DCC plc
Annual Report 2004

Plain-text annual report

T R O P E R L A U N N A 4 0 0 2 S T N U O C C A & DCC IS A VALUE ADDED SALES & MARKETING AND SUPPORT SERVICES GROUP. DCC HAS DELIVERED COMPOUND ANNUAL GROWTH OF 17.3% IN ADJUSTED EARNINGS PER SHARE OVER THE PAST 10 YEARS. % change Reported % change Constant Currency -2.0% +2.6% +8.8% +14.1% +9.8% +15.1% +15.0% +54.3% Sales (continuing activities) €2.2 billion Operating profit (continuing activities) €120.9 million Earnings (adjusted earnings per share) 121.89 cent Dividends (dividend per share) 32.4 cent Cash flow (operating) €151.9 million Return on capital employed - excluding goodwill 39.8% (42.2%: 2003) - including goodwill 21.3% (22.0%: 2003) y t i l i b i s n o p s e R l a i c o S e t a r o p r o C w e i v e R g n i t a r e p O w e i v e R l a i c n a n i F 6 1 2 2 8 2 w e i v e R s ’ e v i t u c e x E f e i h C t n e m e t a t S s ’ n a m r i a h C s r o t c e r i D f o d r a o B t n e m e g a n a M 3 1 - 2 e c n a l G a t a p u o r G R E V O C T N O R F E D I S N I d n a t r o p e R ’ s r o t c e r i D s t n e m e t a t S l a i c n a n i F 4 3 n o i t a m r o f n I l r e d o h e r a h S n o i t a m r o f n I e t a r o p r o C y r o t c e r i D p u o r G x e d n I 1 9 - 4 8 t o h s p a n S l a i c n a n i F y r a m m u S r a e Y e v i F E D I S N I R E V O C K C A B GROUP PBIT % DESCRIPTION GROWTH RECORD KEY STATS GROWTH FOCUS STRONG BRANDS Y G R E N E T I N O I T U B I R T S I D E R A C H T L A E H D N A D O O F E G A R E V E B L A T N E M N O R V N E I 26% 11% 9% 4% ) T N E M E G A N A M I N A H C Y L P P U S D N A 12% I G N D L I U B E M O H ( R E H T O 38% DCC MARKETS AND SELLS liquefied petroleum gas and oil products to commercial / industrial, domestic, catering and agricultural customers in Britain and Ireland. DCC MARKETS AND SELLS a broad range of computer hardware and software products in Britain, Ireland and Continental Europe to computer resellers, high street retailers, computer superstores, on-line retailers and mail order catalogues. DCC MARKETS AND SELLS medical, surgical, laboratory, pharmaceutical, mobility and rehabilitation products to the hospital, community care and laboratory sectors in Ireland and Britain. DCC is also a leading provider of contract services to the nutraceuticals industry in Britain and Continental Europe. DCC MARKETS AND SELLS food and beverages in Ireland. This includes healthy foods, snackfoods, fresh coffee and wine to a broad range of catering, convenience store, food service and multiple grocer customers. DCC Environmental provides specialist waste management services to the industrial/ commercial sectors including the treatment of waste oils, waste chemicals and contaminated soils and the marketing of effluent water treatment chemicals. DCC’s other activities principally comprise a 49% shareholding in a leading Irish builder of houses, apartments and related commercial developments and a developing supply chain management business. 50 40 30 20 10 0 35 30 25 20 15 10 5 0 20 15 10 5 0 12 10 8 6 4 2 0 6 5 4 3 2 1 0 15 12 9 6 3 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 15.6% 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 29.1% 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 23.1% 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 15.5% 99 00 01 02 03 04 5 Year CAGR 126.3% 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 9.0% No 1 or 2 in most of its markets 247,000 customers 93 facilities 642 vehicles Organic market share growth in LPG and oil Consolidation opportunities in oil sector Acquisitions outside of Britain and Ireland Atlas, Cawoods Oil, Emo, Envirotech, Ergas, Flogas, Fuel Services, Scottish Fuels, Shannon Environmental Services (All DCC owned) Leading player in each of its markets No 1 distributor for many brands 15,000 customers 420,000 consignments annually Demand growth in IT returning Improving environment for acquisitions Broadening product portfolio Canon, Cisco Systems, Epson, Fujitsu, HP, IBM, Microsoft, Oracle, Samsung Electronics, Sony, StorageTek, Sun Microsystems, Symantec, Tivoli, Xbox, Xerox No 1 position in Irish hospital supplies market Sole distributor in Ireland for key global brands 2 MHRA approved nutraceuticals facilities Nutraceuticals export sales grew 38% in last financial year Growth in community healthcare New specialist pharmaceuticals compounding business Pursuing acquisition opportunities in UK hospital supplies sector Further organic growth potential in European nutraceuticals CasaCare*, Diagnostica, DiaMed, DMA*, Fannin Healthcare*, Fresenius, Kabi, Grifols, Molnlycke, Oxoid, Smiths, Stratec Medical (*DCC owned) No 1 or 2 in key market segments Focus on fast growing niches 22% of sales are of owned brands Over 7,000 customers across Ireland 3 EPA/EHS licenced facilities in Ireland Leading player in Irish environmental market Produced 24 million litres of re-refined oil products last year Expanding portfolio of strong niche brands Demand growth for healthy foods Pursuing acquisition opportunities in Britain and Ireland Bollinger, Brown Brothers, Hipp, Jordans, Kelkin*, KP, Kylemore, Lemons*, Phileas Fogg, Robinsons, Robt. Roberts*, Torres (*DCC owned) Growing environmental services market Positioned to meet demand for skill-based services from industrial customers Expansion opportunities in Britain Atlas, Envirotech, Shannon Environmental Services (All DCC owned) Building c. 600 residential units annually Providing supply chain management services to leading global technology companies Building: Substantial land bank available for future development SCM: Trend towards outsourcing supply chain solutions Building: Manor Park Homebuilders Supply chain management: Avid, Canon, IBM, JASC, Lotus, Lucent, Medtronic, MapInfo, Microsoft, Nortel Networks, PalmOne, The MathWorks Y G R E N E T I N O I T U B I R T S I D E R A C H T L A E H D N A D O O F E G A R E V E B L A T N E M N O R V N E I ) T N E M E G A N A M I N A H C Y L P P U S D N A I G N D L I U B E M O H ( R E H T O GROUP PBIT % DESCRIPTION GROWTH RECORD KEY STATS GROWTH FOCUS STRONG BRANDS Y G R E N E T I N O I T U B I R T S I D E R A C H T L A E H D N A D O O F E G A R E V E B L A T N E M N O R V N E I 26% 11% 9% 4% ) T N E M E G A N A M I N A H C Y L P P U S D N A 12% I G N D L I U B E M O H ( R E H T O 38% DCC MARKETS AND SELLS liquefied petroleum gas and oil products to commercial / industrial, domestic, catering and agricultural customers in Britain and Ireland. DCC MARKETS AND SELLS a broad range of computer hardware and software products in Britain, Ireland and Continental Europe to computer resellers, high street retailers, computer superstores, on-line retailers and mail order catalogues. DCC MARKETS AND SELLS medical, surgical, laboratory, pharmaceutical, mobility and rehabilitation products to the hospital, community care and laboratory sectors in Ireland and Britain. DCC is also a leading provider of contract services to the nutraceuticals industry in Britain and Continental Europe. DCC MARKETS AND SELLS food and beverages in Ireland. This includes healthy foods, snackfoods, fresh coffee and wine to a broad range of catering, convenience store, food service and multiple grocer customers. DCC Environmental provides specialist waste management services to the industrial/ commercial sectors including the treatment of waste oils, waste chemicals and contaminated soils and the marketing of effluent water treatment chemicals. DCC’s other activities principally comprise a 49% shareholding in a leading Irish builder of houses, apartments and related commercial developments and a developing supply chain management business. 