DCC plc
Annual Report 2002

Plain-text annual report

DCC 2002 front[final 22/5].xp 5/6/02 11:09 am Page 1 DCC Annual Report & Accounts 2002 Business Support Services DCC is a business support services group focused on sales, marketing and distribution in the energy, IT, healthcare and food markets, operating principally in Britain and Ireland. CONTENTS Financial Highlights Group at a Glance Directors Chairman’s Statement Chief Executive’s Review Operating Review Corporate Social Responsibility Financial Review Management Corporate Governance Report of the Directors Report on Directors’ Remuneration Statement of Directors’ Responsibilities Report of the Independent Auditors Accounting Policies Financial Statements Notes to the Financial Statements Group Directory Shareholder Information Corporate Information Index Five Year Summary and Key Ratios inside cover inside flap 2 4 6 11 18 20 24 26 28 30 34 35 37 40 45 74 77 79 80 inside back cover 1 ANNUAL REPORT AND ACCOUNTS 2002 FINANCIAL HIGHLIGHTS TURNOVER €2.049 bn up 9.6% PROFIT operating profit €102.7 m up 12.0% CASH FLOW operating cash flow EARNINGS adjusted earnings per share DIVIDENDS dividend per share €117.5 m up 40.9% 98.3c 24.5c up 16.1% up 16.0% Profit before net exceptional items, goodwill amortisation and tax Adjusted earnings per share Dividend per share 5 year compound annual growth rate: 19.5% 5 year compound annual growth rate: 21.3% 5 year compound annual growth rate: 19.3% € million 97.7 87.3 cent 98.3 84.7 68.8 cent 24.50 21.12 17.60 57.2 45.4 14.66 12.19 71.3 59.2 46.6 98 99 00 01 02 98 99 00 01 02 98 99 00 01 02 GROUP AT A GLANCE ENERGY Marketing and distributing oil and liquefied petroleum gas (LPG) products in Britain and Ireland under our own brands Emo, Flogas and other local brands. • • Oil: DCC is the leading marketer and distributor of oil (heating and transport) products in Scotland and in Northern Ireland. DCC is a substantial player in the Irish oil distribution market with nationwide access to importation facilities. LPG: DCC markets and distributes propane and butane products, including autogas; it has leading market positions in Britain and Ireland. Environmental Services: DCC is a leading environmental services company, engaged in the marketing of chemicals for the treatment of water effluent and process liquids and in the provision of services to the retail petrol sector including waste oil recycling and soil remediation. • DCC is a business support services group focused on sales, marketing and distribution in the energy, IT, healthcare and food markets, operating principally in Britain and Ireland. High quality operations DCC develops skilled management teams who drive consistent strong growth through: • Product focused sales teams • Excellent technical support • Effective use of IT • Focus on working capital • Strong cash generation Market penetration DCC's deep distribution reach penetrates a broad range of customers across market sectors. IT (SerCom Distribution) Marketing and distributing a broad range of computer hardware and software products. • Britain: SerCom Distribution is a leading distributor of computer hardware, including PCs, peripherals, consumables, networking and storage products, to its extensive computer reseller customer base. It is also the leading distributor of consumer software, marketing and distributing business and leisure software to retail outlets, mail order businesses and computer resellers. • Continental Europe: SerCom Distribution is the leading specialist distributor • of high and mid-range storage solutions in France, Spain and Portugal. Ireland: SerCom Distribution is one of the country’s leading IT distributors selling a broad range of major hardware and software brands. Procurement DCC builds enduring relationships with key suppliers and leading brand owners, driving superior volume growth. HEALTHCARE Marketing and distribution of hospital supplies, mobility and rehabilitation equipment and nutraceuticals • Hospital supplies: DCC is the leading supplier of medical, surgical and laboratory equipment, consumables and pharmaceuticals to the Irish healthcare sector. • Mobility and rehabilitation: DCC has a strong position in the UK mobility and rehabilitation market, particularly in electrically powered scooters, with a growing presence in Germany. • Nutraceuticals: DCC is a leading full-service supplier of nutraceuticals (vitamins and health supplements) in Britain with a growing export customer base. DCC provides contract manufacturing (tablets, hard-gel and soft-gel capsules), packing and marketing services to leading branded, private label and mail order companies. FOOD DCC markets and distributes leading own and third party branded food and beverage products, focused on growth segments of the Irish food market, to an extensive retail and food-service customer base. • Snackfoods: DCC markets and distributes KP, Ireland’s leading savoury snackfood brand. • Healthy foods: DCC is the distributor of choice for healthy and fine foods in Ireland. • Beverages: DCC is a leading supplier of ground coffee, wines and soft beverages. OTHER INTERESTS DCC’s other interests comprise of: • Supply Chain Management Services: SerCom Solutions provides outsourced supply chain management solutions to leading global manufacturers in the IT and telecommunications sectors. • Manor Park: DCC's associate company, Manor Park Homebuilders, is one of Ireland's leading house builders and has a substantial land bank available for future development. Corporate logos DCC owned brands [ / ] p / / g ANNUAL REPORT AND ACCOUNTS 2002 BOARD OF DIRECTORS Alex Spain: Chairman Alex Spain, B.Comm., F.C.A. (aged 69), 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/Deputy Chairman Jim Flavin, B.Comm., D.P.A., F.C.A. (aged 59), 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 was also Deputy Chairman of eircom plc until its acquisition by Valentia Telecommunications Limited in November 2001. Tony Barry Tony Barry, Chartered Engineer (aged 67), non- executive Director, is a member of the Court of Directors of Bank of Ireland and is Chairman of Greencore Group 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 43), executive Director, joined DCC in 1985, having previously worked with KPMG. He is Managing Director of DCC SerCom. Mr Breen joined the Board in 2000. Morgan Crowe Morgan Crowe, Dip. Eng., M.B.A. (aged 57), 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 62), non- executive Director, retired as Head of Legal and Pensions Administration at Guinness Ireland Group in 2000. 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. Maurice Keane Maurice Keane, B.Comm., M.Econ.Sc. (aged 61), non-executive Director, is a member of the Court of Directors of Bank of Ireland, having been Chief Executive up until February 2002. He is Chairman of Bristol & West plc and is also Chairman of BUPA Ireland. Mr Keane was co-opted to the Board in March 2002. Audit Committee Paddy Gallagher (Chairman) Tony Barry Maurice Keane Alex Spain Remuneration Committee Tony Barry (Chairman) Paddy Gallagher Maurice Keane Alex Spain Nomination Committee Alex Spain (Chairman) Tony Barry Jim Flavin Paddy Gallagher Maurice Keane Senior Independent Director Maurice Keane 2 Kevin Murray Kevin Murray, B.E., F.C.A. (aged 43), 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 joined the Board in 2000. Fergal O’Dwyer Fergal O’Dwyer, F.C.A. (aged 42), executive Director, joined DCC in 1989 having previously worked with KPMG in Johannesburg and Price Waterhouse in Dublin. He was appointed Chief Financial Officer in 1994. Mr O’Dwyer joined the Board in 2000. 3 DCC 2002 front[final 22/5].xp 5/6/02 10:57 am Page 4 ANNUAL REPORT AND ACCOUNTS 2002 CHAIRMAN’S STATEMENT Results DCC’s continued strong earnings growth and excellent cash generation demonstrates the Group’s resilience in the current more challenging business environment. Turnover grew by 9.6% to €2.05 billion and operating profit increased by 12.0% to €102.7 million. Adjusted earnings per share increased by 16.1% to 98.30 cent, with adjusted fully diluted earnings per share up by 16.0% to 97.35 cent. The return on capital employed was excellent at 46.3% on tangible assets and 23.1% on assets inclusive of acquisition goodwill. Adjusted EPS €‘cent 100 80 60 40 20 0 4 92 93 94 95 96 97 98 99 00 01 02 Year ended 31 March DCC has achieved compound annual growth in adjusted earnings per share of 18.6% over the last ten years and 21.3% over the last five years. DCC’s strong earnings growth has been of high quality - it has been achieved in tandem with consistently high returns on capital, strong cash generation and a strong balance sheet. Dividend The Directors are recommending a final dividend of 15.212 cent per share which, when added to the interim dividend of 9.288 cent per share, gives a total dividend for the year of 24.50 cent per share. This represents an increase of 16.0% on the dividend of 21.12 cent per share paid in respect of the year ended 31 March 2001. Since its public listing in 1994, DCC has increased its dividend at a compound annual rate of 18.4%. The dividend for the year is covered 4.0 times by adjusted earnings per share (2001: 4.0 times). The final dividend will be paid on 11 July 2002 to those shareholders on the register at the close of business on 24 May 2002. DCC 2002 front[final 22/5].xp 5/6/02 10:57 am Page 5 Share buyback Corporate governance As announced on 28 September 2001, the Board took DCC is committed to pursuing best practice in advantage of the Group’s strong balance sheet to buy relation to corporate governance matters. The DCC back 2,275,000 shares (2.6% of the issued share capital) at €9.25 per share at a total cost of €21.04 million. Board is satisfied that the Group has effective ongoing processes for identifying, evaluating and This purchase, when combined with the shares managing risks faced by the Group. A detailed purchased in the prior financial year, brings the total statement of DCC’s compliance with the Principles of bought back to 5.5% of DCC’s issued share capital. Good Governance, as set out in the Combined Code, is given on pages 26 and 27. DCC’s selective approach to share buybacks has a minimal impact on its financial capacity and is intended Propriety of Fyffes share sale in February 2000 to complement, rather than substitute for, the Group’s On 24 January 2002, Fyffes plc initiated legal capital expenditure and acquisition programmes. proceedings against DCC plc and others under Part V Development During the year a total of €102.9 million was of the Irish Companies Act, 1990 in connection with the sale by DCC’s wholly owned subsidiary, Lotus Green Limited, of 87% of its shareholding in Fyffes plc committed to acquisitions and capital expenditure. in February 2000. The Board of DCC plc, having taken DCC completed several synergistic bolt-on legal advice and having obtained the opinion of other acquisitions during the year providing enhanced independent experts, considers the Fyffes legal action platforms for growth in each of its markets. to be without merit and inconsistent with the share DATE ACQUISITION LOCATION DESCRIPTION Jun’01 AGP Britain Sept’01 Scottish Fuels Britain Sept’01 Envirotech Ireland & Britain Specialist distributor of computer storage products based in Romsey in south-east England. Formerly BP’s oil marketing and distribution business with market leadership position in Scotland. Operating in the fast growing water treatment sector of the environmental industry, Envirotech blends, markets and distributes branded chemicals for the treatment of water effluent and process liquids. dealings, actions and statements of Fyffes and certain of its directors and officers at that time. The Board is completely satisfied that no DCC Group company or officer was in possession of price sensitive information, that the confidentiality of Fyffes information was fully maintained and that the sale was undertaken with absolute propriety. The Fyffes legal action will be vigorously rebutted. Oct’01 Noble Fuels Britain Oil marketer and distributor based in Teeside, in northern England. The future Dec’01 Alta Gas Britain Significant marketer and distributor of LPG in the UK. DCC is well placed commercially and financially to Feb’02 TechnoPharm Ireland Rapidly growing value added distributor of specialist pharmaceuticals and medical devices to Irish hospitals. generate ongoing growth both organically and by acquisition. Board appointment On 25 March 2002, Mr Maurice Keane was co-opted to DCC’s Board as a non-executive director. Mr Keane is a member of the Court of Directors of Bank of Ireland, having been Group Chief Executive up until February Alex Spain 2002. He is Chairman of Bristol & West plc and is also Chairman Chairman of BUPA Ireland. Mr Keane brings a wealth 10 May 2002 of knowledge and experience to the Board. 5 DCC 2002 front[final 22/5].xp 5/6/02 10:57 am Page 6 ANNUAL REPORT AND ACCOUNTS 2002 CHIEF EXECUTIVE’S REVIEW DCC is committed to achieving consistent returns, well in excess of its cost of capital, which bring benefits to its shareholders, employees, customers and suppliers. The DCC business model This year we saw the true strength of the DCC Group as DCC again achieved an excellent result despite the current more challenging business environment. DCC’s strong performance against this background is testimony to the resilience of the Group. Balance Sectoral operating profit split DCC’s balanced business model, providing business ENERGY IT HEALTHCARE FOOD OTHER 34% 30% 20% 11% 5% support services across a number of market sectors, provides great strength, stability and consistency of performance even in a more challenging business environment. The value of DCC’s sectoral spread was clearly evident in the current year as the global economic slowdown impacted various industries in different ways. The slowdown resulted in extremely Geographical operating profit split difficult market conditions for the IT industry in UK REP. OF IRL. OTHER 50% 42% 8% particular, however it also gave rise to more stable world energy prices benefiting the downstream energy marketing and distribution sector. Overall, despite the varying consequences of the current environment, DCC once again delivered significant earnings growth. 