Annual Report & Accounts 2000 DCC plc Annual Report & Accounts 2000 Contents Financial Highlights Group at a Glance Directors Chairman’s Statement Chief Executive /Deputy Chairman’s Review Operating Review Financial Review Five Year Summary and Key Ratios Management 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 6 8 12 22 26 27 28 30 32 34 38 39 41 44 49 78 79 81 DCC adds value in the marketing and distribution of its own and third party branded products in growth markets in IT, energy, healthcare and food. DCC also provides complementary supply chain management and e-fulfilment services to the IT industry. The company's shares are quoted on the Irish and London stock exchanges. DCC plc Annual Report & Accounts 2000 Financial Highlights Turnover E1.316bn up 55.3% of continuing activities operating Profit of continuing activities operating E73.8m up 27.4% Cash flow E96.3m up 47.0% adjusted Earnings 68.8c per share Dividend 17.6c per share up 20.3% up 20.1% s t h g i l h g i H l a i c n a n i F 1 e c n a l G a t a p u o r G 2 DCC plc Annual Report & Accounts 2000 Group at a Glance Value Added Marketing and Distribution DCC markets and distributes its own and third party branded products in growth markets. IT DCC is a European marketeer and distributor of leading brands of computer hardware and software. Customers include computer dealers, value added resellers, large multiple retailers, computer superstores, mail order catalogues and a wide range of other resellers, which are served by highly trained and product focused telesales teams. During the year DCC acquired Distrilogie, a specialist value added distributor of computer storage products, based in France with sales offices in Spain, Portugal and Italy. Energy DCC supplies all grades of fuel oils, heating oils, diesel and petrol throughout the island of Ireland. It is also a nationwide supplier of liquefied petroleum gas (LPG) in Ireland and Britain. It supplies industrial, commercial, transport and domestic customers and holds strong positions in all the markets it serves. Healthcare DCC is the largest distributor of medical, surgical and laboratory equipment and consumables to Irish hospitals. The Group also manufactures and distributes lifestyle enhancing mobility and rehabilitation products for an ageing population in Britain, Continental Europe and the US. In nutraceuticals DCC manufactures health supplements and other tablets and capsules, which are marketed and distributed to the retail sector and the industry in Britain and to export markets worldwide. Food DCC markets and distributes healthy foods, snackfoods, hot and cold beverages, wine and bakery products in Ireland and provides chilled and frozen food distribution services. DCC’s food businesses service a broad customer base in the grocery, convenience, off-licence, health store and pharmacy sectors. The fast growing Irish catering sector is a particular focus for growth, especially in ground coffee and wine. Supply Chain Management and E-fulfilment Services Supply chain management services are complementary to the role of the modern distributor in adding value for its customers and suppliers. DCC is a leading provider of supply chain management services to international IT and telecommunications companies through SerCom Solutions. SerCom Solutions’ services include project management, procurement, sub-assembly, warehousing and just- in-time delivery. SerCom Solutions also provides a range of e-fulfilment services to support the processing and fulfilment of its customers’ e- commerce activities. e c n a l G a t a p u o r G 3 DCC plc Annual Report & Accounts 2000 Group at a Glance Profit before net exceptional gains, goodwill amortisation and tax 5 Year CAGR: 17.2% Emillion 71.3 59.2 46.6 40.1 36.2 96 97 98 99 00 Adjusted earnings per share 5 Year CAGR: 19.3% cent 68.8 57.2 45.4 37.5 31.9 96 97 98 99 00 Dividend per share cent 17.6 14.7 12.2 5 Year CAGR: 17.6% 10.2 8.8 96 97 98 99 00 DCC plc Annual Report & Accounts 2000 Directors Alex Spain: Chairman Jim Flavin: Chief Executive / Deputy Chairman s r o t c e r i D 4 Tony Barry Tommy Breen Alex Spain: Chairman Alex Spain, B.Comm., F.C.A. (aged 67), is non-executive Chairman of DCC 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: Chief Executive and Deputy Chairman Jim Flavin, B.Comm., D.P.A., F.C.A. (aged 57), 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 Deputy Chairman of Eircom plc. Tony Barry Tony Barry, Chartered Engineer (aged 65), non-executive Director, is a member of the Court of Bank of Ireland and a director of Greencore Group plc and Ivernia West plc. He was Chairman of CRH plc from 1994 to May 2000, having previously been Chief Executive. He is a past President of The Irish Business and Employers’ Confederation. Mr Barry joined the Board in 1995. Tommy Breen Tommy Breen, B.Sc (Econ), F.C.A., (aged 41), executive Director, joined DCC in 1985, having previously worked with KPMG. He is Managing Director of DCC SerCom. Mr Breen was co-opted to the Board in February 2000. DCC plc Annual Report & Accounts 2000 Directors s r o t c e r i D 5 Morgan Crowe Paddy Gallagher Kevin Murray Fergal O’Dwyer Morgan Crowe Morgan Crowe, Dip. Eng., M.B.A. (aged 55), 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 Paddy Gallagher, B.L., D.P.A. (aged 60), 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. He is a member of the Committee of Management of Irish Pension Fund Property Unit Trust. Mr Gallagher joined the Board in 1976. Kevin Murray Kevin Murray, B.E., F.C.A. (aged 41), executive Director, joined DCC in 1988, having previously worked with Shell Chemicals in London and Arthur Andersen in Dublin. He is Managing Director of DCC Energy and DCC Foods. Mr Murray was co-opted to the Board in February 2000. Fergal O’ Dwyer Fergal O’ Dwyer, F.C.A. (aged 40), executive Director, joined DCC in 1989 having previously worked with KPMG in Johannesberg and Price Waterhouse in Dublin. He was appointed Chief Financial Officer in 1994. Mr O’ Dwyer was co-opted to the Board in February 2000. DCC plc Annual Report & Accounts 2000 Chairman’s Statement t n e m e t a t S s ’ n a m r i a h C 6 covered 3.9 times by adjusted earnings per share (1999: 3.9 times). The final dividend will be paid on 4 July 2000 to shareholders on the register at the close of business on 26 May 2000. Financial Strength DCC is a highly cash generative group. Group operating cash flow increased by 47.0% to E96.3 million (1999: E65.5 million). After the sale of the Group's ordinary shareholding in Fyffes plc for E106.3 million and cash expenditure on acquisitions and development of E62.3 million, net cash at 31 March 2000 amounted to E89.2 million, compared to net debt of E20.3 million at 31 March 1999. Shareholders' funds at 31 March 2000 amounted to E329.1 million (1999: E195.2 million). Alex Spain: Chairman Results DCC's continued emphasis on organic profit growth together with the contribution for a full year from the successful acquisitions undertaken in the previous financial year were the key drivers behind another year of strong earnings growth, excellent Acquisitions, Capital Expenditure and Disposals operating cash flows and increased returns on capital employed. Profit before net exceptional gains, goodwill amortisation and taxation increased by 20.5% to E71.3 million. Adjusted earnings per share increased by 20.3% to 68.8 cent. The return on Acquisition and capital expenditure for the year amounted to E68.1 million. Acquisition expenditure (inclusive of debt and net of cash assumed on acquisition) amounted to E39.1 tangible capital employed increased to 39.5% from million. Acquisition activity during the year focused 36.3% and inclusive of acquisition goodwill the largely on the expansion of the Group's IT and return increased to 21.5% from 21.2%. healthcare distribution businesses into Continental Dividend Europe. In May 1999 DCC acquired Casa Garden (since renamed CasaCare), a German based The Directors are recommending a final dividend of distributor of mobility and rehabilitation products. In 11.15 cent per share which, when added to the January 2000, DCC acquired Distrilogie, a young, fast interim dividend of 6.45 cent per share, gives a total growing specialist distributor of computer storage dividend for the year of 17.60 cent per share. This products based in Paris with offices in Madrid, Lisbon represents an increase of 20.1% on the dividend of and Milan. Other acquisitions during the year included 14.66 cent per share paid in respect of the year the Cawoods oil business in Northern Ireland and ended 31 March 1999. The dividend for the year is a number of small LPG distributors in Britain. DCC plc Annual Report & Accounts 2000 Chairman’s Statement Capital expenditure in the year amounted to E29.0 million (1999: E18.0 million). This included E4.9 Outlook DCC operates in growth markets and is immensely million spent on a new IT distribution centre in Dublin. strong financially. It is well positioned for the future. In February 2000 DCC sold its holding of 31.2 million ordinary shares in Fyffes plc for E106.3 million. DCC Alex Spain Chairman first invested in Fyffes in 1981 and the realisation of 12 May 2000 a significant profit reflects well on the considerable achievements of Neil McCann and his team in building Fyffes into the leading fresh produce distributor in Europe. DCC continues to hold 4.6 million Fyffes convertible preference shares. In March 2000 the Group sold its 90% shareholding in International Translation & Publishing Limited for a cash consideration of E19.8 million. Board On 7 February 2000 Tommy Breen (Managing Director of DCC's SerCom division), Kevin Murray (Managing Director of DCC's Energy and Food divisions) and Fergal O'Dwyer (Chief Financial Officer) were co-opted to DCC's Board of Directors. These new directors bring a wealth of knowledge and experience to the Board. They each have more than ten years experience with DCC and have made a significant contribution to DCC's development as a leading value added marketing and distribution group. t n e m e t a t S s ’ n a m r i a h C 7 w e i v e R s ’ n a m r i a h C y t u p e D / e v i t u c e x E f e i h C 8 DCC plc Annual Report & Accounts 2000 Chief Executive/Deputy Chairman’s Review Development Focus The generation of superior medium to long term shareholder value through strong organic growth and good returns on capital have been priorities in DCC's development focus over many years. Bolt-on acquisitions of well managed companies are an important and complementary source of growth. It is planned to reinvest the cash proceeds of E126 million from the sale of DCC's 10.5% ordinary shareholding in Fyffes and its 90% shareholding in International Translation and Jim Flavin: Chief Executive /Deputy Chairman Another Year of Strong Growth Publishing in core activities. DCC achieved another year of strong growth and thus continued its excellent record. The Group SerCom: SerCom Distribution continued to grow reported in excess of 20% growth in adjusted strongly during the year, benefiting from increased e- earnings per share and generated a high return on commerce activity and the consequent growth in the capital employed. There was excellent growth in demand for internet infrastructure. Also, the growth operating cash flow and DCC ended the year with of the direct channel and related e-fulfilment activity an immensely strong balance sheet. has driven complementary growth in the demand for Adding Value SerCom Solutions' outsourced supply chain management and e-fulfilment services. During the DCC has significant positions in the marketing and past year SerCom Solutions has commenced small distribution of many leading brands, both owned and but exciting projects to engineer global supply chain third party, in the growth markets it serves. The management solutions on behalf of leading Group's focus is primarily on business-to-business international IT companies. trading where it generates the bulk of its turnover. Several factors have underpinned the Group's strong DCC was pleased to complete the acquisition of a growth: product focused sales teams, market sector 55% shareholding in the leading French computer knowledge, distribution reach and rigorous storage hardware and software distributor, operational cost control. In addition, we have the Distrilogie SA, during the year. The growth in necessary skilled personnel with the ability to demand for computer storage products and provide technical support and expertise to resellers Distrilogie's established reputation at the higher and business customers. value-added end of this market brings a new w e i v e R s ’ n a m r i a h C y t u p e D / e v i t u c e x E f e i h C 9 Chief Executive/Deputy Chairman’s Review DCC plc Annual Report & Accounts 2000 dimension to DCC's IT distribution businesses and an over many years. The Group has a deep distribution initial presence for DCC in the continental European reach and is particularly strong in supplies to the IT distribution market. catering sector. With a young population in Ireland and an expanding economy, DCC's key product Energy: DCC's energy businesses continued to be categories - coffee, wine, soft drinks, snacks and highly cash generative and achieved good profit healthy foods - are well positioned to benefit from growth against a background of rapidly rising energy the increasing trend towards eating out and a costs. Particular growth potential exists for Emo Oil growing demand for food and beverages suited to which generates approximately 50% of the operating contemporary lifestyles. profits in the energy business. IT and E-Commerce Healthcare: DCC, through its subsidiary Fannin DCC is committed to leveraging technology to Healthcare, is the clear market leader in the supply of generate maximum competitive advantage. During medical and surgical equipment and consumables to the year the Group continued to enhance its IT Irish hospitals. Its knowledge and experience in this infrastructure, which included the implementation of marketplace and its singular focus on providing an Enterprise Resource Planning systems and the added value service for both vendors and customers development of e-commerce solutions. in the supply of technically complex products will support further growth. DCC's nutraceutical The advent of e-commerce creates two distinct business is the only domestic operation in Britain opportunities for DCC: with the full-service capability to manufacture, • enabling e-commerce for third parties; and market and distribute nutraceuticals in both tablet and • utilising e-commerce within our own businesses. capsule format. From this base, we will continue to seek strong growth in both domestic and export sales The growth of e-commerce is driving growth in of nutraceuticals in the coming years as the consumer demand for internet infrastructure - the computer trend towards greater health awareness grows. DCC's hardware and software resources that enable expanding international mobility and rehabilitation companies to access, trade and service their business also grew strongly during the year and the presence on the web. SerCom Distribution is acquisition of CasaCare in Germany established a direct addressing this growth in demand for internet presence in the