50 40 30 20 10 0 35 30 25 20 15 10 5 0 20 15 10 5 0 12 10 8 6 4 2 0 6 5 4 3 2 1 0 15 12 9 6 3 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 15.6% 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 29.1% 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 23.1% 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 15.5% 99 00 01 02 03 04 5 Year CAGR 126.3% 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 9.0% No 1 or 2 in most of its markets 247,000 customers 93 facilities 642 vehicles Organic market share growth in LPG and oil Consolidation opportunities in oil sector Acquisitions outside of Britain and Ireland Atlas, Cawoods Oil, Emo, Envirotech, Ergas, Flogas, Fuel Services, Scottish Fuels, Shannon Environmental Services (All DCC owned) Leading player in each of its markets No 1 distributor for many brands 15,000 customers 420,000 consignments annually Demand growth in IT returning Improving environment for acquisitions Broadening product portfolio Canon, Cisco Systems, Epson, Fujitsu, HP, IBM, Microsoft, Oracle, Samsung Electronics, Sony, StorageTek, Sun Microsystems, Symantec, Tivoli, Xbox, Xerox No 1 position in Irish hospital supplies market Sole distributor in Ireland for key global brands 2 MHRA approved nutraceuticals facilities Nutraceuticals export sales grew 38% in last financial year Growth in community healthcare New specialist pharmaceuticals compounding business Pursuing acquisition opportunities in UK hospital supplies sector Further organic growth potential in European nutraceuticals CasaCare*, Diagnostica, DiaMed, DMA*, Fannin Healthcare*, Fresenius, Kabi, Grifols, Molnlycke, Oxoid, Smiths, Stratec Medical (*DCC owned) No 1 or 2 in key market segments Focus on fast growing niches 22% of sales are of owned brands Over 7,000 customers across Ireland 3 EPA/EHS licenced facilities in Ireland Leading player in Irish environmental market Produced 24 million litres of re-refined oil products last year Expanding portfolio of strong niche brands Demand growth for healthy foods Pursuing acquisition opportunities in Britain and Ireland Bollinger, Brown Brothers, Hipp, Jordans, Kelkin*, KP, Kylemore, Lemons*, Phileas Fogg, Robinsons, Robt. Roberts*, Torres (*DCC owned) Growing environmental services market Positioned to meet demand for skill-based services from industrial customers Expansion opportunities in Britain Atlas, Envirotech, Shannon Environmental Services (All DCC owned) Building c. 600 residential units annually Providing supply chain management services to leading global technology companies Building: Substantial land bank available for future development SCM: Trend towards outsourcing supply chain solutions Building: Manor Park Homebuilders Supply chain management: Avid, Canon, IBM, JASC, Lotus, Lucent, Medtronic, MapInfo, Microsoft, Nortel Networks, PalmOne, The MathWorks Y G R E N E T I N O I T U B I R T S I D E R A C H T L A E H D N A D O O F E G A R E V E B L A T N E M N O R V N E I ) T N E M E G A N A M I N A H C Y L P P U S D N A I G N D L I U B E M O H ( R E H T O y t i l i b i s n o p s e R l a i c o S e t a r o p r o C w e i v e R g n i t a r e p O w e i v e R l a i c n a n i F 6 1 2 2 8 2 w e i v e R s ’ e v i t u c e x E f e i h C t n e m e t a t S s ’ n a m r i a h C s r o t c e r i D f o d r a o B t n e m e g a n a M 3 1 - 2 e c n a l G a t a p u o r G R E V O C T N O R F E D I S N I d n a t r o p e R ’ s r o t c e r i D s t n e m e t a t S l a i c n a n i F 4 3 n o i t a m r o f n I l r e d o h e r a h S n o i t a m r o f n I e t a r o p r o C y r o t c e r i D p u o r G x e d n I 1 9 - 4 8 t o h s p a n S l a i c n a n i F y r a m m u S r a e Y e v i F E D I S N I R E V O C K C A B BOARD OF DIRECTORS Alex Spain Chairman Alex Spain, B Comm., FCA (aged 71), 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. Chairman of the Nomination Committee and member of the Remuneration Committee. Jim Flavin Chief Executive/Deputy Chairman Jim Flavin, B Comm., DPA, FCA (aged 61), founded DCC in 1976 and is Chief Executive and Deputy Chairman. Prior to founding DCC, he was head of AIB Bank’s venture capital unit. Mr Flavin was non-executive Deputy Chairman of eircom plc until its acquisition by Valentia Telecommunications Limited in November 2001. Member of the Nomination Committee. Kevin Murray Kevin Murray, BE, FCA (aged 45), 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 of DCC Environmental. Mr Murray joined the Board in 2000. Maurice Keane Maurice Keane, B Comm., M Econ Sc (aged 63), non-executive Director, is a member of the Court of Directors of Bank of Ireland, having been Chief Executive until February 2002. He is a director of Axis Capital Holdings Limited and is Chairman of Bristol & West plc, of BUPA Ireland and of University College Dublin Foundation Limited. Mr Keane joined the Board in 2002. Member of the Audit and Nomination Committees. Senior Independent Director. Paddy Gallagher Paddy Gallagher, BL, DPA (aged 64), 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 Property Unit Trust and is Chairman of the Trustees of the An Post Superannuation Scheme. Mr Gallagher joined the Board in 1976. Chairman of the Audit Committee and member of the Nomination Committee. 2 Tommy Breen Tommy Breen, B Sc (Econ), FCA (aged 45), 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, MBA (aged 59), 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. Tony Barry Tony Barry, Chartered Engineer (aged 69), non-executive Director, was a member of the Court of Directors of Bank of Ireland until January 2003 and was Chairman of Greencore Group plc until his retirement in February 2003. 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. Chairman of the Remuneration Committee and member of the Nomination Committee. Fergal O’Dwyer Fergal O’Dwyer, FCA (aged 44), 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. Bernard Somers Bernard Somers, B Comm, FCA (aged 55), non-executive Director, is a non-executive director of Independent News and Media plc, Irish Continental Group plc and Ardagh plc and is Chairman of eTel Group, a central European telecommunications company. He is a former director of the Central Bank of Ireland. Mr Somers is the founder of Somers & Associates, which has built a substantial practice in corporate restructuring. He has also been an investor in and a director of several start-up companies. Mr Somers joined the Board in 2003. Member of the Audit and Remuneration Committees. 