6 DCC 2002 front[final 22/5].xp 5/6/02 10:58 am Page 7 Organic growth and bolt-on acquisitions People and process DCC’s first priority is achieving organic growth. DCC’s Key elements in DCC’s ability to achieve sustainable focus is on recurring revenue businesses which superior performance and competitive advantage are operate in market segments where good growth the quality of its people and the efficiency and opportunities exist. Most of DCC’s growth since its effectiveness of its processes. public listing has been organically generated. DCC is in essence a selling machine, focused on DCC seeks to augment organic growth with providing the highest service levels to its customers shareholder value enhancing bolt-on acquisitions and suppliers. There is no better competitive which can be integrated with existing businesses in advantage than excellent service. The quality of the order to increase their scale, strengthen their brands for which DCC provides sales, marketing and competitive positions and achieve cost efficiencies. distribution services is an endorsement of its proven Making and integrating bolt-on acquisitions is a core ability to drive superior volume growth. DCC’s skill for DCC as its acquisition track record demonstrates. product focused sales teams and committed Bolt-on acquisitions are lower risk than larger managers have deep product and market knowledge. acquisitions and deliver greater long term value. Performance is measured and monitored promptly, Financial strength constantly and rigorously. DCC’s intelligent use of information technology is critical to ensuring the DCC leverages commercial advantage from its effectiveness of its processes. strong balance sheet. DCC’s financial strength enables it to seek better credit terms and buying The quality of the DCC organisation was recognised prices from suppliers. Also, potential new suppliers when DCC received The Irish Times/PA Consulting of quality brands are influenced by financial strength Group Management Award for 2001. The stated when choosing a partner to handle their sales, objective of this prestigious award is to give public marketing and distribution. DCC has the ability to recognition to organisations that achieve outstanding move quickly to seize all organic and acquisition results through a strategic, driven and innovative style opportunities with confidence. of management. DCC RECEIVED THE 2001 IRISH TIMES/PA MANAGEMENT AWARD. PRESENTING THE AWARD TO JIM FLAVIN (LEFT ABOVE), THE TAOISEACH, BERTIE AHERN, SAID THAT DCC “DEMONSTRATES THE EXCELLENT MANAGEMENT SKILLS OUR ECONOMY DEPENDS ON” 7 DCC 2002 front[final 22/5].xp 5/6/02 10:58 am Page 8 8 DCC 2002 front[final 22/5].xp 5/6/02 10:58 am Page 9 ANNUAL REPORT AND ACCOUNTS 2002 CHIEF EXECUTIVE’S REVIEW continued How DCC delivered this year and will go on delivering We remain optimistic for DCC’s future development in The factors that generated DCC’s strong performance the healthcare market despite a number of shorter in the year under review remain in place and the term business-specific issues within our healthcare integration of the businesses acquired during the year operations. This market continues to benefit from a is at an advanced stage. number of significant underlying trends. Most notably, in the Irish healthcare market, the DCC’s strong profit growth in the energy market in Government is committed to increasing healthcare recent years reflects well on the excellent business spending significantly over the coming years, which development which DCC has achieved in this sector. should benefit DCC’s Irish hospital supplies business. The acquisition of BP’s Scottish Fuels gives DCC a The completion during the year of a new sales and market leadership position in Scotland and provides a marketing arrangement with Tyco Healthcare for platform from which to build a significant business in Ireland and the acquisition of TechnoPharm, a the fragmented oil marketing and distribution sector distributor of specialist pharmaceuticals, also provide in Britain. Consolidation has been a feature of the enhanced platforms for further growth. British liquified petroleum gas (LPG) market and the acquisition of Alta Gas places DCC firmly among the DCC’s food business continues to benefit from its market leaders. Overall, DCC is now one of the largest focus on niche growth sectors of the Irish market independent companies marketing and distributing oil (such as snack foods, health foods, wines and soft and LPG products in Britain and Ireland. drinks) and its deep distribution reach to a broad Market conditions for the IT industry became has achieved significant and consistent profit growth increasingly difficult as the year under review and, following a difficult prior year, significant profit progressed. Despite this, DCC’s IT distribution growth resumed in the year under review. customer base. Over the years DCC’s food business operations achieved a very creditable result. These operations are focused on business to business Outlook distribution, with broad vendor and customer bases, The strength, stability and resilience of DCC’s allied to excellence in service levels and operating balanced business model, which enables the Group to processes and controls. Over the past five years DCC’s deliver such consistency of performance, gives me IT distribution business has increased its profits by an great confidence in the long term future of DCC. average of 38.9% per annum - significantly outperforming the market. We believe the current result represents outperformance of a similar magnitude. Looking forward, we are confident that technological advances will continue to drive above average long-term growth in the IT market. Particular Jim Flavin segments of the IT market are likely to see higher Chief Executive/Deputy Chairman growth, including storage products and leisure 10 May 2002 software, where DCC has strong market positions. DCC’s appointment by Microsoft as exclusive distributor of the Xbox for the British and Irish distribution channels provides an excellent platform for further development in the high growth computer games segment of the software market. 9 DCC 2002 front[final 22/5].xp 5/6/02 11:03 am Page 10 10 DCC 2002 front[final 22/5].xp 5/6/02 11:03 am Page 11 ANNUAL REPORT AND ACCOUNTS 2002 OPERATING REVIEW ENERGY Marketing and distributing oil and liquefied petroleum gas (LPG) products in Ireland and Britain under DCC’s own Emo, Flogas and Energy generated outstanding profit growth reflecting the excellent business development which DCC has achieved in this sector. other local brands During the year a number of strategically important bolt-on acquisitions were completed. DCC Energy is now one of the largest independent companies marketing and distributing oil and liquified petroleum gas (LPG) products in Britain and Ireland. LPG volumes benefited from the particularly good growth achieved in the automotive gas sector in Britain. DCC has a significant share of this fast growing segment of the LPG market. Alta Gas, a British based marketer and distributor of cylinder LPG, was purchased in December 2001 and integrated with DCC’s existing Flogas operations. Consolidation has been a feature of the British LPG market in recent years and the acquisition of Alta Gas places DCC firmly among the market leaders. DCC’s oil marketing and distribution activities were extended into Britain with the acquisition of BP’s oil marketing and distribution business in Scotland and Northern England (now called Scottish Fuels) and of Noble Fuels on Teeside. DCC is now the market leader in oil distribution in Scotland and has an excellent platform for further growth in the fragmented British market. DCC HAS A SIGNIFICANT SHARE OF THE FAST THE ACQUISITION OF ALTA GAS PLACES DCC FIRMLY GROWING BRITISH AUTOGAS MARKET AMONG THE BRITISH LPG MARKET LEADERS 11 DCC 2002 front[final 22/5].xp 5/6/02 11:03 am Page 12 ANNUAL REPORT AND ACCOUNTS 2002 OPERATING REVIEW continued DCC has had a strong presence in the oil treatment sector of the environmental services market in Ireland for a number of years. The acquisition in September 2001 of Envirotech, a marketer of chemicals for the treatment of water effluent and process liquids, has broadened DCC’s environmental services activities into the high growth water treatment sector. The environmental services industry is experiencing rapid growth, driven by increased enforcement of regulations, and offers DCC exciting opportunities for development. ENERGY Turnover Operating profit Return on capital employed - excluding goodwill - including goodwill 2002 2001 €717.6m €610.3m +17.6% €35.0m €23.6m +48.1% 49.1% 23.8% 44.8% 21.0% IT (SerCom Distribution) Marketing and distributing a broad range of computer hardware and software products SerCom Distribution achieved a very creditable result in the increasingly difficult market conditions for the IT industry as the past financial year progressed. DCC’s British computer hardware distribution business again demonstrated the robust nature of its business model. It benefited from its broad customer and product base which was enhanced during the year by the acquisition of AGP, a south of England based computer storage products distributor. The logistics and back office functions of AGP were integrated into SerCom Distribution’s UK facility in Altham, where capacity had been significantly extended in the previous financial year. DCC’s British software distribution business benefited from the strong growth in demand for leisure software products. DCC’s appointment by Microsoft as exclusive distributor of the Xbox console, software and peripherals for the UK and Irish distribution channels is a clear endorsement of its market leading position and operational strength in the leisure software sector. SERCOM DISTRIBUTION IS IBM’S LARGEST STORAGE DISTRIBUTOR IN EUROPE 12 DCC 2002 front[final 22/5].xp 5/6/02 11:03 am Page 13 DCC 2002 front[final 22/5].xp 5/6/02 11:03 am Page 14 ANNUAL REPORT AND ACCOUNTS 2002 OPERATING REVIEW continued In Continental Europe, DCC’s specialist computer storage distribution business had a difficult second half following a significant slowdown in IT spending by large corporates. Our specialist focus on computer storage products continues to be recognised by vendors and during the year IBM named the company as its largest storage distributor in Europe. The business is well placed to benefit from an upturn in corporate IT expenditure. SERCOM DISTRIBUTION IS THE EXCLUSIVE DISTRIBUTOR OF MICROSOFT’S XBOX FOR THE BRITISH AND IRISH DISTRIBUTION CHANNELS The Irish business was impacted by the significant slowdown in the Irish IT market. The company has substantially reduced its cost base in order to better position itself for renewed profit growth. IT (SerCom Distribution) Turnover Operating profit Operating margin Return on capital employed - excluding goodwill - including goodwill 2002 2001 €813.8m €753.9m €30.6m €31.2m +7.9% -1.8% 3.8% 4.1% 60.4% 31.3% 67.5% 33.9% HEALTHCARE Marketing and distributing hospital supplies, mobility & rehabilitation equipment and nutraceuticals Healthcare profit growth was held back in the year by a number of shorter term trading issues within the businesses. DCC’s hospital supply business further broadened its product portfolio during the year with the acquisition of TechnoPharm, a fast growing distributor of specialist pharmaceutical products to acute care hospitals in Ireland. Customer service levels were further enhanced with the rollout of a bespoke e-commerce system to Irish hospitals, which are choosing to perform an increasing proportion of their transactions electronically as they see the benefits of this service. Of note during the year was a new sales and marketing arrangement with Tyco Healthcare, under which DCC is now marketing all of Tyco’s medical and surgical products in Ireland. The hospital supply business remains well placed to benefit from increased government spending on health services. DCC MARKETS AND DISTRIBUTES DIABETES MONITORING SYSTEMS TO UK HOSPITALS 14 DCC 2002 front[final 22/5].xp 5/6/02 11:04 am Page 15 Having performed well in the first nine months, DCC’s mobility and rehabilitation business was severely impacted in the last quarter by the disruption of its supply of Shoprider powered mobility products arising from a breach by the manufacturer of a long term supply agreement. Action has been taken which will restore supplies of powered mobility products from alternative sources. In DCC’s nutraceuticals operations, significant new business has been won since the previously announced loss of a major customer. The customer base will continue to be broadened and it is expected that the lost business will be fully replaced over time. HEALTHCARE Turnover Operating profit Operating margin 2002 2001 €192.5m €182.7m €20.7m €20.3m +5.4% +2.0% 10.8% 11.1% Return on capital employed - excluding goodwill - including goodwill 41.4% 17.6% 43.3% 19.1% DCC IS THE MARKET LEADER IN THE SUPPLY OF BEDS TO IRISH HOSPITALS 15 DCC 2002 front[final 22/5].xp 5/6/02 11:04 am Page 16 16 DCC 2002 front[final 22/5].xp 5/6/02 11:04 am Page 17 ANNUAL REPORT AND ACCOUNTS 2002 OPERATING REVIEW continued FOOD DCC markets and distributes leading own and third party branded food and beverage products focused on growth This was an excellent result in Food benefiting from underlying sales growth of 7% and a recovery in margins. segments of the Irish market DCC has deep distribution reach, supplying a broad base of retail and food service customers. DCC continued to invest in extending this distribution reach during the year with increased sales and marketing resources. This contributed to the good sales performance across all product categories, with strong growth in wine and soft drinks. During the year a significant rationalisation was carried out in Kylemore Foods, a 50% owned associate, which involved the closure of the company’s fresh bakery operations. This is reflected in an exceptional charge in the year but has resulted in a substantial increase in Kylemore’s operating profits. FOOD Turnover Operating profit Operating margin Return on capital employed - excluding goodwill - including goodwill 2002 2001 €184.2m €182.4m €11.0m +1.0% €8.5m +30.0% 6.0% 4.6% 62.5% 26.9% 51.3% 21.4% Other interests DCC’s other interests, principally Manor Park Homebuilders (an associate company) and SerCom Solutions, contributed operating profits of €5.4 million (2001: €8.1m). Manor Park, a leading Irish housebuilder with a substantial land bank, achieved a good result and is well placed to achieve strong profit growth in the coming years. SerCom Solutions, which provides supply chain management services to the IT sector, had a challenging year due to the impact of the severe slowdown in the IT market. DCC ENJOYED PARTICULARLY STRONG GROWTH IN WINE AND SOFT DRINKS DCC MARKETS AND DISTRIBUTES KP, IRELAND’S LEADING SAVOURY SNACKFOOD BRAND 17 DCC 2002 front[final 22/5].xp 5/6/02 11:04 am Page 18 ANNUAL REPORT AND ACCOUNTS 2002 CORPORATE SOCIAL RESPONSIBILITY DCC recognises its corporate social responsibilities to shareholders, employees, customers and suppliers and to the communities in which it operates. Responsible corporate citizenship is a natural extension of DCC’s commitment to excellence across all areas of its operations. Employees and management DCC operates a decentralised organisational Employees and management are key elements of structure - employees and managers are afforded a DCC’s success - their talent, innovation and high degree of responsibility and autonomy. This entrepreneurial business flair have been the environment contributes to a thriving growth focused essential ingredients in DCC’s consistent strong culture across the Group and supports a rich vista of growth. Our employment practices emphasise career opportunities, spanning operational and equality of opportunity, continuous training and corporate activities. We believe that the high development, open communication, empowerment performance of the Group is supported by the fact and accountability. that many employees have equity interests in DCC following the successful introduction of the group-wide DCC Employee Share Save Scheme. Building long term competitive advantage and enduring superior performance requires high calibre leaders with the drive, ambition and ability to succeed. One of the key initiatives supported by the DCC Group Human Resources team is the DCC Group Leadership Development process, which seeks to identify and develop future leaders. As part of this annual process each DCC Group company reviews and assesses leadership talent and puts in place a formal development plan to ensure that future leadership requirements are provided for. DCC recognises the importance and value of good employee communications and is launching a Group intranet later this year. 18 DCC 2002 front[final 22/5].xp 5/6/02 11:04 am Page 19 Environment, health and safety Some of DCC’s operations have a beneficial impact on DCC is committed to the effective management of the environment. Within our energy operations, DCC environmental, health and safety (EHS) risks across is a leading player in the marketing and distribution of its operations. Striving for continual improvement in autogas in Britain and Ireland. Autogas i.e. liquefied EHS performance is part of the overall drive for the petroleum gas (LPG) for motor vehicles, is an highest operational standards - it also contributes to environmentally cleaner alternative to petrol and financial success by reducing costs and increasing diesel. Recognising this environmental advantage the operational efficiencies. British government has introduced fiscal measures to promote the use of autogas. DCC also has a DCC faces differing challenges to reduce EHS risk across developing environmental services business involved its operations. DCC’s Group Risk Management function in the marketing of chemicals for the treatment of is putting processes in place to ensure that a consistent water effluent and process liquids and in the approach is adopted across the Group to address provision of services to the retail petrol sector, these challenges - focused on risk assessment, including waste oil recycling and soil remediation. training, review and continuous improvement. Community DCC is committed to: DCC’s businesses are active in supporting the local • Ensuring compliance with all applicable EHS legislation communities in which they operate and, in addition to and leveraging best practices across the Group charitable donations, many of our employees give • Increasing investment in training and infrastructure time voluntarily to charitable causes. to provide a safer workplace for employees • Reducing the production of waste • Further integrating EHS considerations into all aspects of operational and strategic decision making DCC recognises the long term, continuing nature of corporate social responsibility and is committed to Rigorous EHS audits and self assessments are carried meeting its responsibilities as a good corporate citizen. out to ensure compliance with legislation and to measure progress against targets and best practice. 