continental European marketplace. infrastructure through Micro-P and Gem in the UK, Sharptext in Ireland and Distrilogie in Food: DCC has successfully pursued a niche focus in Continental Europe. DCC is also supporting its the marketing and distribution of leading, owned and customers' participation in e-commerce through third party, food and beverage brands, and has the extensive e-fulfilment capabilities SerCom developed a strong presence in the Irish marketplace Solutions has developed. SerCom Solutions' new w e i v e R s ’ n a m r i a h C y t u p e D / e v i t u c e x E f e i h C 10 DCC plc Annual Report & Accounts 2000 Chief Executive/Deputy Chairman’s Review website and proprietary internet tools, "e-vision" Promoting Best Practice and "e-file", enable the leading international IT The extensive managerial knowledge, experience and telecoms customers who have outsourced and resources that exist throughout the DCC Group segments of their supply chain to SerCom have been a particular strength in DCC over many Solutions to have full, secure visibility of the years. The DCC Best Practice Programme was progress of their orders through SerCom initiated during the year to capitalise on this strength Solutions' ERP system. E-commerce was also by providing a formal framework for DCC's used effectively by SerCom Solutions to management teams to share best practice. Initial undertake global fulfilment programmes for one focus has been on areas such as telesales, logistics, of its key customers during the year. information technology, the generation of synergies and the leverage of DCC's group purchasing power. Within its businesses, DCC has a number of significant e-commerce initiatives in progress in its Management Process supply chain management and IT distribution With expanding operations in several countries and businesses which will drive service improvements, almost 3,000 employees, sound management operational cost reductions and the use of processes to support and drive DCC's continued complementary sales channels. Sharptext's recently expansion are of particular importance to the Group. launched web-based customer interface gives A devolved organisational structure affords local dealers and resellers customised on-line access to management significant operating control over their product information, pricing and availability, businesses with strategic, financial and functional promotions, order and account status and automates support and stewardship being provided from head- many otherwise time consuming customer service office. This environment contributes to a thriving, requirements such as account queries and returns. It growth-focused culture across the DCC Group. is planned to launch this web-based customer Coupled with an effective system of management interface in SerCom Distribution's British operations development and remuneration, it also results in a later in the year. very low level of management turnover in the Group and thus ensures a solid platform for DCC's development in the years ahead. Chief Executive/Deputy Chairman’s Review DCC plc Annual Report & Accounts 2000 Looking Forward DCC's commitment to organic growth and bolt-on acquisitions of well managed companies in growth markets is a strategy which has served the Group and its shareholders well for many years. I am confident that this strategy will continue to deliver good growth for shareholders in the years ahead. Jim Flavin Chief Executive / Deputy Chairman 12 May 2000 w e i v e R s ’ n a m r i a h C y t u p e D / e v i t u c e x E f e i h C 11 w e i v e R g n i t a r e p O 12 DCC plc Annual Report & Accounts 2000 Operating Review 2000 1999 Turnover Operating profit Operating margin Return on capital employed E542.3m a354.6m +52.9% E20.5m a15.0m +36.6% 3.8% 60.2% 4.2% 60.1% Value Added Marketing and Distribution SerCom Distribution SerCom Distribution continued to achieve excellent Micro-P and Gem. This expansion, which will increase sales and profit growth in hardware and software capacity to 2.5 times the existing level, reflects the distribution in Britain and Ireland. The reduction in high levels of volume growth which are anticipated in operating margin reflects a change in business mix the future. rather than any adverse trend in product margins. With the acquisition of Distrilogie, SerCom Sharptext, the Irish computer distributor, produced Distribution fulfilled its stated objective of expanding another good result in a buoyant market. Its new into Continental Europe. distribution centre in west Dublin was completed on schedule in December 1999 and Sharptext moved into Micro-P, the British hardware distribution business, the new premises in January 2000. Sharptext has generated significant growth across a broad range of recently disposed of its small direct sales business in product categories including PCs and peripherals, order to concentrate exclusively on the rapid networking products, components and consumables. development of its distribution activities. At the end of Its business approach has been consistently successful. April 2000 Sharptext launched its new e-commerce Through its pro-active, product focused telesales teams site - www.sharptext.com - which provides a full on- and efficient logistics and administration, Micro-P line distribution system. The objectives of the delivers a superior service to both its customers and its development, which has been carefully planned over leading brand suppliers such as Canon, Epson, Fujitsu- the past 18 months, are to improve the quality of Siemens, Phillips, Sony and Xerox. Micro-P received the service which Sharptext provides to its trade 1999 Peripherals Distributor of the Year award at the customers, to reduce operational costs and to create a VNU Channel Group Awards. complementary sales channel. It is planned to roll out similar sites based on the same model in the other Gem Distribution had a strong year across its business SerCom Distribution businesses later in the year. of consumer software distribution and gained a particular benefit in the second half from its In January 2000 DCC completed the acquisition of appointment as distributor of Sega's Dreamcast games Distrilogie, a young, fast growing specialist value console. Gem's position as the leading British added distributor of computer storage products based distributor of consumer software to the retail trade was in Paris. Distrilogie also has offices in Madrid, Lisbon recognised in April 2000 when it was presented with and Milan. With rapid growth forecast for the the Software Distributor of the Year award by the computer storage market, it is planned to grow National Association of Computer Retailers. Distrilogie aggressively as a pan-European business in Since the year end SerCom Distribution has geographic and product synergies with SerCom committed to expand its British warehouse facility in Distribution's operations in Britain and Ireland. Altham, near Manchester, which handles logistics for the internet infrastructure market and to exploit 13 DCC plc Annual Report & Accounts 2000 Operating Review 2000 1999 Turnover Operating profit Operating margin Return on capital employed E369.8m a193.3m +91.3% E20.0m a18.2m +10.1% 5.4% 37.4% 9.4% 32.5% w e i v e R g n i t a r e p O 14 Value Added Marketing and Distribution Energy Creditable growth was achieved in Energy in a year Although still trading under the Burmah and in which the price of crude oil and refined products Cawoods brands in these markets alongside the increased significantly and continuously. main Emo brand, the operations of both businesses have been fully integrated with those of Emo, Turnover almost doubled due to strong growth in oil yielding the anticipated cost savings and operating sales volumes and the sales price increases efficiencies, while continuing to grow volumes. implemented to recover the increased cost of oil and liquefied petroleum gas (LPG). Operating profit grew LPG volumes were slightly ahead of the previous by 10.1% as the strong volume growth in oil more year. A number of LPG price increases were than compensated for reduced margins in LPG. implemented during the financial year but, as is to be While the percentage operating margin fell back, this expected at a time of rapidly and continuously is a consequence of substantial increases in oil prices increasing product costs, sales price increases and was accentuated by the rapid expansion of the lagged product price increases throughout the year oil business which generates lower percentage with a consequent impact on LPG margins. Given margins but higher rates of return on capital. Tight more settled oil prices, LPG margins should return to control of working capital and capital expenditure more normal levels in the year ahead. ensured that DCC's energy businesses continued to be highly cash generative. DCC's oil distribution business serves end users directly in the major cities and operates through distributors in more rural areas. In the Republic of Ireland it is successfully developing a more substantial presence in the faster growing transport fuels market. Oil volumes grew by 63%, benefiting from strong growth in demand and an increased market share in distillates together with a full year's contribution from the Burmah business in the Republic of Ireland (acquired in January 1999) and eight months from the Cawoods business in Northern Ireland (acquired in August 1999). 15 DCC plc Annual Report & Accounts 2000 Operating Review 2000 1999 Turnover Operating profit Operating margin Return on capital employed E155.6m a114.8m +35.6% E16.0m a9.8m +63.1% 10.3% 38.5% 8.5% 31.8% Value Added Marketing and Distribution Healthcare w e i v e R g n i t a r e p O 16 The 63.1% operating profit increase in Healthcare reflects strong organic growth, an improvement in operating margins, the full year impact of acquisitions completed in the previous year and the acquisition of CasaCare in May 1999. Fannin Healthcare, the hospital supply business, achieved substantial sales and profit growth largely as a result of the BM Browne acquisition last year. The enlarged business is using its market leadership position to add further value to the service provided to its customers in the healthcare system through bundled product offerings and more sophisticated IT applications. In mobility and rehabilitation, good sales and profit growth resulted from improved purchasing, increased market share in Britain and increased sales in the German market following the acquisition of CasaCare. In nutraceuticals (vitamin and health supplements), the successful realisation of synergies from last year's acquisitions of Thompson & Capper (tablet manufacture) and EuroCaps (soft gel encapsulation) has boosted sales and profits significantly. Organic sales growth was strong and margins benefited from sourcing tablets and capsules from these recently acquired companies. 17 DCC plc Annual Report & Accounts 2000 Operating Review 2000* 1999* Turnover Operating profit Operating margin Return on capital employed * continuing activities E160.4m a120.2m +33.4% a7.1m +25.0% E8.9m 5.6% 38.2% 5.9% 37.6% Value Added Marketing and Distribution Food w e i v e R g n i t a r e p O 18 DCC's consistent record of achieving strong organic growth in sales and profit from its food businesses continued while there was also a first full year contribution from Kylemore, its 50% associate acquired at the end of the previous year. In Ireland there is continuing growth in food service, convenience foods and healthy/ "better for you" foods. As a leading supplier of branded products in categories such as ground coffee, wine, snackfoods, breads/confectionery and healthy foods, DCC's food businesses benefit from this growth. Strong volume growth was achieved in all of the major product categories noted above. In addition to its own Robt. Roberts ground coffee and Kelkin healthy foods brands, some of the other popular brands distributed by DCC in Ireland include KP and Phileas Fogg snackfoods, Jordans cereals, Filippo Berio olive oil and Torres wines. During the year DCC added Robinsons to its existing range of soft beverages which includes Libby's and Tango. Kylemore produced a satisfactory result, with the restaurants performing well. With a strengthened management team now in place, the company is well positioned for development. Allied Foods, the 50% owned specialist chilled and frozen foods distributor, continued its evolution to a more logistics focused business. 19 w e i v e R g n i t a r e p O 20 DCC plc Annual Report & Accounts 2000 Operating Review Turnover Operating profit Operating margin Return on capital employed * continuing activities 2000* 1999* E61.6m E3.8m 6.2% 22.9% a43.9m +40.2% a5.4m -29.7% 12.4% 36.3% Supply Chain Management Services SerCom Solutions SerCom Solutions grew its business strongly in a The e-fulfilment projects undertaken to date, though year characterised by considerable development modest in scale, have been successful and provide a activity, which included the launch of its new identity platform for SerCom Solutions to grow its services in "SerCom Solutions" and an expanded range of this area for a wider range of customers. supply chain management and e-fulfilment services. In order to focus its development on these exciting growth areas, SerCom Solutions sold ITP, its localisation business. The IT industry outsources certain business critical activities to a small number of carefully selected partners in order to achieve cost efficient distribution, shorter lead times to market and reduced inventory levels. SerCom Solutions provides its customers in the IT industry with a range of these supply chain management services including procurement, project management, sub- assembly, warehousing, just-in-time delivery and e-commerce solutions. Recognising that IT is a key factor in successful provision of supply chain management services, SerCom Solutions has continued to invest in additional IT and customer service personnel and systems development, including a range of e-commerce initiatives. The new IT investment is focused on electronically linking the supply chain through the direct interface of SerCom Solutions' IT systems with those of its customers, its customers' suppliers and its customers' customers. While this investment is impacting profitability in the short term, SerCom Solutions is positioning itself to win new business in the rapidly developing market for supply chain management and e-fulfilment services. 