3 Senior Group Management Jim Flavin Chief Executive/ Deputy Chairman Tommy Breen Managing Director, IT Morgan Crowe Managing Director, Healthcare Frank Fenn Managing Director, Food and Beverage Kevin Murray Managing Director, Energy and Environmental Fergal O’Dwyer Chief Financial Officer 4 Ann Keenan Head of Group Human Resources Donal Murphy Head of Group IT Colman O’Keeffe Deputy Managing Director, Energy Michael Scholefield Managing Director, Corporate Finance Gerard Whyte Group Secretary, Compliance Officer, Head of Enterprise Risk Management Subsidiary Management Energy DCC Energy - Northern Ireland and Scotland Emo Oil Flogas Ireland Flogas UK IT Distribution Distrilogie Gem Distribution Micro Peripherals Sharptext Healthcare Days Medical Aids/CasaCare DCC Nutraceuticals Fannin Healthcare Group Virtus Food and Beverage Broderick Bros Kelkin Robt. Roberts Environmental Sam Chambers Gerry Wilson Pat Mercer Paddy Kilmartin Managing Director Acting Managing Director Managing Director Managing Director Patrice Arzillier Paul Donnelly Anthony Catterson Paul White Managing Director Managing Director Managing Director Managing Director Barry O’Neill Stephen O’Connor Andrew O’Connell John Leonard Managing Director Managing Director Managing Director Managing Director Fintan Corrigan Bernard Rooney Ken Peare Managing Director Managing Director Managing Director Atlas Environmental Ireland Environmental Technology Manufacturing Shannon Environmental Services Declan Ryan John O’Regan Declan Ryan Managing Director Managing Director Managing Director Supply Chain Management SerCom Solutions Kevin Henry Managing Director 5 6 “ DCC consistently seeks to maximise organic growth opportunities. ” 7 Operating Review Chairman’s Statement DCC continued its unbroken record of strong earnings growth in the financial year to 31 March 2004. United Kingdom based subsidiaries generated 50% of the Group’s profits and as a consequence the rate of growth in reported profits in euro was held back due to the translation of sterling profits at weaker average sterling exchange rates to the euro over the past year. On a constant currency basis, operating profit grew by 14.1% while adjusted earnings per share grew by 15.1%. The return on capital employed was Dividend increase of 15% Share buybacks excellent at 39.8% on tangible assets The Directors are recommending a During the year, DCC bought back and 21.3% on assets inclusive of final dividend of 20.65 cent per share 2.3 million of its own shares acquisition goodwill. DCC’s business which, when added to the interim model is focused on generating long dividend of 11.75 cent per share, gives term, quality growth in shareholder a total dividend of 32.40 cent per (2.8% of listed share capital) at an average price per share of €10.70 and a total cost of €25.0 million. DCC has value. The Group has achieved share for the year, a 15% increase over bought back a total of 8.1% of its compound annual growth in the prior year dividend of 28.175 cent adjusted earnings per share of 17.3% per share. The dividend is covered 3.8 over the last ten years, while times by adjusted earnings per share issued share capital since July 2000 at an average price per share of €9.81 and a total cost of €71.0 million. investing sensibly to support future (3.9 times: 2003). The final dividend growth and maintaining a strong will be paid on 14 July 2004 to DCC may use its strong financial financial position. shareholders on the register at the position to buy back more shares in close of business on 28 May 2004. the future. 8 cent 30 25 20 15 10 5 0 0 4 . 2 3 8 1 . 8 2 0 5 . 4 2 2 1 . 1 2 0 6 . 7 6 1 6 . 4 1 9 1 . 2 1 6 1 . 0 1 6 7 . 8 2 8 . 7 95 96 97 98 99 00 01 02 03 04 Dividend per share Compound annual growth rate: 5 years 10 years 17.2% 17.7% Board changes of Ireland. He further strengthens effective ongoing processes for Morgan Crowe will retire as the non-executive Director input to identifying, evaluating and Managing Director of DCC the Board. Healthcare and from the Board of managing risks faced by the Group. A detailed statement, set out on DCC at the conclusion of the Annual Acquisition and development pages 34 to 36, describes how DCC General Meeting on 8 July 2004, Acquisition discussions are currently has complied with all of the following his 60th birthday. being pursued with a range of Principles of Good Governance and Morgan has made an outstanding companies in the Energy, IT Code of Best Practice as set out in contribution to DCC since joining in Distribution, Healthcare, Food and the 1998 Combined Code on 1976 and, in particular, to the Beverage and Environmental Corporate Governance. The Board development of DCC’s healthcare sectors. DCC maintained a strong has considered the implications of division. His commitment and focus on organic development the new Combined Code, published ability have been a great asset to during the year, making solid in July 2003, which applies to DCC DCC. Morgan will become non- progress in several key areas which for the financial year commencing executive Deputy Chairman of DCC will contribute to the Group’s future on 1 April 2004 and is implementing Healthcare following his retirement and will have some continuing involvement in selected project work. His deep knowledge of the healthcare industry will therefore growth. Development expenditure in the year totalled €39.7 million. appropriate changes and will report on compliance with its provisions in Committed acquisition expenditure amounted to €9.2 million (of which €1.6 million was deferred) arising the 2005 Annual Report. The future continue to be available to DCC. from the acquisition of smaller DCC is commercially and financially Bernard Somers was co-opted to Distribution, Healthcare and Food growth both organically and by businesses in the Energy, IT well placed to generate ongoing DCC’s Board as a non-executive director on 29 September 2003. Mr Somers is the founder of Somers and Beverage divisions. Capital expenditure was €30.5 million, of which €17.9 million was in the & Associates which has built a Energy division with the balance substantial practice in corporate incurred across the other divisions. restructuring and he has handled many of the larger restructurings in Corporate governance acquisition. Ireland. Mr Somers is a non- The Board of DCC recognises the Alex Spain executive Director of a number of importance of high standards of Chairman publicly quoted companies and a corporate governance. The Board is 14 May 2004 former director of the Central Bank satisfied that the Group has 9 Chief Executive’s Review Following an excellent