19 DCC 2002 front[final 22/5].xp 5/6/02 11:07 am Page 20 ANNUAL REPORT AND ACCOUNTS 2002 FINANCIAL REVIEW Financial values DCC’s excellent growth record has been built on a solid foundation of traditional financial values and disciplines including rigorous controls and review, balance sheet strength and a strong focus on cash flow and returns on capital. DCC’s success derives from a consistent strategy of seeking broadly based growth and from achieving operational excellence in our focused activity - sales, marketing and distribution - rather than from the development of new technologies or processes. The Group’s operations focus on doing the day-to-day things well. Similarly our accounting and treasury policies and balance sheet structure are straightforward, consistent and transparent. Results Continued strong earnings growth, excellent cash generation - operating cash flow up 40.9% - and consistently high returns on capital employed were the key features of DCC's results for the year ended 31 March 2002. Turnover grew by 9.6% to a record €2,048.9 million and operating profit increased by 12.0% to a record €102.7 million. The profit growth represents a continuation of DCC’s formula of organic growth and bolt-on acquisitions which has been successful for the Group over many years - more than two thirds of DCC’s growth since its public listing in 1994 has been organic. In the year under review, the proportion of the growth generated organically was lower at just under 50%, principally due to the impact of the difficult conditions in the IT industry. The balance of the operating profit increase was contributed by earnings enhancing, bolt-on acquisitions. SECTORAL OPERATING PROFIT SPLIT DCC’s businesses in the energy, IT, healthcare and ENERGY IT HEALTHCARE FOOD OTHER 34% 30% 20% 11% 5% food markets generated 95% of the Group’s operating profit in the year. The chart to the left shows the breakdown of operating profit by market sector and a detailed operating review is set out on pages 11 to 17. 20 DCC 2002 front[final 22/5].xp 5/6/02 11:07 am Page 21 The overall group percentage margin is not a Return on capital employed particularly useful measure for DCC due to the DCC is committed to creating shareholder value influence of changes in oil product costs on the through delivering consistent, long term returns in percentage. While changes in oil product costs will excess of our cost of capital. In the year under review, change percentage operating margins, this has little DCC again generated returns significantly ahead of relevance in the downstream energy market in which cost of capital - 46.3% on tangible capital employed DCC Energy operates, where profitability is driven by and 23.1% on capital employed inclusive of absolute contribution per litre (or tonne) of product acquisition goodwill (2001: 48.1% and 23.7% sold and not a percentage margin. The Group's respectively). The decrease on the prior year principally operating margin was 5.0%, compared with 4.9% in reflects the energy operations’ greater weighting in the the prior year. The operating margin for each of DCC’s results for the year. While the energy business market sectors is set out in the Operating Review. generates excellent returns, 49.1% on tangible capital Interest The net interest charge increased to €5.0 million from €4.4 million, primarily reflecting the impact of in the year under review, the returns in DCC’s IT distribution business, 60.4% on tangible capital in the year ended 31 March 2002, are even higher. acquisition spend and an increase in the Group’s HIGH RATES OF ROCE 50% 40% 30% 20% 10% 0% share of the interest charge of its associates. Interest cover was 20.5 times (2001: 20.8 times). Profit before net exceptional items, goodwill amortisation and tax rose by 11.9% to €97.7 million. Exceptional items The charge for net exceptional items of €1.1 million principally comprises rationalisation costs in DCC’s 50% associate Kylemore Foods, partially offset by a profit on the disposal in August 2001 of an 18% investment in Capco Limited, an Irish building materials distributor. Taxation The Group's taxation charge on ordinary activities for the year represents a tax rate of 14%, down from 15% last year. The standard rate of corporation tax in Ireland is 16% since 1 January 2002 and will be reduced to 12.5% by 1 January 2003. In addition, the Group’s manufacturing profits in Ireland are taxed at 10%. An analysis of the taxation charge is contained in note 11 to the financial statements. 98 99 00 01 02 EXC. GOODWILL INC. GOODWILL 21 DCC 2002 front[final 22/5].xp 5/6/02 11:07 am Page 22 ANNUAL REPORT AND ACCOUNTS 2002 FINANCIAL REVIEW continued Cash flow Balance sheet DCC focuses on increasing operating cash flow to maximise shareholder value over the long-term. Operating cash flow is principally used to fund DCC has a very strong balance sheet with shareholders’ funds of €391.4 million at 31 March 2002 and net cash of €63.1 million. The composition investment in existing operations, complementary of net cash at 31 March 2002 is shown in the bolt-on acquisitions, dividend payments and selective following table. share buybacks. Cash flow from operating activities was excellent, up 40.9% to €117.5 million, which compares with operating profits from subsidiaries of €89.1 million. Strong working capital management gave rise to a cash inflow from working capital and working capital equated to 11.5 days sales at the year end (2001: 13.2 days). The table below sets out a summary of cash flows. NET CASH 2002 E’m 2001 E’m Cash and term deposits 304.7 454.6 Bank and other debt repayable within one year Bank and other debt repayable after more than one year Unsecured notes due 2008/11 Net cash (108.8) (200.6) (26.8) (106.0) 63.1 (65.8) (105.0) 83.2 CASH FLOW SUMMARY 2002 E’m 2001 E’m including currency, interest rates and maturity periods, The Group's cash and debt at 31 March 2002, is shown in notes 22 to 26 to the financial statements. Inflows Operating cash flow Disposal proceeds Share issues (net) Outflows Capital expenditure (net) Acquisitions Share buyback Interest paid Taxation paid Dividends paid Net cash outflow Translation adjustment Movement in net cash Opening net cash Closing net cash 117.5 11.3 0.8 83.4 16.0 1.9 129.6 101.3 33.0 59.6 21.3 3.8 12.5 19.2 149.4 (19.8) (0.3) (20.1) 83.2 63.1 29.5 26.0 24.7 2.6 9.1 16.4 108.3 (7.0) 1.0 (6.0) 89.2 83.2 22 DCC 2002 front[final 22/5].xp 5/6/02 11:07 am Page 23 Treasury policy and management Interest rate risk management The principal objective of the Group's treasury policy The Group borrows at both fixed and floating rates of is the minimisation of financial risk at reasonable interest and utilises interest rate swaps to manage its cost. This policy is reviewed and approved annually exposure to interest rate fluctuations. by the Board. The Group does not take speculative positions but seeks, where considered appropriate, to Credit risk management hedge underlying trading and asset/liability DCC transacts with a variety of financial institutions exposures by way of derivative financial instruments for the purpose of placing deposits and entering into (such as interest rate and currency swaps and derivative contracts. The Group actively monitors its forward contracts). DCC's Group Treasury centrally credit exposure to each counterparty within manages the Group’s funding and liquidity guidelines approved by the Board. requirements. Divisional and subsidiary management, in conjunction with Group Treasury, Commodity price risk management manage foreign currency and commodity price Commodity forwards, swaps and options are exposures within approved guidelines. An analysis of frequently used to fully or partly hedge potential the Group's hedging positions is contained in note price movements in LPG and oil products to be 27(b) to the financial statements. purchased by the Group's energy businesses in Currency risk management into with counterparties approved by the Board and DCC's reporting currency and that in which its share usually for a period not exceeding three months. Britain and Ireland. All such contracts are entered capital is denominated is the euro. Exposures to other currencies arise in the course of ordinary trading, principally sterling and the US dollar. Trading foreign currency exposures are generally hedged by using forward contracts to cover specific or estimated purchases and receivables. Approximately half of the Group's operating profits are sterling denominated and, where appropriate, hedges are put in place to minimise the related exchange rate volatility. However, certain natural hedges also exist within the Group, as a proportion of both the Group's interest payments and purchases by certain 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 operating assets are hedged by an equivalent amount of sterling denominated borrowings. 23 ANNUAL REPORT AND ACCOUNTS 2002 DIRECTORS’ REPORT & FINANCIAL STATEMENTS 2002 ANNUAL REPORT AND ACCOUNTS 2002 CORPORATE GOVERNANCE The Board of Directors Directors: The Board of DCC consists of five executive and four non-executive Directors and the roles of the Chairman and Chief Executive are separate. Maurice Keane was appointed Senior Independent Director on 25 March 2002 in line with DCC’s policy of rotating this position among the non-executive Directors. Brief biographies of the Directors are set out with their photographs on pages 2 and 3. 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 to take independent professional advice in the furtherance of their duties 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 Board Committees with formal terms of reference: the Audit Committee, the Remuneration Committee and the Nomination Committee. The Audit Committee and the Remuneration Committee comprise the four 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 Report on Directors’ Remuneration is set out on pages 30 to 33. Relations with Shareholders DCC attaches considerable importance to shareholder communications and has a well established investor relations function. There is regular dialogue with institutional investors and shareholders as well as presentations after the interim and preliminary results. Results announcements are sent promptly to all shareholders and published on the Company’s website at www.dcc.ie. The website contains additional information for investors which is regularly updated. At the Company’s Annual General Meeting the Chief Executive/Deputy Chairman makes a presentation and answers questions on the Group’s business and its performance during the prior year. The 2001 Annual Report and Notice of Annual General Meeting were sent to shareholders 21 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 2002 Annual Report and Annual General Meeting. The 2002 Annual General Meeting will be held on 5 July 2002 at 11 am 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 and review of the scope and results of the work performed by the DCC Risk Committee and by both the Group Risk Management function (incorporating Internal Audit) and the external auditors. The Audit Committee also reviews the nature and extent of non-audit services provided by the external auditors. 26 ANNUAL REPORT AND ACCOUNTS 2002 CORPORATE GOVERNANCE Internal Control The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss. In accordance with the Turnbull guidance for directors on internal control, Internal Control: Guidance for Directors on the Combined Code, the Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group, that it has been in place for the year under review and up to the date of approval of the financial statements, and that this process is regularly reviewed by the Board. The key risk management and internal control procedures, which are supported by detailed controls and processes, include: • skilled and experienced Group and divisional management; • an organisation structure with clearly defined lines of authority and accountability; • a comprehensive system of financial reporting involving budgeting, monthly reporting and variance analysis; • the operation of approved risk management policies (including treasury and IT); • a Risk Committee, comprising Group senior management, whose main role is to keep under review and report to the Audit Committee of the Board on the principal risks facing the Group, the controls in place to manage those risks and the monitoring procedures; • an independent Group Risk Management function, which incorporates Internal Audit and Group Environmental, Health and Safety; and • a formally constituted Audit Committee which reviews the operation of the Risk Committee and the Group Risk Management function, liaises with the external auditors and reviews the Group’s internal control systems. The Board has reviewed the effectiveness of the Group’s system of internal control. This review covered all controls including financial, operational and compliance controls and risk management. 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 34 and the reporting responsibilities of the auditors are set out in their report on pages 35 and 36. Compliance DCC has complied, during the year ended 31 March 2002, with all of the Principles of Good Governance and Code of Best Practice set out in the Combined Code. 27 ANNUAL REPORT AND ACCOUNTS 2002 REPORT OF THE DIRECTORS for the year ended 31 March 2002 The Directors present their report and the audited financial statements for the year ended 31 March 2002. Principal Activities DCC is a business support services group, selling, marketing and distributing its own and third party branded products in the energy, IT, healthcare and food markets. A summary of the Group’s activities is set out on pages 11 to 17. Subsidiary and Associated Companies Details of the Company’s principal subsidiaries are set out on pages 74 to 76. Details of its principal associated undertakings are set out on page 56, in note 18 to the financial statements. 