DCC plc
Annual Report 1999

Plain-text annual report

COVER 20/9/99 3:30 pm Page 1 DCC plc, DCC House, Brewery Road, Stillorgan, Co. Dublin, Ireland. +353 1 283 1011 +353 1 283 1017 Tel: Fax: e-mail: dccplc@dcc.ie web: www.dcc.ie D C C p l c A n n u a l R e p o r t 1 9 9 9 Adding Value in Marketing and Distribution DCC plc Annual Report 1999 COVER 20/9/99 3:30 pm Page 2 Corporate Profile DCC is an Irish based value adding marketing and distribution group with a strong growth record and a focused approach to the management and development of its four divisions: is a rapidly developing international division which provides distribution and manufacturing services to the high growth computer sector. is building on its strong market position in the cash generative liquified petroleum gas distribution business in Ireland and Britain and is the fastest growing oil distribution business in Ireland. is growing its business in the marketing and distribution of its own branded and third party branded products for higher growth segments of the Irish food trade. is expanding its hospital supply business in Ireland and Britain, expanding internationally in the growing mobility and rehab market and building a vibrant health supplements business in Britain. DCC was founded in 1976 by Jim Flavin, Chief Executive/Deputy Chairman. The Company’s shares are listed on the Irish Stock Exchange and the London Stock Exchange. DCC’s market capitalisation at 7 May 1999 was I762 million (US$823 million). The Group employs approximately 2,700 people. Contents Financial Highlights The Group at a Glance Financial Summary and Key Ratios 1992 - 1999 Directors Chairman’s Statement Chief Executive / Deputy Chairman’s Review Divisional Reviews Financial Review Corporate Information Corporate Governance Report of the Directors Report on Directors’ Remuneration Statement of Directors’ Responsibilities Report of the Auditors Accounting Policies Financial Statements Notes to the Financial Statements Group Directory Shareholder Information Index 1 2 4 5 6 8 12 20 25 26 28 30 34 35 37 40 45 73 77 79 DCC plc Annual Report and Accounts 1999 Printed by SerCom Solutions Limited, a DCC Group company. Designed and produced by Trinity Design. Financial Highlights for the year ended 31 March 1999 1999 1998 % change +18.7% +27.0% +28.9% +25.9% +20.3% Turnover RR1,059.3m R892.3m Profit before goodwill amortisation and tax Operating cash flow Adjusted earnings per share* Dividend per share Dividend cover (times) RR59.2m RR65.5m RR57.19c RR14.66c R46.6m R50.8m R45.41c R12.19c 3.9 3.7 Acquisition and development expenditure RR93.4m R33.4m Return on capital employed - excluding goodwill - including goodwill Group net (debt)/cash Debt ratio 36.3% 21.2% (RR20.3m) 10.4% 33.6% 20.0% R7.0m n/a * adjusted to exclude the effect of goodwill amortisation Operating Profit by Division R(cid:213)m % change DCC SerCom DCC Energy DCC Foods DCC Healthcare Other Interests 18.3 18.2 15.0 9.8 2.4 +18.2% +37.8% +16.1% +36.1% +5.2% DCC Healthcare Other Interests DCC SerCom DCC Foods 63.7 +24.7% DCC Energy DCC plc Annual Report and Accounts 1999 1 The Group at a Glance DCC SerCom (services to the computer industry) provides distribution and manufacturing services, including international computer industry. localisation, to the Micro P and Gem in Britain and Sharptext in Ireland market and distribute a broad range of computer hardware and software products retailers, computer dealers, value added resellers, computer superstores, mail order catalogues and a variety of other outlets. large multiple to of for the procurement supply chain SerCom Solutions provides extensive services and manufacturing requirements of computer software and hardware companies including components, the warehousing, sub-assembly and delivery of product directly customers’ production lines on a "just-in-time" basis. Its subsidiary translates and adapts software, documentation and on-line help for international computer companies to enable their products to conform to the language and cultures of local markets. ITP its to DCC Energy is a leading importer, distributor and marketer of liquefied petroleum gas (LPG) and oil products in the Republic of Ireland and Northern Ireland and is a leading independent marketer and distributor of LPG in Britain. In Ireland, Flogas has marine LPG terminals in Drogheda, Cork and Belfast, while in Britain it operates in Leicester, Glasgow, Newcastle, Leeds, Newport and London. from terminals Emo Oil has marine oil import terminals in Dublin, New Ross and Belfast and supplies all grades of distillates (heating oils and diesel), fuel oils and petrol for transport, domestic, commercial and industrial uses. DCC Foods is principally involved in the marketing and distribution in Ireland of healthfoods, snackfoods, hot and cold beverages, wine and bakery products, and in chilled and frozen food distribution. DCC Foods’ companies service a broad retail customer base in the grocery, convenience, off-licence, health store and pharmacy sectors. DCC Foods is also developing strongly in the fast growing Irish catering sector, particularly in ground coffee and wine. DCC is a 10.3% shareholder with board representation in Fyffes plc, the leading fresh produce distribution group in Europe. 1999 1998 1999 1998 1999 1998 Turnover I416.5m R336.9m +23.6% Turnover I193.3m R160.9m +20.2% Turnover I314.2m R293.3m +7.1% Profit Margin ROCE I18.3m R15.5m +18.2% 4.4% 4.6% 42.8% 47.6% Profit Margin ROCE I18.2m R13.2m +37.8% 9.4% 8.2% 32.5% 24.2% Profit Margin ROCE I15.0m R12.9m +16.1% 4.8% 4.4% 32.1% 31.7% Employees 1,239 1,144 Employees 457 412 Employees 244 249 2 DCC plc Annual Report and Accounts 1999 Profit before goodwill amortisation, net exceptional gains and tax I’million Compound Growth = 20.0% 59.2 46.6 40.1 36.2 32.3 27.6 16.5 18.4 92 93 94 95 96 97 98 99 Compound Growth = 18.1% Adjusted earnings per share I(cid:213)cents 57.2 45.4 37.5 28.4 31.9 24.8 17.8 19.9 92 93 94 95 96 97 98 99 Dividend per share I(cid:213)cents 14.7 12.2 10.2 Compound Growth = 28.5% 7.8 8.8 DCC Healthcare’s business comprises the supply of medical, surgical and laboratory consumables and equipment to hospitals, the manufacture and distribution of mobility and rehabilitation products and the manufacture, marketing and distribution of health supplements. Fannin Healthcare is the largest distributor laboratory of medical, surgical equipment and consumables to Irish hospitals and has a modest, but growing base in Britain. and DMA and DSI are focused on the production and distribution of lifestyle enhancing mobility and rehabilitation products for senior citizens in Britain, mainland Europe and America. Healthilife, EuroCaps and Thompson & Capper manufacture, market and distribute health supplements and other tablets and capsules in Britain and to export markets worldwide. 1999 1998 Turnover I114.8m R81.3m +41.1% Profit Margin ROCE I9.8m R7.2m +36.1% 6.3 8.5% 8.8% 31.8% 29.5% 2.5 2.9 Employees 724 489 92 93 94 95 96 97 98 99 DCC plc Annual Report and Accounts 1999 3 Financial Summary and Key Ratios 1992-1999 Profit & Loss Account Year ended 31 March Turnover Operating profit* Net interest receivable/(payable) Profit on ordinary activities before goodwill amortisation, net exceptional gains and tax Goodwill amortisation Net exceptional gains Profit before taxation Taxation Minority interests Profit attributable to Group shareholders Earnings per share - Basic (e cents) - Basic adjusted (e cents) Dividend per share (e cents) Dividend cover (times) Interest cover (times) Operating profit / Turnover (%) * before goodwill amortisation Consolidated Balance Sheet At 31 March Tangible fixed assets Associated undertakings Goodwill Net current assets Shareholders' funds Minority interests Net (cash)/debt Other long term creditors/provisions Capital expenditure Acquisitions Development expenditure Operating cash flow 1992 e(cid:213)m 237.7 11.6 4.9 16.5 - 2.4 18.9 (4.5) (0.6) 13.8 20.46 17.83 2.54 7.0 n/a 4.9% 1992 e(cid:213)m 1.9 70.7 - 72.6 3.8 76.4 120.7 1.4 (46.7) 1.0 76.4 0.5 13.0 13.5 6.6 Net cash (debt) / equity (%) 38.7% Return on tangible capital employed (%) 16.5% 177 Average no of employees 1993 e(cid:213)m 311.7 13.7 4.7 18.4 - 0.6 19.0 (3.6) (0.9) 14.5 21.36 19.87 2.92 6.8 n/a 4.4% 1993 e(cid:213)m 33.0 57.6 - 90.6 8.0 98.6 113.7 2.5 (24.9) 7.3 98.6 2.4 42.9 45.3 12.9 21.9% 16.4% 480 1994 e(cid:213)m 426.1 27.1 0.5 27.6 (0.2) 0.8 28.2 (5.6) (5.8) 16.8 24.84 24.84 6.35 3.9 n/a 6.4% 1994 e(cid:213)m 87.2 44.0 - 131.2 5.1 136.3 104.1 24.0 (1.1) 9.3 136.3 10.3 39.4 49.7 32.4 1.0% 24.5% 1,551 1995 e(cid:213)m 513.9 32.9 (0.6) 32.3 (0.2) - 32.1 (5.5) (6.3) 20.3 28.12 28.44 7.82 3.6 57.8 6.4% 1995 e(cid:213)m 86.8 49.3 - 136.1 12.4 148.5 118.4 28.5 (9.4) 11.0 148.5 12.5 12.9 25.4 33.3 8.0% 24.2% 1,720 1996 e(cid:213)m 680.1 37.8 (1.6) 36.2 (0.2) 0.6 36.6 (6.5) (6.6) 23.5 32.20 31.93 8.76 3.6 23.1 5.6% 1996 e(cid:213)m 86.9 44.4 - 131.3 18.7 150.0 102.6 4.4 10.5 32.5 150.0 13.3 66.1 79.4 34.3 1997 e(cid:213)m 797.0 44.0 (3.9) 40.1 (0.2) 5.1 45.0 (8.4) (2.7) 33.9 42.33 37.50 10.16 3.7 11.3 5.5% 1997 e(cid:213)m 89.4 41.9 - 131.3 19.1 150.4 122.5 4.8 4.5 18.6 150.4 14.9 23.4 38.3 43.5 (9.7%) 26.4% 2,081 (3.6%) 30.5% 2,170 1998 e(cid:213)m 892.3 51.1 (4.5) 1999 e(cid:213)m 1,059.3 63.7 (4.5) 46.6 (0.2) - 46.4 (7.5) (1.4) 37.5 45.08 45.41 12.19 3.7 11.5 5.7% 1998 e(cid:213)m 98.8 46.5 - 145.3 18.2 163.5 154.1 5.3 (7.0) 11.1 163.5 18.6 14.8 33.4 50.8 4.6% 33.6% 2,294 59.2 (1.5) - 57.7 (8.9) (0.8) 48.0 55.39 57.19 14.66 3.9 14.3 6.0% 1999 e(cid:213)m 106.7 56.9 46.0 209.6 33.3 242.9 195.2 3.9 20.3 23.5 242.9 18.0 75.4 93.4 65.5 (10.4%) 36.3% 2,664 4 DCC plc Annual Report and Accounts 1999 Directors Alex Spain Chairman Jim Flavin Chief Executive / Deputy Chairman Alex Spain, B Comm, FCA (aged 66), is Non-executive Chairman of DCC. He is also Deputy Chairman of National Irish Bank and is a director of a number of other companies. He was Managing Partner of KPMG in Ireland from 1977 to 1984. He is a former President of the Institute of Chartered Accountants in Ireland and a former Chairman of the Financial Services Industry Association in Ireland. Mr Spain joined the Board and became Chairman in 1976. Jim Flavin, B Comm, DPA, FCA (aged 56) founded DCC in 1976 and is Chief Executive and Deputy Chairman. He has extensive experience in the areas of business development and corporate acquisitions. Prior to founding DCC, he worked as head of AIB Bank’s venture capital unit. Mr Flavin is also a director of Fyffes plc and Telecom Eireann plc. Tony Barry Non-executive Director Tony Barry, Chartered Engineer (aged 64), Non-executive Director, is Chairman of CRH plc, having previously been Chief Executive. He is Deputy Governor of the Bank of Ireland and a director of Greencore plc and Ivernia West plc. Mr Barry is the immediate past President of the Irish Business and Employers Confederation. Mr Barry joined the Board in 1995. Morgan Crowe Executive Director Morgan Crowe, Dip Eng, MBA (aged 54), Executive Director, joined DCC in 1976, having previously worked with the Boeing Company in Seattle and with IBM in Dublin. He is Managing Director of DCC Healthcare. Mr Crowe joined the Board in 1979. Paddy Gallagher Non-executive Director Paddy Gallagher, BL, DPA (aged 59), Non-executive Director, is Head of Legal and Pensions Administration at Guinness Ireland Group. He previously worked with Aer Lingus, the Irish national airline, and is a former Chairman of the Irish Association of Pension Funds. Mr Gallagher joined the Board in 1976. DCC plc Annual Report and Accounts 1999 5 Chairman’s Statement Development The year was an active one for acquisitions and development with total expenditure of E93.4 million. Jim Flavin comments further on this in his Chief Executive/Deputy Chairman’s Review. Financial Strength After cash expenditure on acquisitions and development of E76.0 million, net debt at 31 March 1999 amounted to E20.3 million, compared to net cash of E7.0 million at 31 March 1998. Shareholders’ funds at 31 March 1999 amounted to E195.2 million (1998: E154.1 million). The Group’s modest debt ratio of 10.4% and its well structured capital base give DCC the scope to pursue substantial development activity. Alex Spain Chairman Results The Group achieved strong organic profit growth in the year ended 31 March 1999 which was supplemented by positive contributions from acquisition activity during the year. Profit before goodwill amortisation and taxation increased by 27.0% to E59.2 million. Adjusted earnings per share increased by 25.9% to E57.19 cents. The return on tangible capital employed increased to 36.3% from 33.6% and inclusive of acquisition goodwill the return increased to 21.2% from 20.0%. Presentation of Accounts Dividend A second interim dividend of E9.264 cents per share was paid on 1 April 1999. This dividend was When the Euro was launched on 1 January 1999 the rate of conversion from Irish pounds was fixed at E1 = IR£0.787564. The Group’s businesses compete in a global marketplace and are starting to paid in lieu of a final dividend and represented a conduct business in Euros. In addition, international increase over the 20.0% final dividend of E7.720 cents per share paid in respect of the previous year. The total net dividend for the year ended 31 March 1999 of E14.660 cents per share represented a 20.3% increase over the total net dividend of E12.189 cents per share paid in respect of the year ended 31 March 1998. The dividend for the year was covered 3.9 times by adjusted earnings per share (1998: 3.7 times). investors comprise over a third of the Company’s shareholder base and the Irish Stock Exchange now quotes DCC’s share price in Euros. Against this background the Board has deemed it appropriate for DCC to adopt the Euro as its reporting currency. All comparative figures have been restated from Irish pounds to Euros. A resolution will be proposed at the 1999 AGM to redenominate the Company’s share capital into Euros. 6 DCC plc Annual Report and Accounts 1999 Year 2000 extensive industry knowledge. Business growth and DCC’s Year 2000 compliance programme is now acquisitions continue to expand the Group’s nearing completion. This programme has involved employment base. While most of DCC’s 2,700 the compilation of an inventory of all IT systems, employees are based in Ireland and Britain, the embedded chip based systems, customers and Group’s geographic spread now extends to three suppliers, followed by a detailed risk assessment continents - Europe, the US and Asia. The and prioritisation phase. Non-compliant systems commitment to excellence of management and have been updated, replaced or retired as employees throughout the Group has been a appropriate. DCC’s Head of Group IT, Donal significant factor in DCC’s consistent record of Murphy, is responsible for the Group’s Year 2000 profitable growth. programme supported by a designated member of the senior management team in each of the Group’s Outlook subsidiaries. Progress against plan is monitored by The strong growth which has been achieved across the Board of Directors. the Group demonstrates the benefits of the Group’s focused approach to the management and The Group is working closely with its suppliers and development of each of its four divisions. DCC customers to satisfy itself that they too will be Year places a particular emphasis on organic growth that 2000 compliant. The Group’s current priority is on increases cash generation and generates higher the testing of all critical systems and equipment to returns on capital employed. In addition, DCC is ensure compliance and on contingency planning active in seeking acquisitions that provide synergies covering the Group’s own operations as well as and additional scale. those of important suppliers and customers. Corporate Governance With a proven strategy of broadly based growth, excellent operating businesses and a strong balance DCC is committed to compliance with best sheet, DCC is optimistic about the prospects for practice in the governance of its business and a the coming year and beyond. statement on the Company’s application of the principles set out in the Combined Code on Corporate Governance is set out on pages 26 and 27. Alex Spain Chairman 7 May 1999 Management and Employees DCC’s management comprises a powerful blend of entrepreneurial and professional skills with DCC plc Annual Report and Accounts 1999 7 Chief Executive/Deputy Chairman’s Review Jim Flavin Chief Executive/ Deputy Chairman Adding Value in Marketing and Distribution Approximately 84% of DCC’s profits in the year to 31 March 1999 arose from added value marketing and distribution. This is the Group’s core competence which is applied throughout our four divisions. Highly motivated telesales operations, excellent management information systems and efficient transport and logistics, together with tight control of working capital, lie at the heart of many Growth Record DCC’s consistent strategy since 1992 has resulted of our businesses. Increasingly we seek to in an accelerating rate of compound growth in propagate best practice in these areas across the adjusted earnings per share as follows: Group in our continuing quest for improved Over the last 7 years - 18.1% pa Over the last 5 years - 18.2% pa Over the last 3 years - 21.4% pa Over the last year - 25.9% returns. IT and Electronic Commerce There is continuing development of the information technology infrastructure across the Group, to ensure that we leverage technology for maximum The Group’s excellent earnings record has largely competitive advantage. The advent of electronic been driven by organic growth. This results from a commerce offers the opportunity to drive real focus on developing DCC’s business in market business benefits through service improvement, segments where there are opportunities for operational cost reduction, an alternative sales superior organic growth. channel and the ability to reach new markets. Critically this earnings momentum has been Within DCC SerCom we have a strategic focus on accompanied by continued growth in operating cash flow – up 28.9% in 1999 to E65.5 million – and electronic commerce with a number of projects in the development phase. This will allow us to do return on capital employed (including acquisition business with the customers and suppliers of DCC goodwill), which increased in 1999 to 21.2%. In SerCom more effectively by streamlining the addition, the Group is in a strong financial position with shareholders’ funds of E195.2 million and a net debt / equity ratio of only 10.4% at 31 March 1999. procurement process and increasing the volume of automated business to business transactions. 