21 DCC plc Annual Report & Accounts 2000 Financial Review w e i v e R l a i c n a n i F 22 A detailed review of the Group’s value added marketing and distribution and supply chain management activities is contained in the Operating Review on pages 12 to 21. The operating profit from other interests of E4.6 million (1999 E2.4 million) was generated principally from the Group’s 49% shareholding in Manor Park Homebuilders, which enjoyed another excellent year. Fergal O’Dwyer: Chief Financial Officer The Group's operating margin reduced from 6.8% to 5.6%. The following is an overview of the principal Strong Growth reasons for the change: DCC's financial position at 31 March 2000 reflects another year of strong revenue and profit growth and good cash generation. Turnover of continuing activities grew by 55.3% to E1,316.1 million while operating profit of continuing activities increased by 27.4% to E73.8 million. Supply Chain Management Services Food Healthcare SerCom Distribution 5.2% 27.7% 12.1% 21.6% 6.2% Other 27.2% Energy Operating Profit - Continuing Activities Energy margin IT Distribution margin Group margin excluding Energy and IT Distribution 2000 1999 5.4% 3.8% 9.4% 4.2% 8.2% 8.3% In the year Energy turnover increased substantially (91.3%) due to both rising oil prices and volume growth. However because the energy industry operates on a contribution per litre basis rather than on a percentage operating margin on turnover, the Energy margin reduced from 9.4% to 5.4%. The Group margin was also impacted by the faster growth of the IT Distribution businesses which, while generating an excellent return on capital employed (60.2% in the year), earn a lower operating margin compared to the margin for the entire Group. The operating margin of the Group excluding Energy and IT Distribution was similar to the previous year at 8.2% (8.3%). DCC plc Annual Report & Accounts 2000 Financial Review The Group's return on tangible capital employed difference between the effective rate and the increased to 39.5% (1999: 36.3%) and inclusive of standard rate of corporation tax in Ireland. acquisition goodwill the return amounted to 21.5% (1999: 21.2%). Manufacturing relief results in an effective tax rate The net interest charge increased to E6.4 million from E4.4 million principally due to higher average of 10% being applied to manufacturing profits and this arrangement will continue until 2010. The standard rate of corporation tax in Ireland will be reduced on net debt in the earlier part of the year. Interest cover a phased basis to 12.5% by 1 January 2003. was 12.1 times (1999: 14.3 times). Profit before net exceptional gains, goodwill amortisation and tax rose by 20.5% to E71.3 million. An analysis of the taxation charge is contained in note 11 to the financial statements. Cash Flow The disposal of interests in Fyffes plc and Strong operating cash flows were generated during International Translation and Publishing Limited resulted in a net exceptional gain before taxation of E71.4 million. In addition there was a related gain of E20.7 million through the realisation of goodwill the year, particularly in DCC's energy businesses. Cash flow from operating activities was E96.3 million, an increase of 47.0% on the previous year. Working capital was well managed during the year with previously eliminated against reserves. particularly favourable circumstances at 31 March Dividend 2000 contributing to a reduction in working capital to 11.6 days sales compared to 17.4 days sales at 31 The total dividend for the year of 17.6 cent per share March 1999. The table overleaf sets out a cash flow represents an increase of 20.1% over the previous summary for the year ended 31 March 2000. w e i v e R l a i c n a n i F 23 year. The dividend is covered 3.9 times by adjusted earnings per share. This level of cover is consistent with previous years. Taxation The Group's taxation charge on ordinary activities for the year represents an effective tax rate of 15.0% (1999: 15.0%). The impact of manufacturing relief and the geographic spread of DCC's profits contribute to the DCC plc Annual Report & Accounts 2000 Financial Review w e i v e R l a i c n a n i F 24 Cash Flow Summary Net Cash Operating cash flow Disposals Share issues (net) Interest Taxation Capital expenditure (net) Acquisitions Dividends Translation adjustment Other Movement in net cash/(debt) Opening net (debt)/cash 2000 E’m 96.3 109.7 - (5.5) (9.4) (24.7) (37.6) (13.7) (5.5) (0.1) 109.5 (20.3) 1999 E’m 65.5 - 8.7 (4.1) (5.8) (16.8) (59.1) (10.5) 2.7 (7.9) (27.3) 7.0 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 551.3 (191.8) (161.7) (108.6) 89.2 The Group's cash is analysed in note 23 to the financial statements. An analysis of DCC's debt at 31 March 2000, including currency, interest rates and maturity periods, is shown in notes 24 to 27 to the financial statements. Closing net cash/(debt) 89.2 (20.3) Treasury Policy and Management Balance Sheet DCC has an immensely strong balance sheet at 31 March 2000 with shareholders’ funds of E329.1 million and net cash of E89.2million. This net cash position represents a The principal objective of the Group's treasury policy is the minimisation of financial risk at reasonable cost. This policy is reviewed and approved annually by the Board. The Group does not take speculative positions but seeks, where reversal of the 10.4% gearing level that prevailed at the considered appropriate, to hedge underlying end of the previous year. The composition of net cash at trading and asset/liability exposures by way of 31 March 2000 is shown in the following table. derivative financial instruments (such as interest rate and currency swaps and forward contracts). DCC's Group Treasury function centrally manages the Group's cash and debt and administers the Group’s funding requirements. Divisional and subsidiary management manage foreign currency and commodity price exposures within approved guidelines. An analysis of the Group's hedging positions is contained in note 28(b) to the financial statements. DCC plc Annual Report & Accounts 2000 Financial Review Currency risk management Credit risk management DCC's reporting currency and that in which its share DCC transacts with a variety of financial institutions capital is denominated is the Euro. Due to the nature for the purpose of placing deposits and entering into of the Group's activities, exposures arise in the derivative contracts. The Group actively monitors its course of ordinary trading to other currencies, credit exposure to each counterparty within principally sterling and the US dollar. Trading approved guidelines. foreign currency exposures are generally hedged by using forward contracts to cover specific or Commodity price risk management estimated purchases and receivables. Commodity forwards, swaps and options are used to hedge potential price movements in liquefied Approximately half of the Group's operating profits are petroleum gas products and oil products purchased sterling denominated. Where appropriate, hedges are by the Group's energy businesses in Britain and put in place to minimise the exchange rate related Ireland. All such contracts are entered into with volatility of these earnings. However, some natural approved counterparties and hedge a projected hedges also exist within the Group as a proportion of the future purchase or sale of the commodity in question, Group's interest payments and of purchases by certain usually for a two month period. w e i v e R l a i c n a n i F 25 of its Irish businesses are sterling denominated. In order to protect shareholders' funds from material variations due to sterling exchange movements, a proportion of the Group’s sterling net assets are hedged by an equivalent amount of foreign currency borrowings. Interest rate risk management The Group finances its operations through a mixture of retained profit, cash and 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. DCC plc Annual Report & Accounts 2000 Five Year Summary and Key Ratios s o i t a R y e K d n a y r a m m u S r a e Y e v i F 26 Profit & Loss Account Year ended 31 March Turnover Operating profit Net interest 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 (cent) - Basic adjusted (cent) Dividend per share (cent) Dividend cover (times) Interest cover (times) Consolidated Balance Sheet At 31 March Tangible fixed assets Associated undertakings Goodwill Net current assets Net cash/(debt) Shareholders' funds Minority interests Other long term creditors/provisions Capital expenditure Acquisitions Development expenditure Operating cash flow 1996 E’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 1996 E’m 86.9 44.4 - 131.3 2.2 (10.5) 123.0 102.6 4.4 16.0 123.0 13.3 66.1 79.4 34.3 1997 E’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 1997 E’m 89.4 41.9 - 131.3 10.7 (4.5) 137.5 122.5 4.8 10.2 137.5 14.9 23.4 38.3 43.5 1998 E’m 892.3 51.1 (4.5) 46.6 (0.2) - 46.4 (7.5) (1.4) 37.5 45.08 45.41 12.19 3.7 11.5 1998 E’m 98.8 46.5 - 145.3 15.1 7.0 167.4 154.1 5.3 8.0 167.4 18.6 14.8 33.4 50.8 1999 E’m 1,059.3 63.7 (4.5) 59.2 (1.5) - 57.7 (8.9) (0.8) 48.0 55.39 57.19 14.66 3.9 14.3 1999 E’m 106.7 56.9 46.0 209.6 23.1 (20.3) 212.4 195.2 3.9 13.3 212.4 18.0 75.4 93.4 65.5 2000 E’m 1,527.0 77.7 (6.4) 71.3 (3.5) 71.4 139.2 (18.7) (0.7) 119.8 137.39 68.80 17.60 3.9 12.1 2000 E’m 123.1 34.6 75.6 233.3 30.6 89.2 353.1 329.1 3.3 20.7 353.1 29.0 39.1 68.1 96.3 Net cash (debt)/equity (%) Return on tangible capital employed (%) Average number of employees (9.7%) 26.4% 2,081 (3.6%) 30.5% 2,170 4.6% 33.6% 2,294 (10.4%) 36.3% 2,664 27.1% 39.5% 2,933 DCC plc Annual Report & Accounts 2000 Management Senior Group/ Divisional Management Senior Subsidiary and Associate Company Management Value Added Marketing and Distribution Jim Flavin Chief Executive/Deputy Chairman Tommy Breen Managing Director SerCom Morgan Crowe Managing Director Healthcare Kevin Murray Managing Director Energy & Food Fergal O'Dwyer Chief Financial Officer Ann Keenan Head of Human Resources Donal Murphy Head of Group IT Colman O'Keeffe Deputy Managing Director Healthcare Michael Scholefield Group Secretary and Investor Relations Manager Daphne Tease Group Treasurer Gerard Whyte Group Internal Auditor IT Paul Donnelly Managing Director Gem Distribution Gordon McDowell Managing Director Micro Peripherals Energy Paul White Managing Director Sharptext Philippe Fournier and Serge Valin Directeurs General Distrilogie Sam Chambers Managing Director DCC Energy Northern Ireland Daniel Murray Managing Director Emo Oil Paddy Kilmartin Managing Director Flogas UK Pat Mercer Managing Director Flogas Ireland Healthcare John Dalton Managing Director DMA Mike Davies Managing Director Healthilife Günter and Boris Frankowski Joint Managing Directors CasaCare Barry Leonard Managing Director Virtus Harry Niece Managing Director EuroCaps Food Mitchel Barry Managing Director Allied Foods Brian Hogan Managing Director Kylemore Group Ken Peare Managing Director Robt. Roberts Declan Ryan Managing Director Atlas Environmental Barry O'Neill Deputy Managing Director DMA Dan Teeters President DCC Shoprider Inc Reg Witheridge Managing Director Thomson & Capper Peter Woods Chief Executive Fannin Healthcare Bernard Rooney Managing Director Kelkin Michael Scanlon Managing Director Brodericks Supply Chain Management Services Kevin Henry and Ultan Reilly Joint Managing Directors SerCom Solutions t n e m e g a n a M 27 DCC plc Annual Report & Accounts 2000 Corporate Information n o i t a m r o f n I e t a r o p r o C 28 Directors Alex Spain* Chairman Jim Flavin Chief Executive /Deputy Chairman Tony Barry* Tommy Breen Morgan Crowe Paddy Gallagher* Kevin Murray Fergal O'Dwyer *non-executive 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 Secretary Michael Scholefield Registered and Head Office DCC House Stillorgan Blackrock Co. Dublin Solicitors William Fry Fitzwilton House Wilton Place Dublin 2 Stockbrokers Davy Stockbrokers 49 Dawson Street Dublin 2 Cazenove & Co 12 Tokenhouse Yard London EC2R 7AN Auditors PricewaterhouseCoopers Chartered Accountants & Registered Auditors Wilton Place Dublin 2 Bankers ABN AMRO Bank Bank of Ireland Allied Irish Banks Ulster Investment Bank KBC Bank National Westminster Bank Registrars and Transfer Office Computershare Services (Ireland) Limited Heron House Corrig Road Sandyford Industrial Estate Dublin 18 Directors' Reports and Financial Statements for the year ended 31 March 2000 29 s t n u o c c A 30 DCC plc Annual Report & Accounts 2000 Corporate Governance The Board of Directors Directors: The Board of DCC consists of five executive and three non-executive Directors and the roles of the 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 pages 4 and 5. All of the Directors bring independent judgement to bear on issues of strategy, risk, 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. The Board gives consideration as to whether new Directors require additional training for their role. Board Committees: There are three principal 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. The Nomination Committee comprises the non-executive Directors and the Chief Executive/Deputy Chairman. 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. Directors’ Remuneration The Board’s report on Directors’ remuneration is set out on pages 34 to 37. 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. The 1999 Annual Report and AGM notice were sent to shareholders 20 working days before the meeting and the level of proxy votes cast on each resolution, and the numbers for and against, were announced at the meeting. Similar arrangements have been made for the 2000 Annual Report and AGM. The 2000 AGM will be held on 3 July 2000 at 11.00am at the Berkeley Court Hotel, Lansdowne Road, Dublin 4. Accountability and Audit Audit Committee: 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, review of the scope and results of the work performed by both internal and external auditors and review of the Group’s system of internal control. Internal Control The Company has complied with the Combined Code provisions in respect of internal control by reporting on internal financial control in accordance with the guidance for Directors on internal control and financial reporting issued by the Rutteman Committee in December 1994, as permitted by the transitional rules of the Irish and London Stock Exchanges. The updated guidance for Directors on internal control published by the Turnbull Committee in September 1999 extends the existing requirement in respect of internal financial control to cover all controls including financial, operational and compliance controls and risk management. The procedures necessary to implement this guidance have been established and have been fully operational since 1 April 2000. DCC plc Annual Report & Accounts 2000 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; and • 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. Going Concern 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 existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. The Directors’ responsibility for preparing the financial statements is explained on page 38 and the reporting responsibilities of the auditors are set out in their report on pages 39 and 40. Compliance DCC has complied, during the year ended 31 March 2000, with all of the Principles of Good Governance and Code of Best Practice set out in the Combined Code, save that details of Directors’ remuneration have been provided on an aggregate basis as permitted by the Listing Rules of the Irish Stock Exchange. s t n u o c c A 31 s t n u o c c A 32 DCC plc Annual Report & Accounts 2000 Report of the Directors for the year ended 31 March 2000 The Directors present their report and the audited financial statements for the year ended 31 March 2000. Principal Activities DCC adds value in the marketing and distribution of its own and third party branded products in four market sectors: IT (through SerCom Distribution), Energy, Healthcare and Food. DCC is also one of Europe’s leading providers of supply chain management services (including e-fulfilment) to the IT industry through SerCom Solutions. A summary of the Group’s activities is set out on pages 2 and 3. Subsidiary and Associated Companies Details of the Company’s principal subsidiaries are set out on page 78. Details of its principal associated undertakings are set out on page 60, in note 18 to the financial statements. Results and Business Review The profit for the financial year attributable to Group shareholders amounted to e119.8 million as set out in the Consolidated Profit and Loss Account on page 44. This represents an increase of 149.8% over the attributable profit for the year ended 31 March 1999. The Chairman’s Statement on pages 6 and 7, the Chief Executive/Deputy Chairman’s Review on pages 8 to 11, the Financial Review on pages 22 to 25 and the Operating Review on pages 12 to 21 contain a review of the development of the Group’s business during the year, of the state of affairs of the business at 31 March 2000, of recent events and of likely future developments. Dividends An interim dividend of 6.45 cent per share was paid on 26 November 1999. The Directors recommend the payment of a final dividend of 11.15 cent per share. Subject to shareholders’ approval at the Annual General Meeting on 3 July 2000, this dividend will be paid on 4 July 2000 to shareholders on the register on 26 May 2000. The total net dividend for the year ended 31 March 2000 is 17.60 cent per share, amounting to e15.3 million. The balance of profit attributable to Group shareholders, which is retained in the business, amounts to e104.5 million. 