that was driven by PPE? And also going forward, do you expect to slow down in, you know, the demand for vitamins and the preventative medicine as we're sort of moving up into the post-COVID world? The second question is on Almo. Obviously the integration seems to be going well. What should we be expecting in terms of the benefit to margins this year? Would the 60 basis points seem sensible?
The third question is on LPG, gross profit per liter, which is on slide 28. You've obviously done very well to manage the cost of product. I was just wondering if you can sort of give us the bridge of, you know, mix and acquisitions and then potentially cost of product, of how that moves versus last year. Thanks very much.
Thanks, Kate. On the healthcare side, the organic performance has been pretty stellar really over the last couple of years. You know, the year just gone, you know, really pleased with the performance because it was building on, you know, a 30% plus growth in the prior year. Now, PPE, you know, and we have benefited from PPE throughout the pandemic, but clearly we've had an impact in terms of the reduction in elective procedures within the healthcare system. This continues. You know, the healthcare systems continue to be under a fair bit of stress, both labor availability issues and indeed ongoing issues from COVID-related illnesses.
You know, we expect the PPE demand to taper off a little bit and then the elective procedures to come back. Wouldn't be, certainly wouldn't be flagging any kinda, we won't be growing clearly organically at the stellar levels we were through the pandemic, but getting back to that kind of more normal kind of growth trajectory. We've, you know, we talked about in December kind of, when we outlined our priorities for capital allocation growth within the healthcare sector of about 4%-6%, across both sides of our business, and we certainly see that continuing.
Now in terms of demand for nutritional supplements, and this was something that, you know, going back to the first year really of the pandemic, we saw, you know, phenomenal boost in demand for nutritional products, you know, well ahead of historic growth rates, which are high. So, this is a high organic, and I said earlier, probably the highest organic growth sector of the market that DCC operates in. You know, that growth brought in lots of new customers into the supplements net. So actually, we don't see kind of the market and certainly all the industry experts wouldn't suggest that the market is going to go backwards.
That growth will build on that, not at the levels we've seen over the last couple of years, but back more to the kind of longer term growth rates of 6%-7% within that sector. You know, we see really good organic growth continuing within the healthcare business, both on the Vital side and on the health and beauty side. Kevin, do you want to take the Almo?
Yeah. No problem, Donal. Kate, thanks for the questions. From an Almo perspective, obviously it is a higher margin business, and you know, reflects the margin profile, obviously reflects the specialist nature of the services that are provided. You know, from an overall DCC Technology perspective, it is and will be you know, accretive to operating margins. We'd expect you know, operating margins to certainly improve by about 50 basis points as a result, for sure as we look forward.
Maybe not quite at the 60 level that you had, but certainly 50-55 basis points would be reasonable. On the LPG side, Kate, you know, I think one of the things that's most pleasing for us during the year is really how well our teams in the LPG business have managed the pricing environment. So, you know, there's obviously in the operating, or in the gross margin per ton, there's two things clearly as you highlight in your question. You've got, you know, a very significant rebound in volumes. And in terms of, you know, the mix that that brings back into the group, we would have highlighted that it was going to be bringing commercial and industrial volumes back as opposed to the very strong performance we had in domestic in the prior year.
In terms of the impact of pricing, because we forward procure, you know, a reasonable amount of our product and our teams are very proactive from a pricing perspective, we really didn't experience a headwind from a margin perspective during the year. You know, the bridge is actually pretty simple, which is that, you know, we didn't have any category by category dilution in margins, and indeed our team have been eking those margins up very slowly over time. We wouldn't be calling out that there was, you know, a headwind from a margin perspective. I think if you remember back to this call in November or half-year stage, we had, you know, kind of guided that operating profit per ton would be around about the GBP 90 mark.
Obviously, we've come in pretty much bang on that, and that's really because the teams have done such a good job at managing, you know, the difficult pricing environment through the second half of the year. You know, just really a fantastic performance.
Thanks, Kevin.