8 DCC plc Annual Report and Accounts 1999 Management Process DCC SerCom DCC’s management processes are structured to In DCC SerCom we are providing a broad range of ensure that the Group’s operating management distribution and manufacturing services to the continually strive to deliver volume growth and rapidly growing computer hardware and software margin improvement while maintaining tight control industry. We are confident that the opportunity to of operating costs and working capital. Group and grow this division is significant based on the strong divisional management have particular responsibility growth of the computer industry worldwide for providing strategic direction, specific growth combined with the increasing trend by the industry initiatives, management development, acquisitions to out-source distribution and manufacturing and financial control. Treasury and tax are managed activities. During the year, DCC SerCom centrally. Executive management at Board and completed the planned increase in its shareholding subsidiary level have material equity interests in the in its computer distribution subsidiaries, Group. Micro Peripherals, Sharptext and Gem, from 92.4% Development Strategy to 100%. While organic development is at the forefront of The large British market, where its market share is our thoughts, we recognise the opportunity to drive still modest, offers DCC SerCom’s distribution further growth through acquisitions. Our business a particular opportunity for substantial preference is for bolt-on acquisitions which offer growth and expansion into Continental Europe is the potential for integration synergies. DCC also also planned. seeks to add value in management development and through improving IT, treasury and financial control SerCom Solutions’ manufacturing activities are systems. We encourage management to stay and strategically well located in Ireland and Scotland, the contribute to the further development of the DCC principal centres for the computer industry in Group. Europe. It has undertaken significant investment in IT and personnel to meet the extensive range of Acquisition expenditure (inclusive of debt and net supply chain, manufacturing and localisation services of cash acquired) during the year amounted to E75.4 million, all of which was bolt-on in nature. required by its international computer hardware and software customers. SerCom Solutions’ strong track record of providing a flexible and reliable I set out below a summary of DCC’s strategy for service to exacting quality standards leaves it well each of its divisions and further details on the positioned for growth. acquisitions undertaken during the year. DCC plc Annual Report and Accounts 1999 9 Chief Executive/Deputy Chairman’s Review Continued DCC Energy Kylemore Group operates the largest fresh bakery DCC Energy is building on its strong market in Ireland, runs the successful Café Kylemore chain position in the cash generative liquefied petroleum of nine restaurants and owns twenty five bread/cake gas distribution business in Ireland and Britain and is shops around Ireland. The investment in Kylemore the fastest growing oil distribution business in provides DCC Foods with a platform to develop Ireland. into fresh food manufacturing and Kylemore’s retail operations provide a new dimension to DCC DCC Energy completed the acquisition of the fuels Foods’ growing activities in the catering sector. business of Burmah Ireland in January 1999. Burmah Ireland sells distillates (heating oils and DCC Foods has a broad customer base for its diesel) into the commercial, industrial and domestic products including multiple grocers, symbol groups, markets, both directly and through distributors, independents, pharmacies and the catering sector, throughout the Republic of Ireland. It also sells which is a particular focus for growth. petrol and diesel to 130 service stations around the Republic of Ireland. The business of Burmah Ireland DCC Healthcare is complementary to that of Emo Oil and has DCC Healthcare is expanding its hospital supply significantly increased the scale of DCC Energy’s oil business in Ireland and Britain, expanding distribution activities and provided an entry into the internationally in the growing mobility and rehab petrol market in Ireland. The integration of Burmah market and building a vibrant health supplements Ireland within Emo Oil has already been completed business in Britain. and the combined business is well placed to generate strong volume growth in the coming year. The position of Fannin Healthcare as the market DCC Foods leader in the Irish hospital supply business was strengthened through the acquisition in November DCC Foods is growing its business in the marketing 1998 of BM Browne, the leading supplier of and distribution of its own branded and third party laboratory equipment and related consumables to branded products for higher growth segments of hospital laboratories in Ireland. BM Browne is also the Irish food trade. These products include a supplier of surgical equipment to Irish hospitals healthfoods, snackfoods, hot and cold beverages, and has a growing business supplying laboratory and wine, chilled and frozen foods and, through the surgical equipment to British hospitals. Fannin Group’s recent acquisition of a 50% share of the Healthcare’s extensive range of high quality Kylemore Group, fresh and frozen bakery products. products and its strengths in customer service and 10 DCC plc Annual Report and Accounts 1999 IT will facilitate further growth in Ireland and Britain. Looking Forward We are focused on optimising DCC’s expertise and DCC Healthcare continues to build an international strengths in value added marketing and distribution business in mobility and rehabilitation. The US across the four divisions and on shareholder value marketing and distribution company set up in enhancing acquisition activity. January 1998 has made good progress. We now plan to strengthen our distribution capabilities in DCC operates in growth markets and has an Continental Europe. immensely strong financial position. We are committed to driving maximum growth from this The health supplements business in Britain was strong base. expanded through the acquisitions of EuroCaps in July 1998 and Thompson & Capper in March 1999. DCC Healthcare’s health supplements business now embraces contract manufacture of tablets and hard and soft gel capsules as well as the marketing of branded and private label health supplements. Jim Flavin Chief Executive/Deputy Chairman 7 May 1999 DCC plc Annual Report and Accounts 1999 11 Divisional Review DCC SerCom achieved strong growth, led by an of components, warehousing, sub-assembly and excellent performance in its computer distribution delivery of product directly to their production businesses - Micro Peripherals and Gem lines on a "just in time" basis. DCC SerCom has Distribution in Britain and Sharptext in Ireland. been making the necessary investment in IT systems and personnel to augment its capabilities in these The computer distribution channel continues to areas and to take advantage of the expected growth grow in importance for products in areas such as in demand for outsourced services including networking, storage, printers and consumables. internet localisation. While this adds cost in the DCC SerCom’s focused sales approach is delivering short term, DCC SerCom is well positioned for a superior performance for its key suppliers in each future growth in manufacturing services due to its of these product categories. Strong volume growth proven skills and flexibility in meeting the exacting together with efficient logistics and back office standards of its multinational customers. functions leveraged off a low cost base enabled the distribution businesses to again improve operating margins. Being well positioned in this large, rapidly growing market in Britain and Ireland, DCC SerCom has significant potential for further strong growth. Turnover 1999 1998 I416.5m I336.9m +23.6% DCC SerCom’s manufacturing services business Operating Profit had a challenging second half. The high activity levels experienced during the first half by SerCom Solutions (the planned new name for Printech International) fell back in the second six months and localisation results were impacted by the investment required in building a global sales and operational structure. Increasingly SerCom Solutions’ customers are seeking partners to take a greater involvement in managing significant aspects of their supply chains such as the procurement 1999 1998 I18.3m I15.5m +18.2% Operating Margin 1999 1998 4.4% 4.6% Return on Capital Employed 1999 1998 42.8% 47.6% 12 DCC plc Annual Report and Accounts 1999 SerCom Solutions provides a range of supply chain management services, including the production of memory cards (as pictured), to many of the world’s leading software and hardware manufacturers, from its modern premises in Dublin and Scotland. ITP is a global provider of localisation services for computer software, hardware and internet based applications. ITP employs 200 staff in 11 centres in Europe, the USA and Asia. Micro Peripherals, Gem and Sharptext are leading distributors of many of the world’s largest hardware and software brands to computer dealers, value added resellers and retailers in Britain and Ireland. Tommy Breen Managing Director DCC SerCom Paul Donnelly Managing Director Gem Distribution Kevin Henry Joint Managing Director SerCom Solutions David MacDonald Chief Executive ITP Gordon McDowell Managing Director Micro Peripherals Paul White Managing Director Sharptext DCC plc Annual Report and Accounts 1999 13 DCC Energy achieved excellent profit growth in the division’s LPG business in Ireland and Britain and in oil distribution in Ireland. Strong volume growth, particularly in oil, combined with tight control of operating costs resulted in a further improvement in unit operating margins. Flogas continued to focus on cylinder and bulk propane sales to the commercial and catering sectors and experienced good volume growth in Britain and the Republic of Ireland. In Britain the company increased the proportion of its cylinder sales directly to end users which will enable it to improve returns in this segment of the market. Emo Oil achieved exceptional volume growth due to a singular focus on the development of its distillates business (heating oils and diesel). Emo significantly increased the level of its direct sales and improved its geographic coverage in rural areas local through distributors which commercial, agricultural and domestic customers. service Emo’s success in generating superior organic growth, coupled with the acquisition of Burmah, has enabled DCC Energy to double its Republic of Ireland distillate market share during the year to 8%. Divisional Review The acquisition of Burmah has also provided an entry to the retail petrol/diesel market in the Republic of Ireland, significantly increasing DCC Energy’s presence in the faster growing transport fuels business. The integration of Burmah within Emo has been completed and is yielding significant cost savings. Strong cash generation continues to be a key feature of DCC Energy’s business. Turnover 1999 1998 I193.3m I160.9m +20.2% Operating Profit 1999 1998 I18.2m I13.2m +37.8% Operating Margin 1999 1998 9.4% 8.2% Return on Capital Employed 1999 1998 32.5% 24.2% 14 DCC plc Annual Report and Accounts 1999 Emo Oil provides a nationwide oil delivery service to a wide range of commercial, industrial, agricultural and domestic customers. In Ireland DCC Energy owns LPG import facilities in Drogheda, Belfast and Cork and owns or has access to oil import facilities nationwide. Flogas is a leading supplier of LPG in Britain and Ireland. Kevin Murray Managing Director DCC Energy Sam Chambers Managing Director DCC Energy (NI) Patrick Kilmartin Managing Director Flogas Britain Patrick Mercer Managing Director Flogas (ROI) Daniel Murray Managing Director Emo Oil (ROI) DCC plc Annual Report and Accounts 1999 15 DCC Foods’ concentration on higher growth segments of the Irish food trade continued to generate good organic growth in sales and profits. More people are choosing to eat out, driving growth in the catering sector, while consumers are also demanding a greater variety of health foods and convenience foods. As a leading supplier of branded products in expanding markets such as snackfoods, healthfoods, ground coffee, wine and parbaked breads, DCC Foods is benefiting from these trends. Kelkin, the market leader in healthfoods in Ireland, had another excellent year, particularly in its major snacks, cereal and soya product categories. Robt. Roberts achieved good growth across its product range including KP snackfoods and margins recovered from the levels of the previous year. The focus placed by DCC Foods on development in the expanding catering sector resulted in further strong sales growth in ground coffee, wine and catering equipment. The acquisition of a 50% shareholding in the Kylemore bakery and restaurant group offers further opportunities to build on DCC Foods’ strengths in the catering sector. In frozen and chilled foods Allied Foods achieved an Its skills and experience as a cost improved result. efficient provider of logistics services enabled it to win contracts with two major retail groups. Divisional Review Included in DCC Foods’ results for the year is DCC’s 10.3% share of Fyffes plc’s operating profit for Fyffes’ year ended 31 October 1998. Fyffes, which is the leading fresh produce company in Europe, continued to achieve strong growth with operating profit up 12.0% and earnings per share up 21.3%. Turnover 1999 1998 I314.2m I293.3m +7.1% Operating Profit 1999 1998 I15.0m I12.9m +16.1% Operating Margin 1999 1998 4.8% 4.4% Return on Capital Employed 1999 1998 32.1% 31.7% 16 DCC plc Annual Report and Accounts 1999 KP, Ireland’s number one savoury snack food brand, is brought to the Irish consumer through Robt. Roberts’ extensive distribution network. With great coffee and the latest technology in coffee machines Robt. Roberts, coffee specialist, provides the complete catering beverage service to a rapidly growing consumer base. Kelkin, Ireland’s leading healthfoods brand, provides naturally wholesome products as part of a healthy lifestyle. Kevin Murray Managing Director DCC Foods Ken Peare Managing Director Robt. Roberts Mitchel Barry Chief Executive Allied Foods Brian Hogan Managing Director Kylemore Group Bernard Rooney Managing Director Kelkin DCC plc Annual Report and Accounts 1999 17 Divisional Review The strong sales growth in DCC Healthcare resulted from good volume increases across the division and successful acquisition activity in hospital supply and health supplements. The start-up mobility and rehab business in the US had a modest impact on operating margin. However, substantial progress was made in building a vertically integrated business through the acquisition of the EuroCaps encapsulation business in July 1998 and the Thompson & Capper tabletting business in March 1999, providing a platform for cost effective growth in this area. The hospital supply business enjoyed improved margins and strong growth, aided by the acquisition of BM Browne and the smooth completion of the first phase of its integration with Fannin. While the full benefits of integration will only be realised during the coming year, significant progress has been made to date including the full integration of the two operations in Britain to produce a stronger base for further growth in that market. In mobility and rehabilitation, sales growth moderated in DMA due principally to keener competition in the UK market. DCC Healthcare’s competitive position in this business was improved recently by a reduction in product costs from Taiwan. The start-up business in the US made a modest profit in its first full year of operation. The health supplements business experienced a combination of pricing pressure and increased raw material costs leading to some pressure on margins. Turnover 1999 1998 Operating Profit 1999 1998 Operating Margin 1999 1998 II114.8m +41.1% +36.1% I81.3m II9.8m I7.2m 8.5% 8.8% Return on Capital Employed 1999 1998 31.8% 29.5% 18 DCC plc Annual Report and Accounts 1999 Shoprider powerchairs and scooters provide mobility and independence. Morgan Crowe Managing Director DCC Healthcare Colman O’Keeffe Finance Director DCC Healthcare John Dalton Chief Executive DMA Peter Woods Chief Executive Fannin Healthcare Fannin Healthcare supplies a wide range of high tech medical, surgical and laboratory equipment and consumables to hospitals and laboratories in Britain and Ireland. The Healthilife Style range, produced in the Group’s own encapsulation and tabletting facilities, provides the vitamin and health supplements essential to modern everyday living. DCC plc Annual Report and Accounts 1999 19 Financial Review The adoption of FRS 11 and FRS 12 did not give rise to changes in accounting policies or additional In accordance with FRS 13, disclosure for DCC. information on the impact of financial instruments on the Group’s risk profile, the effect these risks may have and how these risks are being managed is set out in note 28 to the financial statements on pages 61 to 63. Reflecting the requirements of FRS 14, both basic and fully diluted earnings per share are set out in the profit and loss account on page 40 and the calculation of both is set out in note 14 to the financial statements on page 52. Profit and Loss Account Turnover Turnover increased by 18.7% to E1,059.3 million. Acquisitions during the year contributed a quarter of the increase with good volume growth across the Group largely responsible for the rest of the increase. Turnover of subsidiaries increased by 23.8% to E791.7 million and DCC's share of associates' turnover rose by 5.9% to E267.6 million. Turnover +18.7% I’million 1000 800 600 400 200 0 1998 I892.3m 1999 II1,059.3m Fergal O’Dwyer Chief Financial Officer Application of Accounting Standards DCC's financial statements have been prepared on the basis of current guidance issued by the Accounting Standards Board. This guidance includes a number of newly issued Financial Reporting Standards which were applied for the first time by DCC in its financial statements for the year ended 31 March 1999 as follows: FRS 10 - Goodwill and Intangible Assets FRS 11 - Impairment of Fixed Assets and Goodwill FRS 12 - Provisions, Contingent Liabilities and Contingent Assets FRS 13 - Derivatives and Other Financial Instruments: Disclosures FRS 14 - Earnings per Share The adoption of FRS 10 resulted in a change in DCC’s accounting policy for goodwill. Previously goodwill arising on subsidiaries acquired up to 31 March 1998 was eliminated from the balance sheet through reserves in the year in which it arose. Goodwill written off to reserves up to 31 March 1998 amounted to E105.8 million. In accordance with FRS10, goodwill arising on the acquisition of subsidiaries from 1 April 1998 is capitalised on the balance sheet and amortised on a straight line basis over its estimated useful economic life. Goodwill arising on the acquisition of subsidiaries in the year ended 31 March 1999 and capitalised in accordance with the new accounting policy amounted to E46.9 million. 20 DCC plc Annual Report and Accounts 1999 Operating Profit Operating profit before goodwill amortisation increased by 24.7% to E63.7 million. 