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. Results and Business Review The profit for the financial year attributable to Group shareholders amounted to €76.3 million as set out in the Consolidated Profit and Loss Account on page 40. The Chairman’s Statement on pages 4 and 5, the Chief Executive’s Review on pages 6 to 9, the Operating Review on pages 11 to 17 and the Financial Review on pages 20 to 23 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 2002, of recent events and of likely future developments. Dividends An interim dividend of 9.288 cent per share, amounting to €7.75 million, was paid on 30 November 2001. The Directors recommend the payment of a final dividend of 15.212 cent per share, amounting to €12.72 million. Subject to shareholders’ approval at the Annual General Meeting on 5 July 2002, this dividend will be paid on 11 July 2002 to shareholders on the register on 24 May 2002. The total dividend for the year ended 31 March 2002 amounts to 24.50 cent per share, a total of €20.47 million. The balance of profit attributable to Group shareholders, which is retained in the business, amounts to €55.8 million. Share Buyback and Treasury Shares On 28 September 2001, the Company purchased 2,275,000 of its own shares (2.58% of the issued share capital) with a nominal value of €0.569 million at a total cost of €21.04 million. These shares, together with the 2,563,045 shares purchased in the previous financial year, were held by the Company as Treasury Shares. The maximum number of shares so held during the year was 4,838,045 (5.48% of the issued share capital) with a nominal value of €1.210 million. A total of 289,325 shares (0.33% of the issued share capital) with a nominal value of €0.072 million were re-issued during the year, 175,825 at prices ranging from €9.05 to €11.35 per share as part consideration for a number of acquisitions and 113,500 at prices ranging from €6.22 to €8.19 consequent to the exercise of share options, leaving a balance of 4,548,720 shares held in treasury at 31 March 2002. 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. 28 ANNUAL REPORT AND ACCOUNTS 2002 REPORT OF THE DIRECTORS for the year ended 31 March 2002 Substantial Shareholdings At 10 May 2002, the Company had been advised of the following interests in its issued share capital: FMR Corp. and its direct and indirect subsidiaries * Bank of Ireland Asset Management Limited ** Merrill Lynch Investment Managers Limited ** Allied Irish Banks plc and its subsidiaries ** No. of €0.25 Ordinary Shares % of Issued Share Capital 10,864,181 8,626,493 5,978,199 4,247,336 12.3% 9.8% 6.8% 4.8% Under Irish and UK law the shares are held by non-beneficial holders. * ** Notified as non-beneficial interests. Apart from these holdings, the Company has not been notified of any other interest of 3% or more in its issued ordinary share capital. Directors The names of the Directors and a short biographical note on each Director appear on pages 2 and 3. Maurice Keane was co-opted to the Board on 25 March 2002. In accordance with Article 83(b) of the Articles of Association, Maurice Keane retires at the 2002 Annual General Meeting and, being eligible, offers himself for re- election. In accordance with Article 80 of the Articles of Association, Tony Barry, Morgan Crowe and Kevin Murray retire by rotation at the 2002 Annual General Meeting and, being eligible, offer themselves for re- election. None of the retiring Directors has a service contract with the Company or with any member of the Group. Details of the Directors’ interests in the share capital of the Company are set out in the Report on Directors’ Remuneration on pages 30 to 33. Health and Safety It is the policy of the Group to ensure the safety, health and welfare of employees by maintaining 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 companies in the Group and the policies set out in these statements are kept under regular review. Political Contributions 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 10 May 2002 29 ANNUAL REPORT AND ACCOUNTS 2002 REPORT ON DIRECTORS’ REMUNERATION Remuneration Committee The Remuneration Committee comprises the four independent non-executive Directors - Tony Barry, Paddy Gallagher, Maurice Keane and Alex Spain. The Committee is chaired by Tony Barry. The terms of reference of the Remuneration Committee are to determine the remuneration packages of the executive Directors and to approve the grant of share options. The Chief Executive/Deputy Chairman 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 The Company’s remuneration policy recognises that employment and remuneration conditions for the Group’s senior executives must properly reward and motivate them to perform in the best interests of the shareholders. The typical elements of the remuneration package for executive Directors are basic salary, performance related remuneration consisting of performance related annual bonuses and share options, pension benefits and a company car. Salaries The salaries of executive Directors are reviewed annually on 1 January having regard to personal performance, Company performance and competitive market practice. No fees are payable to executive Directors. Performance Related Annual Bonuses Performance related annual bonuses are payable to executive Directors, in respect of the financial year to 31 March, as to a maximum of one half based on trading performance and to a maximum of one half based on corporate development in their areas of responsibility. The total bonus potential for the year ended 31 March 2002 for individual Directors ranged from 5% to 40% of basic salary. The performance parameters and maximum bonus potential are reviewed on an annual basis. Share Options Executive Directors and other senior executives participate in the DCC plc 1998 Employee Share Option Scheme, which was approved by shareholders in 1998. The Scheme encourages identification with shareholders’ interests by enabling senior management to build, over time, a shareholding in the Company which is material to their net worth. The percentage of share capital which can be issued under the Scheme, the phasing of the grant of options 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. Basic tier options may not normally be exercised earlier than three years from the date of grant and second tier options not earlier than five years from the date of grant. Basic tier options may normally be exercised only 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 be exercised only if the growth in the adjusted earnings per share of the Company 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. Directors are encouraged to hold their options beyond the earliest exercise date. The Group established the DCC Sharesave Scheme in 2000 and granted options to Group employees, including executive Directors, who participated in the Scheme. 30 ANNUAL REPORT AND ACCOUNTS 2002 REPORT ON DIRECTORS’ REMUNERATION Additional information in relation to the DCC plc 1998 Employee Share Option Scheme and the DCC Sharesave Scheme appears in note 32 on page 67 of the financial statements. Information on share options held by each Director and details of exercise prices and dates are set out on page 33. Pension Benefits Pensions for executive Directors are calculated only on pensionable salary (105% of basic salary) - no performance related bonuses or benefit elements are included - and aim to provide for two thirds of pensionable salary at normal retirement date. 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. A pension is funded for the Chairman, based on his annual fee, to provide a 1/60th accrual for each year of pensionable service. Directors’ Service Agreements Other than for the Chief Executive/Deputy Chairman, there are no service agreements between any Director of the Company and the Company or any of its subsidiaries. The Chief Executive/Deputy Chairman’s service agreement provides for one year’s notice of termination by the Company. Directors’ Remuneration The remuneration payable in respect of Directors who held office for any part of the financial year is as follows: Salary and Fees 1 Bonus 2001 2002 €’000 €’000 2001 2002 €’000 €’000 Benefits 2 2001 2002 €’000 €’000 Pension Contribution 3 2001 2002 €’000 €’000 Total 2001 2002 €’000 €’000 Executive Directors Jim Flavin Morgan Crowe Tommy Breen Kevin Murray Fergal O’Dwyer Total for executive Directors 653 270 242 242 229 538 230 198 198 197 32 32 80 80 52 25 29 57 57 45 33 27 20 20 16 30 17 17 17 15 172 74 68 68 66 161 72 62 62 64 890 403 410 410 363 754 348 334 334 321 1,636 1,361 276 213 116 96 448 421 2,476 2,091 Non-executive Directors Alex Spain Tony Barry Paddy Gallagher Maurice Keane 4 89 35 35 1 79 32 32 - Total for non-executive Directors 160 143 - - - - - - - - - - 10 - 4 - 14 - - - - - 22 - - - 22 - - - 121 35 39 1 101 32 32 - 22 22 196 165 Pension payment to retired Director Total 15 15 2,687 2,271 Notes 1 Fees are only payable to non-executive Directors and include Chairman’s and Board Committee fees. 2 In the case of executive Directors, benefits relate principally to the use of a company car. The benefit in the case of two non-executive Directors is in respect of a special presentation made to them marking their contribution to the Company. 3 Pension contributions represent payments to a defined benefit pension scheme, in accordance with actuarial advice, to provide pension benefits. 4 In respect of the year ended 31 March 2002, remuneration for Maurice Keane is included only for the period from the date of his appointment to the Board, on 25 March 2002, to 31 March 2002. 31 ANNUAL REPORT AND ACCOUNTS 2002 REPORT ON DIRECTORS’ REMUNERATION Directors’ Pensions The table below shows the increase in the accrued pension benefits to which the Directors have become entitled during the year ended 31 March 2002 and the transfer value of the increase in accrued benefit: Increase in accrued pension benefit (excl inflation) during the year €’000 Transfer value equivalent to the increase in accrued pension benefit €’000 Accumulated accrued pension benefit at year end €’000 80 18 10 9 7 124 6 1,242 244 54 51 39 1,630 72 430 147 63 57 51 748 43 Executive Directors Jim Flavin Morgan Crowe Tommy Breen Kevin Murray Fergal O’Dwyer Total Non-executive Chairman Alex Spain The transfer value has been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. The transfer value represents a liability of a pension scheme operated by the Group and not a sum paid to or due to the Director noted. 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 2002, together with their interests at 31 March 2001 (or date of appointment, if later), were: Alex Spain Jim Flavin Tony Barry Tommy Breen Morgan Crowe Paddy Gallagher Maurice Keane Kevin Murray Fergal O’Dwyer Gerard Whyte (Secretary) * At date of appointment – 25 March 2002 No. of Ordinary Shares At 31 March 2002 At 31 March 2001 15,634 2,456,033 7,000 211,512 807,640 2,540 - 212,306 212,506 124,667 15,634 2,456,033 7,000 211,512 807,640 2,540 - 212,306 212,506 124,667 * All of the above interests were beneficially owned. There were no changes in the interests of the Directors and the Company Secretary between 31 March 2002 and 10 May 2002. 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. 32 ANNUAL REPORT AND ACCOUNTS 2002 REPORT ON DIRECTORS’ REMUNERATION Directors’ Share Options DCC plc 1998 Employee Share Option Scheme The following are details of share options granted to Directors under the DCC plc 1998 Employee Share Option Scheme: At 31 March 2001 Granted in year At 31 March 2002 Weighted Average Exercise Price € Normal Exercise Period Jim Flavin Basic Tier Second Tier Morgan Crowe Basic Tier Second Tier Tommy Breen Basic Tier Second Tier Kevin Murray Basic Tier Second Tier Fergal O’Dwyer Basic Tier Second Tier 275,000 275,000 100,000 100,000 95,000 95,000 95,000 95,000 95,000 95,000 75,000 75,000 350,000 350,000 7.8140 7.8140 June 2001 – Nov 2011 June 2003 – Nov 2011 - - 100,000 100,000 7.0019 7.0045 June 2001 – Nov 2011 June 2003 – Nov 2011 50,000 50,000 50,000 50,000 30,000 30,000 145,000 145,000 145,000 145,000 125,000 125,000 8.1489 8.1506 June 2001 – Nov 2011 June 2003 – Nov 2011 8.1489 8.1506 June 2001 – Nov 2011 June 2003 – Nov 2011 7.8127 7.8147 June 2001 – Nov 2011 June 2003 – Nov 2011 No options were exercised by or allowed to lapse by Directors under the DCC plc 1998 Employee Share Option Scheme during the year. DCC Sharesave Scheme The DCC Sharesave Scheme (previously known as the DCC plc Savings-Related Share Option Scheme) was approved at the Annual General Meeting on 3 July 2000. Under the terms of the Scheme, options were granted to all participating Group employees on 15 June 2001 at an option price of €8.79 per share. This represented a discount of 20% to the market price as permitted by the rules of the Scheme. These options are exercisable, provided the savings contracts are completed, between August 2004 and February 2007. The following are details of share options granted to Directors under the DCC Sharesave Scheme: Jim Flavin Morgan Crowe Tommy Breen Kevin Murray Fergal O’Dwyer No. of Ordinary Shares At 31 March 2002 2,383 1,372 2,383 2,383 2,383 The market price of DCC shares on 31 March 2002 was €12.18 and the range during the year was €8.55 to €12.80. The Company’s Register of Directors Interests (which is open to inspection) contains full details of Directors’ shareholdings and share options. 33 ANNUAL REPORT AND ACCOUNTS 2002 STATEMENT OF DIRECTORS’ RESPONSIBILITIES The following statement, which should be read in conjunction with the statement of auditors’ responsibilities set out within their report on pages 35 and 36, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the auditors in relation to the financial statements. The Directors are required by company law to ensure that the Company prepares financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that year. Following discussions with the auditors, the Directors consider that in preparing the financial statements on pages 37 to 73, 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 2001 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. Books of Account The measures taken with regard to keeping proper books of account include the use of systems and procedures appropriate to the business and the employment of competent and reliable persons. The books of account are kept at DCC House, Stillorgan, Blackrock, Co. Dublin. 34 REPORT OF THE INDEPENDENT AUDITORS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 To the Members of DCC plc We have audited the financial statements on pages 37 to 73 and the detailed information on directors’ emoluments, pensions and interests in shares, partly paid shares and share options on pages 30 to 33. Respective responsibilities of directors and auditors The directors‘ responsibilities for preparing the annual report and the financial statements in accordance with applicable Irish law and accounting standards generally accepted in Ireland are set out on page 34 in the statement of directors’ responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements, auditing standards issued by the Auditing Practices Board applicable in Ireland and the Listing Rules of the Irish Stock Exchange. 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 2001, 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. The other information comprises only the directors’ report, the chairman’s statement, the chief executive’s review, the operating review, the corporate social responsibility statement, the financial review and the corporate governance statement. We review whether the statement on page 27 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. 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. 