Very clear. Thank you so much.
Thanks, Kate.
Our next question comes from Gerry Hennigan of Goodbody. Jerry, please go ahead.
Hi, can you hear me?
Yeah, perfectly, Gerry. How are you?
About Donal. Listen, just a quick question on the margins in oil. They've been steadily rising on a operating profit per liter basis. Can you just comment on the dynamics there? Also, in terms of the tech sector, with regard to some of the headwinds you've experienced in the past in the U.K., are you pretty confident they're behind you? I know there's been a certain amount of investment there in terms of ERP, but is that pretty much into this point in time, specifically with regard to the U.K.?
Yeah. Thanks, Jerry. Look, the performance actually over the last couple of years within the retail and oil business has been really strong and, you know, it is good management across the organization through kind of, you know, what has been, you know, incredibly volatile environments. Now, in the year just gone, you know, obviously we had, you know, we continued that momentum. We continued to expand out the business. We have very good volume recovery, which benefits we're getting the leverage on the back of the volume recovery. We have been growing, and you'll hear more from us later on in the day about this, but we've been growing our other income sources within our business. We've been growing in the lubricants sector.
We've been building out our truck stop network. Lots of really good energy transition initiatives across the business which are delivering strong margin performance within the business as well. It's a combination, Gerry, of things. I think the cost management has been super as well across the business. It really has been a very good year for us, building on a very good year in the prior year. Look, Gerry, on the tech side, you know, yes, we believe that the challenges are behind us. We have clearly invested over the last number of years in building our infrastructure in the business in the U.K. All those investments are behind us.
The last element of that was the warehouse management system which went live during the year. You know, when you upgrade a warehouse management system in a very complicated business and large business like our business in the U.K., that's always, there's always teething issues. That's live now. It's working well. The technical challenges we had are all behind us. The market is the market. You know, the market has been tough. Post-Brexit, there's been lots of challenges in the U.K. market generally, whether it was labor availability, whether it was availability of freight to get products in and out of our warehouses and so on. You know, hopefully as we come out of the pandemic now that some of those issues will ease a little bit.
We feel good about where the tech business is now. You know, to deliver 20% growth in our technology business on a constant currency basis when we've had those challenges in the U.K., I think you'd agree that has been a pretty strong performance. Thanks, Gerry.
Our next question comes from Anvesh Agrawal of Morgan Stanley. Anvesh, please go ahead.
Hi. Yeah, I got three questions as well. First, just continuing on the technology business. I mean, it's clearly a very good year last year, but have you seen any sort of change in the consumer demand so far this year, given sort of what's going around and noise around sort of consumer getting impacted in their ability to spend, and how you're thinking about the business in FY 2023? The second question is around the balance sheet. I mean, you have clearly run a balance sheet that is sort of close to zero times levered. Has there been any change in that thinking as you sort of look to invest into the energy transition and sort of build out the capabilities?
Then finally, just on the free cash flow for next year, is the working capital impact now fully reversed? Should we expect the free cash flow growth to be sort of above operating profit growth next year or at least in line?
Yeah. Thanks very much for the questions. You know, on the tech side, you know, we've been saying for some time that we expected to see a little bit of an easing off on the consumer side. You know, consumer demand had been you know a big driver for growth all the way through the pandemic, and you know we certainly have seen some easing off on the consumer side, but that's been balanced, obviously, by growth on the B2B side. You know, our business is kind of broadly 50/50 between the consumer and the B2B side, so it gives us a good balance as economies have been opening up, as people have been gathering again.
You know, we talk about the impact on segments like Pro AV, where people hadn't been congregating or hadn't been gathering together. You know, we're seeing that bounce back, well, and the Almo acquisition was clearly very timely because it brings us into a leadership position within that sector, within the U.S. market. You know, overall, I think we feel good about the demand outlook within the technology sector. The shape will be different clearly to what the shape was through the pandemic with more growth on the B2B side. Kevin, do you want to take the balance sheet and cash flow?