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 12 May 2000 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* 3i Group plc Aberdeen Asset Managers Irish Life Assurance plc * ** Notified as non-beneficial interests. Under Irish and UK law the shares are held by non-beneficial holders. No of E0.25 Ordinary Shares % of Issued Share Capital 11,534,259 9,643,152 5,729,363 3,620,796 3,518,806 3,385,506 13.2% 11.0% 6.5% 4.1% 4.0% 3.9% Apart from these holdings, the Company has not been notified of any other interest of 3% or more in its issued ordinary share capital. DCC plc Annual Report & Accounts 2000 Report of the Directors for the year ended 31 March 2000 Directors The names of the Directors and a short biographical note on each Director appear on pages 4 and 5. Tommy Breen, Kevin Murray and Fergal O’Dwyer were co-opted to the Board on 7 February 2000. In accordance with Article 83(b) of the Articles of Association these Directors retire at the 2000 Annual General Meeting and, being eligible, offer themselves for re-election. In accordance with Article 80 of the Articles of Association, Tony Barry and Morgan Crowe retire by rotation at the 2000 Annual General Meeting and, being eligible, offer themselves for re-election. None of the retiring directors has a service contract with the Company or any member of the Group. Details of Directors’ shareholdings and share options are set out in the Board’s Report on Directors’ Remuneration on pages 34 to 37. Health and Safety It is the policy of the Group to ensure the safety, health and welfare of employees by maintaining safe places and systems 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. Year 2000 During the year DCC completed the formally structured Year 2000 compliance programme that it began in 1997. The costs to the Group of implementing this programme did not add materially to the Group’s normal expenditure on the maintenance and upgrading of computer hardware and software. As a result of the work undertaken, no significant disruption to the business internally or to customers was experienced. Euro DCC’s preparation for Euro changeover is proceeding satisfactorily with most companies in the Group already in a position to engage in dual currency trading. Costs of preparation for the Euro are not expected to have a significant impact on the Group’s financial position or its trading activities. DCC’s share capital was re-denominated into Euros during the year and both the current and prior year financial statements have been prepared in Euros. s t n u o c c A 33 Political Donations There were no political contributions which require to be disclosed under the Electoral Act, 1997. Auditors The auditors, 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. 12 May 2000 DCC plc Annual Report & Accounts 2000 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 Directors and the Remuneration Committee is authorised to obtain access to professional advice if deemed desirable. Executive Directors’ Remuneration Other than for the Chief Executive, there are no service agreements between any Director of the Company and the Company or any of its subsidiaries. The Chief Executive’s service agreement provides for one year’s notice of termination by the Company. s t n u o c c A The typical elements of the remuneration package for executive Directors are basic salary, pension benefits, a company car and performance related remuneration based on the Company’s share option scheme and annual bonuses. 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 salaries of executive Directors are reviewed annually having regard to personal performance, Company performance and competitive market practice. No fees are payable to executive Directors. The Company’s share option arrangements enable senior management to build, over time, a shareholding in the Company which is material to their net worth and encourages identification with shareholders’ interests. The share options granted to executive Directors form a significant part of their total remuneration package. The Remuneration Committee believes 34 this long standing policy has been instrumental in motivating and retaining senior management of the quality required to achieve strong growth. Share options are granted on a phased basis and Directors 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 36 and 37. Employee Share Schemes The DCC plc 1998 Employee Share Option Scheme was approved by shareholders in 1998. 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 grant of both basic and second tier options, in each case up to a maximum of 5% of the Company’s issued share capital. At 31 March 2000 employees held basic tier options to subscribe for 1,874,000 ordinary shares (2.1% of issued share capital) and second tier options to subscribe for 1,656,000 ordinary shares (1.9% of issued share capital) 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 and under which 205,000 ordinary shares remain partly paid (1999: 210,000). 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 (0.7% of issued share capital). 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 Committee duties. Directors’ 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 normal retirement date. DCC plc Annual Report & Accounts 2000 Report on Directors’ Remuneration A pension is funded for the Chairman, based on his annual fee, to provide a 1/60th accrual for each year of pensionable service. The table below shows the increase in the accrued pension benefits to which the Directors have become entitled during the year ended 31 March 2000 and the transfer value of the increase in accrued benefit: 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 Executive Non-Executive Directors e’000 61 484 818 Chairman e’000 2 30 34 The transfer value has been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. 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 undertakings and any Director of the Company. Directors’ Remuneration Executive Directors Salary and benefits: Basic salary Benefits Performance related payments Pension charge for year Total executive Directors’ remuneration Average number of executive Directors Average basic salary per executive Director % change on prior year Non-Executive Directors Fees Pension charge for Chairman Total non-executive Directors’ remuneration Average number of non-executive Directors Average non-executive Directors’ remuneration % change on prior year Retired Director Payment to retired Director Total Directors’ Remuneration Average total number of Directors Notes 2000 E’000 1999 e’000 1 2 3 4 2 5 771 53 824 11 218 1,053 2.4 317 9% 131 22 153 3.0 51 5% 15 1,221 5.4 584 49 633 - 167 800 2.0 292 126 21 147 3.0 49 15 962 5.0 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. Tommy Breen, Kevin Murray and Fergal O’Dwyer were co-opted to the Board as executive Directors on 7 February 2000. 4. Includes Chairman’s and Board Committee fees. 5. Ex gratia pension paid to a retired non-executive Director. s t n u o c c A 35 s t n u o c c A 36 DCC plc Annual Report & Accounts 2000 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 2000, together with their interests at 31 March 1999 (or date of appointment, if later), were: Alex Spain Jim Flavin Tony Barry Tommy Breen Morgan Crowe Paddy Gallagher Kevin Murray Fergal O’Dwyer Michael Scholefield (Secretary) * or date of appointment if later No of Ordinary Shares At 31 March 2000 At 31 March 1999* 15,634 2,284,355 7,000 173,362 731,339 1,040 164,618 113,765 153,518 15,634 2,283,349 7,000 173,362 731,339 1,040 164,618 113,765 153,518 All of the above interests were beneficially owned. At 31 March 1999, Jim Flavin had a non-beneficial interest in 2,012 ordinary shares. There were no changes in the interests of the Directors and the Company Secretary between 31 March 2000 and 12 May 2000. 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. The following are details of share options granted to Directors under the DCC plc 1998 Employee Share Option Scheme: No of Options Weighted Average At 31 March 1999 Granted in year* Exercised in year At 31 March 2000 Exercise Price cent Normal Exercise Period Jim Flavin Basic Second Tier Basic Second Tier Tommy Breen Basic Second Tier Basic Second Tier Morgan Crowe Basic Second Tier Basic Second Tier Kevin Murray Basic Second Tier Basic Second Tier Fergal O’Dwyer Basic Second Tier Basic Second Tier 200,000 200,000 - - 400,000 45,000 45,000 - - 90,000 50,000 50,000 - - 100,000 45,000 45,000 - - 90,000 45,000 45,000 - - 90,000 - - 75,000 75,000 150,000 - - 50,000 50,000 100,000 - - 50,000 50,000 100,000 - - 50,000 50,000 100,000 - - 50,000 50,000 100,000 - - - - - - - - - - - - - - - - - - - - - - - - - 200,000 200,000 75,000 75,000 550,000 45,000 45,000 50,000 50,000 190,000 50,000 50,000 50,000 50,000 200,000 45,000 45,000 50,000 50,000 190,000 45,000 45,000 50,000 50,000 190,000 720.6 720.6 700.0 700.0 709.1 709.6 700.0 700.0 700.4 700.9 700.0 700.0 709.1 709.6 700.0 700.0 709.1 709.6 700.0 700.0 June 2001 - Nov 2008 June 2003 - Nov 2008 Nov 2002 - Nov 2009 Nov 2004 - Nov 2009 June 2001 - Nov 2008 June 2003 - Nov 2008 Nov 2002 - Nov 2009 Nov 2004 - Nov 2009 June 2001 - Nov 2008 June 2003 - Nov 2008 Nov 2002 - Nov 2009 Nov 2004 - Nov 2009 June 2001 - Nov 2008 June 2003 - Nov 2008 Nov 2002 - Nov 2009 Nov 2004 - Nov 2009 June 2001 - Nov 2008 June 2003 - Nov 2008 Nov 2002 - Nov 2009 Nov 2004 - Nov 2009 * Options granted during the year to Tommy Breen, Kevin Murray and Fergal O’Dwyer were granted prior to the date of their appointment as Directors. DCC plc Annual Report & Accounts 2000 Report on Directors’ Remuneration 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: At 31 March 1999* No of Options Exercised in year At 31 March 2000 Exercise Price cent Expiry date Jim Flavin Tommy Breen Morgan Crowe Kevin Murray Fergal O’Dwyer 225,000 50,000 100,000 62,500 137,500 - - - - - 225,000 50,000 100,000 62,500 137,500 253.9 253.9 253.9 253.9 253.9 14 February 2001 14 February 2001 14 February 2001 14 February 2001 14 February 2001 * or date of appointment, if later No options held by Directors lapsed during the year. The market price of DCC shares on 31 March 2000 was e11.15 and the range during the year was e6.55 to e13.00. s t n u o c c A 37 DCC plc Annual Report & Accounts 2000 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 39 and 40, 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 41 to 77, 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 1999 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. s t n u o c c A 38 DCC plc Annual Report & Accounts 2000 Report of the Auditors for the year ended 31 March 2000 To the Members of DCC plc We have audited the financial statements on pages 41 to 77 and the detailed information on Directors’ emoluments, pensions and interests in shares and share options on pages 34 to 37. Respective Responsibilities of Directors and Auditors The Directors are responsible for preparing the Annual Report. As described on page 38, this includes responsibility for preparing the financial statements in accordance with Accounting Standards generally accepted in Ireland. Our responsibilities, as independent auditors, are established in Ireland 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 Irish statute comprising the Companies Acts, 1963 to 1999, 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 Company balance sheet is in agreement with the books of account. We also report to you our opinion 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 convene an extraordinary general meeting; such a financial situation may exist if the net assets of the Company, as stated in the Company balance sheet, are not more than half of its called-up share capital. We also report to you if, in our opinion, information specified by law or the Listing Rules regarding Directors’ remuneration and 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 31 reflects the Company’s compliance with the seven provisions of the Combined Code specified for our review by the Irish Stock Exchange, and we report if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls or to form an opinion on the effectiveness of the Company’s or Group’s corporate governance procedures or its risk and control procedures. s t n u o c c A 39 Basis of Audit 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 & Accounts 2000 Report of the Auditors for the year ended 31 March 2000 Opinion In our opinion, the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 March 2000 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 1999, 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 Company balance sheet is in agreement with the books of account. In our opinion, the information given in the Report of the Directors on pages 32 to 33 is consistent with the financial statements. The net assets of the Company, as stated in the balance sheet on page 47, 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 2000 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 Dublin 12 May 2000 s t n u o c c A 40 DCC plc Annual Report & Accounts 2000 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 e. 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 periods ending on 29 February 2000. In respect of these subsidiary undertakings, audited financial statements for the year ended 29 February 2000 together with interim accounts for March 2000 less interim accounts for March 1999, 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 prior to 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 value and amortised over its expected useful economic life. In the case of similar interests acquired by associated 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 since 1 April 1998 is estimated to equate to 20 years. s t n u o c c A 41 Subsidiaries Subsidiaries are included in the Company balance sheet at cost less provision for any impairment 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 by way of 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. s t n u o c c A 42 DCC plc Annual Report & Accounts 2000 Accounting Policies Turnover Turnover comprises the invoiced value, including excise duty and excluding value added tax, of goods supplied and services rendered. 