second half, in which DCC achieved constant currency growth in operating profit of 18.9% (11.8% on a reported basis), full year constant currency growth was 14.1% (8.8% reported). It is particularly pleasing to note that constant currency operating profit growth in IT Distribution was 15.0% in the second half compared to a decline of 11.6% in the first half. Organic growth was particularly strong, accounting for 90% of the growth in operating profit. DCC generated excellent operating cash flow of €151.9 million and had a net cash position of €62.7 million at the year end having spent €25.0 million buying back 2.8% of the Company’s listed shares during the year. 10 Shareholder value enhancing strategies DCC’s IT Distribution division Bolt-on acquisitions: DCC has continued the expansion of its Paris substantial financial capacity to Organic growth: DCC consistently headquartered specialist storage make acquisitions. Great care is seeks to maximise organic growth business into a more broadly based needed in making acquisitions to opportunities. The Group earns a IT infrastructure business which ensure that they will increase high return on tangible capital includes the sale of servers and shareholder value in the long term. employed, which was just under relevant software. New agreements Public companies are often under 40% in the past year. Consequently, with HP and Sun to distribute their market pressure to be seen to be internally generated capital servers were important milestones acquisitive to help short-term re-invested in organic growth in this regard. In Healthcare, we are market ratings. However, research opportunities drives high returns establishing a new pharmaceutical over many years has shown that a for DCC shareholders. compounding unit in Dublin in lot of corporate acquisition activity association with experienced actually destroys shareholder value There were many examples of pharmacists. This will enable DCC – more often than not the seller, organic development throughout Healthcare to leverage existing rather than the buyer, is the long- the Group during the year, which relationships with hospitals for the term winner. will enhance future shareholder timely supply of specialist returns. Within the Energy division pharmaceuticals in patient-ready Larger businesses that are marketed we have nurtured the development formats for treatment in such areas by investment banks through an of an exciting new Environmental as oncology, pain control and cystic auction process quite often sell at Services business, which has fibrosis. In the Food and Beverage valuations that are hard to justify emerged to become a division in its division, an important organic for a buyer. In DCC we prefer to own right. This division’s reputation development was a new agreement concentrate on exclusive one-to-one for the provision of high quality with KP to market their products in negotiations with companies that environmental services to industrial Northern Ireland which will build on can be acquired and integrated with and Government-related clients DCC’s successful marketing of KP existing business units in the Group. contributed to its success in products in the Republic of Ireland winning new business such as soil over many years. remediation contracts on a number of Ireland’s largest transport infrastructure projects. 11 Such bolt-on acquisitions generally 8.1% of the share capital was bought executive Director of DCC plc and add scale to existing businesses, deepen the management resource within the business unit, improve back at an average price per share of €9.81 and a total cost of €71 million. as Managing Director of DCC Healthcare with effect from 8 July 2004, the date of the supplier relationships and broaden Management development forthcoming AGM. the customer base. Most Management development is importantly, these synergies drive critically important in driving The following changes are currently higher returns on capital invested. ongoing business success. In DCC it being implemented: gets constant attention throughout The past year has been a quiet year the Group involving the divisional Kevin Murray, who since 1996 for the completion of acquisitions Managing Directors, the Head of has been a very successful but acquisition search activity has Group Human Resources and myself. Managing Director of DCC’s continued at a very high level. The In the past year I have particularly Energy division and of DCC’s pipeline of potential bolt-on focused on the development of the Food and Beverage division, acquisitions is encouraging and we senior management team within the will become Managing Director aim to make shareholder value Group and a number of changes are of DCC’s Healthcare division in enhancing acquisitions across all being made that will enhance the July and will retain responsibility divisions in the Group. strength and depth of this team. for DCC’s growing Environmental Services division as Managing Dividends and share buybacks: A key driver for these changes is a Director. DCC has maintained a very recognition that we must continue progressive dividend policy since its to foster, as a core competence Tommy Breen, having been flotation on the stock market in within DCC, the ability to manage Managing Director of DCC’s IT 1994. Over that period the dividend businesses in diverse markets. The Distribution division since 1996, has grown at a compound annual senior management team must have where he very effectively led the growth rate of 17.7% per annum. In the agility, skill and knowledge to strong growth and market out- addition we have used our strong drive growth for DCC in all of its performance of the division in financial position to buy back DCC markets. Another trigger for the Britain, Ireland and Continental shares at attractive prices which has management changes is the Europe, will become Managing been shareholder value enhancing. impending retirement of Morgan Director of DCC’s Energy division Between July 2000 and March 2004, Crowe from his position as an in July. 12 Donal Murphy, Head of Group IT team, together with the highly years has worked in an office next since 1998, will become experienced and committed door to mine. I am glad he has Managing Director of DCC’s IT operating management teams in agreed to remain with us as non- Distribution division in July. He DCC’s subsidiaries, gives the Group executive Deputy Chairman of DCC has led the successful the capacity and sectoral focus Healthcare and to continue to work development of IT platforms to exploit its strong commercial part-time on selected assignments across the DCC Group and has and financial position and to drive in the development of the contributed greatly to related the creation of long-term healthcare business. operational issues. shareholder value. Looking forward Frank Fenn has joined DCC as Morgan Crowe We will continue