17.8% of this growth was organic and 6.9% was derived from acquisitions made during the year. Profits of subsidiaries increased by 26.9% to E51.5 million and DCC's share of associates' profits rose by 16.1 % to E12.1 million. Operating Profit before Goodwill Amortisation +24.7% I’million 70 60 50 40 30 20 10 0 1998 I51.1m 1999 II63.7m The operating profit of DCC's four divisions and its other interests, together with details of operating margin and return on capital employed, is set out below: E’m Operating ROCE (excl Margin ROCE (incl goodwill) goodwill) DCC SerCom DCC Energy DCC Foods DCC Healthcare Other Interests Total 18.3 18.2 15.0 9.8 2.4 63.7 4.4% 42.8% 25.1% 9.4% 32.5% 17.7% 4.8% 32.1% 24.3% 8.5% 31.8% 15.1% 11.6% 29.2% 29.2% 6.0% 36.3% 21.2% Reviews of DCC’s divisions are set out on pages 12 to 19. The Group’s principal other interest is its 49% shareholding in Manor Park Homebuilders. Building has commenced at Manor Park’s new housing development in Cork - Pembroke Wood - which is being undertaken with a joint venture partner, while the company’s major residential development at Clare Hall in Dublin will be completed during 1999. Manor Park’s land bank, which principally comprises a 166 acre residential development site in west County Dublin, has been acquired at attractive purchase prices. The Group's return on tangible capital employed increased to 36.3% (1998: 33.6%), while inclusive of acquisition goodwill the return increased to 21.2% (1998: 20.0%). Interest The net interest charge was similar to the previous year at E4.5 million. Interest cover was 14.3 times (1998: 11.5 times). Profit Before Taxation Profit before goodwill amortisation and tax increased by 27.0% to E59.2 million. Overall the Group was a modest net beneficiary of the strength of sterling during the year. After a goodwill charge of E1.5 million, profit before taxation increased by 24.4% to E57.7 million. Taxation A portion of the Group's profits is earned from manufacturing activities in Ireland which are taxed at a 10% rate. This manufacturing tax rate will DCC plc Annual Report and Accounts 1999 21 Financial Review Continued Dividend per Share I’cents 20 15 10 5 0 1998 I12.19 cents 1999 II14.66 cents Balance Sheet and Funding Operating Assets Tangible fixed assets employed in the Group of E106.7 million are stated after depreciation for the year of E16.2 million, capital expenditure, net of disposals, of E16.7 million and net translation losses of E2.1 million. Working capital at 31 March 1999 increased to E53.2 million from E41.0 million in 1998, reflecting acquisition activity and a year of strong sales growth. The level of working capital was equivalent to approximately 17.4 days sales which is a further improvement on the previous year’s 18.1 days. Shareholders' Funds Shareholders' funds at 31 March 1999 increased to E195.2 million principally due to retained earnings of E35.0 million and the issue of share capital. DCC shares with a value of E9.5 million were issued during the year as a result of the exercise of options and the payment up of partly paid shares under employee share incentive schemes and the issue of shares under the Company's scrip dividend scheme. continue until the year 2010. The Irish government has indicated a commitment to reduce the standard rate of corporation tax on a phased basis to 12.5% by the year 2003. The tax charge of E8.9 million represents an effective tax rate on profits for the year of 15.0% compared with 16.0% for 1998. Earnings per Share Basic earnings per share increased by 22.9% to E55.39 cents. Adjusted basic earnings per share increased by 25.9% from E45.41 cents to E57.19 cents. Adjusted Basic Earnings per Share I’cents 60 50 40 30 20 10 0 1998 I45.41 cents 1999 II57.19 cents Adjusted fully diluted earnings per share increased by 27.7% to E56.08 cents. Adjusted earnings per share excludes goodwill amortisation and is considered by the Directors to be a more appropriate long term measure of underlying performance. Dividend The total net dividend for the year of E14.66 cents represents an increase of 20.3% over the total net dividend of E12.19 cents paid in respect of the previous The dividend was covered 3.9 times by adjusted earnings per share (1998: 3.7 times). year. 22 DCC plc Annual Report and Accounts 1999 Financial Strength and Liquid Resources Net debt at 31 March 1999 amounted to E20.3 million (1998: net cash of E7.0 million) giving a net debt/equity ratio of 10.4%. Net debt at 31 March 1999 was made up as follows: Cash and term deposits Bank loans and other debt repayable within 1 year Bank loans and other debt repayable after 1 year Unsecured Notes due 2008/11 Total E’m 311.3 (41.7) (192.3) (97.6) (20.3) As regards liquidity, the Group had cash balances at 31 March 1999 of E311.3 million. In addition, at 31 March 1999 43% of the Group’s gross borrowings of E331.6 million matures after five years. This maturity profile and the Group’s cash balances, finance and along with existing sources of operational cash flows, gives DCC a strong, well balanced capital structure to support future growth and development. Notes 24 to 28 of the financial statements on pages 59 to 63 provide details of the maturity and profile of the Group's gross debt. Cash Flow Operating cash flow for the year amounted to E65.5 million, a 28.9% increase over 1998, notwithstanding the funding of sales growth of 23.8% in subsidiary undertakings. After net capital expenditure in cash of E16.8 million and acquisition expenditure in cash of E59.1 million, the Group’s net debt at 31 March 1999 amounted to E20.3 million: Operating cash flow Share issues (net) Interest Taxation Capital expenditure (net) Acquisitions Dividends Other Net cash (outflow)/inflow Translation adjustment Movement in net (debt)/cash Opening net cash/(debt) Closing net (debt)/cash 1999 EE'm 65.5 8.7 (4.1) (5.8) (16.8) (59.1) (10.5) (7.9) (30.0) 2.7 (27.3) 7.0 (20.3) 1998 E’m 50.8 1.2 (3.4) (4.6) (16.3) (8.6) (6.8) 7.5 19.8 (8.3) 11.5 (4.5) 7.0 Acquisition and Development Expenditure Acquisition and development expenditure in the year amounted to E93.4 million as follows:- Acquisitions E’m 42.8 17.1 8.3 7.2 75.4 Capital Expenditure E’m 2.4 7.9 6.2 1.5 18.0 Total E’m 45.2 25.0 14.5 8.7 93.4 DCC Healthcare DCC Energy DCC SerCom DCC Foods Total Acquisition expenditure (inclusive of debt and net of cash acquired) amounted to E75.4 million as the Group continued its policy of supplementing its strong organic growth with shareholder value enhancing acquisitions. The cash impact in the year was E59.1 million with an amount of E6.6 million payable in 1999/2000 and E9.7 million deferred for future payment. Capital expenditure of E18.0 million included plant, vehicles and computer equipment with no individual significant items. DCC plc Annual Report and Accounts 1999 23 Financial Review Continued Interest Rate Risk Management The Group finances its operations through a mixture of retained profit and bank borrowings. The Group borrows in the desired currencies at both fixed and floating rates of interest and then uses interest rate swaps to generate the desired interest profile and to manage the Group’s exposure to interest rate fluctuations. Note 28 to the financial statements on pages 61 to 63 includes an analysis of the currency and interest rate composition of the Group's gross debt and cash portfolios after taking currency and interest rate swaps into account. Year 2000 Details of the Group’s Year 2000 compliance programme are set out in the Chairman’s Statement on pages 6 and 7. The incremental capital costs associated with Year 2000 compliance are expected to amount to E1.4 million. The incremental costs (both internal and bought in) to be expensed by the Group in ensuring its systems are Year 2000 compliant are not material and are included within operating costs. Treasury Policy and Management Treasury policy is reviewed annually by the Board. The principal objective is the minimisation of financial risk at reasonable cost. The Group does not take speculative positions but seeks, where considered appropriate, to hedge underlying trading and asset/liability exposures by using derivative financial instruments (such as interest rate and currency swaps and forward contracts). The Group Treasury function manages centrally the Group's cash and debt and administers the Group’s funding requirements. Divisional and subsidiary management manage trading foreign currency and commodity price exposures and working capital. Currency Risk Management Principal trading foreign currency exposures are to sterling and the US dollar. Trading foreign currency exposures are generally hedged by using forward contracts to cover specific or estimated purchases and receivables. Approximately half of the Group’s profits was earned by subsidiaries based in the sterling area. The Group’s policy is, where appropriate, to put in place hedges using forward contracts against sterling and other currencies to minimise the volatility of the Group’s earnings arising from fluctuations in exchange rates. In order to protect shareholders’ funds from material variations due to sterling exchange movements, a significant proportion of overseas net sterling assets are hedged where practicable, by taking out equivalent foreign currency borrowings. 24 DCC plc Annual Report and Accounts 1999 Corporate Information Directors Auditors Alex Spain* - Chairman Jim Flavin - Chief Executive / Deputy Chairman Tony Barry* - Senior Independent Director Morgan Crowe Paddy Gallagher* * Non-executive PricewaterhouseCoopers Chartered Accountants & Registered Auditors Wilton Place Dublin 2 Audit Committee Alex Spain - Chairman Tony Barry Paddy Gallagher Nomination Committee Alex Spain - Chairman Jim Flavin Tony Barry Paddy Gallagher Remuneration Committee Alex Spain - Chairman Tony Barry Paddy Gallagher Chief Financial Officer Fergal O’Dwyer Secretary Michael Scholefield Solicitors William Fry Fitzwilton House Wilton Place Dublin 2 Stockbrokers Davy Stockbrokers 49 Dawson Street Dublin 2 Warburg Dillon Read 2 Finsbury Avenue London EC2M 2PP Bankers ABN AMRO Bank AIB Bank Bank of Ireland Irish Intercontinental Bank National Westminster Bank Ulster Bank Markets Donal Murphy Head of Group IT Michael Scholefield Group Secretary and Investor Relations Manager Daphne Tease Group Treasurer Registered and Head Office Registrars and Transfer Office Ger Whyte Group Internal Auditor DCC House Stillorgan Blackrock Co Dublin Computershare Services (Ireland) Limited Heron House Corrig Road Sandyford Industrial Estate Dublin 18 DCC plc Annual Report and Accounts 1999 25 Corporate Governance The Board of Directors Directors: The Board of DCC consists of two executive and three non-executive Directors and the roles of Chairman and Chief Executive are separate. The Board has appointed Tony Barry as the senior independent Director. Brief biographies of the Directors are set out underneath their photographs on page 5. All of the Directors bring independent judgement to bear on issues of strategy, performance, resources, key appointments and standards. Directors are subject to re-election at least every three years. Board Procedures: The Board holds regular meetings (normally at least six per annum) and there is contact between meetings as required in order to progress the Group’s business. The Directors receive regular and timely information in a form and quality appropriate to enable the Board to discharge its duties. The Board has a formal schedule of matters specifically reserved to it for decision, which covers key areas of the Group’s business including approval of financial statements, budgets (including capital expenditure), acquisitions and dividends. Certain additional matters are delegated to Board Committees. There is an established procedure for Directors in the furtherance of their duties to take independent professional advice if they consider this necessary. All Directors have access to the advice and services of the Company Secretary who is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. Board Committees: There are three Board Committees with formal terms of reference: the Audit Committee, the Nomination Committee and the Remuneration Committee. The Audit Committee and the Remuneration Committee comprise the three non-executive Directors. All of the non-executive Directors are considered by the Board to be independent of management and free of any relationships which could interfere with the exercise of their independent judgement. The Nomination Committee, comprising the non-executive Directors and the Chief Executive/Deputy Chairman, was established on 1 February 1999. Directors’ Remuneration The Board’s report on Directors’ remuneration is set out on pages 30 to 33. Relations with Shareholders DCC attaches considerable importance to shareholder communications and has a well-established investor relations function. There is regular dialogue with institutional investors and shareholders as well as presentations after the interim and preliminary results. Results announcements are sent promptly to all shareholders and published on the company’s web site at www.dcc.ie. The web site contains additional information for investors which is regularly updated. At the Company’s Annual General Meeting the Group Chief Executive makes a presentation and answers questions on the Group’s business and its performance during the prior year. Arrangements have been made for the 1999 annual report and AGM notice to be sent to shareholders 20 working days before the meeting and for the level of proxy votes cast on each resolution, and the numbers for and against, to be announced at the meeting. The 1999 AGM will be held at 11am in the Conrad International Hotel, Earlsfort Terrace, Dublin 2 on 25 June 1999. Accountability and Audit The written terms of reference of the Audit Committee deal clearly with its authority and duties which include, inter alia, consideration of the appointment of the external auditors and their fees and review of the scope and results of the work performed by both internal and external auditors. As permitted by the Irish and London Stock Exchanges, the Company has complied with the Combined Code provisions in respect of internal control by reporting on internal financial controls in accordance with the guidance for Directors on internal control and financial reporting issued in December 1994. 26 DCC plc Annual Report and Accounts 1999 Corporate Governance The Directors acknowledge that they are responsible for the Group’s system of internal financial control, which is established to provide reasonable assurance of • the safeguarding of assets against unauthorised use or disposition; and • the maintenance of proper accounting records and the reliability of financial information used within the business or for publication. This system can provide only reasonable and not absolute assurance against material misstatement or loss. The Directors have established a number of key procedures designed to provide an effective system of internal financial control, including providing a basis for the Directors to review the effectiveness of the system. The more important of these procedures, which are supported by detailed controls and processes, include • developing an organisation structure with clearly defined lines of authority and accountability • a comprehensive system of financial reporting involving budgeting, monthly reporting and variance analysis • maintenance of a highly skilled and experienced workforce, particularly at senior management level • a treasury risk management policy which limits the exposure of the Group in this area • a formally constituted audit committee which meets with internal and external auditors and reviews the Group’s financial reporting and internal financial control systems • an independent Group internal audit function. The Directors have reviewed the effectiveness of the Group’s system of internal financial control and will continue to do so on a regular basis. After making enquiries, the Directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Company and the Group as a whole have adequate resources to continue in operational For this reason, they continue to adopt the going concern basis in preparing the existence for the foreseeable future. financial statements. The Directors’ responsibility for preparing the financial statements is explained on page 34 and the reporting responsibilities of the auditors are set out in their report on pages 35 and 36. Compliance DCC has complied, during the year ended 31 March 1999, with all of the Principles of Good Governance and Code of Best Practice ("the Combined Code") derived by the Committee on Corporate Governance from the Committee’s Final Report and from the Cadbury and Greenbury Reports, save in respect of the following matters: Directors’ remuneration: Disclosures regarding Directors’ remuneration have been drawn up on an aggregate basis in accordance with the Listing Rules of the Irish Stock Exchange. Annual General Meeting: The 1998 Annual Report and Notice of Annual General Meeting were circulated to shareholders 18 rather than 20 working days before the meeting and details of proxy votes cast on each resolution were not announced at the meeting. As stated above, arrangements have been made to comply with the requirements of the Combined Code in relation to both these matters in respect of the 1999 AGM. Senior independent non-executive Director: As stated above, the Board has appointed Tony Barry as senior independent non-executive Director. However, this appointment was not effective for the whole of the financial year ended 31 March 1999. DCC plc Annual Report and Accounts 1999 27 Report of the Directors for the year ended 31 March 1999 The Directors present their report and the audited financial statements for the year ended 31 March 1999. Principal Activities DCC is an industrial group with four focused divisions operating in the computer, energy, food and healthcare sectors. A summary of the Group’s activities is set out on pages 2 and 3. Details of the Company’s principal subsidiaries are set out on pages 73 to 76. Details of its principal associated undertakings are set out on page 56 in note 17 to the financial statements. Results and Business Review The profit on ordinary activities before taxation for the year amounted to e57.7 million. Details of the results and appropriations for the year are set out in the consolidated profit and loss account on page 40 and in the related notes. A full review of the Group’s performance and development during the year is set out in the Chairman’s Statement, the Chief Executive/Deputy Chairman’s Review, the Divisional Reviews and the Financial Review on pages 6 to 24. Dividends An interim dividend of IR4.250p (e5.396 cents) per share with a related tax credit of IR0.503639p (e0.639490 cents) per share was paid on 27 November 1998. A second interim dividend of IR7.296p (e9.264 cents) per share with a related tax credit of IR0.884612p (e1.123226 cents) was paid on 1 April 1999 in lieu of a final dividend for the year. The total net dividend for the year ended 31 March 1999 amounted to IR11.546p (e14.660 cents). Share Capital Details of ordinary shares issued during the year ended 31 March 1999 are set out in note 32 to the financial statements on page 66. Research and Development Certain Group companies carry out development work aimed at improving the quality, competitiveness and range of their products. This expenditure is not material in relation to the size of the Group and is written off to the profit and loss account as it is incurred. Substantial Shareholdings At 7 May 1999, the Company had been advised of the following interests in its issued share capital: Bank of Ireland Nominees Limited* FMR Corp and its direct and indirect subsidiaries** Allied Irish Banks plc and its subsidiaries*** Guinness Ireland Group Pension Scheme* Standard Life Assurance Company 3i Group plc Irish Life Assurance plc The Scottish Provident Institution No of IR20p Ordinary Shares % of Issued Share Capital 14,179,396 8,911,152 5,664,706 4,179,635 4,020,385 3,620,796 3,286,790 3,042,500 16.2% 10.2% 6.5% 4.8% 4.6% 4.1% 3.8% 3.5% * ** *** The 16.2% interest of Bank of Ireland Nominees Limited is a non-beneficial interest and includes the 4.8% interest of Guinness Ireland Group Pension Scheme also shown above. Under Irish and UK law the shares are held by non-beneficial holders. Notified as non-beneficial interests. Norwich Union Life Insurance Ireland Limited has advised the Company that it holds between 3% and 5% of the Company’s issued share capital. Apart from these holdings, the Company has not been notified of any other interest of 3% or more in its issued ordinary share capital. 