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% - 331/3% 62/3% 10% - 331/3% 10% - 331/3% 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. DCC plc Annual Report & Accounts 2000 Accounting Policies Foreign Currencies Assets and liabilities denominated in foreign currencies are translated into Euros 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 Euros 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. s t n u o c c A 43 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 are determined on the advice of independent qualified actuaries. s t n u o c c A 44 DCC plc Annual Report & Accounts 2000 Consolidated Profit and Loss Account for the year ended 31 March 2000 Notes E’000 E’000 e’000 e’000 2000 1999 Turnover Subsidiary undertakings Share of turnover of associated undertakings Total turnover - continuing activities Discontinued activities Total turnover Turnover - subsidiary undertakings Continuing activities Acquisitions Discontinued activities Cost of sales Gross profit Net operating costs Operating profit before goodwill amortisation - parent and subsidiary undertakings Share of operating profit before goodwill amortisation of associated undertakings Operating profit before goodwill amortisation Continuing activities Acquisitions Discontinued activities Goodwill amortisation Operating profit Net exceptional gains on sale of associated and subsidiary undertakings - discontinued activities 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 Discontinued activities 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 (cent) - fully diluted (cent) Adjusted earnings per ordinary share - basic (cent) - fully diluted (cent) Alex Spain, Jim Flavin, Directors 1 1 1 1 1 2 2 2 2 1 1 5 1 6 7 8 9 10 11 12 13 14 14 15 15 15 15 1,203,758 112,353 1,316,111 210,889 1,527,000 1,154,860 48,898 1,203,758 16,480 1,220,238 (1,005,720) 214,518 (152,654) 61,864 15,879 77,743 (3,535) 74,208 71,365 (6,132) (268) 139,173 (18,701) 120,472 (631) 119,841 (5,631) (9,735) 104,475 137.39c 133.43c 68.80c 66.89c 774,144 73,132 847,276 211,990 1,059,266 735,604 38,540 774,144 17,562 791,706 (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 55.39c 54.32c 57.19c 56.08c 54,388 3,512 57,900 5,761 63,661 48,433 3,644 52,077 5,588 57,665 73,187 598 73,785 3,958 77,743 63,333 306 63,639 75,534 139,173 DCC plc Annual Report & Accounts 2000 Statement of Total Recognised Gains and Losses for the year ended 31 March 2000 Profit attributable to Group shareholders Other movements on associated company reserves Exchange adjustments Total recognised gains relating to the year 2000 E’000 1999 e’000 119,841 2,307 4,968 127,116 47,980 (454) (220) 47,306 Note of Historical Cost Profits and Losses for the year ended 31 March 2000 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 44. s t n u o c c A 45 DCC plc Annual Report & Accounts 2000 Consolidated Balance Sheet as at 31 March 2000 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 Bank and other debt Trade and other creditors Corporation tax Proposed dividend Net Current Assets Total Assets less Current Liabilities Financed by: s t n u o c c A 46 Creditors: Amounts falling due after more than one year Bank and other debt Unsecured Notes due 2008/11 Deferred acquisition consideration 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 Alex Spain, Jim Flavin, Directors Notes 2000 E’000 1999 e’000 16 17 18 20 21 23 24 29 24 24 30 33 34 35 36 37 38 75,559 123,094 34,598 233,251 76,016 248,401 551,276 875,693 191,781 266,133 17,937 9,735 485,586 46,028 106,697 56,844 209,569 54,133 150,924 311,314 516,371 42,724 163,081 10,762 8,070 224,637 390,107 291,734 623,358 501,303 161,725 108,611 17,569 287,905 191,330 97,557 9,868 298,755 2,090 289,995 2,244 300,999 21,827 121,987 185,309 329,123 3,274 966 333,363 22,128 120,796 52,297 195,221 3,902 1,181 200,304 623,358 501,303 DCC plc Annual Report & Accounts 2000 Company Balance Sheet as at 31 March 2000 Notes 2000 E’000 1999 e’000 17 18 19 21 21 23 24 29 30 33 34 35 s t n u o c c A 47 733 512 1,233 70,860 72,826 1,233 67,385 69,130 3,396 226,944 4,792 235,132 644 1,176 4 9,735 11,559 2,167 212,414 1,930 216,511 886 1,366 - 8,070 10,322 223,573 206,189 296,399 275,319 107,104 87,394 4 107,108 4 87,398 21,827 121,987 45,477 189,291 22,128 120,796 44,997 187,921 296,399 275,319 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 Bank and other debt Trade and other creditors Corporation tax Proposed dividend Net Current Assets Total Assets less Current Liabilities Financed by: Creditors: Amounts falling due after more than one year Amounts owed to subsidiary undertakings Provisions for Liabilities and Charges Capital and Reserves Called up equity share capital Share premium account Reserves Equity Shareholders’ Funds Alex Spain, Jim Flavin, Directors DCC plc Annual Report & Accounts 2000 Consolidated Cash Flow Statement for the year ended 31 March 2000 Cash flow from operating activities Returns on investments and servicing of finance Taxation paid Capital expenditure Acquisitions and disposals Equity dividends paid Cash inflow/(outflow) before management of liquid resources and financing (Increase)/decrease in liquid resources Financing Increase in cash for the year Notes 2000 E’000 1999 e’000 41 42 42 42 43 42 43 96,297 (5,635) (9,400) (24,736) 72,170 (13,701) 65,530 (4,214) (5,768) (16,816) (59,124) (10,527) 114,995 (46,231) 95,255 (30,919) 140,319 29,478 164,019 138,878 Reconciliation of Net Cash Flow to Movement in Net Cash/(Debt) for the year ended 31 March 2000 Increase in cash for the year Increase/(decrease) in liquid resources Net loans drawn down Funds paid on finance lease arrangements Changes in net cash/(debt) resulting from cash flow Exchange movements Movement in net cash/(debt) in the year Net (debt)/cash at start of year Net cash/(debt) at end of year Notes 2000 E’000 1999 e’000 43 43 43 43 43 43 43 164,019 46,231 (99,116) 3,870 115,004 (5,548) 109,456 (20,297) 138,878 (140,319) (31,260) 2,693 (30,008) 2,677 (27,331) 7,034 89,159 (20,297) s t n u o c c A 48 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 1. Segmental Information (a) Segmental Analysis by Class of Business An analysis by class of business of turnover, profit before taxation and net assets is set out below: (i) Summary IT Energy Healthcare Food Value Added 2000 Profit Before Taxation E’000 20,458 20,053 15,951 8,916 Turnover* E’000 542,298 369,812 155,555 160,372 Net Assets E’000 41,017 51,526 48,400 23,616 Turnover* e’000 354,613 193,305 114,759 120,190 1999 Profit Before Taxation e’000 14,975 18,213 9,780 7,135 Net Assets e’000 31,351 55,740 34,523 23,030 Marketing and Distribution 1,228,037 65,378 164,559 782,867 50,103 144,644 Supply Chain Management Services Other Interests Continuing activities Discontinued activities Goodwill amortisation Net exceptional gains Interest (net) Net cash/(debt) Amounts due in respect of acquisitions Investments Disposal proceeds receivable Capitalised goodwill Minority interests Group unallocated net assets 61,551 26,523 1,316,111 210,889 1,527,000 3,812 4,595 73,785 3,958 77,743 (3,535) 71,365 (6,400) 17,019 11,816 193,394 - 193,394 43,899 20,510 847,276 211,990 1,059,266 5,424 2,373 57,900 5,761 63,661 (1,557) - (4,439) 89,159 (28,569) 7,128 16,100 75,559 (3,274) (20,374) 16,332 8,985 169,961 31,121 201,082 (20,297) (20,035) 673 - 46,028 (3,902) (8,328) * Comprises turnover of subsidiary and associated undertakings. 1,527,000 139,173 329,123 1,059,266 57,665 195,221 s t n u o c c A 49 (ii) Turnover IT Energy Healthcare Food Value Added 2000 1999 Subsidiary Associated Undertakings Undertakings E’000 E’000 Subsidiary Associated Total Undertakings Undertakings e’000 e’000 E’000 541,649 369,812 140,427 90,319 649 - 15,128 70,053 542,298 369,812 155,555 160,372 354,613 193,305 103,256 79,071 - - 11,503 41,119 Total e’000 354,613 193,305 114,759 120,190 Marketing and Distribution 1,142,207 85,830 1,228,037 730,245 52,622 782,867 Supply Chain Management Services Other Interests Continuing activities** Discontinued activities*** 61,551 - 1,203,758 16,480 - 26,523 112,353 194,409 61,551 26,523 1,316,111 210,889 43,899 - 774,144 17,562 - 20,510 73,132 194,428 43,899 20,510 847,276 211,990 Turnover 1,220,238 306,762 1,527,000 791,706 267,560 1,059,266 ** Of which acquisitions in 2000 contributed e49.547 million (1999: e42.531 million). *** Of which e194.300 million (1999: e193.989 million) related to Food and e16.589 million (1999: e18.001 million) related to Supply Chain Management Services. s t n u o c c A 50 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 1. Segmental Information continued (iii) Profit before Taxation 2000 1999 Parent and Subsidiary Associated Undertakings Undertakings E’000 E’000 Parent and Subsidiary Associated Total Undertakings Undertakings e’000 e’000 E’000 20,430 20,053 14,880 7,081 28 - 1,071 1,835 20,458 20,053 15,951 8,916 14,975 18,213 9,085 5,950 - - 695 1,185 Total e’000 14,975 18,213 9,780 7,135 62,444 2,934 65,378 48,223 1,880 50,103 3,812 - 66,256 (4,392) 61,864 (2,710) 59,154 10,365 (6,132) - 4,595 7,529 8,350 15,879 (825) 15,054 61,000 (268) 3,812 4,595 73,785 3,958 77,743 (3,535) 74,208 71,365 (6,400) 5,424 - 53,647 (2,115) 51,532 (830) 50,702 - (4,364) - 2,373 4,253 7,876 12,129 (727) 11,402 - (75) 5,424 2,373 57,900 5,761 63,661 (1,557) 62,104 - (4,439) IT Energy Healthcare Food Value Added Marketing and Distribution Supply Chain Management Services Other Interests Continuing activities* Discontinued activities** Operating profit before goodwill amortisation Goodwill amortisation Operating profit Net exceptional gains Interest (net) Profit before Taxation 63,387 75,786 139,173 46,338 11,327 57,665 * Of which acquisitions in 2000 contributed a profit of e0.598 million (1999: e3.512 million). ** Of which a profit of e8.342 million (1999: e7.848 million) related to Food and a loss of e4.384 million (1999: loss: e2.087 million) related to Supply Chain Management Services. (iv) Net Assets IT Energy Healthcare Food Value Added 2000 1999 Parent and Subsidiary Associated Undertakings Undertakings E’000 E’000 Parent and Subsidiary Associated Total Undertakings Undertakings e’000 e’000 E’000 40,824 50,934 41,369 8,650 193 592 7,031 14,966 41,017 51,526 48,400 23,616 31,351 55,740 29,020 8,876 - - 5,503 14,154 Total e’000 31,351 55,740 34,523 23,030 Marketing and Distribution 141,777 22,782 164,559 124,987 19,657 144,644 Supply Chain Management Services Other Interests Continuing activities Discontinued activities*** Net cash/(debt) Amounts due in respect of acquisitions Investments Disposal proceeds receivable Capitalised goodwill Minority interests Group unallocated net assets 17,019 - 158,796 - 158,796 89,159 (28,569) 7,128 16,100 75,559 (3,274) (20,374) - 11,816 34,598 - 34,598 - - - - - - - 17,019 11,816 193,394 - 193,394 89,159 (28,569) 7,128 16,100 75,559 (3,274) (20,374) 16,332 - 141,319 2,919 144,238 (20,297) (20,035) 673 - 46,028 (3,902) (8,328) - 8,985 28,642 28,202 56,844 - - - - - - - 16,332 8,985 169,961 31,121 201,082 (20,297) (20,035) 673 - 46,028 (3,902) (8,328) Net Assets 294,525 34,598 329,123 138,377 56,844 195,221 *** At 31 March 1999 e28.169 million related to Food and e2.952 million related to Supply Chain Management Services. DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 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: Turnover by Origin E’000 515,921 687,837 1,203,758 112,353 1,316,111 210,889 1,527,000 2000 Profit Before Taxation E’000 35,451 30,805 66,256 7,529 73,785 3,958 77,743 (3,535) 71,365 (6,400) (i) Summary Ireland Rest of the World Associated undertakings Continuing activities Discontinued activities Goodwill amortisation Net exceptional gains Interest (net) Net cash/(debt) Investments Disposal proceeds receivable Amounts due in respect of acquisitions Capitalised goodwill Minority interests Group unallocated net assets Net Assets E’000 50,538 108,258 158,796 34,598 193,394 - 193,394 89,159 7,128 16,100 (28,569) 75,559 (3,274) (20,374) Turnover by Origin e’000 332,220 441,924 774,144 73,132 847,276 211,990 1,059,266 1999 Profit Before Taxation e’000 28,985 24,662 53,647 4,253 57,900 5,761 63,661 (1,557) - (4,439) Net Assets e’000 68,214 73,105 141,319 28,642 169,961 31,121 201,082 (20,297) 673 - (20,035) 46,028 (3,902) (8,328) s t n u o c c A 51 1,527,000 139,173 329,123 1,059,266 57,665 195,221 (ii) Turnover by Destination - Continuing Activities Ireland United Kingdom Rest of Europe USA Other Share of associated undertakings 2000 E’000 1999 e’000 502,875 636,394 44,883 15,259 4,347 112,353 1,316,111 318,463 427,912 12,763 11,738 3,268 73,132 847,276 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 2. Cost of Sales and Net Operating Costs 2000 1999 Continuing Activities Acquisitions E’000 E’000 Discontinued Activities E’000 Total E’000 Continuing Activities e’000 Acquisitions e’000 Discontinued Activities e’000 Total e’000 Cost of sales (953,410) (41,153) (11,157) (1,005,720) (585,662) (28,127) (10,971) (624,760) Gross profit 201,450 7,745 5,323 214,518 149,942 10,413 6,591 166,946 Operating costs Distribution Administrative (72,163) (67,307) Other operating expenses (214) (5,143) (2,024) (8) - (9,312) (403) (77,306) (78,643) (625) (55,697) (44,913) (178) (3,432) (3,659) (5) - (59,129) (8,706) (57,278) - (183) Other operating income 3,920 - - 3,920 1,082 94 - 1,176 Net operating costs (135,764) (7,175) (9,715) (152,654) (99,706) (7,002) (8,706) (115,414) (139,684) (7,175) (9,715) (156,574) (100,788) (7,096) (8,706) (116,590) Operating profit before goodwill amortisation - parent and subsidiaries 65,686 570 (4,392) 61,864 50,236 3,411 (2,115) 51,532 3. Employee Information The average weekly number of persons (including executive Directors) employed by the Group during the year analysed by class of business was: s t n u o c c A 52 IT Energy Healthcare Food Value Added Marketing and Distribution Supply Chain Management Services The staff costs for the above were: Wages and salaries Social welfare costs Pension costs 4. Directors’ Emoluments and Interests 2000 Number 1999 Number 704 515 759 274 2,252 681 2,933 2000 E’000 86,114 8,408 3,875 98,397 602 457 724 244 2,027 637 2,664 1999 e’000 67,113 6,440 3,119 76,672 Directors’ emoluments and interests are given in the Report on Directors’ Remuneration on pages 34 to 37. DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 5. Goodwill Amortisation Amortisation of capitalised goodwill arising on the acquisition of subsidiaries after 1 April 1998 (note 16) Amortisation of goodwill included in the carrying value of associated undertakings (note 18) 6. Net Exceptional Gains on Sale of Associated and Subsidiary Undertakings Profit on sale of associated undertaking Profit on sale of subsidiary net tangible assets Other Goodwill previously eliminated against reserves Taxation 2000 E’000 1999 e’000 2,710 830 825 3,535 727 1,557 2000 E’000 1999 e’000 76,000 18,000 (1,902) 92,098 (20,733) 71,365 (8,000) - - - - - - - In February 2000 the Group sold its holding of ordinary shares in its associated undertaking, Fyffes plc. The Group still holds 4,621,901 Convertible Preference shares in Fyffes plc. In March 2000 the Group unconditionally contracted to sell its 90% interest in International Translation and Publishing Limited, the consideration for which is receivable in cash on 16 May 2000. 