35 ANNUAL REPORT AND ACCOUNTS 2002 REPORT OF THE INDEPENDENT AUDITORS for the year ended 31 March 2002 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 2002 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 2001, 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 28 and 29 is consistent with the financial statements. The net assets of the Company, as stated in the balance sheet on page 43, are more than half of the amount of its called up share capital and, in our opinion, on that basis there did not exist at 31 March 2002 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 10 May 2002 36 ANNUAL REPORT AND ACCOUNTS 2002 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 €. Basis of Preparation The financial statements have been prepared in accordance with accounting standards generally accepted in Ireland and Irish statute comprising the Companies Acts, 1963 to 2001. Accounting standards generally accepted in Ireland in preparing financial statements giving a true and fair view are those published by the Institute of Chartered Accountants in Ireland and issued by the Accounting Standards Board. The financial statements have been prepared in accordance with Financial Reporting Standard 18 ‘Accounting Policies’ which became mandatory for accounting periods ending on or after 22 June 2001. This standard addresses the adoption of appropriate accounting policies, judged against the objectives of relevance, reliability, comparability and understandability. The directors have reviewed the Group's existing accounting policies and consider that they are already consistent with this new standard. Basis of Consolidation The consolidated financial statements include the Company and all its subsidiaries. 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 since 1 April 1998 is capitalised on the balance sheet and amortised on a straight line basis over its estimated useful economic life. On disposal of an undertaking acquired prior to 1 April 1998, goodwill eliminated against reserves in respect of that undertaking is included in the determination of the profit or loss on disposal. 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 the associated undertakings. The useful economic life of capitalised goodwill arising on acquisitions since 1 April 1998 is estimated to be 20 years. 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. 37 ANNUAL REPORT AND ACCOUNTS 2002 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 residual level 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% - 33⅓% 6⅔% 10% - 33⅓% 10% - 33⅓% 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 Consideration Where acquisitions involve further payments which are deferred or contingent on levels of performance achieved in the years following the acquisition, a discounted deferred acquisition creditor is accrued. Notional interest is charged to the profit and loss account over the relevant period by reference to the period of deferral, current interest rates and the amount of the likely payments. 38 ANNUAL REPORT AND ACCOUNTS 2002 ACCOUNTING POLICIES Deferred Taxation The Group adopted Financial Reporting Standard 19 ‘Deferred Tax’ during the year. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. 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. A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Foreign Currencies Assets and liabilities denominated in foreign currencies are translated into euro 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 euro 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 will be recognised on the maturity of the underlying debt, together with the matching loss or gain on the debt. Interest rate swap agreements and similar contracts are used to manage interest rate exposures. Amounts payable or receivable in respect of these derivatives are recognised as adjustments to interest expense over the period of the contracts. Pension Costs Pension costs are accounted for on the basis of charging the expected cost of providing pensions over the period during which the Group benefits from the employees’ services. The effect of variations from regular cost are spread over the expected average remaining service lives of the members in the schemes. The basis of contributions are determined on the advice of independent qualified actuaries. The disclosures required under the transitional arrangements of Financial Reporting Standard 17 ‘Retirement Benefits’ for the year ended 31 March 2002 are shown in note 31 (b). 39 ANNUAL REPORT AND ACCOUNTS 2002 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 March 2002 Notes €’000 €’000 €’000 €’000 2002 2001 Turnover Subsidiary undertakings Share of turnover of associated undertakings Total turnover Turnover - subsidiary undertakings Continuing activities Acquisitions Cost of sales Gross profit Net operating costs Operating profit 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 Goodwill amortisation Operating profit Net exceptional items Net interest payable and similar charges - parent and subsidiary undertakings Share of net interest payable and similar charges - associated undertakings Profit on ordinary activities before taxation Continuing activities Acquisitions Taxation Profit after taxation Minority interests Profit for the financial year attributable to Group shareholders Dividends paid Dividends proposed Profit retained for the year Earnings per ordinary share - basic (cent) Earnings per ordinary share - diluted (cent) Adjusted earnings per ordinary share - basic (cent) Adjusted earnings per ordinary share - diluted (cent) 1 1 1 1 2 2 2 2 1 1 6 7 8 9 10 3 11 12 13 14 14 35 15 15 15 15 1,888,678 160,211 2,048,889 1,701,427 187,251 1,888,678 (1,595,706) 292,972 (203,862) 89,110 13,602 102,712 (5,671) 97,041 (1,126) (2,984) (2,019) 90,912 (13,679) 77,233 (940) 76,293 (7,750) (12,716) 55,827 90.26c 89.38c 98.30c 97.35c 1,712,402 157,739 1,870,141 1,643,194 69,208 1,712,402 (1,452,786) 259,616 (176,829) 82,787 8,950 91,737 (4,923) 86,814 - (3,121) (1,281) 82,412 (13,100) 69,312 (1,230) 68,082 (6,691) (11,449) 49,942 78.98c 78.28c 84.69c 83.94c 90,659 1,078 91,737 81,342 1,070 82,412 95,600 7,112 102,712 83,762 7,150 90,912 Alex Spain, Jim Flavin, Directors 40 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 Note Profit for the financial year Other movements on associated company reserves Exchange adjustments Total recognised gains for the financial year Prior year adjustment – deferred tax 29 2001 €’000 68,082 (25) (2,356) 65,701 2002 €’000 76,293 8 715 77,016 (963) 76,053 NOTE OF HISTORICAL COST PROFITS AND LOSSES for the year ended 31 March 2002 There is no difference between the profit on ordinary activities before taxation and the profit retained for the year on an historical cost basis and the amounts shown in the consolidated profit and loss account on page 40. 41 2002 €’000 Restated 2001 €’000 Notes 16 17 18 20 21 22 23 28 23 23 29 32 33 34 35 36 37 38 118,332 159,156 38,976 316,464 112,795 334,341 304,661 751,797 108,795 377,151 18,473 12,716 517,135 84,447 135,241 38,458 258,146 93,063 296,804 454,582 844,449 200,621 328,328 18,959 11,449 559,357 234,662 285,092 551,126 543,238 26,757 106,036 18,954 151,747 2,816 154,563 22,034 124,431 1,400 243,565 391,430 4,010 1,123 396,563 65,753 104,977 11,464 182,194 2,764 184,958 22,034 124,450 1,400 205,839 353,723 3,493 1,064 358,280 551,126 543,238 ANNUAL REPORT AND ACCOUNTS 2002 CONSOLIDATED BALANCE SHEET as at 31 March 2002 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: 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 Other reserves Profit and loss Equity Shareholders’ Funds Equity minority interests Capital grants Alex Spain, Jim Flavin, Directors 42 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 Deferred acquisition consideration Provisions for Liabilities and Charges Capital and Reserves Called up equity share capital Share premium account Other reserves Profit and loss Equity Shareholders’ Funds ANNUAL REPORT AND ACCOUNTS 2002 COMPANY BALANCE SHEET as at 31 March 2002 Notes 2002 €’000 2001 €’000 17 18 19 21 21 22 23 28 29 32 33 34 35 1,092 1,077 1,300 101,178 103,570 4,616 257,816 1,054 263,486 9,751 3,477 6 12,716 25,950 1,522 82,715 85,314 7,138 203,084 3,178 213,400 1,359 1,331 4 11,449 14,143 237,536 199,257 341,106 284,571 181,239 3,456 184,695 4 184,699 22,034 124,431 344 9,598 156,407 117,773 - 117,773 4 117,777 22,034 124,450 344 19,966 166,794 341,106 284,571 Alex Spain, Jim Flavin, Directors 43 ANNUAL REPORT AND ACCOUNTS 2002 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 March 2002 Cash flow from operating activities Returns on investments and servicing of finance Taxation paid Capital expenditure Acquisitions and disposals Equity dividends paid Cash inflow before management of liquid resources and financing Decrease/(increase) in liquid resources Financing Increase/(decrease) in cash for the year Notes 2002 €’000 2001 €’000 40 41 41 41 42 41 42 117,470 (3,789) (12,461) (33,006) (48,279) (19,199) 83,369 (2,587) (9,073) (29,506) (9,943) (16,426) 736 199,532 (172,842) 15,834 (165,894) (137,704) 27,426 (287,764) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN CASH/(DEBT) for the year ended 31 March 2002 Increase/(decrease) in cash for the year (Decrease)/increase in liquid resources Net loans repaid Capital element of finance lease payments Changes in net cash resulting from cash flow Exchange movements Net outflow in the year Net cash at start of year Net cash at end of year Notes 2002 €’000 2001 €’000 42 42 42 42 42 42 42 27,426 (199,532) 148,259 4,068 (19,779) (379) (20,158) 83,231 (287,764) 165,894 110,853 4,113 (6,904) 976 (5,928) 89,159 63,073 83,231 44 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 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 Energy IT Healthcare Food Other Activities Continuing activities Turnover €’000 717,623 813,769 192,474 184,219 140,804 2,048,889 Goodwill amortisation Net exceptional items Interest (net) Net cash Amounts due in respect of acquisitions Investments Disposal proceeds receivable Capitalised goodwill - subsidiaries Capitalised goodwill - associates Minority interests Proposed dividend 2002 Profit Before Taxation €’000 34,979 30,631 20,717 11,007 5,378 102,712 (5,671) (1,126) (5,003) Net Assets €’000 85,212 47,629 50,697 18,010 35,519 237,067 63,073 (26,422) 7,128 736 118,332 8,242 (4,010) (12,716) Turnover €’000 610,257 753,887 182,657 182,367 140,973 1,870,141 2001 Profit Before Taxation €’000 23,617 31,203 20,313 8,464 8,140 91,737 (4,923) - (4,402) Restated Net Assets €’000 57,338 53,767 49,367 17,235 29,274 206,981 83,231 (21,976) 7,128 - 84,447 8,854 (3,493) (11,449) 2,048,889 90,912 391,430 1,870,141 82,412 353,723 (ii) Split between Subsidiary Undertakings and Associated Undertakings Subsidiary 2002 Associated Undertakings Undertakings €’000 €’000 2001 Associated Total Undertakings Undertakings €’000 €’000 Subsidiary €’000 Restated Total €’000 Turnover 1,888,678 160,211 2,048,889 1,712,402 157,739 1,870,141 Operating profit before goodwill amortisation Goodwill amortisation Operating profit Net exceptional items Interest (net) 89,110 (5,123) 83,987 3,342 (2,984) 13,602 (548) 13,054 (4,468) (2,019) 102,712 (5,671) 97,041 (1,126) (5,003) 82,787 (4,367) 78,420 - (3,121) 8,950 (556) 8,394 - (1,281) 91,737 (4,923) 86,814 - (4,402) Profit before taxation 84,345 6,567 90,912 75,299 7,113 82,412 Net assets (including capitalised goodwill) 352,454 38,976 391,430 315,265 38,458 353,723 45 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 1. Segmental Information continued (iii) Other Activities Other Activities are analysed as follows: 2002 Profit Before Taxation €’000 Turnover €’000 Net Assets €’000 Turnover €’000 2001 Profit Before Taxation €’000 Restated Net Assets €’000 103,299 37,505 (114) 5,492 22,233 13,286 103,558 37,415 2,791 5,349 15,678 13,596 140,804 5,378 35,519 140,973 8,140 29,274 Supply Chain Management Services Other Interests (iv) Acquisitions Acquisitions in the year contributed turnover of €187.251 million (2001: €69.208 million) and operating profit before goodwill amortisation of €7.112 million (2001: €1.078 million). 46 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 1. Segmental Information continued (b) Segmental Analysis by Geographical Area An analysis by geographical area of turnover, profit before taxation and net assets is set out below: (i) Summary Ireland Rest of the World Associated undertakings Continuing activities Goodwill amortisation Net exceptional items Interest (net) Net cash Amounts due in respect of acquisitions Investments Disposal proceeds receivable Capitalised goodwill - subsidiaries Capitalised goodwill - associates Minority interests Proposed dividend Turnover by Origin €’000 671,927 1,216,751 1,888,678 160,211 2,048,889 2002 Profit Before Taxation €’000 34,874 54,236 89,110 13,602 102,712 (5,671) (1,126) (5,003) Net Assets €’000 Turnover by Origin €’000 70,144 136,189 206,333 30,734 237,067 709,425 1,002,977 1,712,402 157,739 1,870,141 2001 Profit Before Taxation €’000 36,130 46,657 82,787 8,950 91,737 (4,923) - (4,402) 63,073 (26,422) 7,128 736 118,332 8,242 (4,010) (12,716) 391,430 1,870,141 82,412 Restated Net Assets €’000 61,001 116,376 177,377 29,604 206,981 83,231 (21,976) 7,128 - 84,447 8,854 (3,493) (11,449) 353,723 2,048,889 90,912 (ii) Turnover by Destination - Continuing Activities Ireland United Kingdom Rest of Europe USA Other Share of associated undertakings 2002 €’000 2001 €’000 657,266 1,063,223 149,458 13,966 4,765 160,211 2,048,889 681,722 872,860 127,795 24,807 5,218 157,739 1,870,141 47 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 2. Cost of Sales and Net Operating Costs Continuing Continuing 2002 2001 Activities Acquisitions €’000 €’000 Total €’000 Activities Acquisitions €’000 €’000 Total €’000 Cost of sales (1,432,757) (162,949) (1,595,706) (1,390,624) (62,162) (1,452,786) Gross profit 268,670 24,302 292,972 252,570 7,046 259,616 Operating costs Distribution Administrative Other operating expenses Other operating income Net operating costs Operating profit before goodwill amortisation (97,935) (92,585) (233) (190,753) 4,081 (186,672) (6,590) (10,582) (18) (17,190) - (17,190) (104,525) (103,167) (251) (207,943) 4,081 (203,862) (83,295) (90,394) (212) (173,901) 3,040 (170,861) (3,640) (2,328) - (5,968) - (5,968) (86,935) (92,722) (212) (179,869) 3,040 (176,829) -parent and subsidiaries 81,998 7,112 89,110 81,709 1,078 82,787 3. Acquisitions The profit on ordinary activities before taxation arising from acquisitions represents the aggregate of net incremental profit resulting from the acquisition of subsidiaries and associated undertakings in the relevant financial year. 4. Employee Information The average weekly number of persons (including executive Directors) employed by subsidiaries of the Group during the year analysed by class of business was: Energy IT Healthcare Food Other Activities The staff costs for the above were: Wages and salaries Social welfare costs Pension costs 48 2002 Number 2001 Number 907 782 846 301 525 3,361 2002 €’000 111,925 12,753 5,107 129,785 620 737 832 287 580 3,056 2001 €’000 97,717 10,321 4,228 112,266 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 5. Directors’ Emoluments and Interests Directors’ emoluments and interests are given in the Report on Directors’ Remuneration on pages 30 to 33. 