Yeah, I mean, thanks, Anvesh, for the questions. On balance sheets, obviously, we've been evolving our approach for some time, and I think, you know, the proportionately DCC now is holding it less gross cash than it used to, you know, in proportion to the size and scale of the group. We've announced this morning, and you'll hear more about this later, we've obviously increased the size of our revolving credit facility. That is to ensure that DCC has, you know, the most options as it can available to it in terms of timing its entries and exits from, you know, the capital markets from a debt perspective. We continue to evolve our thinking on that and, you know, I think DCC will continue to mature in regard to, you know, how we finance the group.
I don't think there's been any particular change, Anvesh, since we would've taken you through our thinking on that maybe earlier this year, but you know, balance sheet remains very strong from a net debt perspective, 0.5x net debt EBITDA. The business remains very cash generative. You know, we continue to believe we'll have very strong capability to be acquisitive. I think the balance sheet, you know, in terms of gross cash and gross debt, that profile may evolve and change over time and as I say, as the group matures. On the free cash flow.
Yeah, I mean, I think again, as best we can call it today, you know, we'd see maybe just a very, very modest investment in working capital into the following year. I'm talking the order of GBP 20 million or GBP 30 million, Anvesh. So, you know, obviously, that would give us very significant free cash flow generation in the year ahead if we can deliver that. So, you know, typically, we're investing in working capital and in organic capital development in terms of CapEx in excess of depreciation. So, we wouldn't expect that model to change materially. But, you know, I think we've obviously been investing in working capital over the course of FY 2022.
You know, a lot of that was to build resilience around stock positions and to make sure that we had the capability to deliver for our customers. You know, as we go forward, you know, the volatility that we see in supply chains will influence the level of working capital, but as best we can call it today, we wouldn't be calling any sort of material inflow or outflow in working capital for next year. Pretty much steady state.
Thanks, Kevin.
Our next question comes from Allan Smylie of Davy. Allan, the line is yours.
Yeah, morning, guys. Just two quick ones for me, please. Within the healthcare division, you flagged that supply chain and labor challenges have kind of held back the growth in health and beauty solutions as we've seen in many businesses. I'd be interested in your view on how those evolve going into fiscal year 2023. Just a very high-level question on M&A. Do you think the current macro backdrop of broader growth concerns and rising rates will have any impact on either the availability and/or of potential deals across each of the four going to three divisions? Thank you.
Thanks, Allan. It's the tee off for this afternoon, is it, the three to four? Just on the supply chain side, like, that, you know, that comment was really about the U.S. market and, you know, we again, you know, we had pretty stellar growth in the U.S. market in the prior financial year. The comps were very high. We did see impact on, you know, just some of the ingredients and getting availability of some of the ingredients during the period. Labor has been an issue. It continues to be a bit of an issue across many markets but has been an issue in the health and beauty business in the U.S., where we're navigating our way through that very well.
It was really to call out that, you know, that was, I suppose, a little bit slower maybe in terms of growth rate than we would have liked to see during the year. You know, overall, clearly the healthcare and the organic growth in the healthcare business has been very strong. Again, benefit of diversity, Allan, where, you know, we have our health and beauty business now with strong operations across both Europe and the U.S. On the M&A front, you know, and time is going to tell really, and I certainly don't see it slowing down availability of options.
You know, we've obviously been creating platforms across each of our sectors and across multiple geographies, including you know, really the excellent work that we've done in the U.S. market over the last four years in building the scale platform that we have now in North America. I think there'll be plenty of opportunities, hopefully higher interest rates, a bit more challenge in the market actually, changes maybe some of the competitive dynamic for us it's a little bit, but I've said that before and it hasn't always turned out. You know, time will tell, but hopefully it's more of a positive than a negative from our perspective.
Yeah, I think at the margin, Allan, it's helpful, but, you know, I think there's plenty of capital remains out there, plenty of liquidity from a financing market perspective, and obviously at the margins, obviously the, as the, as interest rates tick up, but certainly, you'd logically think that would mean return aspirations might be a little bit higher, but I think that, as Donal said, that's time will tell.