to target organic Managing Director of DCC’s After I founded DCC in the early part and acquisition growth Food and Beverage division from of 1976, at that time as a start-up opportunities, principally in Britain Diageo, where he was Chief venture capital company, I set about and Ireland, that can earn high Executive of R&A Bailey & Co recruiting a core executive team. returns on capital employed and since 1998. Frank’s experience DCC got a lucky break when Morgan generate strong cash flows. and track record of success in Crowe applied to join the team. DCC has the business platforms, management and marketing He has been with us for 27 years the management capacity and equips him well to lead the of distinguished and committed the financial strength to strategic and operational service seeking, at all times, to pursue ambitious organic and development of the Food and enhance the interests of DCC acquisition growth. Beverage division and to drive shareholders. His intellect, presence the growth of its brands. and straightforward approach have won him the respect and friendship DCC’s proven ability to manage of everyone he has dealt with in sales and marketing businesses in DCC. On a personal level I will miss diverse sectors has been an him, not just for his wise counsel as Jim Flavin important factor in the Group’s a senior executive colleague but Chief Executive/Deputy Chairman growth. The senior management also as a trusted friend who for 27 14 May 2004 13 14 “ DCC has substantial financial capacity to make acquisitions. Great care is needed in making acquisitions to ensure that they will increase shareholder value in the long term. ” 15 Operating Review DCC achieved excellent growth in the profitability of its Energy, Healthcare, Environmental and Homebuilding activities. IT Distribution also achieved excellent growth in the second half of the financial year after a challenging first half. Food and Beverage showed a modest decline. Tommy Breen IT Morgan Crowe Healthcare Frank Fenn Food and Beverage Kevin Murray Energy and Environmental 16 Energy 2004 2003 Sales Operating profit Return on capital employed - excluding goodwill - including goodwill €841.3m €45.8m 39.4% 21.9% €845.0m €42.2m 41.2% 23.1% % change Reported % change Constant currency -0.4% +8.4% +4.8% +16.1% DCC’s strong growth in the energy increased by 16% benefiting from These developments will facilitate sector continued during the year the inclusion for the full year of sales the achievement of further with operating profit increasing to of the British Gas LPG business efficiencies in the coming year. €45.8 million, a constant currency acquired in the prior year. The increase of 16.1%. DCC is now the integration of British Gas LPG into DCC’s oil business performed leading independent marketer of DCC’s existing LPG business in the satisfactorily. The business in LPG and oil products in Britain and UK has been completed and the Scotland performed strongly while Ireland and delivered 2.1 billion litres planned synergies have been trading in the Republic of Ireland of product during the year. obtained. The combined business was more challenging. Overall, oil moved to new headquarters in sales volumes were in line with the DCC’s LPG business performed Syston, Leicestershire in March 2004 prior year. strongly. LPG sales volumes and has completed the upgrade to a single IT platform. IT Distribution 2004 2003 Sales Operating profit Operating margin Return on capital employed - excluding goodwill - including goodwill €859.4m €31.3m 3.6% 41.9% 25.5% €894.9m €32.3m 3.6% 54.7% 30.2% % change Reported % change Constant currency -4.0% -3.1% +2.0% +3.8% Following a challenging first half, DCC’s UK software distribution The business continues to benefit excellent constant currency profit business had a satisfactory from its position as the leading IT growth of 15.0% was achieved in the performance notwithstanding the distribution business in Ireland and second half due to strong sales fact that there were no major new from its very broad range of volume growth and good cost product releases by its suppliers and customers. control. entertainment software vendors during the year. Lower selling prices DCC’s Continental European IT DCC’s UK hardware distribution of games consoles resulted in an distribution business, Distrilogie, business recorded strong sales increase in the installed base which generated excellent profit growth, growth in several key product areas, should contribute to increased with improved margins and good with particular growth in sales of PC future demand for related software cost control. The acquisition of a and multi-function office products. and accessories. small French enterprise software An improved second half benefited distribution business shortly before from a moderation in the rate of DCC’s Irish IT distribution subsidiary the year end and its integration product price deflation and strong had a very good year and delivered with Distrilogie broadened the sales volume growth. strong profit growth despite product base and strengthened product price deflation which was DCC’s market position as a leading particularly severe in the first half. enterprise infrastructure distributor. 17 Healthcare 2004 2003 Sales Operating profit Operating margin Return on capital employed - excluding goodwill - including goodwill €149.0m €13.6m 9.1% 37.0% 12.1% €161.6m €11.4m 7.1% 33.6% 12.4% % change Reported % change Constant currency -7.8% +19.1% -4.8% +21.2% Strong profit growth in DCC’s business with a particularly strong Strong organic sales growth drove healthcare business resulted from performance in specialist excellent profit growth in the improved profitability in all areas of pharmaceutical products where nutraceuticals business. The its activities. Operating margins Technopharm continued its excellent upgrading of the licenced packing improved from 7.1% to 9.1% on record of rapid growth. A number of facility in Cheshire was successfully slightly reduced sales, reflecting exciting organic developments took completed. The business continued good growth in higher margin place including the establishment of to broaden its customer base and business and the discontinuation of a pharmaceutical compounding achieved particularly good progress some activities. facility in Ireland, the establishment in Continental Europe with export Profit growth was strong in the and the European launch of a new represent 50% of total nutraceuticals hospital and community care range of mobility and rehabilitation sales for the year. of a pharma sales division in Britain sales from the UK growing by 38% to products under DCC’s own brands. Food and Beverage 2004 2003 Sales Operating profit Operating margin Return on capital employed - excluding goodwill - including goodwill €170.7m €10.9m 6.4% 42.0% 21.4% €185.2m €11.8m 6.3% 55.8% 26.3% % change Reported % change