28 DCC plc Annual Report and Accounts 1999 Report of the Directors for the year ended 31 March 1999 Directors There was no change in the Directors of the Company during the year. The names of the Directors and a short biographical In accordance with Article 80 of the Articles of Association, Jim Flavin and Paddy note on each Director appear on page 5. Gallagher retire by rotation at the 1999 Annual General Meeting and, being eligible, offer themselves for re-appointment. Neither of the retiring Directors has a service contract with the Company or any member of the Group with a notice period in excess of one year or with provisions for predetermined compensation on termination which exceeds one year’s salary and benefits in kind. Details of the Directors’ interests in the share capital of the Company are set out in the Board’s Report on Directors’ Remuneration on pages 30 to 33. Health and Safety It is the policy of the Group to ensure the safety, health and welfare of employees by maintaining a safe place of work. This policy is based on the requirements of the Safety, Health and Welfare at Work Act, 1989. Safety statements have been prepared by each of the relevant companies in the Group and the policies set out in these statements are kept under regular review. Auditors The auditors, Coopers & Lybrand, who now practise in the name of PricewaterhouseCoopers, will continue in office in accordance with the provisions of Section 160(2) of the Companies Act, 1963. Alex Spain, Jim Flavin, Directors DCC House, Stillorgan, Blackrock, Co Dublin. 7 May 1999 DCC plc Annual Report and Accounts 1999 29 Report on Directors’ Remuneration Remuneration Committee The Remuneration Committee consists solely of the independent non-executive Directors - Alex Spain (Chairman), Tony Barry and Paddy Gallagher. The terms of reference for the Remuneration Committee are to determine the remuneration packages of the executive Directors and to approve the grant of share options. The Chief Executive is consulted about remuneration proposals for the other executive Director and the Remuneration Committee is authorised to obtain access to professional advice if deemed desirable. Policy on Executive Directors’ Remuneration The Company’s policy on executive Directors’ remuneration recognises that employment and remuneration conditions for the Group’s senior executives must properly reward and motivate them to perform in the best interest of the shareholders. The typical elements of the remuneration package for executive Directors are basic salary and benefits, pensions and It is the policy of the Remuneration Committee that share incentive participation in share incentive arrangements. arrangements be offered to all key managers within the Group to encourage identification with shareholders’ interests. The share incentive arrangements offered to executive Directors form a significant part of their total remuneration package and form part of a long term policy within the Company to encourage senior management to build, over time, a shareholding in the Company which is material to their net worth. The Remuneration Committee believe this long standing policy has been instrumental in motivating and retaining the quality of senior management required to run a successful business and the achievement of DCC’s record of strong growth over many years. Share options are offered on a phased basis and all employees are encouraged to hold their options beyond the earliest exercise date. Information on share options held by each Director and details of exercise prices and dates are set out on pages 32 and 33. Employee Share Schemes The DCC plc 1998 Employee Share Option Scheme was approved by shareholders at the 1998 Annual General Meeting. The percentage of share capital which can be issued under the scheme and the individual grant limits comply with guidelines published by the institutional investment associations. The scheme provides for the granting of both basic and second tier options. At 31 March 1999 employees held basic tier options to subscribe for 1,299,000 ordinary shares and second tier options to subscribe for 1,120,000 ordinary shares under this scheme. The DCC plc 1998 Employee Share Option Scheme replaced the DCC Employee Partly Paid Share Scheme which was terminated in May 1998 due to changes in the taxation treatment of partly paid shares in the Finance Act, 1998. Under the terminated DCC Employee Partly Paid Share Scheme, 210,000 (1998: 2,725,990) shares remain partly paid. Under a terminated 1986 DCC Executive Share Option Scheme, which applied before DCC became a public company, employees hold options to subscribe for 650,000 ordinary shares (1998: 1,287,500 ordinary shares). Executive Directors’ Salary and Benefits The salaries of executive Directors are reviewed annually having regard to personal performance, company performance and competitive market practice. Employment related benefits consist principally of a company car. No fees are payable to executive Directors. Non-executive Directors’ Remuneration The remuneration of the non-executive Directors is determined by the Board. The fees paid to non-executive Directors reflect their experience and ability and the time demands of their Board and Board sub-committee duties. Pensions Pensions for executive Directors are calculated on basic salary only - no benefit elements are included - and aim to provide for two thirds of salary at age 60. A pension is funded for the Chairman, based on his annual fee, to provide a 1/60th accrual for each year of service. 30 DCC plc Annual Report and Accounts 1999 Report on Directors’ Remuneration The table below shows the increase in the accrued pension benefits to which the Directors became entitled during the year ended 31 March 1999 and the transfer value of the increase in accrued benefits: Executive Directors e’000 Non-executive Chairman e’000 Increase in accrued annual pension benefits (excl inflation) during the year Accumulated accrued annual pension benefits at year end Transfer value equivalent to increase in accrued annual pension benefits at year end 45 311 601 2 27 27 The transfer value has been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. Directors’ Service Agreements There are no service agreements between any Director of the Company and the Company or any of its subsidiaries with a notice period in excess of one year or with provisions for predetermined compensation on termination which exceeds one year’s salary and benefits in kind. Directors’ Interests in Contracts There were no contracts (other than a service agreement with a notice period of one year) at any stage during the year between the Company or other Group undertaking and any Director of the Company. Directors’ Remuneration Notes Executive Directors Salary and benefits: Basic salary Benefits Other costs: Pension charge for year Total executive Directors’ remuneration % change on prior year Number of executive Directors Non-executive Directors Fees Pension charge for Chairman Total non-executive Directors’ remuneration % change on prior year Number of non-executive Directors Retired Director Payment to retired Director Total Directors’ Remuneration % change on prior year 1 2 3 4 2 5 1999 EE’000 584 49 633 167 800 15.0% increase 2 126 21 147 5.7% increase 3 15 962 13.2% increase 1998 E’000 509 49 558 138 696 2 120 19 139 3 15 850 Notes 1. Benefits relate principally to use of a company car. 2. The pension charge for each year represents payments made to a pension fund as advised by an independent actuary. 3. There were no performance related emoluments in respect of the two years ended 31 March 1999. 4. Includes Chairman’s and Board sub-committee fees. 5. Ex gratia pension paid to a retired non-executive Director. DCC plc Annual Report and Accounts 1999 31 Report on Directors’ Remuneration Directors’ and Company Secretary’s Interests The interests of the Directors and the Company Secretary (including their respective family interests) in the share capital of DCC plc at 31 March 1999, together with their interests at 31 March 1998, were: At 31 March 1999 Alex Spain Jim Flavin Tony Barry Morgan Crowe Paddy Gallagher Michael Scholefield (Secretary) At 31 March 1998 Alex Spain Jim Flavin Tony Barry Morgan Crowe Paddy Gallagher Michael Scholefield (Secretary) Fully paid No of Ordinary Shares Partly paid (IR0.2p paid) Under option 15,634 2,283,349 7,000 731,339 1,040 153,518 15,499 1,500,000 7,000 580,175 1,040 1,249 Nil Nil Nil Nil Nil Nil Nil 1,077,500 Nil 230,990 Nil 127,500 Nil 625,000 Nil 200,000 Nil 94,500 Nil 350,000 Nil 100,000 Nil 137,500 All of the above interests were beneficially owned. There were no changes in the interests of the Directors and the Company Secretary between 31 March 1999 and 7 May 1999. At 31 March 1999, Jim Flavin had a non-beneficial interest in 2,012 DCC IR20p fully paid ordinary shares (1998: 2,012 shares). Apart from the interests disclosed above neither the Directors nor the Company Secretary were interested at any time in the year in the share capital or loan stock of the Company or other Group undertakings. On 21 May 1998 Jim Flavin paid up the outstanding balance of IR£2,397,970 (E3,044,794) on 1,077,500 partly paid shares issued to him under the DCC plc Employee Partly Paid Share Scheme and previous schemes. On the same date Morgan Crowe paid up the outstanding balance of IR£504,298 (E640,326) on 230,990 partly paid shares issued to him under the DCC plc Employee Partly Paid Share Scheme and previous schemes. The market price of DCC shares on 21 May 1998 was IR700p (E889 cents). 32 DCC plc Annual Report and Accounts 1999 Report on Directors’ Remuneration Directors’ Share Options The following are details of share options granted to Directors under the DCC plc 1998 Employee Share Option Scheme: Jim Flavin Basic Second Tier Morgan Crowe Basic Second Tier No of Options Weighted Average Normal 31 March 1998 Granted in year Exercised in year 31 March 1999 Option Price E cents Exercise Period - - - - - 200,000 200,000 50,000 50,000 500,000 - - - - - 200,000 200,000 50,000 50,000 500,000 720.6 720.6 700.4 700.9 June 2001 - Nov 2008 June 2003 - Nov 2008 June 2001 - Nov 2008 June 2003 - Nov 2008 Basic tier options may not normally be exercised earlier than three years from the date of grant nor second tier options earlier than five years from the date of grant. Basic tier options may normally only be exercised if there has been growth in the adjusted earnings per share of the Company equivalent to the increase in the Consumer Price Index plus 2%, compound, per annum over the period following the date of grant. Second tier options may normally only be exercised if the growth in the adjusted earnings per share over the previous five years is such as would place the Company in the top quartile of companies on the ISEQ index in terms of comparison of growth in adjusted earnings per share and if there has been growth in the adjusted earnings per share of the Company equivalent to the increase in the Consumer Price Index plus 10%, compound, per annum in that period. The following are the details of share options granted to Directors under the terminated 1986 DCC Executive Share Option Scheme which applied before DCC became a public company: Jim Flavin Morgan Crowe 31 March 1998 350,000 100,000 450,000 No of Options Granted in year Exercised in year 31 March 1999 Option Price E cents Exercise Period - - - (125,000) - (125,000) 225,000 100,000 325,000 253.9 253.9 Feb 1989 - Feb 2001 Feb 1991 - Feb 2001 On 21 May 1998 Jim Flavin exercised options over 125,000 shares at an option price of IR200p (E253.9 cents) per share. The market price of DCC shares on that date was IR700p (E889 cents). No options lapsed during the year. The market price of DCC shares on 31 March 1999 was E725 cents and the range during the year was E432 cents (IR340p) to E902 cents (IR710p). DCC plc Annual Report and Accounts 1999 33 Statement of Directors’ Responsibilities The following statement, which should be read in conjunction with the statement of auditors’ responsibilities set out within their report on pages 35 and 36, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the auditors in relation to the financial statements. The Directors are required by company law to ensure that the Company prepares financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that year. Following discussions with the auditors, the Directors consider that in preparing the financial statements on pages 37 to 72, which have been prepared on the going concern basis, the Company has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all accounting standards which they consider applicable have been followed (subject to any explanations or material departures disclosed in the notes to the financial statements). The Directors are required to take all reasonable steps to secure compliance by the Company with its obligations in relation to the preparation and maintenance of proper books of account and financial statements which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Acts, 1963 to 1990 and the European Communities (Companies: Group Accounts) Regulations, 1992. The Directors have a general duty to act in the best interests of the Company and must, therefore, take such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. 34 DCC plc Annual Report and Accounts 1999 Report of the Auditors for the year ended 31 March 1999 To the Members of DCC plc We have audited the financial statements on pages 37 to 72 which have been prepared under the historical cost convention and the accounting policies set out on pages 37 to 39, and the detailed information on Directors’ emoluments, pensions and interests in shares, partly paid shares and share options on pages 30 to 33. Respective Responsibilities of Directors and Auditors The directors are responsible for preparing the Annual Report, including as described on page 34 the financial statements. Our responsibilities, as independent auditors, are established by statute, the Auditing Practices Board, the Listing Rules of the Irish Stock Exchange and our profession’s ethical guidance. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Acts, 1963 to 1990, and the European Communities (Companies: Group Accounts) Regulations, 1992. We state whether we have obtained all the information and explanations we consider necessary for the purposes of our audit and whether the balance sheet of the Company is in agreement with the books of account. We also report to you our opinions as to: • whether the company has kept proper books of account; • whether the directors’ report is consistent with the financial statements; and • whether, at the balance sheet date, there existed a financial situation which may require the Company to hold an extraordinary general meeting because the net assets of the Company, as shown in the balance sheet of the Company, are not more than half of its called up share capital. We also report to you if, in our opinion, any information required by law or the Irish Listing Rules regarding directors’ remuneration or directors’ transactions is not disclosed. We read the other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. We review whether the statement on page 27 reflects the Company’s compliance with those provisions of the Combined Code on corporate governance specified for our review by the Irish Stock Exchange, and we report if it does not. We are not required to form an opinion on the effectiveness of the Company’s or Group’s corporate governance procedures or internal controls. Basis of Opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements. DCC plc Annual Report and Accounts 1999 35 Report of the Auditors for the year ended 31 March 1999 Opinion In our opinion, the financial statements give a true and fair view of the state of affairs of the Company and of the Group at 31 March 1999 and of the profit and cash flows of the Group for the year then ended and have been properly prepared in accordance with the Companies Acts, 1963 to 1990, and the European Communities (Companies: Group Accounts) Regulations, 1992. We have obtained all the information and explanations we consider necessary for the purposes of our audit. In our opinion, proper books of account have been kept by the Company. The balance sheet of the Company at 31 March 1999 is in agreement with the books of account. In our opinion, the information given in the Report of the Directors on pages 28 and 29 is consistent with the financial statements. The net assets of the Company, as stated in the balance sheet on page 43, are more than half of the amount of its called up share capital, and in our opinion, on that basis there did not exist at 31 March 1999 a financial situation which, under Section 40(1) of the Companies (Amendment) Act, 1983, would require the convening of an extraordinary general meeting of the Company. PricewaterhouseCoopers Chartered Accountants and Registered Auditors 7 May 1999 Dublin 36 DCC plc Annual Report and Accounts 1999 Accounting Policies Accounting Convention The financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards. The currency used in these financial statements is the Euro, denoted by the symbol I. Basis of Consolidation The consolidated financial statements include the Company and all its subsidiaries. Two of the Group’s subsidiary undertakings have, for commercial considerations, financial years ending 28 February 1999. In respect of these subsidiary undertakings, audited financial statements for the year ended 28 February 1999, together with interim accounts for March 1999 less interim accounts for March 1998, have been used in preparing the consolidated financial statements. The results of subsidiary and associated undertakings acquired or disposed of during the year are included in the consolidated profit and loss account from the date of their acquisition or up to the date of their disposal. Goodwill Goodwill comprises the excess of consideration paid to acquire new businesses over the fair value of the net assets