6. Goodwill Amortisation Amortisation of capitalised goodwill arising on the acquisition of subsidiaries after 1 April 1998 (note 16) Amortisation of goodwill included in the carrying value of associated undertakings (note 18) 7. Net Exceptional Items Profit on sale of associated undertaking Profit on sale of subsidiary net tangible assets Share of associates’ reorganisation costs Other 8. Net Interest Payable and Similar Charges - Parent and Subsidiary Undertakings Interest receivable and similar income Interest on cash and term deposits Other interest and similar income receivable Interest payable and similar charges On bank loans, overdrafts and Unsecured Notes 2008/11 - repayable within 5 years, not by instalments - repayable within 5 years, by instalments - repayable wholly or partly in more than 5 years On loan notes - repayable within 5 years, not by instalments - repayable wholly or partly in more than 5 years On finance leases Notional interest on deferred consideration 2002 €’000 2001 €’000 5,123 4,367 548 5,671 556 4,923 2002 €’000 5,960 53 (4,468) (2,671) (1,126) 2002 €’000 17,676 389 18,065 (9,166) (123) (9,097) (461) - (2,142) (20,989) (60) (21,049) 2001 €’000 - - - - - 2001 €’000 25,010 512 25,522 (14,150) (54) (9,352) (48) (1,694) (2,891) (28,189) (454) (28,643) (2,984) (3,121) 49 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 9. 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. 10. 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 11. Taxation Irish Corporation Tax at 19% (2001: 23%) - current - deferred - less: manufacturing relief United Kingdom Corporation Tax at 30% - current - deferred Other overseas tax Capital Gains Tax Under/(over) provision in respect of prior years - corporation tax - deferred tax Associated undertakings 2002 €’000 490 (152) (179) 2,997 51 1,645 19,885 5,383 2002 €’000 6,385 (11) (1,281) 4,861 20 1,226 - 139 - 11,339 2,340 13,679 2001 €’000 470 (264) (327) 1,791 62 1,173 13,989 6,777 2001 €’000 7,931 (107) (2,062) 5,635 102 1,610 98 (1,535) (280) 11,392 1,708 13,100 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. The Group adopted FRS 19 ‘Deferred Tax’ during the year. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. 50 12. Minority Interests Subsidiary undertakings Associated undertakings NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 2002 €’000 670 270 940 2001 €’000 489 741 1,230 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 shareholders dealt with in the financial statements of the holding company amounted to €28,922,000 (2001: €17,641,000). 14. Dividends Per Ordinary Share Interim dividend of 9.288 cent per share (2001: 7.74 cent per share) Proposed final dividend of 15.212 cent per share (2001: 13.38 cent per share) Additional dividend 2002 €’000 2001 €’000 7,750 6,619 12,716 - 20,466 11,449 72 18,140 The additional dividend of €72,000 paid during the year ended 31 March 2001 was in respect of shares issued after the date of approval of the 2000 financial statements but qualifying for receipt of the final dividend declared. 51 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 15. Earnings per Ordinary Share and Adjusted Earnings per Ordinary Share Profit after taxation and minority interests Net exceptional items Goodwill amortisation Adjusted profit after taxation and minority interests Basic earnings per ordinary share Basic earnings per ordinary share Net exceptional items Goodwill amortisation Adjusted basic earnings per ordinary share 2002 €’000 76,293 1,126 5,671 83,090 cent 90.26 1.33 6.71 98.30 2001 €’000 68,082 - 4,923 73,005 cent 78.98 - 5.71 84.69 Weighted average number of shares in issue during the year (’000) 84,527 86,202 Diluted earnings per ordinary share Diluted earnings per ordinary share Net exceptional items Goodwill amortisation Adjusted diluted earnings per ordinary share cent 89.38 1.32 6.65 97.35 cent 78.28 - 5.66 83.94 Diluted weighted average number of ordinary shares (’000) 85,354 87,030 The adjusted figures for basic earnings per ordinary share and 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. The weighted average number of ordinary shares used in calculating the diluted earnings per ordinary share for the year ended 31 March 2002 was 85.354 million (2001: 87.030 million). A reconciliation of the weighted average number of ordinary shares used for the purpose of calculating the diluted earnings per share amounts is as follows: Weighted average number of shares in issue used for the calculation of basic earnings per share amounts Dilutive effect of options and partly paid shares Dilutive effect of shares potentially issuable under deferred contingent consideration arrangements Weighted average number of shares in issue used for the calculation of diluted earnings per share 2002 ’000 84,527 685 2001 ’000 86,202 601 142 227 85,354 87,030 The earnings used for the purpose of the diluted earnings per share calculations were €76.293 million (2001: €68.131 million) and €83.090 million (2001: €73.054 million) for the purposes of the adjusted diluted earnings per share calculation. 52 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 16. Intangible Assets - Goodwill Group The movement in goodwill arising on the acquisition of subsidiaries is as follows: Cost At 1 April Additions (note 39) At 31 March Amortisation At 1 April Amortisation for the year (note 6) At 31 March Net Book Value At 31 March 17. Tangible Fixed Assets (a) Group Cost At 1 April 2001 Acquisitions (note 39) Additions Reclassifications Disposals Exchange adjustments At 31 March 2002 Depreciation At 1 April 2001 Acquisitions (note 39) Charge for year Disposals Exchange adjustments At 31 March 2002 Net Book Value At 31 March 2002 At 31 March 2001 2002 €’000 2001 €’000 92,354 39,008 131,362 7,907 5,123 13,030 79,099 13,255 92,354 3,540 4,367 7,907 118,332 84,447 Fixtures & fittings & office equipment €’000 33,521 1,004 6,944 107 (4,688) 116 37,004 19,447 630 5,173 (4,246) 54 21,058 Motor vehicles €’000 31,247 6,788 8,487 - (3,633) 191 43,080 15,934 82 6,382 (2,486) 98 20,010 Total €’000 285,180 15,691 37,271 - (15,055) 1,549 324,636 149,939 789 25,268 (11,248) 732 165,480 Freehold & long term Plant & leasehold land machinery & cylinders €’000 & buildings €’000 54,854 3,737 5,642 - (1,523) 225 62,935 9,249 2 1,401 (495) 31 10,188 165,558 4,162 16,198 (107) (5,211) 1,017 181,617 105,309 75 12,312 (4,021) 549 114,224 52,747 45,605 67,393 60,249 15,946 14,074 23,070 15,313 159,156 135,241 The net book value of tangible fixed assets includes an amount of €11,786,000 (2001: €15,101,000) in respect of assets held under finance leases. 53 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 17. Tangible Fixed Assets continued (b) Company Cost At 1 April 2001 Additions Disposals At 31 March 2002 Depreciation At 1 April 2001 Charge for year Disposals At 31 March 2002 Net Book Value At 31 March 2002 At 31 March 2001 18. Financial Assets - Associated Undertakings (a) Group At 1 April Additions Disposals Retained profits less dividends Other movements in reserves Amortisation of goodwill (note 6) At 31 March Fixtures & fittings & office equipment €’000 Motor vehicles €’000 1,403 274 (166) 1,511 969 137 (162) 944 567 434 934 107 (63) 978 291 188 (26) 453 525 643 2002 €’000 38,458 - (3,139) 4,197 8 (548) 38,976 Total €’000 2,337 381 (229) 2,489 1,260 325 (188) 1,397 1,092 1,077 2001 €’000 34,598 325 - 4,116 (25) (556) 38,458 54 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 18. Financial Assets - Associated Undertakings continued The carrying value of associated undertakings is analysed as follows: Interest in net assets Share of post acquisition reserves Goodwill (net of amortisation) 2002 €’000 7,278 23,456 30,734 8,242 38,976 2001 €’000 7,404 22,200 29,604 8,854 38,458 At 31 March 2002 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 Disposals At 31 March Amortisation At 1 April Amortisation for the year Disposals At 31 March Net Book Value At 31 March 2002 €’000 2001 €’000 20,941 70,535 (30,003) (30,739) 30,734 20,765 69,721 (40,600) (20,282) 29,604 2002 €’000 10,680 (97) 10,583 1,826 548 (33) 2,341 2001 €’000 10,680 - 10,680 1,270 556 - 1,826 8,242 8,854 55 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 18. Financial Assets - Associated Undertakings continued Details of the Group’s principal associated undertakings at 31 March 2002 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 Shareholding Healthcare Merits Health Products Company Limited, 9 Road 36, Taichung Industrial Park, Taichung, Taiwan. Manufacture of mobility aids. 45.0% Food KP (Ireland) Limited, 79 Broomhill Road, Tallaght, Dublin 24, Ireland. Manufacture of snack foods. Kylemore Foods Holdings Limited, DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland. Holding company for the Kylemore group of companies whose principal activities are the operation of restaurants and bread manufacture. 50.0% 50.0% Millais Investments Limited, Kinsale Road, Cork, Ireland. Holding company for Allied Foods Limited, a distributor of frozen and chilled foods. 51.5%* * The Group holds 50% of the voting share capital of Millais Investments Limited. Other Activities Manor Park Homebuilders Limited, "The Gables", Torquay Road, Dublin 18, Ireland. Residential house building. 49.0% 2002 €’000 1,522 - (222) 1,300 2001 €’000 1,233 289 - 1,522 (b) Company At April 1 Additions Disposals At 31 March 56 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 19. Financial Assets - Subsidiary Undertakings Company At 1 April Additions At 31 March 2002 €’000 82,715 18,463 101,178 2001 €’000 70,860 11,855 82,715 The Group’s principal operating subsidiary undertakings are shown on pages 74 to 76. All of these subsidiaries are wholly owned except Broderick Holdings Limited (78.6%), Virtus Limited (51.0%), EuroCaps Limited (85.0%), where put and call options exist to acquire the remaining 15.0%, Distrilogie SA (93.4%), where put and call options exist to acquire the remaining 6.6%, Environmental Technology Manufacturing Limited (70%) where put and call option exist to purchase the remaining 30.0%, Technopharm Limited (75.0%) where put and call options exist to purchase the remaining 25.0% and Fannin Limited (94.0%) where put and call options exist to acquire the remaining 6.0%. 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. 20. Stocks Group Raw materials and consumables Work in progress Finished goods and goods for resale 2002 €’000 7,133 1,942 103,720 112,795 2001 €’000 7,825 1,280 83,958 93,063 The replacement cost of stocks is not considered to be materially different from the amounts shown above. 57 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 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 Other debtors Amounts falling due after more than one year: Amounts owed by subsidiary undertakings Investments Other debtors 22. Cash and Term Deposits Cash in hand and at bank Term deposits 2002 €’000 297,494 - 736 1,166 2,690 16,436 508 319,030 - 7,128 8,183 15,311 Group Company 2001 €’000 259,327 - - - 3,263 16,283 6,950 285,823 - 7,128 3,853 10,981 2002 €’000 937 1,875 - - - 1,804 - 4,616 2001 €’000 1,591 2,453 - - - 3,094 - 7,138 253,918 - 3,898 257,816 203,084 - - 203,084 334,341 296,804 262,432 210,222 Group Company 2002 €’000 177,244 127,417 304,661 2001 €’000 127,972 326,610 454,582 2002 €’000 - 1,054 1,054 2001 €’000 - 3,178 3,178 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 42. 58 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 23. Bank and Other Debt Bank loans and overdrafts (note 24) Loan notes (note 25) Obligations under finance leases (note 26) Unsecured Notes due 2008/11 (note 24) Bank and other loans and leases: - repayable within one year - repayable after more than one year Unsecured Notes due 2008/11 Group Company 2002 €’000 100,484 3,194 31,874 135,552 106,036 241,588 108,795 26,757 106,036 241,588 2001 €’000 198,764 32,013 35,597 266,374 104,977 371,351 200,621 65,753 104,977 371,351 2002 €’000 9,416 335 - 9,751 - 9,751 9,751 - - 9,751 2001 €’000 846 513 - 1,359 - 1,359 1,359 - - 1,359 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. 24. Bank Loans, Overdrafts and Unsecured Notes due 2008/11 Repayable as follows: Within one year Between one and two years Between two and five years After 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 - after five years Repayable other than by instalments: - after five years Group Company 2002 €’000 100,333 151 - 106,036 206,520 2001 €’000 195,217 2,413 542 105,569 303,741 2002 €’000 9,416 - - - 9,416 2001 €’000 846 - - - 846 100,333 195,217 9,416 846 151 - - 2,413 542 592 - - - 106,036 206,520 104,977 303,741 - 9,416 - - - - 846 59 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 25. Loan Notes The loan notes are repayable as follows: Within one year After five years Loan notes are further analysed as follows: Wholly repayable within one year Repayable other than by instalments: - after five years Group 2001 €’000 1,128 30,885 32,013 2002 €’000 3,194 - 3,194 3,194 1,128 - 3,194 30,885 32,013 Company 2002 €’000 2001 €’000 335 - 335 335 - 335 513 - 513 513 - 513 The above loan notes are unsecured and €3,194,000 (2001: €10,911,000) 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. 26. Finance Leases The net finance lease obligations to which the Group is committed are: Within one year Between one and two years Between two and five years After five years 2002 €’000 2001 €’000 5,268 4,276 4,622 15,834 6,150 26,606 5,135 14,469 11,717 31,321 31,874 35,597 27. 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 revenues and costs are exposed to movements in the financial and commodity markets which are outside the Group’s control. In particular, interest rates can fluctuate, affecting the cost of borrowings, and commodity price movements can impact on the cost of certain raw materials purchased. Furthermore, foreign exchange movements can impact on the cost of products sourced and revenues generated from overseas markets and can also impact on the translation of the results and net operating assets or operating liabilities of the Group’s overseas operations save to the extent that they are hedged by borrowings or deposits in the same currency. In order to reduce these exposures and to bring both stability and more certainty to the Group’s revenues and costs, the Group uses various derivative financial instruments to hedge its positions 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. 60 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 27. Derivative and Other Financial Instruments continued (a) Interest Rate Risk Profile of Financial Assets and Financial Liabilities The following tables analyse the currency and interest rate composition of the Group’s gross cash and debt portfolio, as stated on the balance sheet, after taking cross currency and interest rate swaps into account: 2002 € equivalent Financial Liabilities €’000 (273) (23,405) (23,678) (99,510) (118,244) (217,754) - (156) (156) Financial Assets €’000 - 82,768 82,768 99,510 118,379 217,889 - 4,004 4,004 Net €’000 (273) 59,363 59,090 - 135 135 - 3,848 3,848 Financial Assets €’000 - 135,765 135,765 98,517 213,069 311,586 - 7,231 7,231 2001 € equivalent Financial Liabilities €’000 (1,655) (33,232) (34,887) (98,759) (236,982) (335,741) - (723) (723) Net €’000 (1,655) 102,533 100,878 (242) (23,913) (24,155) - 6,508 6,508 € Fixed € Floating € Total Stg£ Fixed Stg£ Floating Stg£ Total US$ Fixed US$ Floating US$ Total Total 304,661 (241,588) 63,073 454,582 (371,351) 83,231 The Group’s deferred acquisition consideration of €26,422,000 (2001: €21,976,000) as stated on the balance sheet, comprises €23,138,000 (2001: €20,102,000) of € floating rate financial liabilities and €3,284,000 (2001: €1,874,000) of Stg£ floating rate financial liabilities payable as follows: Within one year Between one and two years Between two and five years 2002 €’000 7,468 7,069 11,885 26,422 2001 €’000 10,512 7,428 4,036 21,976 The Group’s floating rate financial assets and financial liabilities primarily bear interest rates based on: • 1 - 6 month Euribor • 1 - 12 month Sterling Libor • US$ prime rate At 31 March the interest rate profile of the Group’s fixed rate financial assets and financial liabilities was as follows: € Stg£ € Stg£ 2002 Weighted average interest rate Fixed rate Fixed rate financial liabilities financial assets 2001 Weighted average interest rate Fixed rate Fixed rate financial liabilities financial assets n/a 8.0% 5.8% 8.8% n/a 8.0% 4.7% 8.8% 2002 Weighted average period for which rate is fixed 2001 Weighted average period for which rate is fixed Fixed rate financial assets Fixed rate financial liabilities Fixed rate financial assets Fixed rate financial liabilities n/a 6.5 years 2.1 years 6.5 years n/a 7.5 years 8.3 years 7.5 years 61 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 27. Derivative and Other Financial Instruments continued The maturity profile of the Group’s financial liabilities is set out in notes 24 to 26 and can be summarised as follows: Within one year Between one and two years Between two and five years After five years 2002 €’000 108,795 4,773 15,834 112,186 241,588 2001 €’000 200,621 7,548 15,011 148,171 371,351 (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: At 1 April Portion recognised in current year Arising in current year At 31 March Of which, expected to be recognised: - within one year - after one year Gains €’000 5,100 (2,650) (777) 1,673 1,462 211 1,673 2002 Losses €’000 (985) 673 (535) (847) (321) (526) (847) Total €’000 4,115 (1,977) (1,312) 826 1,141 (315) 826 Gains €’000 429 (429) 5,100 5,100 2,650 2,450 5,100 2001 Losses €’000 (6,393) 5,898 (490) (985) Total €’000 (5,964) 5,469 4,610 4,115 (673) (312) (985) 1,977 2,138 4,115 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 as described in the 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: 2002 2001 Carrying amount €’000 Fair value €’000 Carrying amount €’000 Fair value €’000 304,661 304,661 454,582 454,582 (26,422) (108,795) (26,757) (106,036) (26,422) (108,795) (26,757) (106,036) (21,976) (200,621) (65,753) (104,977) (21,976) (200,621) (65,682) (104,977) - - - 36,651 (14) 840 - 37,477 - - - 61,255 575 3,540 - 65,441 Assets: Cash and short term deposits 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 62 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 27. 