Constant currency -7.8% -7.5% -7.1% -7.9% DCC’s food and beverage business Good sales growth was achieved in a Also, building upon its successful was impacted by a slowdown in number of categories including wine track record of marketing KP demand across the Irish grocery and and certain health food segments. products in the Republic of Ireland, food service sectors which DCC reached agreement during the contributed to a 7.5% reduction in DCC expanded its food and beverage year to market KP products in operating profit. The reported sales business in Northern Ireland through Northern Ireland. DCC now has a figure for 2004 was also impacted by the acquisition of Savoury Foods, sales and distribution reach comparison with 2003 due to a which had a well developed van throughout Ireland in each of the contract amounting to €19.7 million sales force, and DWS, a wine snackfoods, healthy foods, hot and in 2003 which changed to a importer and distributor. cold beverage and wine segments in commission based contract in 2004. which it operates. 18 Environmental 2004 2003 Sales Operating profit Operating margin Return on capital employed excluding goodwill including goodwill €24.1m €5.0m 20.9% 50.8% 19.8% €19.2m €3.2m 16.8% 38.2% 14.4% % change Reported % change Constant currency +25.6% +56.7% +28.1% +63.7% Excellent growth in all areas of The environmental industry Ireland. DCC now provides a broad DCC’s environmental business continues to develop, driven by the range of services including waste continued during the year with increased amount and enforcement chemical, water and oil treatment, constant currency sales increasing of environmental legislation. soil remediation and emergency by 28.1% (25.6% on a reported basis) response to industrial and to €24.1 million and operating profit Following the acquisitions in recent commercial customers from its increasing by 63.7% (56.7% reported) years of Envirotech and Shannon three Environmental Protection to €5.0 million. Environmental Services, DCC has Agency/Environment and Heritage leading positions in a number of Service licenced sites in Ireland. environmental market segments in Other (Homebuilding and Supply Chain Management) 2004 2003 Sales Operating profit €153.4m €14.3m €136.9m €10.2m % change Reported % change Constant currency +12.0% +40.5% +12.0% +40.5% Manor Park Homebuilders SerCom Solutions, the supply chain During the second half SerCom (a 49% owned associate company), management business, generated a Solutions announced that it had which is a leading Irish small second-half operating profit entered into a strategic partnership homebuilding company, contributed and reported an operating loss for with Kuehne & Nagel, one of the operating profit of €15.2 million the year of €0.9 million (operating world’s leading logistics companies, (€9.6 million: 2003). This excellent profit of €0.6 million: 2003). to combine their respective growth in profit was driven by an The business has continued to businesses’ capabilities in supply increase in completed house and generate good positive cash flow. chain management and global apartment sales to 607 from 500 logistics solutions. in the prior year. Note: All constant currency figures quoted in this report are based on retranslating current year figures at prior year translation rates. 19 20 “ DCC has maintained a very progressive dividend policy since its flotation on the stock market in 1994. Over that period the dividend has grown at a compound annual growth rate of 17.7% per annum. ” 21 Financial Review Fergal O’Dwyer Chief Financial Officer A constant focus on maximising returns on capital employed and cash generation underpin DCC’s financial strategy. DCC operates detailed and rigorous operating and financial controls across the Group. Key performance indicators are monitored, often on a daily basis, and operating and financial performance is measured weekly and monthly against targets and prior year. Results are reported and reviewed performance in the more significant was organic. Since public listing in promptly, with immediate follow up second half was particularly strong 1994 approximately two thirds of to exploit opportunities or address with constant currency growth in DCC’s growth has been organic. weaknesses. Financial discipline is a operating profit of 19% compared to way of life at DCC. growth of 6% in the first half. The Group’s operating margin Turnover grew by 2.6% on a constant increased to 5.5% from 5.0%; Results currency basis (2.0% decline reported) however, it is important to note that Continued strong earnings growth, to €2,198.0 million and operating this measurement of the overall cash generation and high returns on profit increased by 14.1% on a Group margin is of limited relevance capital employed were key features constant currency basis (8.8% due to the influence of changes in of DCC’s results for the year ended 31 reported) to a record €120.9 million, oil product costs on the percentage. March 2004. As Table 1 shows, approximately 90% of which growth 22 Table 1: Operating profit from continuing activities 2004 2003 Reported Constant currency Growth H1 H2 FY €’m €’m €’m H1 FY H2 €’m €’m €’m H1 % H2 % FY % Energy IT Distribution Healthcare Food and Beverage Environmental Other 10.7 11.6 6.5 5.0 2.3 5.1 35.1 45.8 19.7 7.1 5.9 2.7 9.2 31.3 13.6 10.9 5.0 14.3 8.9 13.6 5.0 5.8 1.2 5.3 33.3 42.2 18.7 6.4 6.0 2.0 4.9 32.3 11.4 11.8 3.2 10.2 +8% +5% +21% -15% -3% +5% +29% +12% +19% -14% -7% -1% +88% +37% +57% -3% +88% +41% H1 % H2 % FY % +25% +14% +16% -12% +15% +4% +29% +15% +21% -14% -8% -2% +88% +48% +64% -3% +88% +41% Total - continuing 41.2 79.7 120.9 39.8 71.3 111.1 +3% +12% +9% +6% +19% +14% All constant currency figures quoted in this report are based on retranslating current year figures at prior year translation rates. While changes in oil product costs the year amounted to €8.2 million. The defendants are in breach of a will change percentage operating Net operating exceptional items of London High Court order in respect margins, this has little relevance in €2.3 million are non-recurring costs of the non-payment of the damages the downstream energy market in incurred on restructuring and and the interim cost award. which DCC Energy operates, where redundancy in a drive for improved Collection of the amount profitability is driven by absolute efficiencies across the Group. outstanding and interest accruing contribution per litre (or tonne) of Non-operating exceptional costs of thereon at 8% per annum (per Court product sold and not a percentage €4.8 million were incurred on the order) is being vigorously pursued. margin. Excluding Energy, the termination of operations associated Group’s operating margin increased with the Shoprider distribution The remaining non-operating from 4.9% to 5.5%. contract. These costs relating to exceptional costs of €1.1 million legal, restructuring and redundancy primarily related to the termination A detailed operating review is set out costs associated with the breach of a of SerCom Solutions’ operations in on pages 16 to 19. contract to supply powered mobility Scotland. products to DCC’s subsidiary Days Interest Medical Aids Limited (DMA) by Taxation The net interest charge was €4.8 Pihsiang Machinery Manufacturing The Group’s taxation charge on million, a decrease of €0.2 million on Company Limited (a Taiwanese ordinary activities for the year the prior year. Development public company) have been represents an effective tax rate of expenditure of €39.7 million was recognised in these accounts. 