acquired. Goodwill arising on the acquisition of subsidiaries pre 1 April 1998 was eliminated from the balance sheet through reserves in the year in which it arose. Goodwill arising on the acquisition of subsidiaries from 1 April 1998 is capitalised on the balance sheet and amortised on a straight line basis over its estimated useful economic life. In the case of interests acquired by the Group in associated undertakings, goodwill is capitalised as part of their carrying In the case of similar interests acquired by associated value and amortised over its expected useful economic life. undertakings of the Group, the accounting treatment followed in respect of goodwill is that adopted by that associated undertaking. The useful economic life of capitalised goodwill arising on acquisitions after 1 April 1998 is estimated to equate to 20 years. Subsidiaries Subsidiaries are included in the Company balance sheet at cost less provision for any permanent diminution in value. Associated Undertakings Associated undertakings are companies other than subsidiaries in which the Group holds, on a long-term basis, a participating interest in the voting equity share capital and exercises significant influence. Associated undertakings are included in the Company balance sheet at cost less provision for any impairment in value. Income from associated undertakings included in the Company profit and loss account comprises dividends received and receivable. The appropriate share of results of associated undertakings is included in the consolidated profit and loss account using the equity method of accounting. Associated undertakings are stated in the consolidated balance sheet at cost plus the attributable portion of their retained reserves from the date of acquisition, less goodwill amortised. Provision is made, where appropriate, where the directors consider there has been an impairment in value. Turnover Turnover comprises the invoiced value, including excise duty and excluding value added tax, of goods supplied and services rendered. DCC plc Annual Report and Accounts 1999 37 Accounting Policies Stocks Stocks are valued at the lower of cost and net realisable value. Cost is determined on a first in first out basis and in the case of raw materials, bought-in goods and expense stocks, comprises purchase price plus transport and handling costs less trade discounts and subsidies. Cost, in the case of products manufactured by the Group, consists of direct material and labour costs together with the relevant production overheads based on normal levels of activity. Net realisable value represents the estimated selling price less costs to completion and appropriate selling and distribution costs. Provision is made, where necessary, for slow moving, obsolete and defective stocks. Tangible Fixed Assets Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on a straight line basis at the rates stated below, which are estimated to reduce the assets to their net realisable values by the end of their expected working lives: Freehold and Long Term Leasehold Buildings Plant and Machinery Cylinders Motor Vehicles Fixtures, Fittings and Office Equipment Land is not depreciated. Annual Rate 2% 5% - 33 % 1 3/ 6 % 2 3/ 10% - 33 % 10% - 33 % 1 3/ 1 3/ Leased Assets Tangible fixed assets, acquired under a lease which transfers substantially all of the risks and rewards of ownership to the Group, are capitalised as fixed assets. Amounts payable under such leases (finance leases), net of finance charges, are shown as short, medium or long term lease obligations, as appropriate. Finance charges on finance leases are charged to the profit and loss account over the term of the lease on an actuarial basis. The annual rentals under operating leases are charged to the profit and loss account as incurred. Capital Grants Capital grants received and receivable by the Group are credited to capital grants and are amortised to the profit and loss account on a straight line basis over the expected useful lives of the assets to which they relate. Deferred Taxation Full provision under the liability method is made for deferred taxation on timing differences to the extent that, in the opinion of the directors, it is probable that a liability will crystallise in the foreseeable future. Timing differences are temporary differences between profit as computed for taxation purposes and profit as stated in the financial statements which arise because certain items of income and expenditure in the financial statements are dealt with in different periods for taxation purposes. 38 DCC plc Annual Report and Accounts 1999 Accounting Policies Foreign Currencies The 1999 financial statements and the 1998 comparative amounts are presented in Euros. The Euro amounts have been arrived at by converting the underlying Irish Pound figures at the fixed conversion rate of E1 = IR£0.787564. Assets and liabilities denominated in foreign currencies are translated into Irish Pounds at the exchange rates ruling at the balance sheet date or at contracted rates, where appropriate. The trading results of overseas subsidiaries are translated into Irish Pounds at the average rate of exchange for the year. Profits and losses arising on transactions in foreign currencies during the year are included in the profit and loss account at the exchange rate ruling on the date of the transactions. Exchange differences arising from a re-translation of the opening net investment in subsidiary and associated undertakings are dealt with in retained profits net of differences on related currency borrowings. Derivative Financial Instruments The Group is a party to derivative financial instruments (derivatives), primarily to manage its exposure to fluctuations in foreign currency exchange rates and interest rates and to manage its exposure to changes in the prices of certain commodity products. Gains and losses on derivative contracts used to hedge foreign exchange and commodity price trading exposures are recognised in the profit and loss account when the hedged transactions occur. As part of exchange rate risk management, foreign currency swap agreements are used to convert US dollar borrowings into Sterling borrowings. Gains and losses on these derivatives are deferred and recognised on the maturity of the underlying debt, together with the matching loss or gain on the debt. Interest rate swap agreements and similar contracts are used to manage interest rate exposures. Amounts payable or receivable in respect of these derivatives are recognised as adjustments to interest expense over the period of the contracts. Pension Costs Pension costs are accounted for on the basis of charging the expected cost of providing pensions over the period during which the Group benefits from the employees’ services. The effect of variations from regular cost are spread over the expected average remaining service lives of the members in the schemes. The basis of contributions is determined on the advice of independent qualified actuaries. DCC plc Annual Report and Accounts 1999 39 Consolidated Profit and Loss Account for the year ended 31 March 1999 Notes e’000 e’000 e’000 e’000 1999 1998 Turnover Subsidiary undertakings Share of turnover of associated undertakings Total turnover Turnover - subsidiary undertakings Continuing activities Acquisitions Cost of sales Gross profit Net operating costs Operating profit - parent and subsidiary undertakings Share of operating profit of associated undertakings Operating profit before goodwill amortisation Continuing activities Acquisitions Goodwill amortisation Operating profit Net interest payable and similar charges - parent and subsidiary undertakings Share of net interest payable and similar charges - associated undertakings Profit on ordinary activities before taxation Continuing activities Acquisitions Taxation Profit after taxation Minority interests Profit for the financial year attributable to Group shareholders Dividends paid Dividends proposed Profit retained for the year Earnings per ordinary share - basic (cents) - fully diluted (cents) Adjusted earnings per ordinary share - basic (cents) - fully diluted (cents) 1 1 1 2 2 2 2 1 1 6 7 8 9 3 10 11 12 13 13 14 14 14 14 60,149 3,512 63,661 54,021 3,644 57,665 791,706 267,560 1,059,266 753,166 38,540 791,706 (624,760) 166,946 (115,414) 51,532 12,129 63,661 (1,557) 62,104 (4,364) (75) 57,665 (8,883) 48,782 (802) 47,980 (4,922) (8,070) 34,988 e55.39c e54.32c e57.19c e56.08c 51,250 (193) 51,057 46,547 (193) 46,354 639,591 252,729 892,320 638,944 647 639,591 (503,852) 135,739 (95,133) 40,606 10,451 51,057 (278) 50,779 (4,133) (292) 46,354 (7,467) 38,887 (1,422) 37,465 (3,790) (6,476) 27,199 e45.08c e43.60c e45.41c e43.92c Alex Spain, Jim Flavin, Directors The notes on pages 45 to 72 and the accounting policies on pages 37 to 39 form part of these financial statements. Report of the Auditors pages 35 and 36. 40 DCC plc Annual Report and Accounts 1999 Statement of Total Recognised Gains and Losses for the year ended 31 March 1999 Profit attributable to Group shareholders Other movements on associated company reserves Exchange adjustments Total recognised gains relating to the year 1999 e’000 47,980 (454) (220) 47,306 1998 e’000 37,465 (767) 1,435 38,133 Notes of Historical Cost Profits and Losses for the year ended 31 March 1999 There is no difference between the profit on ordinary activities before taxation and the profit retained for the year on an historical cost basis and the amounts shown in the consolidated profit and loss account on page 40. The notes on pages 45 to 72 and the accounting policies on pages 37 to 39 form part of these financial statements. Report of the Auditors pages 35 and 36. DCC plc Annual Report and Accounts 1999 41 Consolidated Balance Sheet as at 31 March 1999 Notes 1999 e’000 Fixed Assets Intangible assets - goodwill Tangible fixed assets Financial assets - associated undertakings Current Assets Stocks Debtors Cash and term deposits Creditors: Amounts falling due within one year Trade and other creditors Acquisition creditors Bank and other debt Corporation tax Proposed dividend Net Current Assets Total Assets less Current Liabilities Financed by: Creditors: Amounts falling due after more than one year Bank and other debt Unsecured Notes due 2008/11 Acquisition creditors Provisions for Liabilities and Charges Capital and Reserves Called up equity share capital Share premium account Reserves Equity Shareholders’ Funds Equity minority interests Capital grants 15 16 17 19 20 22 23 24 13 24 24 29 32 33 34 35 36 37 46,028 106,697 56,844 209,569 54,133 150,924 311,314 516,371 152,914 10,167 41,759 10,762 8,070 223,672 292,699 502,268 192,295 97,557 9,868 299,720 2,244 301,964 22,128 120,796 52,297 195,221 3,902 1,181 200,304 502,268 1998 e’000 - 98,761 46,474 145,235 44,204 117,065 289,362 450,631 128,878 3,063 17,423 7,731 6,476 163,571 287,060 432,295 163,151 101,754 3,722 268,627 2,569 271,196 21,309 112,090 20,683 154,082 5,295 1,722 161,099 432,295 Alex Spain, Jim Flavin, Directors The notes on pages 45 to 72 and the accounting policies on pages 37 to 39 form part of these financial statements. Report of the Auditors pages 35 and 36. 42 DCC plc Annual Report and Accounts 1999 Company Balance Sheet as at 31 March 1999 Notes Fixed Assets Tangible fixed assets Financial assets - associated undertakings - subsidiary undertakings Current Assets Debtors: Amounts falling due within one year Debtors: Amounts falling due after more than one year Cash and term deposits Creditors: Amounts falling due within one year Trade and other creditors Bank and other debt Proposed dividend Net Current Assets Total Assets less Current Liabilities Financed by: Creditors: Amounts falling due after more than one year Bank and other debt Amounts owed to subsidiary undertakings Provisions for Liabilities and Charges Capital and Reserves Called up equity share capital Share premium account Profit and loss account Equity Shareholders’ Funds 16 17 18 20 20 22 23 24 13 24 29 32 33 34 1999 e’000 512 1,233 67,385 69,130 2,167 212,414 1,930 216,511 1,366 - 8,070 9,436 207,075 276,205 886 87,394 88,280 4 88,284 22,128 120,796 44,997 187,921 276,205 1998 e’000 418 1,233 57,283 58,934 1,713 195,420 3,469 200,602 1,052 2,413 6,476 9,941 190,661 249,595 13,580 55,660 69,240 4 69,244 21,309 112,090 46,952 180,351 249,595 Alex Spain, Jim Flavin, Directors The notes on pages 45 to 72 and the accounting policies on pages 37 to 39 form part of these financial statements. Report of the Auditors pages 35 and 36. DCC plc Annual Report and Accounts 1999 43 Consolidated Cash Flow Statement for the year ended 31 March 1999 Cash flow from operating activities Returns on investments and servicing of finance Taxation paid Capital expenditure Acquisitions and disposals Equity dividends paid Cash (outflow)/inflow before management of liquid resources and financing Decrease/(Increase) in liquid resources Financing Increase in cash for the year Notes 39 40 40 40 41 40 41 1999 e’000 65,530 (4,214) (5,768) (16,816) (59,124) (10,527) (30,919) 140,319 29,478 138,878 1998 e’000 50,833 (3,643) (4,577) (16,285) (8,600) (6,835) 10,893 (133,524) 127,276 4,645 Reconciliation of Net Cash Flow to Movement in Net (Debt) / Cash for the year ended 31 March 1999 Increase in cash for the year (Decrease)/increase in liquid resources Net loans drawn down Funds paid/(raised) on finance lease arrangements Changes in net (debt)/cash resulting from cash flow Exchange movements Movement in net (debt)/cash in the year Net cash /(debt) at start of year Net (debt)/cash at end of year Notes 41 41 41 41 41 41 41 1999 e’000 138,878 (140,319) (31,260) 2,693 (30,008) 2,677 (27,331) 7,034 (20,297) 1998 e’000 4,645 133,524 (77,789) (40,567) 19,813 (8,313) 11,500 (4,466) 7,034 The notes on pages 45 to 72 and the accounting policies on pages 37 to 39 form part of these financial statements. Report of the Auditors pages 35 and 36. 44 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 1. Segmental Information (a) Segmental Analysis by Class of Business An analysis by class of business of the Group’s turnover, profit before taxation and net assets is set out below: (i) Summary DCC SerCom DCC Energy DCC Foods DCC Healthcare Other Interests Goodwill amortisation Interest (net) Net (debt)/cash Acquisition creditors Capitalised goodwill Minority interests Group unallocated net assets Turnover* e’000 416,513 193,305 314,179 114,759 20,510 1,059,266 - - - - - - - 1999 Profit before Taxation e’000 18,311 18,213 14,984 9,780 2,373 63,661 (1,557) (4,439) - - - - - Net Assets e’000 50,636 55,740 51,198 34,523 8,985 201,082 - - (20,297) (20,035) 46,028 (3,902) (7,655) Turnover e’000 336,931 160,880 293,304 81,347 19,858 892,320 - - - - - - - 1998 Profit Before Taxation e’000 15,491 13,213 12,909 7,188 2,256 51,057 (278) (4,425) - - - - - Net Assets e’000 34,923 56,332 42,174 29,289 7,294 170,012 - - 7,034 (6,785) - (5,295) (10,884) 1,059,266 57,665 195,221 892,320 46,354 154,082 * Comprises turnover of subsidiary and associated undertakings. (ii) Turnover Subsidiary 1999 Associated Undertakings Undertakings e’000 e’000 1998 Associated Total Undertakings Undertakings e’000 e’000 e’000 Subsidiary DCC SerCom DCC Energy DCC Foods DCC Healthcare Other Interests 416,074 193,305 79,071 103,256 - 439 - 235,108 11,503 20,510 416,513 193,305 314,179 114,759 20,510 336,065 160,880 71,452 71,194 - 866 - 221,852 10,153 19,858 Total e’000 336,931 160,880 293,304 81,347 19,858 Turnover** 791,706 267,560 1,059,266 639,591 252,729 892,320 ** Of which acquisitions in the year contributed E42.531 million (1998: E0.647 million). DCC plc Annual Report and Accounts 1999 45 Notes to the Financial Statements for the year ended 31 March 1999 1. Segmental Information continued (iii) Profit before Taxation 1999 1998 Parent and Subsidiary Associated Undertakings Undertakings e’000 e’000 Parent and Subsidiary Associated Total Undertakings Undertakings e’000 e’000 e’000 DCC SerCom DCC Energy DCC Foods DCC Healthcare Other Interests Operating profit before goodwill amortisation* Goodwill amortisation Operating profit Interest (net) 18,284 18,213 5,950 9,085 - 51,532 (830) 50,702 (4,364) 27 - 9,034 695 2,373 12,129 (727) 11,402 (75) 18,311 18,213 14,984 9,780 2,373 63,661 (1,557) 62,104 (4,439) 15,369 13,213 5,109 6,915 - 40,606 - 40,606 (4,133) 122 - 7,800 273 2,256 10,451 (278) 10,173 (292) Total e’000 15,491 13,213 12,909 7,188 2,256 51,057 (278) 50,779 (4,425) Profit before taxation 46,338 11,327 57,665 36,473 9,881 46,354 * Of which acquisitions in the year contributed a profit of E3.512 million (1998: Loss of E0.193 million). (iv) Net Assets 1999 1998 Parent and Subsidiary Associated Undertakings Undertakings e’000 e’000 Parent and Subsidiary Associated Total Undertakings Undertakings e’000 e’000 e’000 DCC SerCom DCC Energy DCC Foods DCC Healthcare Other Interests Net (debt)/cash Acquisition creditors Capitalised goodwill Minority interests Group unallocated net assets 50,603 55,740 8,875 29,020 - 144,238 (20,297) (20,035) 46,028 (3,902) (7,655) 33 - 42,323 5,503 8,985 56,844 - - - - - 50,636 55,740 51,198 34,523 8,985 201,082 (20,297) (20,035) 46,028 (3,902) (7,655) 34,786 56,332 8,361 24,059 - 123,538 7,034 (6,785) - (5,295) (10,884) 137 - 33,813 5,230 7,294 46,474 - - - - - Total e’000 34,923 56,332 42,174 29,289 7,294 170,012 7,034 (6,785) - (5,295) (10,884) Net assets 138,377 56,844 195,221 107,608 46,474 154,082 46 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 1. Segmental Information continued (b) Segmental Analysis by Geographical Area An analysis by geographical area of turnover, profit before taxation and net assets is set out below: (i) Summary 1999 Profit before Taxation e’000 26,786 24,746 51,532 12,129 63,661 (1,557) (4,439) - - - - - Turnover by Origin e’000 348,626 443,080 791,706 267,560 1,059,266 - - - - - - - Net Assets e’000 70,899 73,339 144,238 56,844 201,082 - - (20,297) (20,035) 46,028 (3,902) (7,655) 1998 Profit before Taxation e’000 Turnover by Origin e’000 269,612 369,979 639,591 252,729 892,320 - - - - - - - 20,431 20,175 40,606 10,451 51,057 (278) (4,425) - - - - - Net Assets e’000 52,477 71,061 123,538 46,474 170,012 - - 7,034 (6,785) - (5,295) (10,884) 1,059,266 57,665 195,221 892,320 46,354 154,082 1999 e’000 320,708 429,596 15,173 21,173 5,056 267,560 1,059,266 1998 e’000 239,625 365,769 12,951 15,834 5,412 252,729 892,320 Ireland Rest of the World Associated undertakings Goodwill amortisation Interest (net) Net (debt)/cash Acquisition creditors Capitalised goodwill Minority Interests Group unallocated net assets (ii) Turnover by Destination Ireland United Kingdom Rest of Europe USA Other Share of associated undertakings DCC plc Annual Report and Accounts 1999 47 Notes to the Financial Statements for the year ended 31 March 1999 2. Cost of Sales and Net Operating Costs 1999 1998 Continuing Operations Acquisitions e’000 e’000 Total e’000 Continuing Operations Acquisitions e’000 e’000 Total e’000 Cost of sales (596,633) (28,127) (624,760) (503,384) (468) (503,852) Gross profit 156,533 10,413 166,946 135,560 179 135,739 Operating costs Distribution Administrative Other operating expenses Other operating income Net operating costs Operating profit before goodwill amortisation - parent and subsidiaries 3. Acquisitions (55,697) (53,619) (178) (109,494) 1,082 (108,412) (3,432) (3,659) (5) (7,096) 94 (7,002) (59,129) (57,278) (183) (116,590) 1,176 (115,414) (49,224) (45,859) (20) (95,103) 342 (94,761) (152) (220) - (372) - (372) (49,376) (46,079) (20) (95,475) 342 (95,133) 48,121 3,411 51,532 40,799 (193) 40,606 The profit or loss on ordinary activities before taxation arising from acquisitions represents the aggregate of net incremental profit or loss resulting from the acquisition of subsidiary and associated undertakings in the relevant financial year. 4. Employee Information The average weekly number of persons (including executive directors) employed by the Group during the year analysed by class of business was: DCC SerCom DCC Energy DCC Foods DCC Healthcare The staff costs for the above were: Wages and salaries Social welfare costs Pension costs 1999 Number 1,239 457 244 724 2,664 1999 e’000 67,113 6,440 3,119 76,672 1998 Number 1,144 412 249 489 2,294 1998 e’000 58,301 5,577 2,802 66,680 48 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 5. Directors’ Emoluments and Interests Directors’ emoluments and interests are given in the Report on Directors’ Remuneration on pages 30 to 33. 