7. Net Interest Payable and Similar Charges - Parent and Subsidiary Undertakings s t n u o c c A 53 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 due 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 2000 E’000 19,496 4 19,500 (11,968) (73) (9,042) (50) (1,551) (2,637) (311) (25,632) 1999 e’000 17,792 259 18,051 (8,171) (310) (8,293) (296) (1,663) (3,484) (198) (22,415) (6,132) (4,364) 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 amount of the likely payments. s t n u o c c A 54 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 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. 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. Acquisitions 2000 E’000 1999 e’000 444 (79) (296) 2,316 12 988 317 (17) (366) 1,938 48 700 13,655 5,235 11,772 4,404 The profit on ordinary activities before taxation arising from acquisitions represents the aggregate of net incremental profit resulting from the acquisition of subsidiary and associated undertakings in the relevant financial year. 11. Taxation Irish Corporation Tax at 27% (1999: 31%) - current - deferred - less: manufacturing relief United Kingdom Corporation Tax at 30% - current - deferred Netherlands Corporation Tax Other overseas tax Tax on net exceptional gains (Over)/under provision in respect of prior years - current - deferred Associated undertakings 2000 E’000 5,368 (244) (2,625) 4,003 40 759 188 8,000 (202) 26 15,313 3,388 18,701 1999 e’000 7,476 (65) (3,799) 2,881 (10) 336 19 - (307) (374) 6,157 2,726 8,883 Manufacturing relief is scheduled to expire in the year 2010. The standard rate of corporation tax in Ireland will be reduced on a phased basis to 12.5% by 1 January 2003. 12. Minority Interests Subsidiary undertakings Associated undertakings DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 2000 E’000 1999 e’000 3 628 631 137 665 802 13. 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 in the financial statements of the holding company amounted to e15,502,000 shareholders dealt with (1999: e11,037,000). 14. Dividends Per Ordinary Share Interim dividend of 6.450 cent per share (1999: 5.396 cent per share) Proposed final dividend of 11.150 cent per share (1999: second interim dividend of 9.264 cent per share) Additional dividend 2000 E’000 1999 e’000 5,631 4,698 9,735 - 15,366 8,070 224 12,992 The additional dividend of e224,000 paid during the year ended 31 March 1999 was in respect of shares issued after the date of approval of the relevant financial statements but qualifying for receipt of the dividend declared. s t n u o c c A 55 s t n u o c c A 56 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 15. Earnings per Ordinary Share and Adjusted Earnings per Ordinary Share Profit after taxation and minority interests Net exceptional gains (net of taxation) Goodwill amortisation Adjusted profit after taxation and minority interests Basic earnings per ordinary share Basic earnings per ordinary share Net exceptional gains Goodwill amortisation Adjusted basic earnings per ordinary share 2000 E’000 119,841 (63,365) 3,535 60,011 cent 137.39 (72.64) 4.05 68.80 1999 e’000 47,980 - 1,557 49,537 cent 55.39 - 1.80 57.19 Weighted average number of ordinary shares in issue during the year (’000) 87,225 86,621 Fully diluted earnings per ordinary share Fully diluted earnings per ordinary share Net exceptional gains Goodwill amortisation Adjusted fully diluted earnings per ordinary share cent 133.43 (70.46) 3.92 66.89 cent 54.32 - 1.76 56.08 Fully diluted weighted average number of ordinary shares (’000) 89,925 88,504 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 and net exceptional items which are not expected to recur regularly. The weighted average number of ordinary shares used in calculating the fully diluted earnings per ordinary share for the year ended 31 March 2000 was 89.925 million (1999: 88.504 million). A reconciliation of the weighted average number of ordinary shares used for the purpose of calculating the fully diluted earnings per share amounts is as follows: Weighted average number of ordinary shares in issue used for the calculation of basic earnings per ordinary share amounts Dilutive effect of options and partly paid shares 2000 ’000 1999 ’000 87,225 86,621 943 917 Dilutive effect of ordinary shares potentially issuable under deferred contingent consideration arrangements 1,757 966 Weighted average number of ordinary shares in issue used for the calculation of diluted earnings per ordinary share amounts 89,925 88,504 The earnings used for the purpose of the fully diluted earnings per ordinary share calculations were e119.989 million (1999: e48.079 million) and e60.159 million (1999: e49.636 million) for the purpose of the adjusted diluted earnings per ordinary share calculations. 16. Intangible Assets - Goodwill Group Arising on the acquisition of subsidiaries: At 1 April Arising during the year (note 39) Amortised to profit and loss account (note 5) At 31 March DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 2000 E’000 46,028 32,241 (2,710) 75,559 1999 e’000 - 46,858 (830) 46,028 17. Tangible Fixed Assets (a) Group Cost At 1 April 1999 Acquisitions (note 39) Additions Disposals Reclassifications Exchange adjustments At 31 March 2000 Depreciation At 1 April 1999 Acquisitions (note 39) Charge for year Disposals Reclassifications Exchange adjustments At 31 March 2000 Net Book Value At 31 March 2000 At 31 March 1999 s t n u o c c A 57 Freehold & long term leasehold land & buildings E’000 Plant & machinery & cylinders E’000 Fixtures & fittings & office equipment E’000 42,675 1,361 6,958 (1,008) (1,759) 1,613 49,840 7,806 - 1,089 (367) (560) 277 8,245 41,595 34,869 138,523 1,764 10,304 (1,776) 396 8,302 157,513 84,117 - 10,669 (1,421) 303 4,996 98,664 58,849 54,406 23,007 922 6,219 (5,241) 1,354 863 27,124 16,288 369 3,399 (3,834) 263 390 16,875 10,249 6,719 Motor vehicles E’000 22,841 307 5,526 (3,167) 9 1,357 26,873 12,138 28 3,733 (2,283) (6) 862 Total E’000 227,046 4,354 29,007 (11,192) - 12,135 261,350 120,349 397 18,890 (7,905) - 6,525 14,472 138,256 12,401 10,703 123,094 106,697 The net book value of tangible fixed assets includes an amount of e20,361,000 (1999: e24,136,000) in respect of assets held under finance leases. DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 17. Tangible Fixed Assets continued (b) Company s t n u o c c A 58 Cost At 1 April 1999 Additions Disposals At 31 March 2000 Depreciation At 1 April 1999 Charge for year Disposals At 31 March 2000 Net Book Value At 31 March 2000 At 31 March 1999 18. Financial Assets - Associated Undertakings (a) Group At 1 April Additions Disposals/transfer to investments Retained profits less dividends Other movements in reserves Amortisation of goodwill (note 5) Acquired as a subsidiary At 31 March Fixtures & fittings & office equipment E’000 Motor vehicles E’000 999 143 - 1,142 802 96 - 898 244 197 540 324 (124) 740 225 129 (103) 251 489 315 2000 E’000 56,844 726 (34,144) 9,505 2,492 (825) - 34,598 Total E’000 1,539 467 (124) 1,882 1,027 225 (103) 1,149 733 512 1999 e’000 46,474 7,194 - 7,175 (3,154) (727) (118) 56,844 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 18. 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 2000 E’000 7,079 9,410 18,109 34,598 1999 e’000 25,615 13,865 17,364 56,844 During the year the Group acquired a 50% interest in an Irish oil distributor for a consideration of e726,000. At 31 March 2000 the Group’s aggregate share of its associated undertakings’ fixed assets, current assets, liabilities due within one year and liabilities due after more than one year was 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 Disposals At 31 March Amortisation At 1 April Amortisation for the year Disposals At 31 March Net Book Value At 31 March 2000 E’000 17,155 55,739 (29,095) (18,611) 2000 E’000 16,137 685 (6,142) 10,680 2,272 825 (1,827) 1,270 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 9,410 13,865 s t n u o c c A 59 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 18. Financial Assets - Associated Undertakings continued Details of the Group’s principal associated undertakings at 31 March 2000 are set out below. All of these companies are incorporated and operate principally in their country of registration. Name and Registered Office Nature of Business Merits Health Products Company Limited, 9 Road 36, Taichung Industrial Park, Taichung, Taiwan. KP (Ireland) Limited, 79 Broomhill Road, Tallaght, Dublin 24, Ireland. Kylemore Foods Holdings Limited, DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland. Millais Investments Limited, Kinsale Road, Cork, Ireland. Manor Park Homebuilders Limited, “The Gables”, Torquay Road, Dublin 18, Ireland. Manufacture of mobility aids. Manufacture of snack foods. Holding company for the Kylemore group of companies whose principal activities are the baking, wholesaling and retailing of bakery products and the operation of restaurants. Holding company for Allied Foods Limited, a distributor of frozen and chilled foods. Residential house building. s t n u o c c A 60 (b) Company At 31 March Shareholding 45.0% 50.0% 50.0% 50.0% 49.0% 2000 E’000 1999 e’000 1,233 1,233 19. Financial Assets - Subsidiary Undertakings Company At 1 April Additions Disposals At 31 March DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 2000 E’000 67,385 3,475 - 70,860 1999 e’000 57,283 10,209 (107) 67,385 The Group’s principal operating subsidiary undertakings are shown on page 78. All of these subsidiaries are wholly owned except Broderick Bros. Limited (82.5%), Virtus Limited (51.0%), EuroCaps Limited (80.0%), where put and call options exist to acquire the remaining 20.0%, CasaCare GmbH (74.9%), where put and call options exist to acquire the remaining 25.1%, Distrilogie SA (55.0%), where put and call options exist to acquire the remaining 45.0% and Fannin Limited (82.0%), where put and call options exist to acquire the remaining 18.0%. 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 B.V., 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 B.V. is Drentestraat 24, 1083 HK Amsterdam, the Netherlands. s t n u o c c A 61 20. Stocks Group Raw materials and consumables Work in progress Finished goods and goods for resale 2000 E’000 6,873 1,852 67,291 76,016 1999 e’000 5,407 552 48,174 54,133 The replacement cost of stocks is not considered to be materially different from the amounts shown above. DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 21. Debtors Amounts falling due within one year: Trade debtors Amounts owed by subsidiary undertakings Disposal proceeds receivable Corporation tax recoverable Value added tax recoverable Prepayments and accrued income Investments Other debtors (note 22) Amounts falling due after more than one year: Amounts owed by subsidiary undertakings Other debtors (note 22) Group 2000 E’000 1999 e’000 201,816 - 16,100 1,492 2,413 12,771 7,128 3,043 244,763 134,074 - - 850 729 9,202 673 2,030 147,558 Company 2000 E’000 866 1,812 - - 11 707 - - 3,396 1999 e’000 421 1,064 - - - 667 - 15 2,167 - 3,638 3,638 - 3,366 3,366 226,944 - 226,944 212,318 96 212,414 248,401 150,924 230,340 214,581 22. Director’s Loan Accounts Other debtors include nil (1999: e29,000) in respect of house loans to an executive Director as follows: s t n u o c c A 62 Balance at 1 April 1999 Interest Repayments Balance at 31 March 2000 Maximum amount outstanding during year Interest was charged at 5% per annum. 23. Cash and Term Deposits Cash in hand and at bank Term deposits M Crowe E’000 29 1 (30) - 29 Group 2000 E’000 1999 e’000 389,247 162,029 551,276 201,751 109,563 311,314 Company 2000 E’000 85 4,707 4,792 1999 e’000 128 1,802 1,930 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 43. 24. Bank and Other Debt Bank loans and overdrafts (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 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 Group 2000 E’000 1999 e’000 Company 2000 E’000 1999 e’000 279,271 33,205 41,030 353,506 108,611 462,117 191,781 161,725 108,611 462,117 164,767 28,655 40,632 234,054 97,557 331,611 42,724 191,330 97,557 331,611 - 644 - 644 - 644 644 - - 644 - 886 - 886 - 886 886 - - 886 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. 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 Over five years 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 - over five years Repayable other than by instalments: - between one and two years - between two and five years - over five years Group 2000 E’000 1999 e’000 186,324 79,652 12,675 109,231 387,882 35,730 61,054 67,983 97,557 262,324 186,324 35,730 630 12,675 620 79,022 - 108,611 387,882 180 11,208 - 60,874 56,775 97,557 262,324 Company 2000 E’000 1999 e’000 - - - - - - - - - - - - - - - - - - - - - - - - - - s t n u o c c A 63 s t n u o c c A 64 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 26. Loan Notes The loan notes are repayable as follows: In one year or less Over five years Loan notes are further analysed as follows: Wholly repayable within one year Repayable other than by instalments: - over five years Group 2000 E’000 1999 e’000 Company 2000 E’000 1999 e’000 1,251 31,954 33,205 3,206 25,449 28,655 1,251 3,206 31,954 33,205 25,449 28,655 644 - 644 644 - 644 886 - 886 886 - 886 The above loan notes are unsecured and e33,152,000 (1999: e28,402,000) 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. 