12.5%. The effective tax rate reflects, fully funded by cash flows from However, damages of Stg£10.2 in part, lower rates of tax in Ireland, operations. Interest cover was 25.2 million and an interim cost award of including manufacturing relief at times (23.0 times: 2003). Stg£2.0 million – in total Stg£12.2 10.0%. The standard rate of million (€18.3 million) – against corporation tax in Ireland is 12.5% Profit before net exceptional items, Pihsiang, its Chairman and major since 1 January 2003. An analysis of goodwill amortisation and tax rose by shareholder Mr Donald Wu and his the taxation charge is contained in 11.2% on a constant currency basis wife and Director Mrs Jenny Wu note 11 to the financial statements. (6.1% reported) to €116.1 million. following a successful London High Court action by DMA have not yet Dividend Net exceptional items been recognised in the accounts as The total dividend for the year of Operating exceptional items and non- the amount has not yet been 32.40 cent per share represents an operating net exceptional items in received. increase of 15% over the previous year. 23 The dividend is covered 3.8 times (3.9 goodwill, significantly ahead of is principally used to fund times: 2003) by adjusted earnings DCC’s cost of capital of investment in existing operations, per share. approximately 7.5%. DCC’s complementary bolt-on acquisitions, consistently high returns on capital dividend payments and selective Return on capital employed employed reflect the combination of share buybacks. DCC’s record of DCC is committed to creating strong organic growth and the excellent cash generation continued shareholder value through delivering attractive valuations and excellent with operating cash flow before consistent, long term returns in integration synergies DCC has exceptional items growing to €151.9 excess of the Company’s cost of achieved in its bolt-on acquisitions. million (as detailed in Table 2), an capital. In the year under review, DCC again generated excellent Cash flow increase of 54.3%. Working capital decreased by €20.6 million to equate returns, 39.8% on tangible capital DCC focuses on operating cash flow to 11.6 days’ sales at 31 March 2004, employed and 21.3% on capital to maximise shareholder value over which compares favourably with 15.4 employed inclusive of acquisition the long-term. Operating cash flow days’ at 31 March 2003. Table 2: Summary of Cash Flows Table 3: Working Capital Days Stocks Debtors Creditors 2004 Days 15.8 46.5 (50.7) 2003 Days 15.8 48.8 (49.2) Net working capital 11.6 15.4 2004 €’m 151.9 (10.7) 141.2 - 1.1 142.3 28.1 14.3 25.0 8.9 24.7 101.0 41.3 1.3 20.1 62.7 2003 €’m 98.5 (6.0) 92.5 14.7 0.2 107.4 34.8 88.2 - 7.8 21.3 152.1 (44.7) 1.7 63.1 20.1 Inflows Operating cash flow Exceptional costs Disposal proceeds Shares issues (net) Outflows Capital expenditure (net) Acquisitions Share buyback Interest and tax paid Dividends paid Net cash inflow/(outflow) Translation adjustment Opening net cash Closing net cash 24 Table 4: Analysis of Net Cash Cash and term deposits 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 2004 €’m 2003 €’m 320.6 354.0 (143.7) (218.4) (16.6) (97.6) 62.7 (21.2) (94.3) 20.1 Balance sheet the Board. The Group does not take rate volatility. However, certain DCC has a very strong balance sheet with shareholders’ funds of €469.6 million at 31 March 2004 and net cash of €62.7 million. speculative positions but seeks, natural hedges also exist within the where considered appropriate, to Group, as a proportion of both the hedge underlying trading and Group’s interest payments and asset/liability exposures by way of purchases by certain of its Irish The composition of net cash at 31 derivative financial instruments businesses are sterling March 2004 is analysed in Table 4. (such as interest rate and currency denominated. swaps and forward contracts). Cash and term deposits are DCC’s Group Treasury function Interest rate risk management analysed in note 22 to the financial centrally manages the Group’s The Group borrows at both fixed statements. An analysis of DCC’s funding and liquidity requirements. and floating rates of interest and debt at 31 March 2004, including Divisional and subsidiary utilises interest rate swaps to currency, interest rates and maturity management, in conjunction with manage its exposure to interest rate periods, is shown in notes 23 to 26 Group Treasury, manage foreign fluctuations. to the financial statements. currency and commodity price exposures within approved Credit risk management In April 2004 DCC completed a guidelines. An analysis of the DCC transacts with a variety of private placement of debt raising the equivalent of €212.1 million in 10 and Group’s hedging positions is financial institutions for the contained in note 27(b) to the purpose of placing deposits and 12 year funding (average maturity financial statements. entering into derivative contracts. 10.3 years) which further strengthens The Group actively monitors its the Group’s capital structure and its Currency risk management credit exposure to each capacity to pursue organic and DCC’s reporting currency and that in counterparty within guidelines acquisition growth opportunities in which its share capital is approved by the Board. all of its core business areas. denominated is the euro. Exposures The strength of DCC’s business to other currencies, principally Commodity price risk management model and attractive market sterling and the US dollar, arise in Commodity forwards and swaps are conditions at the time of the the course of ordinary trading. frequently used to fully or partly placement led to the funds being Trading-related foreign currency hedge potential price movements in raised on very good terms. exposures are generally hedged by LPG products and oil products to be using forward contracts to cover purchased by the Group’s energy Treasury policy and management specific or estimated purchases and businesses in Britain and Ireland. The principal objective of the receivables. Over half of the Group’s All such contracts are entered into Group’s treasury policy is the operating profits are sterling with counterparties approved by the minimisation of financial risk at denominated and, where Board and usually for a period not reasonable cost. This policy is appropriate, hedges are put in place exceeding three months. reviewed and approved annually by to minimise the related exchange 25 26 “ We must continue to foster, as a core competence within DCC, the ability to manage businesses in diverse markets. ” 27 Corporate Social Responsibility DCC recognises its corporate 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. 