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. Deferred acquisition consideration: The carrying amount reported in the balance sheet generally approximates to fair value because the future amounts payable are discounted back to their present value. Medium and long term debt: The carrying amount of the Group’s medium and long term debt approximates to fair value because interest rates on these instruments frequently reset to short term 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 sterling cross currency interest rate swap used to hedge these loan notes (note 23). At 31 March 2002 the cross currency interest rate swap had a fair value equating to a gain of €20,992,000 (2001: gain of €19,821,000) and the fair value of the Unsecured Notes 2008/11 was lower than the book value by 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 contract attributable to financial assets is offset by the fair value of the interest rate contracts attributable to financial liabilities. (d) Undrawn Bank Borrowing Facilities While the Group had various borrowing facilities available at 31 March 2002, it had no undrawn committed facilities. (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 2002, 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 financial instruments is discussed in the financial review on pages 20 to 23. 63 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 28. Trade and Other Creditors Group Company 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 29. Provisions for Liabilities and Charges (a) Group 2002 Pension Deferred and similar taxation obligations (note 31) (note 30) €’000 €’000 At 1 April as previously reported Prior year adjustment At 1 April – as restated Credited to profit and loss account Exchange adjustments At 31 March 1,758 963 2,721 9 43 2,773 43 - 43 - - 43 2002 €’000 301,817 38,566 7,468 3,505 18,649 132 1,848 579 4,587 377,151 2001 €’000 254,278 38,099 10,512 2,535 14,939 305 2,744 1,163 3,753 328,328 2002 €’000 183 2,943 - 221 130 - - - - 3,477 2001 Pension Deferred and similar taxation obligations (note 31) (note 30) €’000 €’000 2,047 963 3,010 (285) (4) 2,721 43 - 43 - - 43 Total €’000 1,801 963 2,764 9 43 2,816 2001 €’000 155 1,002 - - 174 - - - - 1,331 Total €’000 2,090 963 3,053 (285) (4) 2,764 The prior year adjustment reflects the adoption of FRS 19 ‘Deferred Tax’ by the Group. This has resulted in the full provision of all deferred tax amounts. There is no material difference between the deferred tax charges as calculated using both the full or partial provision methods in either of the years ended 31 March 2002 and 31 March 2001. (b) Company Deferred taxation at 31 March (note 30) 2002 €’000 2001 €’000 4 4 64 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 30. Deferred Taxation Deferred taxation provided in the financial statements is analysed as follows: (a) Group Tax effect of timing differences due to: Excess of accelerated capital allowances over depreciation Other short term timing differences (b) Company Tax effect of timing differences due to: Excess of accelerated capital allowances over depreciation Other short term timing differences 31. Pension and Similar Obligations As previously FRS 19 reported adjustment 2001 €’000 2001 €’000 As restated 2001 €’000 2,112 (354) 1,758 963 - 963 3,075 (354) 2,721 As previously FRS 19 reported adjustment 2001 €’000 2001 €’000 As restated 2001 €’000 3 1 4 - - - 3 1 4 2002 €’000 2,936 (163) 2,773 2002 €’000 3 1 4 The Group has continued to account for pensions in accordance with SSAP 24 and the relevant disclosures are given in note (a) below. The Group will fully adopt FRS 17 ‘Retirement Benefits’ in the year ending 31 March 2004. The phased transitional disclosures for FRS 17 are shown in note (b). (a) SSAP 24 Disclosures The Group operates defined benefit and defined contribution 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 €5,107,000 (2001: €4,228,000) of which €1,879,000 (2001: €1,493,000) 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 projected unit benefits method are used to assess pension costs. The most recent actuarial valuations range from 1 April 1998 to 1 April 2001. 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 €41,254,000 (2001: €33,220,000). After allowing for expected future increases in earnings and pension payments, the actuarial values of the various schemes’ assets were sufficient to cover between 84% and 110% (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 2002, €119,000 (2001: €48,000) was included in creditors in respect of pension liabilities and €4,223,000 (2001: €2,486,000) 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. 65 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 31. Pension and Similar Obligations continued (b) Financial Reporting Standard 17 'Retirement Benefits' Disclosures The Group operates eight defined benefit schemes in the Republic of Ireland and three in the UK. Full actuarial valuations were carried out between 1 April 1998 and 1 April 2001 and updated to 31 March 2002 for Financial Reporting Standard 17 disclosure purposes by a qualified independent actuary. The main financial assumptions used in the valuation were: RoI Rate of increase in salaries 4.00% Rate of increase in pensions in payment 2.00% - 5.00% Discount rate 6.00% Inflation assumption 2.25% UK 4.00% 2.25% - 4.00% 6.25% 2.25% The expected long term rates of return on the assets of the schemes at 31 March 2002 were as follows: Equities Bonds Property Cash RoI 8.50% 5.50% 7.00% 4.00% The market value of the assets of the schemes at 31 March 2002 were as follows: Equities Bonds Property Cash Total market value at 31 March 2002 Present value of scheme liabilities Related deferred tax asset Net pension deficit RoI €’000 26,966 7,488 2,419 1,165 38,038 (40,317) (2,279) UK 8.50% 5.50% 7.00% 4.00% UK €’000 7,061 848 79 364 8,352 (9,237) (885) Total €’000 34,027 8,336 2,498 1,529 46,390 (49,554) (3,164) 443 (2,721) If FRS 17 had been adopted in the financial statements, the Group’s net assets and reserves at 31 March 2002 would be as follows: Net Assets Group net assets excluding pension deficit Net pension deficit Pension prepayment Related deferred tax asset Net pension prepayment Group net assets including pension deficit and pension prepayment Reserves Profit and loss reserve excluding pension deficit Net pension deficit Pension prepayment Related deferred tax asset Net pension prepayment Profit and loss reserve including pension deficit and pension prepayment €’000 €’000 (4,223) 216 (4,223) 216 551,126 (2,721) (4,007) 544,398 243,565 (2,721) (4,007) 236,837 66 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 32. Called up Equity Share Capital Group and Company Authorised 152,368,568 ordinary shares of €0.25 each Issued 88,134,404 ordinary shares (including 4,548,720 ordinary shares held as Treasury Shares) of €0.25 each, fully paid (2001: 88,134,404 ordinary shares including 2,563,045 ordinary shares held as Treasury Shares of €0.25 each, fully paid) 90,000 ordinary shares of €0.25 each, €0.0025 paid (2001: 90,000 ordinary shares of €0.25 each, €0.0025 paid) 2002 €’000 2001 €’000 38,092 38,092 22,034 22,034 - 22,034 - 22,034 Movements during year Ordinary shares of €0.25 each No. of shares (’000) €’000 At 31 March 2002 and 31 March 2001 88,224 22,034 During the year the Group purchased 2,275,000 of its own ordinary shares of €0.25 each at a total cost of €21.044 million. These shares are held as Treasury Shares and they are not included in the calculation of earnings per share from the date they were purchased by the Group. Under the DCC plc 1998 Employee Share Option Scheme, employees hold basic tier options to subscribe for 2,469,000 ordinary shares and second tier options to subscribe for 2,337,000 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 shares in issue in each case. The DCC Sharesave Scheme (previously known as the DCC plc Savings Related Share Option Scheme) was approved at the Annual General Meeting on 3 July 2000. The Scheme was launched on 17 May 2001 and under its terms options over a total of 710,762 ordinary shares were granted to participating Group employees on 15 June 2001 at an option price of €8.79. This represented a discount of 20% to the market price as permitted by the rules of the Scheme. At 31 March 2002, options remain over a total of 695,355 ordinary shares and are exercisable, provided the participants’ savings contracts are completed, between August 2004 and February 2007. Under the terminated DCC Employee Partly Paid Share Scheme, at 31 March 2002, 90,000 shares (2001: 90,000 shares) remain partly paid. 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. 67 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 33. Share Premium Account Group and Company At 1 April Premium on issue of shares Share issue expenses At 31 March 34. Other Reserves (a) Group 2002 €’000 2001 €’000 124,450 - (19) 124,431 121,987 2,493 (30) 124,450 Capital Conversion Reserve Fund €’000 Other Reserves €’000 Total €’000 At 31 March 2002 and 31 March 2001 344 1,056 1,400 (b) Company At 31 March 2002 and 31 March 2001 35. Profit and Loss (a) Group At 1 April as previously reported Prior year adjustment - deferred tax (note 29) At 1 April - as restated Profit retained for the year Share buyback (inclusive of costs) (note 32) Re-issue of Treasury Shares (net of expenses) Movement on other reserves - associated undertakings Exchange adjustments and other At 31 March Capital Conversion Reserve Fund €’000 344 2002 €’000 2001 €’000 206,802 (963) 205,839 55,827 (21,307) 2,483 8 715 243,565 183,909 (963) 182,946 49,942 (24,668) - (25) (2,356) 205,839 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 €100.079 million. 68 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 35. Profit and Loss continued (b) Company At 1 April Profit retained Share buyback (inclusive of costs) (note 32) Re-issue of Treasury Shares (net of expenses) At 31 March 36. Reconciliation of Movements in Equity Shareholders’ Funds Group Profit for the financial year Dividends Movement on associated undertaking reserves Equity share capital issued (net of expenses) Share buyback (inclusive of costs) (note 32) Exchange adjustments and other Net movement in shareholders’ funds Opening equity shareholders’ funds as previously reported Prior year adjustment - deferred tax (note 29) Opening equity shareholders’ funds as restated Closing equity shareholders’ funds 37. Equity Minority Interests Group At 1 April Acquisition of minority interest in subsidiary undertakings Share of profit for the financial year (note 12) Dividends to minority Exchange and other adjustments At 31 March 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 28) 2002 €’000 2001 €’000 19,966 8,456 (21,307) 2,483 9,598 45,133 (499) (24,668) - 19,966 2002 €’000 76,293 (20,466) 55,827 8 2,464 (21,307) 715 37,707 Restated 2001 €’000 68,082 (18,140) 49,942 (25) 2,670 (24,668) (2,356) 25,563 354,686 (963) 353,723 329,123 (963) 328,160 391,430 353,723 2002 €’000 3,493 - 670 (173) 20 4,010 2002 €’000 1,369 65 (179) - 1,255 (132) 1,123 2001 €’000 3,274 (61) 489 (173) (36) 3,493 2001 €’000 1,201 502 (327) (7) 1,369 (305) 1,064 69 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 39. Acquisitions of Subsidiary Undertakings The principal acquisitions completed during the year were Scottish Fuels, Envirotech, Noble Fuels, AGP, Alta Gas, TechnoPharm and a number of smaller oil and LPG distributors. A summary of the effect of acquisitions is as follows: Acquisition of subsidiary undertakings €’000 14,902 9,306 34,069 (998) (29,680) 27,599 Tangible fixed assets Stock and work in progress Debtors Net debt Creditors Net assets acquired Goodwill Cost Satisfied by: Cash Shares Deferred consideration and deferred contingent consideration Fair value adjustments €’000 Fair value at acquisition €’000 - (300) (1,120) - (550) (1,970) 14,902 9,006 32,949 (998) (30,230) 25,629 39,008 64,637 50,261 404 13,972 64,637 Acquisition accounting has been adopted in respect of the above acquisitions. An analysis of the net outflow of cash in respect of the acquisition of subsidiary undertakings is as follows: Cost Net debt acquired Shares issued Deferred consideration and deferred contingent consideration Net outflow of cash 2002 €’000 64,637 998 (404) (13,972) 51,259 70 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 40. Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities Operating profit before goodwill amortisation Operating profit of associated undertakings Dividends received from associated undertakings Depreciation of tangible fixed assets Amortisation of capital grants Profit on sale of tangible fixed assets Increase in stocks Increase in debtors Increase in creditors Other Cash flow from operating activities 41. 