6. Goodwill Amortisation Amortisation of capitalised goodwill arising on the acquisition of subsidiaries after 1 April 1998 (note 15) Amortisation of goodwill included in the carrying value of associated undertakings (note 17) 1999 e’000 830 727 1,557 7. Net Interest Payable and Similar Charges - Parent and Subsidiary Undertakings Interest receivable and similar income Interest on cash and term deposits Other interest receivable Interest payable and similar charges On bank loans, overdrafts and Unsecured Notes 2008/11 - repayable within 5 years, not by instalments - repayable within 5 years, by instalments - repayable wholly or partly in more than 5 years On loan notes - repayable within 5 years, not by instalments - repayable wholly or partly in more than 5 years On finance leases Notional interest 1999 e’000 17,792 259 18,051 (8,171) (310) (8,293) (296) (1,663) (3,484) (198) (22,415) (4,364) 1998 e’000 - 278 278 1998 e’000 13,497 12 13,509 (6,934) (283) (8,046) (504) (1,384) (222) (269) (17,642) (4,133) Where acquisitions involve further payments which are deferred or contingent on levels of performance achieved in the years following acquisition, the profit and loss account is charged with notional interest to eliminate the benefit which the Group is temporarily deriving. The notional interest charge is calculated by reference to the period of deferral, current interest rates and the estimated amount of the likely payments. 8. Share of Net Interest Payable and Similar Charges - Associated Undertakings This comprises the Group’s share of the net interest payable and similar charges of its associated undertakings. DCC plc Annual Report and Accounts 1999 49 Notes to the Financial Statements for the year ended 31 March 1999 9. Profit on Ordinary Activities Before Taxation Profit on ordinary activities before taxation is stated after charging/(crediting): Auditors’ remuneration Revenue grants Amortisation of capital grants Operating leases - land and buildings - plant and machinery - motor vehicles Depreciation - owned assets - leased assets 10. Taxation Irish Corporation Tax at 31% (1998: 35%) - Current - Deferred - Less: manufacturing relief United Kingdom Corporation Tax at 31% - Current - Deferred United States Corporation Tax Netherlands Corporation Tax Other (Over)/under provision in respect of prior years - Current - Deferred Associated undertakings 1999 e’000 317 (17) (366) 1,938 48 700 11,772 4,404 1999 e’000 7,476 (65) (3,799) 2,881 (10) (48) 336 67 (307) (374) 6,157 2,726 8,883 1998 e’000 254 (95) (395) 961 32 494 14,295 373 1998 e’000 7,415 (311) (4,528) 2,632 (609) (76) 265 27 78 - 4,893 2,574 7,467 Manufacturing relief is scheduled to expire in the year 2010. The Irish government has indicated a commitment to reduce the standard rate of corporation tax on a phased basis to 12.5% by the year 2003. 50 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 11. Minority Interests Subsidiary undertakings Associated undertakings 1999 e’000 137 665 802 1998 e’000 719 703 1,422 12. Profit for the Financial Year Attributable to Group Shareholders As permitted by Section 3(2) of the Companies (Amendment) Act, 1986, a separate profit and loss account for the holding company has not been included in these financial statements. The profit for the financial year attributable to DCC shareholders dealt with in the financial statements of the holding company amounted to e11,037,000 (1998: e19,968,000). 13. Dividends Per Ordinary Share Interim dividend paid of e5.396 cents per fully paid share (1998: e4.470 cents) Additional dividend Total dividend paid Proposed second interim dividend of e9.264 cents per fully paid share Proposed final dividend of e7.720 cents per fully paid share 1999 e’000 4,698 224 4,922 8,070 - 12,992 1998 e’000 3,729 61 3,790 - 6,476 10,266 The additional dividend of e224,000 (1998: e61,000) is in respect of shares issued after the date of approval of the relevant accounts but qualifying for receipt of the dividend declared. DCC plc Annual Report and Accounts 1999 51 Notes to the Financial Statements for the year ended 31 March 1999 14. Earnings Per Ordinary Share and Adjusted Earnings per Ordinary Share Profit after taxation and minority interests Goodwill amortisation Adjusted profit after taxation and minority interests Basic earnings per ordinary share Basic earnings per ordinary share (cents) Goodwill amortisation Adjusted basic earnings per ordinary share (cents) 1999 e’000 47,980 1,557 49,537 e cents 55.39 1.80 57.19 Weighted average number of shares in issue during the year (’000) 86,621 Fully diluted earnings per ordinary share Fully diluted earnings per ordinary share (cents) Goodwill amortisation Adjusted fully diluted earnings per ordinary share (cents) Fully diluted weighted average number of ordinary shares (’000) e cents 54.32 1.76 56.08 88,504 1998 e’000 37,465 278 37,743 e cents 45.08 0.33 45.41 83,111 e cents 43.60 0.32 43.92 85,936 The adjusted figures for basic earnings per ordinary share and fully diluted earnings per ordinary share are intended to demonstrate the results of the Group after eliminating the impact of goodwill amortisation. The weighted average number of ordinary shares used in calculating the fully diluted earnings per share for the year ended 31 March 1999 was 88.504 million (1998: 85.936 million). A reconciliation of the weighted average number of ordinary shares used for the purposes of calculating the fully diluted earnings per share amounts is as follows: Weighted average number of shares used for the calculation of basic earnings per share amounts Dilutive effect of options and partly paid shares Dilutive effect of shares potentially issuable under deferred contingent consideration arrangements 1999 ’000 86,621 917 966 1998 ’000 83,111 2,325 500 Weighted average number of shares used for the calculation of diluted earnings per share amounts 88,504 85,936 The earnings used for the purpose of the fully diluted earnings per share calculations were E48.079 million (1998: E37.465 million) and E49.636 million (1998: E37.743 million) for the purposes of the adjusted diluted earnings per share calculation. 52 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 15. Intangible Assets - Goodwill Group Arising on the acquisition of subsidiaries: At 1 April Arising during the year (note 38) Amortised to profit and loss account (note 6) At 31 March 16. Tangible Fixed Assets (a) Group Freehold & long term Plant & leasehold land machinery & cylinders e’000 & buildings e’000 33,159 8,126 2,007 - (47) (570) 42,675 5,286 1,727 881 (47) - (41) 7,806 128,662 6,368 8,709 (184) (2,438) (2,594) 138,523 73,731 4,337 9,405 (1,919) (142) (1,295) 84,117 Cost At 1 April 1998 Acquisitions (note 38) Additions Reclassifications Disposals Exchange adjustments At 31 March 1999 Depreciation At 1 April 1998 Acquisitions (note 38) Charge for year Disposals Reclassifications Exchange adjustments At 31 March 1999 Net Book Value At 31 March 1999 At 31 March 1998 1999 e’000 - 46,858 (830) 46,028 Total e’000 200,595 17,775 18,014 - (5,657) (3,681) 227,046 101,834 8,296 16,176 (4,359) - (1,598) 120,349 Fixtures, fittings & office equipment e’000 17,495 2,908 3,130 71 (507) (90) 23,007 11,754 2,089 2,773 (432) 142 (38) 16,288 Motor vehicles e’000 21,279 373 4,168 113 (2,665) (427) 22,841 11,063 143 3,117 (1,961) - (224) 12,138 34,869 27,873 54,406 54,931 6,719 5,741 10,703 10,216 106,697 98,761 The net book value of tangible fixed assets includes an amount of e24,136,000 (1998: e29,125,000) in respect of assets held under finance leases. DCC plc Annual Report and Accounts 1999 53 Notes to the Financial Statements for the year ended 31 March 1999 16. Tangible Fixed Assets continued (b) Company Cost At 1 April 1998 Additions Disposals At 31 March 1999 Depreciation At 1 April 1998 Charge for year Disposals At 31 March 1999 Net Book Value At 31 March 1999 At 31 March 1998 Fixtures fittings & office equipment e’000 Motor vehicles e’000 960 48 (9) 999 700 110 (8) 802 197 260 379 246 (85) 540 221 87 (83) 225 315 158 17. Financial Assets - Associated Undertakings (a) Group At 1 April Additions Retained profits less dividends Other movements in reserves Amortisation of goodwill (note 6) Acquired as a subsidiary in the year (note 38) At 31 March 1999 e’000 46,474 7,194 7,175 (3,154) (727) (118) 56,844 Total e’000 1,339 294 (94) 1,539 921 197 (91) 1,027 512 418 1998 e’000 41,920 - 5,887 (767) (278) (288) 46,474 The principal investment in associated undertakings made by the Group during the year was the acquisition of a 50% shareholding in Sparrowrock Limited, the holding company for the Kylemore group of companies. 54 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 17. Financial Assets - Associated Undertakings continued The carrying value of associated undertakings is analysed as follows: Interest in net assets Goodwill (net of amortisation) Share of post acquisition reserves 1999 e’000 25,615 13,865 17,364 56,844 1998 e’000 20,826 12,187 13,461 46,474 Included in the above are amounts of e28,169,000 (1998: e27,273,000) in respect of a listed associated undertaking which, at 31 March 1999, had a market value of e78,025,000 (1998: e81,804,000). The Group’s aggregate share of its associate undertakings’ fixed assets, current assets, liabilities due within one year and liabilities due after more than one year were as follows: Fixed assets Current assets Liabilities due within one year Liabilities due after more than one year and minority interests The movement in goodwill of associated undertakings is as follows: Cost At 1 April Additions At 31 March Amortisation At 1 April Amortisation for the year At 31 March Net Book Value At 31 March 1999 e’000 33,455 90,428 (59,979) (20,925) 1999 e’000 13,732 2,405 16,137 1,545 727 2,272 1998 e’000 22,540 79,528 (43,038) (24,743) 1998 e’000 13,732 - 13,732 1,267 278 1,545 13,865 12,187 DCC plc Annual Report and Accounts 1999 55 Notes to the Financial Statements for the year ended 31 March 1999 17. Financial Assets - Associated Undertakings continued Details of the Group’s principal associated undertakings at 31 March 1999 are set out below. All of these companies are incorporated and operate principally in their country of registration except Fyffes plc, which is incorporated in Ireland and has significant subsidiaries in Ireland, the United Kingdom and Continental Europe. Name and Registered Office Nature of Business % Shareholding Relevant Share Capital DCC Foods Fyffes plc, 1 Beresford Street, Dublin 7, Ireland. Distribution of fresh fruit and vegetables. 10.7%* 8.1% 294,197,490 ordinary shares of IR5p each 56,797,295 convertible cumulative preference shares of IR£1 each * If all of the convertible cumulative preference shares of Fyffes plc in issue were converted into ordinary shares, the Group would hold 10.3% of the ordinary shares of Fyffes plc KP (Ireland) Limited, 79 Broomhill Road,Tallaght, Dublin 24, Ireland. Millais Investments Limited, Kinsale Road, Cork, Ireland. Manufacture of snack foods. 50.0% Holding company for Allied Foods Limited, a distributor of frozen and chilled foods. 50.0% Sparrowrock Limited, DCC House, Stillorgan, Blackrock, Co Dublin, Ireland. Holding company for the Kylemore group of companies whose principal activity is the baking, wholesaling and retailing of bakery products and the operation of restaurants. 50.0% 500,000 ordinary shares of IR£1 each 1,750,000 "A" ordinary shares of IR10p each 1,750,000 "B" ordinary shares of IR10p each 1,000,000 "D" ordinary shares of IR10p each 916,166 "E" ordinary shares of IR10p each 2,500,000 "A" ordinary shares of IR£1 each 2,500,000 "C" ordinary shares of IR£1 each DCC Healthcare Merits Health Products Company Limited, 9 Road 36, Taichung Industrial Park, Taichung,Taiwan. Other Associated Undertakings Manor Park Homebuilders Limited, “The Gables”,Torquay Road, Dublin 18, Ireland. (b) Company At 31 March Manufacture of mobility aids. 45.0% 7,387 capital stock of NT$10,000 each Residential house building. 49.0% 90,000 ordinary shares of IR£1 each 1999 e’000 1,233 1998 e’000 1,233 56 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 18. Financial Assets - Subsidiary Undertakings Company At 1 April Additions Disposals At 31 March 1999 e’000 57,283 10,209 (107) 67,385 1998 e’000 76,677 3,122 (22,516) 57,283 The Group’s principal operating subsidiary undertakings and the location of their principal operations and registered office are shown on pages 73 to 76. All of these subsidiaries are wholly owned except Broderick Holdings Limited (82.5%), International Translation and Publishing Limited (90.0%), Virtus Limited (51.0%), EuroCaps Limited (80.0%) where put and call options exist in respect of the remaining 20.0%, and Fannin Limited (75.0%) where put and call options exist in respect of the remaining 25.0%. The Group’s principal overseas holding company subsidiaries are DCC Holdings (UK) Limited, a company operating, incorporated and registered in England and Wales and DCC International Holdings BV, a company operating, incorporated and registered in the Netherlands. The registered office of DCC Holdings (UK) Limited is at Days Medical Aids Limited, Litchard Industrial Estate, Bridgend, Mid Glamorgan CF31 2AL, Wales. The registered office of DCC International Holdings BV is Drentestaete, Drentestraat 24, 1083 HK Amsterdam,The Netherlands. 19. Stocks Group Raw materials and consumables Work in progress Finished goods and goods for resale 1999 e’000 5,407 552 48,174 54,133 1998 e’000 4,680 943 38,581 44,204 The replacement cost of stocks is not considered to be materially different from the amounts shown above. DCC plc Annual Report and Accounts 1999 57 Notes to the Financial Statements for the year ended 31 March 1999 20. Debtors Amounts falling due within one year: Trade debtors Amounts owed by subsidiary undertakings Corporation tax recoverable Value added tax recoverable Prepayments and accrued income Investments Other debtors (note 21) Amounts falling due after more than one year: Amounts owed by subsidiary undertakings Other debtors (note 21) Group 1999 e’000 1998 e’000 134,074 - 850 729 9,202 673 2,030 147,558 103,938 - 1,006 58 9,984 673 1,114 116,773 Company 1999 e’000 1998 e’000 421 1,064 - - 667 - 15 2,167 248 648 6 - 795 - 16 1,713 - 3,366 3,366 - 292 292 212,318 96 212,414 195,218 202 195,420 150,924 117,065 214,581 197,133 21. Directors’ Loan Accounts Other debtors include e29,000 (1998: e65,000) in respect of house loans to executive Directors as follows: Balance at 1 April 1998 Interest Repayments Balance at 31 March 1999 Maximum amount outstanding during year J Flavin M Crowe e’000 e’000 Total e’000 32 1 (33) - 32 33 1 (5) 29 33 65 2 (38) 29 65 Interest was charged at rates varying from 3% to 5% per annum. No provision is considered necessary in respect of the above loan. 22. Cash and Term Deposits Cash in hand and at bank Term deposits Group 1999 e’000 1998 e’000 201,751 109,563 311,314 32,197 257,165 289,362 Company 1999 e’000 128 1,802 1,930 1998 e’000 969 2,500 3,469 For the purposes of the consolidated cash flow statement, cash in hand and at bank comprises cash on demand. The movements in cash in hand and at bank and term deposits are set out in note 41. 58 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 23. Trade and Other Creditors Amounts falling due within one year: Trade creditors Other creditors and accruals PAYE and PRSI Value added tax Capital grants (note 37) Interest payable Amounts due in respect of fixed assets Amounts due to associated undertakings 24. Bank and Other Debt Bank loans (note 25) Loan notes (note 26) Obligations under finance leases (note 27) Unsecured Notes due 2008/11 (note 25) Bank and other loans and leases: - repayable within one year - repayable after more than one year Unsecured Notes due 2008/11 Group 1999 e’000 1998 e’000 Company 1999 e’000 1998 e’000 113,183 21,880 1,911 9,626 245 2,035 714 3,320 152,914 91,407 17,061 4,551 9,268 231 2,614 974 2,772 128,878 Group 1999 e’000 1998 e’000 164,767 28,655 40,632 234,054 97,557 331,611 41,759 192,295 97,557 331,611 102,638 32,686 45,250 180,574 101,754 282,328 17,423 163,151 101,754 282,328 284 933 136 13 - - - - 1,366 145 778 104 25 - - - - 1,052 Company 1999 e’000 - 886 - 886 - 886 - 886 - 886 1998 e’000 12,634 3,359 - 15,993 - 15,993 2,413 13,580 - 15,993 In September 1996 the Group raised US$100 million of senior unsecured notes in a private placement with US institutional investors. Of this amount US$92.5 million is due in 2008 and US$7.5 million is due in 2011. The funds have been swapped to sterling at a margin over LIBOR. DCC plc Annual Report and Accounts 1999 59 Notes to the Financial Statements for the year ended 31 March 1999 25. Bank Loans, Overdrafts and Unsecured Notes due 2008/11 Repayable as follows: In one year or less Between one and two years Between two and five years In five years or more The above amounts are further analysed as follows: Wholly repayable within one year Repayable by instalments: - between one and two years - between two and five years Repayable other than by instalments: - between one and two years - between two and five years - in five years or more Group 1999 e’000 1998 e’000 35,730 61,054 67,983 97,557 262,324 6,061 846 95,731 101,754 204,392 35,730 6,061 180 11,208 60,874 56,775 97,557 262,324 846 235 - 95,496 101,754 204,392 Company 1999 e’000 - - - - - - - - - - - - 1998 e’000 - - 12,634 - 12,634 - - - - 12,634 - 12,634 26. Loan Notes Group 1999 e’000 1998 e’000 Company 1999 e’000 1998 e’000 The loan notes are repayable as follows: In one year or less Between one and two years Between two and five years In five years or more Loan notes are further analysed as follows: Wholly repayable within one year Repayable by instalments: - between one and two years - between two and five years Repayable other than by instalments: - between one and two years - between two and five years - in five years or more 2,241 69 896 25,449 28,655 7,926 9 834 23,917 32,686 2,241 7,926 8 11 61 885 25,449 28,655 9 - - 834 23,917 32,686 - - 886 - 886 - - - - 886 - 886 2,413 - 513 433 3,359 2,413 - - - 513 433 3,359 The above loan notes are unsecured and e28,402,000 (1998: e30,151,000) are supported by bank guarantees. The Company and certain of its subsidiaries have guaranteed the obligations of the relevant banks in respect of the loan notes which are guaranteed by the banks. 