Thanks, Allan Smylie.
Our next question comes from Oscar Val Mas of JP Morgan. Oscar, please go ahead.
Yes. Good morning, Donal and Kevin.
Good morning.
A lot of the questions have been asked, but I have two. The first one on CapEx. You talked about this a bit, but could you just. CapEx is running GBP 30 million above depreciation this year. How should we think about CapEx next year? And are there any incremental investments for kind of energy solutions in the health and beauty? That's the first question. And then the second question is going back to the LPG business. Could you just comment on whether, and in the past, it has sometimes been split out as a net benefit or drag. Was that something material this year? Thank you.
Okay. In the LPG side, it wasn't, Oscar. I think Kevin kinda talked about a little bit earlier. I think we've, you know, it was like the cost of product almost doubled during the year. The work to manage that without having impact on the profitability of the business was superb by the teams, you know. We navigated our way through that pretty well. You know, the CapEx and there will be, not to steal the thunder from this afternoon, but you'll hear us talking lots about investments in energy solutions later on this afternoon. Might leave that one till a little bit later.
The health and beauty, yes, you know, and I talked about the gummies investment that we're making now in our U.S. business in our facility in Florida, and that's a material enough investment we have. You know, we'd certainly see our CapEx running ahead of depreciation as we invest in the growth platforms that we have across each of our sectors. Kevin, if you wanna talk about that.
Yeah. Oscar, I mean, in terms of what that means, I think the CapEx ahead of depreciation likely to be maybe slightly higher as we look forward. I think we'd be thinking about a depreciation number of about GBP 150 million, and you're likely to see CapEx, you know, GBP 35 million-GBP 40 million ahead of that, in FY 2023. You know, thankfully, we've got lots of interesting organic opportunities to invest behind within the group. You know, we'd be delighted if that does come through because it'll mean that we found opportunities to deploy capital in interesting organic opportunities for us.
Thanks, Oscar.
Our next question comes from Thomas Truckle of Jefferies. Thomas, please go ahead.
Yes. Thank you. Tom Truckle here with Jefferies. I have three, if I may. Firstly, just coming back to Kate's point on health and beauty. You mentioned the elective procedures, and there's still some catch-up there. I'm intrigued, based on the trajectory you've seen perhaps over the three to six months that have just been, how much recovery upside do you see left in those elective procedures or consultations? And what sort of pace do you expect that recovery to come through? And then secondly, on healthcare, clearly there seems to be an opportunity around the nutritional products and the strong demand there. Please may you just remind us how much of the healthcare division is made up of nutritional products?
Thirdly, on M&A, please may you share any insight as to whether there are any particular divisions or geographies you may be targeting or whether you're broad-based looking at all opportunities across the whole group. Thank you.
Thanks, Tom. In the healthcare sector and on the Vital side, it's really the impact on the elective procedures. You know, I think what you'll see is you'll see that recover in the healthcare system. It needs it to recover because there's patients not getting the treatment that they need today because of backlogs. I think as we'd see it, you'll see that easing off of probably demand that we've seen on the PPE side and then the recovery in the products that we sell from an elective perspective. That kinda goes back to, I suppose, what I was saying earlier, really, about the growth rates in the healthcare sector.
We'd see them being kind of pretty normal growth rates for our business going forward. You know, elective procedures getting back to where they should be and indeed probably a little bit of a backlog, but that's gonna take time to work through the systems because, you know, of constraints within the healthcare systems just generally. You know, the nutritional side again, we see being strong. Sorry, Kevin, go on.
Yeah, I was just gonna say, Thomas, it's about 50% of the profits of Healthcare, approximately. It changes a little from year to year, and it'll obviously change as capital is deployed into the Healthcare business, but Health and Beauty would account for approximately half the profits.