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 Over five years 2000 E’000 1999 e’000 4,206 3,788 4,418 14,900 17,506 36,824 3,784 12,862 20,198 36,844 41,030 40,632 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 affect the cost of certain raw materials purchased. Furthermore, foreign exchange movements can affect the cost of products sourced and revenues generated from overseas markets and can also affect 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. DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 28. Derivative and Other Financial Instruments continued (a) Interest Rate Risk Profile of Financial Liabilities and Financial Assets The following tables analyse 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: 2000 E equivalent Financial Assets E’000 Financial Liabilities E’000 (1,983) (77,979) (79,962) (101,929) (279,697) (381,626) - (529) (529) - 201,792 201,792 101,921 241,584 343,505 - 5,979 5,979 Net E’000 (1,983) 123,813 121,830 (8) (38,113) (38,121) - 5,450 5,450 1999 e equivalent Financial Assets e’000 - 66,303 66,303 Financial Liabilities e’000 (220) (39,445) (39,665) (97,579) (194,335) (291,914) 91,553 150,133 241,686 - (32) (32) - 3,325 3,325 Net e’000 (220) 26,858 26,638 (6,026) (44,202) (50,228) - 3,293 3,293 (462,117) 551,276 89,159 (331,611) 311,314 (20,297) e Fixed e Floating e Total Stg£ Fixed Stg£ Floating Stg£ Total US$ Fixed US$ Floating US$ Total Total The Group’s deferred acquisition consideration of e28,569,000 as stated on the balance sheet, consists entirely of e floating rate financial liabilities (1999: e16,247,000 of e floating rate financial liabilities and e3,788,000 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 2000 E’000 11,000 7,166 10,403 28,569 1999 e’000 10,167 3,268 6,600 20,035 The Group’s floating rate financial liabilities and financial assets bear interest rates based primarily on: • 1 - 3 month EURIBOR • 1 - 12 month LIBOR • US$ prime rate 2000 Weighted average interest rate 1999 Weighted average interest rate Fixed rate financial liabilities Fixed rate financial assets Fixed rate financial liabilities Fixed rate financial assets 5.2% 8.8% n/a 8.0% 7.8% 8.8% n/a 8.0% 2000 Weighted average period for which rate is fixed 1999 Weighted average period for which rate is fixed Fixed rate financial liabilities Fixed rate financial assets Fixed rate financial liabilities Fixed rate financial assets 6.9 years 8.5 years n/a 8.5 years 1.5 years 9.0 years n/a 9.5 years e Stg£ e Stg£ s t n u o c c A 65 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 28. Derivative and Other Financial Instruments continued The maturity profile of the Group’s financial liabilities 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 2000 E’000 1999 e’000 191,781 84,070 27,575 158,691 462,117 42,724 64,838 80,845 143,204 331,611 s t n u o c c A 66 (b) Gains and Losses on Hedges The Group enters into forward foreign currency contracts to eliminate the currency exposures that arise on revenues and costs denominated in foreign currencies. The Group also enters into commodity swap contracts in order to eliminate the exposure to price movements of oil and LPG. 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: 2000 1999 Gains E’000 Losses E’000 Total net gains/ (losses) E’000 Gains e’000 Losses e’000 Total net gains/ (losses) e’000 Opening unrecognised gains and losses on hedges Gains and losses arising in previous years that were recognised in current year Gains and losses arising in previous years that were not recognised in current year Gains and losses arising in current year that were not recognised in current year Closing unrecognised gains and losses on hedges Of which: Gains and losses expected to be recognised within one year Gains and losses expected to be recognised thereafter 356 356 3,332 (2,976) 1,879 (1,523) 365 365 1,646 (1,281) 1,316 (951) - 1,453 (1,453) - 330 (330) 429 429 429 - 429 4,940 6,393 (4,511) (5,964) 5,898 495 6,393 (5,469) (495) (5,964) 356 356 356 - 356 3,002 3,332 (2,646) (2,976) 1,879 1,453 3,332 (1,523) (1,453) (2,976) The above table does not include cross currency interest rate swaps where unrecognised gains or losses on the swaps are matched by equal and opposite gains or losses in the fair value of Unsecured Notes due 2008/11. See accounting policy for derivative financial instruments. (c) Fair Value of Financial Instruments The carrying amounts and estimated fair values of the financial assets and financial liabilities of the Group are as follows: Assets: Cash and short term deposits Publicly traded investments Liabilities: Deferred acquisition consideration Short term debt Medium and long term debt Unsecured Notes due 2008/11 Derivative financial instruments: Commodity swaps Forward exchange rate contracts Interest rate contracts 2000 Carrying amount E’000 Fair value E’000 1999 Carrying amount e’000 Fair value e’000 551,276 7,128 551,188 11,297 311,314 673 311,314 343 (28,569) (191,781) (161,725) (108,611) (28,569) (191,781) (161,637) (108,611) - - - (1,199) (4,765) - (20,035) (41,759) (192,295) (97,557) (20,035) (41,759) (192,295) (97,557) - - - - (2,976) - DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 28. Derivative and Other Financial Instruments continued The following methods and assumptions were used by the Group in estimating its fair value disclosures for financial instruments: Cash, short term deposits and short term debt: The carrying amount reported in the balance sheet generally approximates to fair value because of the short maturity of these instruments. Publicly traded investments: These are valued based on quoted prices. Deferred acquisition consideration: The carrying amount reported in the balance sheet approximates to fair value because the future amounts payable are discounted back to their present value. Medium and long term debt: The fair value of the Group’s medium and long term debt generally approximates to fair value because these instruments re-price frequently at market rates. Unsecured Notes due 2008/11: The fair value of the Group’s Unsecured Notes due 2008/11 is shown net of the gain or loss on the cross currency interest rate swap used to hedge these loan notes. At 31 March 2000 the cross currency interest rate swap had a fair value equating to a loss of e3,338,000. Conversely the Unsecured Notes due 2008/11 had a fair value equating to a gain of the same amount. Commodity and forward exchange rate contracts: The fair value of these instruments is based on the estimated replacement cost of equivalent instruments at the balance sheet date. Interest rate contracts: The fair value of these instruments is based on the estimated replacement cost of equivalent instruments at the balance sheet date. The Group uses interest rate contracts to swap floating rate assets and liabilities into fixed rate assets and liabilities. The fair value of the interest rate contracts attributable to financial assets is offset by the fair value of the interest rate contracts attributable to financial liabilities. (d) Undrawn Bank Borrowing Facilities The Group has various borrowing facilities available to it. The undrawn committed bank borrowing facilities available at 31 March 2000 in respect of which all conditions precedent had been met at that date mature as follows: s t n u o c c A 67 In one year or less In more than two years 2000 E’000 3,169 1,081 4,250 1999 e’000 - 4,297 4,297 (e) Short Term Debtors and Creditors Short term debtors and creditors are not included in the above disclosures of financial assets and financial liabilities. (f) Currency Exposures At 31 March 2000, after taking into account the effects of foreign currency contracts, the Group had no material currency exposures. (g) Treasury Policy The Group’s treasury policy and management of derivatives and of financial instruments is discussed in the Financial Review on pages 24 and 25. DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 29. Trade and Other Creditors Amounts falling due within one year: Trade creditors Other creditors and accruals Deferred acquisition consideration PAYE and PRSI Value added tax Capital grants (note 38) Interest payable Amounts due in respect of fixed assets Amounts due to associated undertakings 30. Provisions for Liabilities and Charges (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 31) 31. Deferred Taxation s t n u o c c A 68 Group 2000 E’000 1999 e’000 Company 2000 E’000 1999 e’000 199,454 34,900 11,000 2,450 12,049 235 2,401 905 2,739 266,133 113,183 21,880 10,167 1,911 9,626 245 2,035 714 3,320 163,081 73 941 - 162 - - - - - 1,176 284 933 - 136 13 - - - - 1,366 Total e’000 2,569 (450) 147 (22) 2,244 2000 E’000 1999 e’000 4 4 2000 Pensions and similar obligations (note 32) E’000 44 (1) - - 43 Deferred taxation (note 31) E’000 2,200 (178) - 25 2,047 Deferred taxation (note 31) e’000 Total E’000 2,244 2,524 (179) - 25 2,090 (449) 147 (22) 2,200 1999 Pensions and similar obligations (note 32) e’000 45 (1) - - 44 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 2000 E’000 1999 e’000 Full Potential Liability 1999 e’000 2000 E’000 2,097 (50) 2,047 2,454 (254) 2,200 2,204 (50) 2,154 2,587 (254) 2,333 No provision is made for certain potential taxation liabilities amounting to e107,000 (1999: e133,000) 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. DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 Amount Provided Full Potential Liability 2000 E’000 1999 e’000 2000 E’000 1999 e’000 3 1 4 3 1 4 3 1 4 3 1 4 (b) Company Tax effect of timing differences due to: Excess of accelerated capital allowances over depreciation Other short term timing differences 32. 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 e3,875,000 (1999: e3,119,000) of which e1,332,000 (1999: e1,331,000) 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 31 December 1996 to 17 August 1999. 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 e24,643,000 (1999: e18,837,000). s t n u o c c A 69 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 111% (Group weighted average cover: 100%) of the benefits that had accrued to the members of the individual schemes. Any actuarial deficits are being spread over the average remaining service lives of current employees. At 31 March 2000, e71,000 (1999: e48,000) was included in creditors in respect of pension liabilities and e566,000 (1999: e721,000) 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 & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 33. Called up Equity Share Capital Group and Company Authorised 152,368,568 ordinary shares of e0.25 each Issued 87,306,376 ordinary shares of e0.25 each, fully paid 2000 E’000 1999 e’000 38,092 38,092 s t n u o c c A 70 (1999: 87,134,555 ordinary shares of IR20p each, fully paid) 21,827 22,128 205,000 ordinary shares of e0.25 each, e0.0025 paid (1999: 210,000 ordinary shares of IR20p each, IR0.2p paid) Movements during year Ordinary shares of e0.25 each At 1 April 1999 Acquisition issue Payment up of partly paid shares Transfer to capital conversion reserve fund At 31 March 2000 - 21,827 - 22,128 No of shares (’000) e’000 87,345 22,128 166 - - 87,511 42 1 (344) 21,827 At the last Annual General Meeting held on 25 June 1999 each of the issued and unissued ordinary shares of IR20p in DCC plc was re-denominated into an ordinary share of 25.394761 cent. Each such share was then re-nominalised to be an ordinary share of 25 cent. An amount equal to the reduction in the issued share capital resulting from this re-nominalisation was transferred to a capital conversion reserve fund. Under the DCC plc 1998 Employee Share Option Scheme, employees hold basic tier options to subscribe for 1,874,000 ordinary shares and second tier options to subscribe for 1,656,000 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 2000, 205,000 shares (1999: 210,000 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 (1999: 650,000 ordinary shares) at e2.5395 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. DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 2000 E’000 1999 e’000 120,796 1,203 (12) 121,987 112,090 8,769 (63) 120,796 Profit and loss account E’000 33,877 94,970 5,733 26,253 - - 4,968 165,801 Associated undertaking reserves E’000 Capital conversion reserve fund E’000 17,364 9,505 15,000 (26,253) - 2,492 - 18,108 - - - - 344 - - 344 Other reserves E’000 1,056 - - - - - - Total E’000 52,297 104,475 20,733 - 344 2,492 4,968 1,056 185,309 s t n u o c c A 71 34. Share Premium Account Group and Company At 1 April Premium on issue of shares Share issue expenses At 31 March 35. Reserves (a) Group At 1 April 1999 Profit retained for the year Goodwill previously eliminated against reserves realised on sale of subsidiary and associated undertakings Transfers Re-nominalisation of share capital Movement on other reserves - associated undertakings Exchange adjustments At 31 March 2000 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 e100.079 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 At 1 April 1999 Profit retained Re-nominalisation of share capital At 31 March 2000 Profit and loss account E’000 Capital conversion reserve fund E’000 44,997 136 - 45,133 - - 344 344 Total E’000 44,997 136 344 45,477 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 36. Reconciliation of Movements in Equity Shareholders’ Funds Group Profit attributable to Group shareholders Dividends Movement on associated undertaking reserves Goodwill realised previously eliminated against reserves (note 6) Equity share capital issued (net of expenses) Exchange adjustments Net movement in shareholders’ funds Opening equity shareholders’ funds Closing equity shareholders’ funds 37. Equity Minority Interests Group At 1 April Acquisitions (note 39) Acquisition of minority interest in subsidiary undertakings Disposal of minority interest in subsidiary undertaking (note 40) Share of profit for the financial year (note 12) Dividends to minorities Exchange and other adjustments At 31 March s t n u o c c A 72 38. 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 29) 2000 E’000 1999 e’000 119,841 (15,366) 104,475 2,492 20,733 1,234 4,968 133,902 195,221 329,123 47,980 (12,992) 34,988 (3,154) - 9,525 (220) 41,139 154,082 195,221 2000 E’000 3,902 326 - (947) 3 (86) 76 3,274 1999 e’000 5,295 (166) (1,289) - 137 (135) 60 3,902 2000 E’000 1999 e’000 1,426 62 (296) 9 1,201 (235) 966 1,953 14 (366) (175) 1,426 (245) 1,181 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 39. Acquisitions of Subsidiary Undertakings The principal acquisitions completed during the year were Distrilogie SA (55.0%), Casa Garden & Co. KG (since renamed CasaCare) (74.9%), the Cawoods oil business (100.0%) and a number of other smaller LPG distributors. The Group acquired 55% of the share capital of Distrilogie and entered into put and call options for the remaining 45%. Distrilogie is treated as a 100% subsidiary of the Group with an estimate of the consideration payable, on exercise of the put and call options, included in the deferred contingent consideration arising on the acquisition. The amounts provided in deferred contingent consideration represent an estimate of the amounts that are reasonably expected to be payable, discounted to their present values which are contingent on the future performance of Distrilogie. Further performance related payments beyond these amounts, of a maximum of e18.857 million may be made up to 31 March 2003. The estimation of deferred contingent consideration will be reviewed as more certain information becomes available with the corresponding adjustments being made to goodwill. In addition to the above the Group has provided for the purchase of certain minority interests. A summary of the effect of these acquisitions is as follows: Tangible fixed assets Stocks Debtors Net debt Creditors Tax and deferred tax Minority interests Net assets acquired Goodwill Cost Satisfied by: Cash Deferred consideration and deferred contingent consideration Acquisition of subsidiary undertakings E’000 Fair value Fair value adjustments E’000 at acquisition E’000 3,957 7,743 22,291 (9,303) (16,353) (761) (326) 7,248 - (750) (850) - (300) - - (1,900) 3,957 6,993 21,441 (9,303) (16,653) (761) (326) 5,348 32,241 37,589 19,124 18,465 37,589 Acquisition accounting has been adopted in respect of the above acquisitions. The fair value adjustments relate to 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 is as follows: Cost Net debt acquired Deferred consideration and deferred contingent consideration Net outflow of cash 2000 E’000 37,589 9,303 (18,465) 28,427 s t n u o c c A 73 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 40. Sale of Associated and Subsidiary Undertakings (a) Sale of Subsidiary Undertaking Net assets disposed of: Fixed assets Associated undertakings Stocks Debtors Creditors Net debt Minority interest Profit on sale of subsidiary undertaking (note 6) Satisfied by: Disposal proceeds receivable in cash (b) Sale of Associated Undertaking Carrying value as an associate Profit on sale of associated undertaking (note 6) Satisfied by: Cash s t n u o c c A 74 41. Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities Group Operating profit before goodwill amortisation Operating profit of associated undertakings Dividends received from associated undertakings Depreciation of tangible fixed assets Increase in stocks Increase in debtors Increase in creditors Other Cash flow from operating activities 2000 E’000 1,343 34 329 2,981 (2,184) (3,456) (947) (1,900) 18,000 16,100 16,100 30,289 76,000 106,289 106,289 2000 E’000 77,743 (15,879) 2,768 18,890 (11,081) (45,941) 72,845 (3,048) 96,297 1999 e’000 63,661 (12,129) 2,268 16,176 (5,151) (20,680) 22,479 (1,094) 65,530 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 42. Analysis of Cash Flows 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 (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 debt/cash acquired) (note 39) Investment in associated undertakings (note 18) Purchase of minority interests Sale of subsidiary (note 40) Sale of associated undertaking (note 40) Payment of deferred consideration/accruals in respect of acquisitions Net cash inflow/(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 43. Analysis of Movement in Net Cash/(Debt) 2000 E’000 1999 E’000 19,432 (24,981) (86) (5,635) (28,815) 4,017 62 (24,736) (28,427) (726) - 3,456 106,289 (8,422) 72,170 9 (3,870) 99,116 - 95,255 19,032 (23,112) (134) (4,214) (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 s t n u o c c A 75 Cash in hand and at bank Overdrafts Term deposits Bank loans and loan notes Unsecured Notes due 2008/11 Finance leases Total At 1 April 1999 E’000 201,751 (33,294) 168,457 109,563 (160,128) (97,557) (40,632) (20,297) At Cash Exchange 31 March flow movements E’000 E’000 2000 E’000 161,205 2,814 164,019 46,231 (99,116) - 3,870 115,004 26,291 (3,283) 23,008 6,235 (19,469) (11,054) (4,268) (5,548) 389,247 (33,763) 355,484 162,029 (278,713) (108,611) (41,030) 89,159 DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 44. Capital Commitments Group Capital expenditure that has been contracted for but has not been provided for in the financial statements 4,248 7,004 Capital expenditure that has been authorised by the directors but has not yet been contracted for 12,707 11,482 2000 E’000 1999 e’000 45. Operating Lease Commitments At 31 March 2000 the Group had annual commitments under operating leases as follows: s t n u o c c A 76 Expiring within one year Expiring between two and five years Expiring after five years 46. Contingent Liabilities 2000 1999 Land and Buildings E’000 178 173 1,547 1,898 Other E’000 73 648 - 721 Land and Buildings e’000 59 519 1,352 1,930 Other e’000 50 425 - 475 (a) Bank and Other Loans The parent undertaking and certain subsidiaries have given guarantees of up to e454,280,000 (1999: e330,943,000) in respect of borrowings by the parent undertaking itself and other group undertakings. (b) Grants In certain circumstances capital grants amounting to a maximum of e4,759,000 (1999: e4,797,000) and revenue grants amounting to a maximum of nil (1999: e863,000) may become repayable. (c) Other Included in trade creditors are amounts of approximately e8,909,000 (1999: e7,860,000) 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 Alvabay Limited, Atlas Oil Refining Company Limited, Classic Fuel and Oil Limited, DCC Energy Limited, DCC SerCom Limited, Emo Oil Limited, Emo Oil Services Limited and Flogas Ireland Limited and, as a result, these companies have been exempted from the filing provisions of Section 7, Companies (Amendment) Act, 1986. DCC plc Annual Report & Accounts 2000 Notes to the Financial Statements for the year ended 31 March 2000 47. 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: 2000 E1=Stg£ 0.599 0.643 1999 e1=Stg£ 0.666 0.681 Balance sheet (closing rate) Profit and loss (average rate) 48. Transactions with Related Parties On 29 September 1999 the Company increased to 82% its shareholding in Fannin Limited by acquiring from minority shareholders in Fannin Limited 7% of its issued share capital, which was subject to put and call options exercisable by DCC and the Fannin Limited minority shareholders. The total value of the consideration amounted to e3.440 million which was satisfied by e2.215 million in cash and e1.225 million in shares. The remaining 18% shareholding is also subject to put and call options exercisable up to 2003. 49. Approval of Financial Statements The financial statements were approved by the Board of Directors on 12 May 2000. s t n u o c c A 77 DCC plc Annual Report & Accounts 2000 Group Directory Value Added Marketing and Distribution IT SerCom Distribution Limited Holding company Micro Peripherals Limited* Computer products distribution Sharptext Limited Computer products and office equipment distribution Gem Distribution Limited* Computer products distribution Distrilogie SA Computer storage products distribution www.dcc.ie www.micro-p.com www.sharptext.com www.gem.co.uk www.distrilogie.com s t n u o c c A 78 Energy DCC Energy Limited Emo Oil Limited Holding and management company Distribution of oil products www.dcc.ie www.emo.ie Flogas Ireland Limited Manufacture and distribution of liquefied petroleum gas www.flogas.ie Flogas UK Limited* Atlas Ireland Limited Distribution of liquefied petroleum gas Environmental services to garages www.flogas.co.uk www.atlasireland.com DCC Energy (NI) Limited Distribution of liquefied petroleum gas and oil products www.emooil.com Healthcare DCC Healthcare Limited Days Medical Aids Limited* Fannin Limited DCC Shoprider Inc. CasaCare GmbH Holding and management company Manufacture and distribution of mobility and rehabilitation products Manufacture and distribution of healthcare products Distribution of mobility scooters and power chairs Manufacture and distribution of mobility and rehabilitation products Virtus Limited Healthilife Limited* Manufacture and distribution of healthcare products Distribution of vitamin and food supplements EuroCaps Limited* Thompson & Capper Limited* Manufacture and distribution of tablets and capsules Manufacture and distribution of soft gelatine capsules www.dcc.ie www.daysmedical.com www.dcc.ie www.dcc-shoprider.com www.casagarden.de www.virtus.ie www.healthilife.com www.softgels.co.uk www.tablets2buy.com Food DCC Foods Limited Robt. Roberts Limited Holding and management company Marketing and distribution of branded food and www.dcc.ie www.robt-roberts.com beverage products Kelkin Limited Marketing and distribution of branded healthy food www.kelkin.com Broderick Bros. Limited Distribution and service of equipment and consumables www.dcc.ie to the food processing, retailing and catering industries products Supply Chain Management Services SerCom Solutions Limited Supply chain management services for the computer www.sercomsolutions.com industry All of 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, Distrilogie SA which is incorporated and operates principally in France, DCC Energy (NI) Limited which is incorporated and operates principally in Northern Ireland, DCC Shoprider Inc. which is incorporated and operates principally in the United States of America and CasaCare GmbH which is incorporated and operates principally in Germany. A full list of subsidiary and associated undertakings will be annexed to the Annual Return of the Company to be filed with the Irish Registrar of Companies. DCC plc Annual Report & Accounts 2000 Shareholder Information Number of accounts % of accounts Number of shares (’000) 1,313 1,040 81 28 30 39 51.9% 41.1% 3.2% 1.1% 1.2% 1.5% 697,911 2,797,173 1,794,656 1,997,573 4,509,666 75,509,397 2,531 100.0% 87,306,376 % of shares 0.8% 3.2% 2.0% 2.3% 5.2% 86.5% 100.0% High 13.00 9.02 Low 6.55 4.32 31 March 11.15 7.25 Shareholder Analysis at 12 May 2000 1 - 1,000 1,001 - 10,000 10,001 - 50,000 50,001 - 100,000 100,001 - 250,000 Over 250,000 Total Share Price Data (E) Year ended 31 March 2000 Year ended 31 March 1999 The market capitalisation of DCC plc at 31 March 2000 was e976 million (1999: e632 million) and at 12 May 2000 was e936 million (e10.70 per share). Web Site DCC’s web site address is www.dcc.ie The web site includes further information on the Group’s activities and provides links into Group companies’ web sites. DCC’s recent press releases can be read or downloaded from the News section, where visitors can also register to receive future press releases directly by e-mail. The Investor Information section contains a complete dividend history, the financial calendar and s t n u o c c A 79 further points of contact. Investor Relations 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. e-mail: investorrelations@dcc.ie Registrar Administrative enquiries about the holding of DCC shares should be directed in the first instance to the Company’s Registrar at: Computershare Services (Ireland) Limited, Heron House, Corrig Road, Dublin 18. Tel: 353 1 216 3100 Fax: 353 1 216 3151 e-mail: web.queries@computershare.co.uk DCC plc Annual Report & Accounts 2000 Shareholder Information Amalgamation of Accounts Shareholders who receive duplicate sets of company mailings owing to multiple accounts in their names should write to the Company’s Registrar to have their accounts amalgamated. Dividends Shareholders are offered the option of having dividends paid in Euros or pounds sterling. Shareholders may also elect to receive dividend payments either by cheque or by electronic funds transfer directly into their bank accounts. Shareholders should contact the Company’s Registrar for details. Dividend Withholding Tax (DWT) s t n u o c c A 80 The Company is obliged to deduct tax at the standard rate of income tax in Ireland (currently 22%), from dividends paid to its shareholders, unless a particular shareholder is entitled to an exemption from DWT and has completed and returned to the Company’s Registrar a declaration form claiming entitlement to the particular exemption. Exemption from DWT may be available to shareholders resident in another EU Member State, or in a country with which the Republic of Ireland has a double taxation agreement in place, and to certain non-individual shareholders resident in Ireland (e.g. companies, pension funds, charities etc). An explanatory leaflet entitled “Dividend Withholding Tax Information Leaflet”, has been published by the Irish Revenue Commissioners and can be obtained by contacting the Company’s Registrar. This leaflet can also be downloaded from the Irish Revenue Commissioners web site at http://www.revenue.ie/download/dwtleaf.doc. Declaration forms for claiming an exemption are available from the Company’s Registrar. Annual General Meeting The Annual General Meeting will be held at the Berkeley Court Hotel, Lansdowne Road, Dublin 4 on Monday 3 July 2000 at 11a.m. 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. Share Listings DCC’s shares are listed on the Irish Stock Exchange (symbol: DCC.I) and the London Stock Exchange (symbol: DCC.L). Financial Calendar Preliminary results announced Ex-dividend date for the final dividend Record date for the final dividend Annual Report posted Annual General Meeting Proposed final dividend payment date Interim results announced Payment date for interim dividend 15 May 2000 22 May 2000 26 May 2000 31 May 2000 3 July 2000 4 July 2000 early November 2000 late November 2000 Index 32,55 80 1,56 9 20 52 34 33 53 34 66 64 58 80 1 6 22 22 57 66 31 53,57 2 78 33 s t n u o c c A 81 DCC plc Annual Report & Accounts 2000 Page Dividends (note 14) 41 41 6 73 80 77 58 30 39 63 10 Dividends Withholding Tax Earnings Per Share (note 15) E-Commerce E-Fulfilment Employee Information (note 3) Employee Share Schemes Euro Exceptional Gains on Sale of Associated and Subsidiary Undertakings (note 6) Exectutive Directors’ Remuneration Fair Value of Financial Instruments 76 6,75 Finance Leases (note 27) Financial Assets (note 18) Financial Calendar Financial Highlights Financial Strength Financial Review Five Year Summary and Key Ratios 1996 - 2000 Fixed Assets (note 17) Forward Contracts - currency and commodity Going Concern Goodwill Group at a Glance Group Directory Health and Safety Interest Payable & Similar Charges (notes 7 & 8) 53 Interest Rate Risk Management 24,65 Internal Financial Controls Investor Relations IT and E-Commerce Management Development Minority Interests (note 12) 31 79 9 10 55 Net Cash/(Debt) (note 43) 6,23,48,75 Note of Historical Cost Profits and Losses Notes to the Financial Statements 45 49 Accounting Convention Accounting Policies Acquisitions, Capital Expenditure and Disposals Acquisitions of Subsidiary Undertakings (note 39) Annual General Meeting Approval of Financial Statements (note 49) Associated Undertakings (note 18) Audit Committee Members Auditors' Report Bank and Other Debt (notes 24-26) Best Practice Capital Commitments (note 44) Capital Expenditure Capital Grants (note 38) Cash and Term Deposits (note 23) 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 46) Corporate Governance Corporate Information Creditors, Trade and Other (note 29) Credit Risk Management Commodity Price Risk Management CREST Currency Risk Management Debtors (note 21) Deferred Tax (note 31) Depreciation Derivative Financial Instruments (note 28) Directors' and Company Secretary's Interests Directors' Interests in Contracts Directors of the Company Directors' Remuneration (Report on) Directors' Report Directors' Share Options Dividend Cover 72 62 6 8 47 46 48 44 76 30 28 68 25,64 25,64 80 24 62 54,68 54,57 24,64 36 35 4 34 32 37 22 s t n u o c c A 82 DCC plc Annual Report & Accounts 2000 Index Operating Cash Flow Operating Lease Commitments (note 45) Operating Reviews SerCom Distribution Energy Healthcare Foods Supply Chain Management Services Pensions and Similar Obligations (note 32) Pensions - Directors Provisions for Liabilities and Charges (note 30) Reconciliation of Movements in Equity Shareholders' Funds (note 36) Reconciliation of Net Cash Flow to Movement in Net Cash/(Debt) Registrar Related Party Transactions (note 48) Remuneration Committee Reporting Currency (note 47) Reserves (note 35) Return on Capital Employed (ROCE) Sale of Associated and Subsidiary Undertakings (note 39) Segmental Information (note 1) Senior Group/Divisional Management Share Capital (note 33) Share Listings Share Premium (note 34) Share Price Data Shareholder Information Shareholders' Funds Statement of Directors' Responsibilities Statement of Total Recognised Gains and Losses Stocks (note 20) Subsidiary Undertakings (note 19) Substantial Shareholdings Swaps - currency Swaps - interest rates 23,74 76 12 14 Taxation (note 11) 23,54 Treasury Policy and Management Undrawn Bank Borrowing Facilities 24 67 79 33 16 Web Site Year 2000 18 20 69 34 68 72 48 79 77 34 77 71 23 74 49 27 70 80 71 79 79 72 38 45 61 61 32 65 65 DCC plc Annual Report & Accounts 2000 Notes s t n u o c c A 83 DCC plc Annual Report & Accounts 2000 Notes s t n u o c c A 84 DCC plc DCC House Brewery Road Stillorgan Co Dublin Tel: 353 1 283 1011 Fax: 353 1 283 1017 e-mail: info@dcc.ie Web: www.dcc.ie