60 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 27. Finance Leases The net finance lease obligations to which the Group is committed are: In one year or less Between one and two years Between two and five years In five years or more 1999 e’000 3,788 3,784 12,862 20,198 36,844 40,632 1998 e’000 3,436 3,623 12,813 25,378 41,814 45,250 28. Derivative and Other Financial Instruments The Group’s treasury activities are designed to finance its operations and to reduce or eliminate the financial risks arising from those operations. A number of the Group’s operating and financial costs and revenues are exposed to movements in the financial and commodity markets which are outside the Group’s control. In particular, interest rates can fluctuate, affecting the cost of borrowings, and commodity price movements can impact on the cost of certain raw materials purchased. Furthermore, foreign exchange movements can impact on the cost of products sourced and revenues generated from overseas markets and can also impact on the translation of the results and net operating assets or operating liabilities of the Group’s overseas operations save to the extent that they are hedged by borrowings in the same currency. In order to reduce these exposures and to bring both stability and more certainty to the Group’s costs and revenues, the Group uses various derivative financial instruments to hedge its position going forward. All transactions in derivatives (which are mainly interest rate swaps, forward foreign currency and commodity contracts and purchased currency and commodity options) are designed to manage risks without engaging in speculative transactions. (a) Fair Values of Financial Liabilities and Financial Assets The Group has entered into cross currency and interest rate swaps to manage its exposure to the US dollar liability arising from the issue of Unsecured Notes due 2008/11 in a private placement with US institutional investors (note 24). The fair value of these cross currency and interest rate swaps at 31 March 1999 equated to a loss of e2.714 million. The fair value of the currency and the interest rate swaps has been calculated by discounting future cash flows at prevailing interest rates. The fair values of the Group’s financial liabilities and financial assets are not considered to be materially different to their book values disclosed in paragraph (b) with the exception of the fair value of the Unsecured Notes due 2008/11 which on a fair value basis would show a liability of e94.843 million compared with their book value liability of e97.557 million. The fair value of foreign currency contracts outstanding at 31 March 1999 equates to a loss of e2.976 million (book value: enil). At 31 March 1999 the Group did not have any material commodity contracts outstanding. DCC plc Annual Report and Accounts 1999 61 Notes to the Financial Statements for the year ended 31 March 1999 28. Derivative and Other Financial Instruments continued (b) Interest Rate Risk Profile of Financial Liabilities and Financial Assets The following table analyses the currency and interest rate composition of the Group’s gross debt and cash portfolio, as stated on the balance sheet, after taking cross currency and interest rate swaps into account: 1999 e equivalent Financial Assets e’000 Financial Liabilities e’000 (220) (39,445) (39,665) - 66,303 66,303 Net e’000 (220) 26,858 26,638 (97,579) (194,335) (291,914) 91,553 150,133 241,686 (6,026) (44,202) (50,228) - (32) (32) - 3,325 3,325 - 3,293 3,293 1998 e equivalent Financial Assets e’000 - 128,455 128,455 95,493 63,848 159,341 - 1,566 1,566 Financial Liabilities e’000 - (81,667) (81,667) (114,871) (85,790) (200,661) - - - Net e’000 - 46,788 46,788 (19,378) (21,942) (41,320) - 1,566 1,566 (331,611) 311,314 (20,297) (282,328) 289,362 7,034 e Fixed e Floating e Total Stg£ Fixed Stg£ Floating Stg£ Total US$ Fixed US$ Floating US$ Total Total The Group’s acquisition creditors of e20.035 million, as stated on the balance sheet, comprises e16.247 million of e floating rate financial liabilities and e3.788 million of Stg£ floating rate financial liabilities (1998: e6.785 million of Stg£ floating rate financial liabilities) payable as follows: In one year or less In more than one year but not more than two years In more than two years but not more than five years 1999 e’000 10,167 3,268 6,600 20,035 1998 e’000 3,063 3,722 - 6,785 The Group’s floating rate financial liabilities and financial assets primarily bear interest rates based on: • 1 - 6 month EURIBOR • 1 month LIBOR • US$ prime rate 1999 Weighted average interest rate % 1998 Weighted average interest rate % Fixed rate Fixed rate financial liabilities financial assets Fixed rate financial liabilities Fixed rate financial assets e Stg£ 7.8% 8.8% n/a 8.0% n/a 8.6% n/a 8.0% 62 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 28. Derivative and Other Financial Instruments continued 1999 Weighted average period for which rate is fixed 1998 Weighted average period for which rate is fixed Fixed rate Fixed rate financial liabilities financial assets Fixed rate financial liabilities Fixed rate financial assets e Stg£ 1.5 years 9.0 years n/a 9.5 years n/a 9.0 years n/a 10.5 years The maturity profile of the Group’s gross debt is set out in notes 25 to 27 and can be summarised as follows: In one year or less In more than one year but not more than two years In more than two years but not more than five years In more than five years 1999 e’000 41,759 64,907 81,741 143,204 331,611 1998 e’000 17,423 4,478 109,378 151,049 282,328 (c) Gains and Losses on Hedges The Group enters into forward foreign currency contracts to eliminate the currency exposures that arise on revenue and costs denominated in foreign currencies. Changes in the fair value of instruments used as hedges are not recognised in the financial statements until the hedged position matures. An analysis of these unrecognised gains and losses is as follows: Unrecognised gains and losses on hedges at 31 March 1998 Gains and losses arising in previous years that were recognised in 1998/1999 Gains and losses arising before 31 March 1998 that were not recognised in 1998/1999 Gains and losses arising in 1998/1999 that were not recognised in 1998/1999 Unrecognised gains and losses on hedges at 31 March 1999 Of which: Gains and losses expected to be recognised in 1999/2000 Gains and losses expected to be recognised thereafter Gains e’000 365 365 - 356 356 356 - 356 Losses e’000 1,646 1,316 330 3,002 3,332 1,879 1,453 3,332 Total net gains/(losses) e’000 (1,281) (951) (330) (2,646) (2,976) (1,523) (1,453) (2,976) (d) Currency Exposures At 31 March 1999, after taking into account the effects of foreign currency contracts, the Group had no material currency exposures. (e) Treasury Policy The Group’s treasury policy and management of derivatives and of financial instruments is discussed in the Financial Review on page 24. DCC plc Annual Report and Accounts 1999 63 Notes to the Financial Statements for the year ended 31 March 1999 29. Provisions for Liabilities and Charges 1999 Pensions and similar obligations (note 31) e’000 Deferred taxation (note 30) e’000 Deferred taxation (note 30) e’000 Total e’000 2,524 (449) 147 (22) 2,200 45 (1) - - 44 2,569 3,407 (450) 147 (22) 2,244 (920) - 37 2,524 (a) Group At 1 April Credited to profit and loss account Acquisitions Exchange adjustments At 31 March (b) Company Deferred taxation at 31 March (note 30) 30. Deferred Taxation 1998 Pensions and similar obligations (note 31) e’000 46 (1) - - 45 Total e’000 3,453 (921) - 37 2,569 1999 e’000 1998 e’000 4 4 Deferred taxation provided in the financial statements and the full potential liability are as follows: (a) Group Tax effect of timing differences due to: Excess of accelerated capital allowances over depreciation Other short term timing differences Amount Provided 1998 1999 e’000 e’000 Full Potential Liability 1998 e’000 1999 e’000 2,454 (254) 2,200 2,872 (348) 2,524 2,587 (254) 2,333 3,048 (348) 2,700 No provision is made for certain potential taxation liabilities amounting to e133,000 (1998: e176,000) arising from accelerated capital allowances as it is considered that the related taxation will not become payable in the foreseeable future. No provision is made for taxation liabilities which would arise on the distribution of profits retained by overseas subsidiaries as there is no intention in the foreseeable future to remit such profits. (b) Company 1999 Amount Provided Full Potential Liability 1998 e’000 1998 e’000 1999 e’000 e’000 Tax effect of timing differences due to: Excess of accelerated capital allowances over depreciation Other short term timing differences 3 1 4 3 1 4 3 1 4 3 1 4 64 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 31. Pensions and Similar Obligations The Group operates defined benefit and defined contribution pension schemes in the parent and subsidiary undertakings. The pension scheme assets are held in separate trustee administered funds. Total pension costs for the year amounted to e3,119,000 (1998: e2,802,000) of which e1,331,000 (1998: e1,130,000) was paid in respect of defined contribution schemes. The pension costs relating to the Group’s defined benefit schemes are assessed in accordance with the advice of independent qualified actuaries. Either the attained age or the accrued benefits method are used to assess pension costs. The most recent actuarial valuations range from 1 May 1996 to 1 January 1998. The assumptions which have the most significant effect on the results of the actuarial valuations are those relating to the rates of return on investments and the rates of increase in remuneration and pensions. It was assumed that the rates of return on investments would, on average, exceed annual remuneration increases by 2% and pension increases by 3% per annum. At the dates of the most recent actuarial valuations, the market value of the assets of the Group’s defined benefit schemes totalled e18,837,000 (1998: e13,502,000). After allowing for expected future increases in earnings and pension payments, the actuarial values of the various schemes’ assets were sufficient to cover between 79% and 112% (Group weighted average cover: 99%) of the benefits that had accrued to the members of the individual schemes. The actuarial deficit is being spread over the average remaining service lives of current employees. At the year end, e48,000 (1998: e31,743) was included in creditors in respect of pension liabilities and e721,000 (1998: e717,000) was included in debtors in respect of pension prepayments. In general, actuarial valuations are not available for public inspection, although the results of valuations are advised to the members of the various pension schemes. DCC plc Annual Report and Accounts 1999 65 Notes to the Financial Statements for the year ended 31 March 1999 32. Called up Equity Share Capital Group and Company Authorised 150,000,000 ordinary shares of IR20p each Issued 87,134,555 ordinary shares of IR20p each, fully paid (1998: 83,882,974 ordinary shares of IR20p each, fully paid) 210,000 ordinary shares of IR20p each, IR0.2p paid (1998: 2,725,990 ordinary shares of IR20p each, IR0.2p paid) Movements during year Ordinary shares of IR20p each At 1 April 1998 Exercise of share options Scrip issues Payment up of partly paid shares At 31 March 1999 1999 e’000 38,092 22,128 - 22,128 No of shares (’000) 86,609 638 98 - 87,345 1998 e’000 38,092 21,303 6 21,309 e’000 21,309 161 26 632 22,128 Under the DCC plc 1998 Employee Share Option Scheme, employees hold basic options to subscribe for 1,299,000 ordinary shares and second tier options to subscribe for 1,120,000 ordinary shares. The number of shares in respect of which basic tier and second tier options may be granted under this scheme may not exceed 5% of all numbers of shares in issue in each case. Under the terminated DCC Employee Partly Paid Share Scheme, at 31 March 1999 210,000 (1998: 2,725,990) shares remain partly paid. Under a terminated 1986 DCC Executive Share Option Scheme, which applied before DCC became a public company, employees hold options exercisable up to February 2001 to subscribe for 650,000 ordinary shares (1998: 1,287,500 ordinary shares) at IR200p (e254 cents) per share. All shares, whether fully or partly paid, carry equal voting rights and rank for dividends to the extent to which the total amount payable on each share is paid up. 33. Share Premium Account Group and Company At 1 April Premium on issue of shares Share issue expenses At 31 March 1999 e’000 112,090 8,769 (63) 120,796 1998 e’000 103,152 9,027 (89) 112,090 66 DCC plc Annual Report and Accounts 1999 34. Reserves (a) Group Notes to the Financial Statements for the year ended 31 March 1999 Profit Goodwill arising on and loss acquisition of subsidiaries account e’000 e’000 Associated undertaking reserves e’000 At 1 April 1998 Profit retained for the year Reclassification of reserves Movement on other reserves - associated undertakings Exchange adjustments At 31 March 1999 111,978 27,813 (105,694) - (220) 33,877 (105,812) - 105,812 - - - 13,461 7,175 (118) (3,154) - 17,364 Other reserves e’000 1,056 - - - - 1,056 Total e’000 20,683 34,988 - (3,154) (220) 52,297 In accordance with the Group’s accounting policy, goodwill arising on the acquisition of subsidiaries prior to 1 April 1998, eliminated from the balance sheet through reserves, amounts to e105.812 million. This goodwill will be charged in the profit and loss account should the Group dispose of the businesses to which it relates. (b) Company Profit and Loss Account At 1 April 1998 Loss retained At 31 March 1999 35. Reconciliation of Movements in Equity Shareholders’ Funds Group Profit attributable to Group shareholders Dividends Movement on associated undertaking reserves Equity share capital issued (net of expenses) Goodwill arising on acquisitions written off to reserves Exchange adjustments Net movement in shareholders’ funds Opening equity shareholders’ funds Closing equity shareholders’ funds 1999 e’000 47,980 (12,992) 34,988 (3,154) 9,525 - (220) 41,139 154,082 195,221 e’000 46,952 (1,955) 44,997 1998 e’000 37,465 (10,266) 27,199 (767) 9,536 (5,805) 1,435 31,598 122,484 154,082 DCC plc Annual Report and Accounts 1999 67 Notes to the Financial Statements for the year ended 31 March 1999 36. Equity Minority Interests Group At 1 April Acquisitions (note 38) Acquisition of minority interest in subsidiary undertakings (note 38) Share of profit for the financial year (note 11) Dividends to minority Exchange and other adjustments At 31 March 37. Capital Grants Group At 1 April Received in year Amortisation in year Exchange and other adjustments At 31 March Disclosed as due within one year (note 23) 1999 e’000 5,295 (166) (1,289) 137 (135) 60 3,902 1999 e’000 1,953 14 (366) (175) 1,426 (245) 1,181 1998 e’000 4,867 53 (202) 719 (251) 109 5,295 1998 e’000 2,183 161 (395) 4 1,953 (231) 1,722 38. Acquisitions of Subsidiary Undertakings The principal acquisitions completed during the year were an increase in the Group’s interest in Sharptext Limited, Micro Peripherals Limited and Gem Distribution Limited (from 92.4% to 100%), the acquisition of 100% interests in BM Browne Limited, Burmah Castrol (Ireland) Limited (since renamed Classic Fuel & Oil Limited) and Thompson & Capper Limited and an 80% interest in EuroCaps Limited. 68 DCC plc Annual Report and Accounts 1999 Notes to the Financial Statements for the year ended 31 March 1999 38. Acquisitions of Subsidiary Undertakings continued A summary of the effect of these acquisitions is as follows: Acquisition of subsidiary undertakings e’000 Fair value adjustments e’000 Fair value at acquisition e’000 Acquisition of minority interest in subsidiaries e’000 10,241 6,022 17,256 3,112 (12,585) (2,223) 166 21,989 Tangible fixed assets Stock and work in progress Debtors Net cash Creditors Tax and deferred tax Minority interests Net assets acquired Carrying value as an associate Goodwill Cost Satisfied by: Cash Acquisition creditors payable in 1999/2000 Deferred contingent consideration (762) (127) (453) - (326) - - (1,668) 9,479 5,895 16,803 3,112 (12,911) (2,223) 166 20,321 (118) 39,913 60,116 - - - - - - 1,289 1,289 - 6,945 8,234 Total e’000 9,479 5,895 16,803 3,112 (12,911) (2,223) 1,455 21,610 (118) 46,858 68,350 52,104 6,573 9,673 68,350 Acquisition accounting has been adopted in respect of the above acquisitions. The fair value adjustments relate to fixed assets, stocks, debtors and creditors and the alignment of accounting policies with those of the Group. An analysis of the net outflow of cash in respect of the acquisition of subsidiary undertakings and the purchase of minority interests in certain subsidiaries is as follows: Cost Net cash acquired Acquisition creditors payable in 1999/2000 Deferred contingent consideration Net outflow of cash Comprised of: Purchase of subsidiary (net of cash acquired) (note 40 (c)) Purchase of minority interests (note 40 (c)) 1999 e’000 68,350 (3,112) (6,573) (9,673) 48,992 40,758 8,234 48,992 The vendors of BM Browne Limited received shares, representing a 25% shareholding in Fannin Limited (the immediate parent of BM Browne Limited), as part consideration. Put and call options exist over these shares and Fannin Limited is treated as a 100% subsidiary of the Group. The total shown above in respect of the acquisition creditors payable in 1999/2000 includes an amount in respect of a planned exercise of a call option over 7% of the shares in Fannin Limited and an amount payable in respect of the acquisition of Burmah Castrol (Ireland) Limited. The deferred contingent consideration amount set out above represents an estimate of the additional acquisition payments, which are contingent on the future performance of Fannin Limited, payable on the exercise of the put or call options over the remaining 18% of Fannin Limited. DCC plc Annual Report and Accounts 1999 69 Notes to the Financial Statements for the year ended 31 March 1999 38. Acquisitions of Subsidiary Undertakings continued The deferred contingent consideration amounts provided represent those amounts that are reasonably expected to be payable discounted to their present value. Further performance related payments beyond these amounts up to a maximum of E4.4 million may be made up to 2002. The estimation of deferred contingent consideration will be revised as more certain information becomes available with corresponding adjustments being made to goodwill. 39. Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities Group Operating profit Operating profit of associated undertakings Dividends received from associated undertakings Depreciation of tangible fixed assets Amortisation of capital grants Profit on sale of tangible fixed assets Increase in stocks Increase in debtors Increase in creditors Other Cash flow from operating activities 1999 e’000 63,661 (12,129) 2,268 16,176 (366) (146) (5,151) (20,680) 22,479 (582) 65,530 40. Analysis of Cashflows for Headings netted in the Consolidated Cash Flow Statement (a) Returns on investments and servicing of finance Interest received and similar receipts Interest paid and similar payments Dividends paid to minority interests Net cash outflow from returns on investments and servicing of finance 19,032 (23,112) (134) (4,214) 1999 e’000 (b) Capital expenditure Expenditure on tangible fixed assets Proceeds on sale of tangible fixed assets Grants received Net cash outflow from capital expenditure (c) Acquisitions and disposals Purchase of subsidiary undertakings (net of cash acquired) (note 38) Investment in associated undertakings (note 17) Purchase of minority interests (note 38) Payment of deferred consideration/accruals in respect of acquisitions Net cash outflow from acquisitions and disposals (d) Financing Issues of share capital (including share premium) Capital element of finance lease payments Loans drawn down Other Net cash inflow from financing (18,274) 1,444 14 (16,816) (40,758) (7,194) (8,234) (2,938) (59,124) 8,656 (2,693) 31,260 (7,745) 29,478 70 DCC plc Annual Report and Accounts 1999 1998 e’000 51,057 (10,451) 2,276 14,668 (395) (293) (8,637) (10,186) 13,775 (981) 50,833 1998 e’000 13,688 (17,079) (252) (3,643) (19,147) 2,701 161 (16,285) (3,007) - (1,875) (3,718) (8,600) 1,175 40,567 77,789 7,745 127,276 At 31 March 1999 e’000 201,751 (33,294) 168,457 109,563 (160,128) (40,632) (97,557) (20,297) 1998 e’000 1,487 6,490 Other e’000 112 192 142 446 Notes to the Financial Statements for the year ended 31 March 1999 41. Analysis of Movement in Net Cash/(Debt) At 1 April 1998 e’000 32,197 (6,061) 26,136 257,165 (129,263) (45,250) (101,754) 7,034 Cash in hand and at bank Overdrafts Term deposits Bank loans and loan notes Finance leases Unsecured Notes due 2008/11 Total 42. Capital Commitments Group Capital expenditure that has been contracted for but has not been provided for in the financial statements Capital expenditure that has been authorised by the directors but has not yet been contracted for Cash Flow e’000 Exchange Movements e’000 166,887 (28,009) 138,878 (140,319) (31,260) 2,693 - (30,008) 2,667 776 3,443 (7,283) 395 1,925 4,197 2,677 1999 e’000 7,004 11,482 43. Operating Lease Commitments At 31 March 1999 the Group had annual commitments under operating leases as follows:- 1999 1998 Land and Buildings e’000 59 519 1,352 1,930 Other e’000 50 425 - 475 Land and Buildings e’000 102 184 512 798 Expiring within one year Expiring between two and five years Expiring after five years 44. Contingent Liabilities (a) Bank and Other Loans The parent undertaking has guaranteed borrowings amounting to e330,057,000 (1998: e265,848,000) in respect of certain subsidiaries. The parent undertaking and certain subsidiaries have given guarantees in respect of borrowings of e330,943,000 (1998: e281,840,000) by the parent undertaking itself and other group undertakings. (b) Grants In certain circumstances capital grants amounting to a maximum of e4,797,000 (1998: e4,916,000) and revenue grants amounting to a maximum of e863,000 (1998: e1,169,000) may become repayable. DCC plc Annual Report and Accounts 1999 71 Notes to the Financial Statements for the year ended 31 March 1999 44. Contingent Liabilities continued (c) Other Included in trade creditors and amounts due in respect of tangible fixed assets acquired is an amount of approximately e7,860,000 (1998: e3,492,000) due to creditors who have reserved title to goods supplied. Since the extent to which these creditors are effectively secured at any time depends on a number of conditions, the validity of some of which is not readily determinable, it is not possible to indicate how much of the above amount was effectively secured by reservation of title. However, the amount referred to above is matched in terms of net book value of fixed assets and stocks of raw materials in the possession of the Group which were supplied subject to reservation of title and accordingly the creditors referred to could be regarded as effectively secured to the extent of at least this amount. Pursuant to the provisions of Section 17, Companies (Amendment) Act, 1986, the Company has guaranteed the liabilities of Flogas Ireland Limited and Alvabay Limited and as a result, these companies have been exempted from the filing provisions of Section 7, Companies (Amendment) Act, 1986. 45. Reporting Currency The primary currency used in these financial statements is the Euro which is denoted by the symbol e. The exchange rates used in translating sterling balance sheets and profit and loss account amounts were as follows: Balance sheet (closing rate) Profit and loss (average rate) 46. Comparative Amounts 1999 e1=Stg£ 0.666 0.681 1998 e1=Stg£ 0.639 0.704 Comparative amounts have been translated to Euros at the fixed translation rate of e1 = IR£0.787564 and have been regrouped and restated, where necessary, on the same basis as those for the current year. 47. Transactions with Related Parties On 7 July 1998 the Company increased to 100% its shareholding in the issued share capital of Sharptext Group Limited and Runsole Limited, the holding companies for DCC’s computer distribution subsidiaries - Micro Peripherals, Gem Distribution and Sharptext - by acquiring 7.6% of their issued share capital from Mr Patrick Garvey, a director of these companies. The total value of the consideration amounted to e8.063 million which was satisfied in cash. In addition put and call options are held by management of the computer distribution companies and DCC, exercisable in the year 2000, over shares which may be issued to management, arising from the exercise by them of share options over an effective 4.7% of the equity of these companies. 48. Approval of Financial Statements The financial statements were approved by the Board of Directors on 7 May 1999. 72 DCC plc Annual Report and Accounts 1999 Group Directory Name and Address of Subsidiary Nature of Business Telephone/Fax/Email and web site if applicable DCC SerCom DCC SerCom Limited, DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland. Holding and divisional management company Micro Peripherals Limited,* Shorten Brook Way, Altham Business Park, Altham, Accrington, Lancashire BB5 5YJ, England. Computer products distribution Sharptext Limited, 1 Airton Close,Tallaght, Dublin 24, Ireland. Computer products and office equipment distribution Gem Distribution Limited,* Lovet Road,The Pinnacles, Harlow, Essex CM19 5TB, England. Computer products distribution SerCom Solutions Limited, Cloverhill Industrial Estate, Clondalkin, Dublin 22, Ireland. Provision of manufacturing services for the computer industry International Translation and Publishing Limited, The Boulevard, Quinsboro Road, Bray, Co.Wicklow, Ireland. Localisation and translation services for the computer industry +353 1 283 1011 +353 1 283 1017 sercom@dcc.ie www.dcc.ie +44 1282 776 776 +44 1282 770 001 www.microp.co.uk +353 1 451 6311 +353 1 451 6927 distribution@sharptext.com www.sharptext.com +44 1279 822 800 +44 1279 416 228 www.gem.co.uk +353 1 405 6500 +353 1 405 6555 info@sercomsolutions.ie www.sercomsolutions.com +353 1 205 0200 +353 1 282 8395 info@itp.ie www.itp.ie All the above companies are incorporated and operate principally in the Republic of Ireland except those indicated with * which are incorporated and operate principally in England and Wales. DCC plc Annual Report and Accounts 1999 73 Group Directory Name and Address of Subsidiary Nature of Business Telephone/Fax/Email and web site if applicable DCC Energy DCC Energy Limited, DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland. Flogas Ireland Limited, Dublin Road, Drogheda, Co. Louth, Ireland. Holding and divisional management company Manufacture and distribution of liquefied petroleum gas DCC Energy (NI) Limited, Airport Road West, Sydenham, Belfast BT3 9ED, Northern Ireland. Distribution of: - Flogas liquefied petroleum gas - Emo oil products Flogas UK Limited, Merrylees, Leicestershire LE9 9FE, England. Distribution of liquefied petroleum gas Emo Oil Limited, Clonminam Industrial Estate, Portlaoise, Co. Laois, Ireland. Atlas Oil Limited, Clonminam Industrial Estate, Portlaoise, Co. Laois, Ireland. Distribution of oil products Environmental services to garages +353 1 278 2577 +353 1 283 1017 energy@dcc.ie www.dcc.ie +353 41 983 1041 +353 41 983 4652 info@flogas.ie www.flogas.ie +44 1232 732 611 +44 1232 732 020 +44 1232 454 555 +44 1232 457 371 enquiries@emooil.com www.emooil.com +44 1530 230 352 +44 1530 230 253 info@flogas.co.uk www.flogas.co.uk +353 502 74 700 +353 502 74 750 info@emo.ie +353 502 74 747 +353 502 74 757 info@atlasoil.iol.ie All the above companies are incorporated and operate principally in the Republic of Ireland except Flogas UK Limited which is incorporated and operates principally in England and Wales and DCC Energy (NI) Limited which is incorporated and operates principally in Northern Ireland. 74 DCC plc Annual Report and Accounts 1999 Group Directory Name and Address of Subsidiary Nature of Business Telephone/Fax/Email and web site if applicable DCC Foods DCC Foods Limited, DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland. Holding and divisional management company Robt. Roberts Limited, 79 Broomhill Road,Tallaght, Dublin 24, Ireland. Marketing and distribution of branded food and beverage products +353 1 283 1011 +353 1 283 1017 foods@dcc.ie www.dcc.ie +353 1 404 7300 +353 1 459 9369 Kelkin Limited, Unit 1, Crosslands Industrial Park, Ballymount Cross, Dublin 12, Ireland. Marketing and distribution of branded healthfood products +353 1 460 0400 +353 1 460 0411 kelkin@tinet.ie Broderick Holdings Limited, Broderick Buildings, John F. Kennedy Industrial Estate, Naas Road, Dublin 12, Ireland. Distribution and service of equipment and consumables to the food processing, retailing and catering industries +353 1 450 9083 +353 1 450 9570 broderickbros@tinet.ie All the above companies are incorporated and operate principally in the Republic of Ireland. DCC plc Annual Report and Accounts 1999 75 Group Directory Name and Address of Subsidiary Nature of Business Telephone/Fax/Email and web site if applicable DCC Healthcare DCC Healthcare Limited, DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland. Days Medical Aids Limited,* Litchard Industrial Estate, Bridgend, Mid Glamorgan CF31 2AL, Wales. DCC Shoprider Inc., 3635 SW30th Avenue, Fort Lauderdale, Florida 33312, USA. Fannin Limited, Fannin House, 106 Dublin Industrial Estate, Dublin 11, Ireland. Virtus Limited, Adamstown, Lucan, Co. Dublin, Ireland. Holding and divisional management company +353 1 283 1011 +353 1 283 1017 healthcare@dcc.ie www.dcc.ie Manufacture and distribution of mobility and rehabilitation products +44 1656 657 495 +44 1656 767 178 daysmedical@btinternet.com Distribution of mobility scooters and power chairs +1 954 797 2955 +1 954 797 7081 Distribution of healthcare products Manufacture and distribution of healthcare products +353 1 830 9211 +353 1 830 9291 fannin@iol.ie +353 1 628 0571 +353 1 628 0572 info@virtus.ie Healthilife Limited, * Charlestown House, Otley Road, Baildon, Shipley, West Yorkshire BD17 7JS, England. Manufacture and distribution of vitamins and food supplements +44 1274 595 021 +44 1274 581 515 enquiries@healthilife.com EuroCaps Limited, * Crown Business Park, Dukestown,Tredegar, Gwent NP2 4EF, Wales. Manufacture and distribution of soft gelatine capsules Thompson & Capper Limited, * Hardwick Road, Astmoor, Runcorn, Cheshire WA7 1PH, England. Manufacture and sale of tablets and capsules +44 1495 308 900 +44 1495 308 990 enquiries@softgels.co.uk www.softgels.co.uk +44 1928 573 734 +44 1928 580 694 tablets@t-cuk.u-net.com www.t-cuk.u-net.com All the above companies are incorporated and operate principally in the Republic of Ireland except those indicated with * which are incorporated and operate principally in England and Wales and DCC Shoprider Inc. which is incorporated and operates principally in the United States of America. 76 DCC plc Annual Report and Accounts 1999 Shareholder Information Shareholder Analysis at 7 May 1999 Number of accounts % of accounts Number of shares (’000) 1 - 1,000 1,001 - 10,000 10,001 - 50,000 50,001 - 100,000 100,001 - 250,000 Over 250,000 Total 1,268 1,089 84 22 32 40 2,535 50.0% 43.0% 3.3% 0.8% 1.3% 1.6% 677,856 2,900,840 1,946,100 1,513,684 5,072,875 75,023,200 % of shares 0.8% 3.4% 2.2% 1.7% 5.8% 86.1% 100.0% 87,134,555 100.0% Share Price Data (EE cents) Year ended 31 March 1999 Year ended 31 March 1998 High 902 902 Low 432 387 31 March 725 825 The market capitalisation of DCC plc at 31 March 1999 was E632 million (1998: E692 million) and at 7 May 1999 was E762 million (E8.75 per share). Investor Relations Registrars For investor enquiries please contact: Michael Scholefield, Investor Relations Manager, DCC plc, DCC House, Brewery Road, Stillorgan, Blackrock, Co Dublin. Tel: + 353 1 283 1011. Fax: + 353 1 283 1018. email: investorrelations@dcc.ie Web Site DCC’s web site address is www.dcc.ie Administrative enquiries about the holding of DCC shares should be directed in the first instance to the Company’s Registrars at: Computershare Services (Ireland) Limited, Heron House, Corrig Road, Dublin 18. Tel: + 353 1 216 3100 Fax: + 353 1 216 3151 DCC plc Annual Report and Accounts 1999 77 Shareholder Information Amalgamation of Accounts Shareholders who receive duplicate sets of company mailings owing to multiple accounts in their name should write to the Company’s Registrars at the address on page 77 to have their accounts amalgamated. Dividends Shareholders will be offered the option of having future dividends paid in Euros, Irish pounds or pounds sterling. Shareholders will also be offered the opportunity of having future dividends paid directly to their bank account. Due to changes in the taxation of dividends in Ireland, dividends paid after 5 April 1999 will no In addition, dividends longer carry a tax credit. paid to certain shareholders will be paid net of withholding tax, currently at the rate of 24%. Some shareholders will be entitled to an exemption from this witholding tax. As an interim measure, no witholding tax will apply in respect of dividends paid to a person, whether or not the beneficial owner, whose address in the share register is in another Member State of the EU or in a country with which Ireland has concluded a double taxation treaty. This interim measure applies only in respect of dividends paid before 6 April 2000. In addition, provided certain administrative procedures are adhered to, a witholding tax exemption will also apply to Irish resident companies, Revenue approved pension funds, certain residents of other EU Member States or tax treaty countries, companies controlled by residents of other EU Member States or tax treaty countries and companies whose principal class of shares (or those of their parent companies) are regularly traded on a recognised Stock Exchange. There is no witholding tax exemption available for individuals who are tax resident in Ireland. The Company will write to shareholders to provide further details of all these matters at the time of the next dividend announcement (expected to be in early November 1999.) Annual General Meeting The Annual General Meeting will be held at the Conrad International Hotel, Earlsfort Terrace, Dublin 2 on Friday 25 June 1999 at 11.00am. The Notice of Meeting together with an explanatory letter from the Chairman and a proxy card accompany this report. CREST DCC is a member of the CREST share settlement system. Shareholders may continue to hold paper share certificates or hold their shares in electronic form. Financial Calendar Preliminary results announced Annual Report posted Annual General Meeting Interim results announced Payment date for interim dividend 10 May 1999 26 May 1999 25 June 1999 early November 1999 early January 2000 78 DCC plc Annual Report and Accounts 1999 Index Page 37 37 23 68 78 72 54 25 Directors' Report Directors' Share Options Dividend Cover Dividends (note 13) Divisional Reviews DCC SerCom DCC Energy DCC Foods 35,36 DCC Healthcare Accounting Convention Accounting Policies Acquisition and Development Expenditure Acquisitions of Subsidiary Undertakings (note 38) Annual General Meeting Approval of Financial Statements (note 48) Associated Undertakings (note 17) Audit Committee Members Auditors' Report Bank and other Debt (notes 24-26) Capital Commitments (note 42) Capital Expenditure Capital Grants (note 37) Cash and Term Deposits (note 22) Chairman's Statement Chief Executive/Deputy Chairman's Review Company Balance Sheet Consolidated Balance Sheet Consolidated Cash Flow Statement Consolidated Profit and Loss Account Contingent Liabilities (note 44) Corporate Governance Corporate Profile Creditors,Trade and Other (note 23) CREST Currency Risk Management Debtors (note 20) Deferred Taxation (note 30) Depreciation Derivative Financial Instruments (note 28) Directors' and Company Secretary's Interests Directors' Interests in Contracts Directors of the Company Directors' Remuneration (Report on) 59 78 24 58 64,50 53,50 61,24 32 31 5 30 Earnings Per Share (note 14) 52,22,1 59 71 Employee Information (note 4) Employee Share Schemes 23,70 Euro 68 58 6 8 43 42 44 40 71 Finance Leases (note 27) Financial Assets (note 17) Financial Calendar Financial Highlights Financial Strength Financial Review Financial Summary and Key Ratios 1992 - 1999 Fixed Assets (note 16) 7,26 Forward Contracts - currency Inside Cover Going Concern Goodwill Group at a Glance Group Directory Health and Safety Interest Payable & Similar Charges (notes 7 & 8) 49,21 Interest Rate Risk Management Internal Financial Controls Investor Relations 24 27 77 Page 28 33 22 51,78,28 12 14 16 18 48 30 6 61 54 78 1 23 20 4 53 63 27 20,53 2 73 29 DCC plc Annual Report and Accounts 1999 79 Index Subsidiary Undertakings (note 18) Substantial Shareholdings Swaps - currency Swaps - interest rates Taxation (note 10) Treasury Policy and Management Page 57 28 62 62 50 24 Turnover Segmental Analysis 45,47 Web Site Working Capital Year 2000 77 22 7,24 Minority Interests (note 11) Net Cash/Debt (note 41) Net Debt/Equity Ratio Nomination Committee Members Notes to the Financial Statements Operating Assets Operating Cash Flow Operating Lease Commitments (note 43) Operating Profit by Division Pensions and Similar Obligations (note 31) Pensions - Directors Provisions for Liabilities and Charges (note 29) Reconciliation of Movements in Equity Shareholders' Funds (note 35) Reconciliation of Net Cash Flow to Movement in Net (Debt) / Cash Registrars Related Party Transactions (note 47) Remuneration Committee Reporting Currency (note 45) Reserves (note 34) Page 51 71 23 25 45 22 23,70 71 1 65 30 64 67 44 77 72 30 72 67 Return on Capital Employed (ROCE) 1,21 Segmental Information (note 1) Service Agreements Share Capital (note 32) Share Premium (note 33) Share Price Data Shareholder Information Shareholders' Funds Statement of Directors' Responsibilities Statement of Total Recognised Gains and Losses Stocks (note 19) 45 31 66 66 77 77 22,67 34 41 57 80 DCC plc Annual Report and Accounts 1999 

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