Yeah. That is the slightly higher growth segment of the business. We've, you know, slightly lower growth, all good growth. The 4%-6% within our healthcare business is a little bit lower on the Vital side, a little bit higher on the health and beauty side. Just organic growth, we'll see that growing from there. You know, you know, again, M&A, we have, you know, created platforms, across both North America and Europe, across all three sectors. I think we're very active on the on the M&A front across each of our sectors. You know, I think it's you know, trying to drive our M&A, ideally, we could do it in line with the growth priorities that we talked about.
Again, you'll hear us talking about that a little bit more this afternoon in our energy events. Following the growth priorities that we have, healthcare technology, clean and renewable energies, and kind of consolidation then within the energy markets where we see the platform to transition our customers to lower carbon energies going forward.
Thanks.
Our final question comes from Christopher Bamberry of Peel Hunt. Christopher, please go ahead.
Morning, Donal and Kevin.
Hi, Chris. How are you?
Three questions, if I may. I'm good, thank you. How are you?
Great.
Obviously, we've had slower return on capital in technology the last few years with the challenges in the U.K. and the substantial investments you made. Can you see a path, you know, back towards 15% or more? If so, perhaps give us an idea on some of the constituents of that. Secondly, last year there was a bit of restructuring obviously in things like U.K. warehousing and the French LPG infrastructure. Apart from the continuation of that, French LPG restructuring, are there any other areas you're looking at restructuring this year? Finally, given where we are now with FX rates, what's your estimate of the impact on profit from that this year? Thanks.
Thanks, Chris. Yeah, the returns, absolutely. You know, we see getting our returns back to 15%+ within the technology sector. You know, our underlying, and we talked about it actually if you go back to our event in December. You know, the performance actually of our businesses in North America and the returns on those business is pretty strong. You know, the U.K. has been a drag from a returns perspective. You know, with the investments behind us and hopefully a better recovery in that market, you know, we see the bounce back in the U.K. as well. We're on that road, Chris.
You know, I think we're not happy with where the returns are today within technology, but we get them back to the right levels over the coming couple of years. You know, there's always integrations that we're doing across the business and the group. We're an acquisitive group, you know. When we acquire something and we integrate it and we leverage the synergies out of it. Again, the ones you called out are behind us now at this stage. It's very much down to acquisitions that we'll do, and the integration associated with that. You know, Almo. Actually, we have integrated our Pro AV business into the Almo business.
That's pretty much complete. Actually, we did that. It's more modest in terms of any kind of knock-on impact of that, and we'll see the benefits flowing through in the current year. Kevin, do you want to just talk about FX?
Yeah. Chris, again, thanks for the questions. On the FX side, I mean, obviously FX is a little bit volatile at the moment. As best we can call it today, we probably see a very, very modest tailwind into FY 2023, Chris. You know, it's very early in the year to be calling that. I mean, obviously the U.S. dollar is stronger, and we have, you know, a reasonable proportion of U.S. dollar earnings now. I think relative to average rates as we sit here this morning, you know, maybe the euro is a little weaker relative to where it was over the course of FY 2022. You know, there's a balance as always within the currency mix.
You know, don't see it being, at this point, as material an impact as it was obviously in the prior year when it cost us 4% of our unreported growth. You know, it's not a major feature as we sit here today.
Super. Thanks, Chris. I think that was our last question. Just to thank everyone for joining us this morning. Really do want to encourage everyone to join us this afternoon, 1:00 P.M. , BST. If you haven't already registered for our energy event, please do so. You can do so on www.dcc.ie. I think it'll be very insightful and I look forward to you all joining us. Look forward to meeting you all, either on the road as we thankfully are doing our first physical roadshow for the first time in a couple of years now. We look forward to meeting many of you face-to-face over the coming days and weeks.
We do have an event as well tomorrow evening for our analysts, so you can have an opportunity to further delve into your questions tomorrow evening as well. Look, thank you all for joining us today. Thank you for your support of DCC and look forward to seeing you all soon. Many thanks. Bye-bye.