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 Sale of associated undertaking Payment of deferred consideration in respect of acquisitions Net cash outflow from acquisitions and disposals (d) Financing Issues of share capital (including share premium) Share buyback Capital element of finance lease payments Loans repaid Net cash outflow from financing 2002 €’000 2001 €’000 102,712 (13,602) 1,264 25,268 (179) (1,063) (11,516) (3,554) 21,974 (3,834) 117,470 91,737 (8,950) 1,896 20,766 (327) (1,032) (17,650) (66,961) 64,682 (792) 83,369 2002 €’000 2001 €’000 17,869 (21,485) (173) (3,789) (37,855) 4,784 65 (33,006) (51,259) - - 2,995 8,363 (8,378) (48,279) 25,432 (27,846) (173) (2,587) (33,804) 3,796 502 (29,506) (13,866) (325) (61) 16,026 - (11,717) (9,943) 792 (21,307) (4,068) (148,259) (172,842) 1,930 (24,668) (4,113) (110,853) (137,704) 71 ANNUAL REPORT AND ACCOUNTS 2002 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 42. Analysis of Movement in Net Funds At 1 April 2001 €’000 127,972 (69,439) 58,533 326,610 (161,338) (104,977) (35,597) 83,231 Cash in hand and at bank Overdrafts Term deposits Bank loans and loan notes Unsecured Notes due 2008/11 Finance leases Total 43. Capital Commitments Group Exchange 31 March Cash flow movements €’000 €’000 46,777 (19,351) 27,426 (199,532) 148,259 - 4,068 (19,779) 2,495 (804) 1,691 339 (1,005) (1,059) (345) (379) At 2002 €’000 177,244 (89,594) 87,650 127,417 (14,084) (106,036) (31,874) 63,073 Capital expenditure that has been contracted for but has not been provided for in the financial statements Capital expenditure that has been authorised by the Directors but has not yet been contracted for 2002 €’000 2001 €’000 3,634 5,264 22,976 18,037 44. Operating Lease Commitments At 31 March 2001 the Group had annual commitments under operating leases expiring as follows: Expiring within one year Expiring between two and five years Expiring after five years Land and Buildings €’000 136 1,087 2,249 3,472 2002 Other €’000 269 1,008 - 1,277 Land and Total Buildings €’000 €’000 405 2,095 2,249 4,749 155 460 1,339 1,954 2001 Other €’000 434 519 11 964 Total €’000 589 979 1,350 2,918 72 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2002 ANNUAL REPORT AND ACCOUNTS 2002 45. Contingent Liabilities (a) Bank and Other Loans The parent undertaking and certain subsidiaries have given guarantees of up to €241,057,000 (2001: €339,776,000) 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 €85,000 (2001: €84,000) may become repayable. (c) Other Included in trade creditors is an amount of approximately €5,955,000 (2001: €14,193,000) 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 & Oil Limited, DCC Energy Limited, DCC Healthcare Limited, DCC SerCom Limited, Emo Oil 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. 46. Reporting Currency The primary currency used in these financial statements is the euro which is denoted by the symbol €. The exchange rates used in translating sterling balance sheets and profit and loss account amounts were as follows: Balance sheet (closing rate) Profit and loss (average rate) 47. Transactions with Related Parties 2002 €1=Stg£ 2001 €1=Stg£ 0.613 0.615 0.619 0.613 On 28 September 2001, the Company increased its shareholding in Fannin Limited to 94% by acquiring 6% of the issued share capital from the minority shareholders in Fannin Limited, which was subject to put and call options exercisable by DCC and the Fannin minority shareholders. The total value of the consideration amounted to €3,276,000 of which €2,007,000 was satisfied in cash and €1,269,000 in shares. The remaining 6% shareholding is also subject to put and call options up to 2005. 48. Approval of Financial Statements The financial statements were approved by the Board of Directors on 10 May 2002. 73 ANNUAL REPORT AND ACCOUNTS 2002 GROUP DIRECTORY Name and Head Office Address Principal Activity Energy DCC Energy Limited DCC House, Stillorgan, Blackrock, County Dublin, Ireland Flogas Ireland Limited Dublin Road, Drogheda, County Louth, Ireland DCC Energy Limited Airport Road West, Sydenham, Belfast BT3 9ED, Northern Ireland Scottish Fuels Callendar Boulevarde, Callendar Business Park, Falkirk FK1 1XR, Scotland Flogas (UK) Limited Merrylees, Leicestershire LE9 9FE, England Emo Oil Limited Clonminam Industrial Estate, Portlaoise, County Laois, Ireland Atlas Environmental Ireland Limited Clonminam Industrial Estate, Portlaoise, County Laois, Ireland Environmental Technology Manufacturing Limited Ballycurreen Industrial Estate, Kinsale Road, Cork, Ireland SerCom DCC SerCom Limited DCC House, Stillorgan, Blackrock, County Dublin, Ireland SerCom Distribution Limited DCC House, Stillorgan, Blackrock, County Dublin, Ireland Sharptext Limited M50 Business Park, Ballymount Road Upper, Dublin 12, Ireland 74 Holding and divisional management company Manufacture and distribution of liquified petroleum gas Marketing and distribution of petroleum products Marketing and distribution of petroleum products Processing and distribution of liquified petroleum gas Marketing and distribution of petroleum products Waste treatment / remediation and oil reprocessing Manufacture and distribution of water treatment and process chemicals Holding and divisional management company Holding and divisional management company Distribution of computer products and office equipment Telephone/Fax/email and website if applicable Tel: + 353 1 2799 400 Fax: + 353 1 2831 017 email: energy@dcc.ie www.dcc.ie Tel: + 353 41 9831 041 Fax: + 353 41 9834 652 email: info@flogas.ie www.flogas.ie Tel: + 44 28 9073 2611 Fax: + 44 28 9073 2020 email: enquiries@emooil.com www.emooil.com Tel: + 44 1324 408 000 Fax: + 44 1324 408 109 email: info@scottishfuels.net Tel: + 44 1530 230 352 Fax: + 44 1530 230 253 email: info@flogas.co.uk www.flogas.co.uk Tel: + 353 502 747 00 Fax: + 353 502 747 50 email: info@emo.ie www.emo.ie Tel: + 353 502 786 00 Fax: + 353 502 747 57 email: info@atlasireland.ie www.atlasireland.ie Tel + 353 21 496 2554 Fax: + 353 21 496 2345 email: info@envirotech.ie www.envirotech.ie Tel: + 353 1 2799 400 Fax: + 353 1 2831 017 email: sercom@dcc.ie www.dcc.ie Tel: + 353 1 2799 400 Fax: + 353 1 2831 017 email: sercom@dcc.ie www.sercomdistribution.com Tel: + 353 1 4087 171 Fax: + 353 1 4599 421 email: info@sharptext.com www.sharptext.com Name and Head Office Address Principal Activity Micro Peripherals Limited Shorten Brook Way, Altham Business Park, Altham, Accrington, Lancashire BB5 5YJ, England Gem Distribution Limited Shorten Brook Way, Altham Business Park, Altham, Accrington, Lancashire BB5 5YJ, England SerCom Solutions Limited Cloverhill Industrial Estate, Clondalkin, Dublin 22, Ireland Distrilogie SA 12, Rue des Frères Caudron 78147 Vélizy Cedex France Healthcare DCC Healthcare Limited DCC House, Stillorgan, Blackrock, County Dublin, Ireland Fannin Limited Blackthorn Road, Sandyford Industrial Estate, Foxrock, Dublin 18, Ireland TechnoPharm Limited Pharmapark, Chapelizod, Dublin 20, Ireland Distribution of computer products Distribution of computer software Provision of supply chain services Distribution of computer storage products Holding and divisional management company Distribution of medical and scientific equipment and consumables Distribution of pharmaceutical products and medical devices Days Medical Aids Limited Litchard Industrial Estate, Bridgend, Manufacture and distribution of rehabilitation and mobility products Mid Glamorgan CF31 2AL, Wales CasaCare GmbH & Co KG Gewerbestraße 13, Manufacture and distribution of rehabilitation and mobility products 32584 Löhne, Germany Virtus Limited Adamstown, Lucan, County Dublin, Ireland Manufacture and distribution of pneumatic healthcare appliances ANNUAL REPORT AND ACCOUNTS 2002 GROUP DIRECTORY Telephone/Fax/email and website if applicable Tel: + 44 1282 776 776 Fax: + 44 1282 770 001 email: info@micro-p.com www.micro-p.com Tel: + 44 1279 822 800 Fax: + 44 1279 416 228 email: info@gem.co.uk www.gem.co.uk Tel: + 353 1 405 6500 Fax: + 353 1 405 6555 email: info@sercomsolutions.com www.sercomsolutions.com Tel: + 33 1 34 58 47 00 Fax: + 33 1 34 58 47 27 email: info@distrilogie.com www.distrilogie.com Tel: + 353 1 2799 400 Fax: + 353 1 2831 017 email: healthcare@dcc.ie www.dcc.ie Tel: + 353 1 294 4500 Fax: + 353 1 295 3818 email: info@fanninhealthcare.com www.fanninhealthcare.com Tel: + 353 1 626 5006 Fax: + 353 1 626 5071 email: info@technopharm.com www.technopharm.com Tel: + 44 1656 657 495 Fax: + 44 1656 767 178 email: sales@daysmedical.com Tel: + 49 5731 786 50 Fax: + 49 5731 786 520 email: sales@casacare.de www.casacare.de Tel: + 353 1 628 0571 Fax: + 353 1 628 0572 email: info@virtus.ie 75 ANNUAL REPORT AND ACCOUNTS 2002 GROUP DIRECTORY Name and Head Office Address Principal Activity Primacy Healthcare Limited Priory Court, Wellfield, Preston Brook, Runcorn, Cheshire WA7 3FT, England EuroCaps Limited Crown Business Park, Dukestown, Tredegar, Gwent NP22 4EF, Wales Marketing and distribution of vitamin and mineral health supplements Contract manufacture of soft gel capsule nutraceuticals Thompson and Capper Limited 9-12 Hardwick Road, Astmoor Industrial Estate, Runcorn, Contract manufacture and packing of tablet and hard gel capsule nutraceuticals Cheshire WA7 1PH, England Food DCC Foods Limited DCC House, Stillorgan, Blackrock, County Dublin, Ireland Robt. Roberts Limited 79 Broomhill Road, Tallaght, Dublin 24, Ireland Holding and divisional management company Distribution of food and beverages Kelkin Limited Unit 1, Crosslands Industrial Park, Marketing and distribution of branded healthfood products Telephone/Fax/email and website if applicable Tel: + 44 1928 704600 Fax: + 44 1928 704601 email: enquiries@vitsRus.com www.primacy.co.uk Tel: + 44 1495 308 900 Fax: + 44 1495 308 990 email: enquiries@softgels.co.uk www.softgels.co.uk Tel: +44 1928 573734 Fax: +44 1928 580694 email: enquiries@tablets2buy.com www.tablets2buy.co.uk Tel: + 353 1 2799 400 Fax: + 353 1 2831 017 email: foods@dcc.ie www.dcc.ie Tel: + 353 1 4047 300 Fax: + 353 1 4599 369 email: info@robt-roberts.ie Tel: + 353 1 4600 400 Fax: + 353 1 4600 411 email: info@kelkin.ie Manufacture, distribution and service of food equipment Tel: + 353 1 4291 500 Fax: + 353 1 4509 570 email: info@broderickbros.ie Ballymount Cross, Dublin 12, Ireland Broderick Bros. Limited JFK Industrial Estate, Naas Road, Dublin 12, Ireland 76 ANNUAL REPORT AND ACCOUNTS 2002 SHAREHOLDER INFORMATION Shareholder Analysis at 10 May 2002 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 (€) Year ended 31 March 2002 Year ended 31 March 2001 Number of accounts 1,777 1,137 103 26 30 37 3,110 % of accounts 57.1 36.6 3.3 0.8 1.0 1.2 100.0 High 12.80 12.35 Number of shares 923,946 3,145,003 2,445,651 1,879,470 5,025,916 70,170,698 83,590,684 % of shares 1.1 3.8 2.9 2.2 6.0 84.0 100.0 Low 8.55 9.00 31 March 12.18 10.55 The market capitalisation of DCC plc at 31 March 2002 was €1,019 million (2001: €904 million) and at 10 May 2002 was €1,101 million (€13.16 per share). Website DCC’s website address is www.dcc.ie. The website provides comprehensive information on DCC, including up to date information on the Group’s operations, stock exchange announcements, annual reports and investor presentations. Users can also register for news and announcements. Investor Relations For investor enquiries please contact: Conor Costigan, Investor Relations Manager, DCC plc, DCC House, Brewery Road, Stillorgan, Blackrock, Co Dublin, Ireland. Tel: + 353 1 2799 400. Fax: + 353 1 2831 018. email: investorrelations@dcc.ie Registrar Administrative enquiries about the holding of DCC shares should be directed in the first instance to the Company’s Registrar: Computershare Investor Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland. Tel: + 353 1 216 3100. Fax: + 353 1 216 3151. email: web.queries@computershare.co.uk 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. 77 ANNUAL REPORT AND ACCOUNTS 2002 SHAREHOLDER INFORMATION Dividends Shareholders are offered the option of having dividends paid in euro 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”) The Company is obliged to deduct tax at the standard rate of income tax in Ireland (currently 20%) 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 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 at the above address. This leaflet can also be downloaded from the Irish Revenue Commissioners web site at http://www.revenue.ie/pdf/dwtinfv3.pdf. 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 Friday 5 July 2002 at 11 a.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 traded on the Irish Stock Exchange and the London Stock Exchange. DCC’s shares are quoted on the official lists of both the Irish Stock Exchange and the UK Listing Authority. DCC’s ISIN code is IE0002424939. 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 payment date for final dividend Interim results announced Payment date for the interim dividend 13 May 2002 22 May 2002 24 May 2002 4 June 2002 5 July 2002 11 July 2002 early November 2002 early December 2002 78 ANNUAL REPORT AND ACCOUNTS 2002 CORPORATE INFORMATION Solicitors William Fry Fitzwilton House Wilton Place Dublin 2 Stockbrokers Davy Stockbrokers 49 Dawson Street Dublin 2 Cazenove 12 Tokenhouse Yard London EC2R 7AN Registered and Head Office DCC House Stillorgan Blackrock Co. Dublin Registrar and Transfer Office Computershare Investor Services (Ireland) Limited Heron House Corrig Road Sandyford Industrial Estate Dublin 18 Auditors PricewaterhouseCoopers Chartered Accountants & Registered Auditors George’s Quay Dublin 2 Bankers ABN AMRO Bank Allied Irish Banks Bank of Ireland IIB Bank KBC Bank Royal Bank of Scotland Ulster Bank 79 ANNUAL REPORT AND ACCOUNTS 2002 INDEX Accounting Convention Accounting Policies Acquisitions Page 37 37 5 Acquisitions of Subsidiary Undertakings (note 39) 70 78 Annual General Meeting 73 54 26 35 59 5 6 72 69 58 4 6 43 42 44 40 73 5,26 79 18 64 23,60 23,60 78 23,60 58 50,65 50,53 23,60 32 2 30 28 33 21 Approval of Financial Statements (note 48) Associated Undertakings (note 18) Audit Committee Auditors' Report Bank and Other Debt (notes 23) Board Appointment Business Model Capital Commitments (note 43) Capital Grants (note 38) Cash and Term Deposits (note 22) Chairman's Statement Chief Executive’s Review Company Balance Sheet Consolidated Balance Sheet Consolidated Cash Flow Statement Consolidated Profit and Loss Account Contingent Liabilities (note 45) Corporate Governance Corporate Information Corporate Social Responsibility Creditors, Trade and Other (note 28) Credit Risk Management Commodity Price Risk Management CREST Currency Risk Management Debtors (note 21) Deferred Tax (note 30) Depreciation Derivative Financial Instruments (note 27) Directors' and Company Secretary's Interests Directors of the Company Directors' Remuneration Directors' Report Directors' Share Options Dividend Cover Dividends (note 14) Dividend Withholding Tax Earnings Per Share (note 15) Employee Information (note 4) Employees and Management Environment, health and safety Exceptional Items (note 7) Fair Value of Financial Instruments Finance Leases (note 26) Financial Assets (note 18) Financial Calendar Financial Highlights Financial Strength Financial Review 80 Financial Values Five Year Summary and Key Ratios 20 1998 - 2002 Fixed Assets (note 17) Inside Back Cover 53 Forward Contracts - currency and commodity 62 Going Concern Goodwill (note 6,16) Group at a Glance Group Directory 27 49,53 Inside Front Flap 74 49 23,61 27 77 51,69 22,44,72 41 45 22,71 Interest Payable & Similar Charges (note 8) Interest Rate Risk Management Internal Control Investor Relations Minority Interests (note 12,37) Net Cash/(Debt) (note 42) Note of Historical Cost Profits and Losses Notes to the Financial Statements Operating Cash Flow Operating Lease Commitments (note 44) Operating Profit - sectoral split - geographical split Operating Reviews Energy IT (SerCom Distribution) Healthcare Food Other Interests Pension and Similar Obligations (note 31) Pensions - Directors Provisions for Liabilities and Charges (note 29) Reconciliation of Movements in Equity Shareholders' Funds (note 36) Reconciliation of Net Cash Flow to Movement in Net Cash/(Debt) 72 6 6 11 12 14 17 17 65 32 64 69 44 77 73 30 73 68 21 45 24 5 67 78 68 77 77 28,51 Registrar 78 52 48 18 19,29 49 62 60 54 78 Inside Front Cover 7 20 Related Party Transactions (note 47) Remuneration Committee Reporting Currency (note 46) Reserves (note 34) Return on Capital Employed (ROCE) Segmental Information (note 1) Senior Group and Subsidiary Company Management Share Buyback Share Capital (note 32) Share Listings Share Premium (note 33) Share Price Data Shareholder Information ANNUAL REPORT AND ACCOUNTS 2002 INDEX 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 Taxation (note 11) Treasury Policy and Management Undrawn Bank Borrowing Facilities Website 77 77 69 34 41 57 57 29 50 23 63 77 81 ANNUAL REPORT AND ACCOUNTS 2002 NOTES 82 

Continue reading text version or see original annual report in PDF format above