28 Commitment DCC’s commitment to Corporate Social Responsibility (CSR) benefits both DCC and its key stakeholders – communities, customers, employees, the environment and shareholders. Understanding the needs of all stakeholders strengthens DCC’s ability to take advantage of business opportunities and minimise risks to support enduring, sustainable competitive advantage and longer term shareholder value enhancement. Progress Over the past year DCC has made solid progress towards the development of a best-practice framework to underpin the Group’s proactive approach to CSR. The framework will embrace each of the following key dimensions of CSR: Marketplace Environment, Health and Safety Community Workplace The extent of the progress DCC has made in each of these areas is illustrated on pages 30 and 31. Plans Over the coming year DCC plans to progress its strategy to build continued awareness and understanding of the business implications and benefits of CSR throughout the Group. This is a long-term, evolutionary process, building on progress made to date and developing more effective systems to benchmark and seek continuous improvement in CSR performance as part of the overall measurement of business performance. 29 Marketplace Leinster Society of Chartered Regular Environment, Accountants. In addition to winning Health and Safety audits Dow Jones STOXX Sustainability Index the overall award, DCC was DCC’s Enterprise Risk Management shortlisted for the Society’s function carries out scheduled EHS DCC’s CSR progress was recognised CSR award. audits of all DCC subsidiaries by the Group’s selection for inclusion ensuring compliance with applicable in the Dow Jones STOXX Environment, Health and Safety legislation, anticipation of future Sustainability Index (DJSI STOXX) requirements and dissemination of during the year. Proactive approach to best practice. Environmental, Health and This followed DCC’s previous Safety management Respect for the environment inclusion in another key Socially All DCC subsidiaries are taking a DCC continuously seeks ways in Responsible Investing index, the systematic and proactive approach which to exert a positive influence FTSE4Good. The DJSI STOXX tracks to Environmental, Health and Safety on the environments in which its the performance of the top 20% of (EHS) management. Formal risk businesses operate and to minimise the companies in the Dow Jones assessments are carried out on an the Group’s environmental impact. STOXX 600 Index that lead the field ongoing basis as a key part of During the year the Group increased in terms of sustainability. Investors policies and procedures documented the amount of packaging waste are increasingly diversifying their in subsidiaries’ EHS management diverted away from scarce landfill portfolios by investing in companies systems. Annual EHS objectives are facilities to recycling contractors. that set industry-wide best practices set and EHS programmes then Many subsidiaries have programmes with regard to sustainability. implemented, monitored and to recycle bottles, cans and paper reviewed for effectiveness. products and employees are Published Accounts Award A number of subsidiaries are already encouraged to limit the need for DCC’s commitment to best financial certified to the ISO14001 standard recycling by reducing the use of reporting practice contributed to the for their environmental office paper at source through Group’s success in winning the management systems. This is a initiatives such as electronic faxing Published Accounts Award for large positive recognition against an and double sided printing. Irish quoted companies during the external benchmark. year. This is the main award for excellence in financial reporting in Ireland, presented annually by the 30 Community DCC is committed to managing its Strong tradition of communication business in a fair and equitable DCC places considerable emphasis Embracing community initiatives manner and to providing an on employee communication. DCC’s commitment to the environment that has at its Strong traditions of open and community is reflected in the cornerstone dignity and equality of regular communication within Group’s involvement in many local opportunity for all. The Group is DCC’s businesses are supported causes in the communities in which continuously developing progressive through regular newsletters, the Group’s subsidiaries operate. employment practices to ensure not employee forums (including the These include sporting, social and just full compliance with legal DCC European Employee Forum), educational initiatives that are requirements but to promote best team briefings, suggestion schemes, supported through employee human resources practice. employee attitude surveys and the volunteerism and fundraising. group intranet. Continuous employee development Workplace A variety of initiatives recognise the Supporting entrepreneurial importance to the Group’s long- management Pursuing best human term competitive advantage of DCC’s business structure affords resources practice continuous training and subsidiary management teams the People are the key element of DCC’s development of employees. flexibility to pursue entrepreneurial success – their talent, innovation Through the DCC leadership growth opportunities using their and entrepreneurial flair have been development programme we ensure industry knowledge and market essential ingredients in DCC’s that development plans are in place, awareness. Group management consistent strong growth and in support of our strategic business supports these opportunities performance. objectives, to nurture and develop through the provision of strategic the potential of tomorrow’s guidance, the promotion of best business leaders. practice and remuneration structures that reward the talented, energised people who drive business growth. 31 32 “ The senior management team, together with the highly experienced and committed operating management teams in DCC’s subsidiaries, gives the Group the capacity and sectoral focus to exploit its strong commercial and financial position and to drive the creation of long-term shareholder value. ” 33 Directors’ Report and Financial Statements 2004 Corporate Governance The Board of DCC recognises the importance of high standards of corporate governance. DCC has complied, during the year ended 31 March 2004, with all of the Principles of Good Governance and Code of Best Practice set out in the 1998 Combined Code on Corporate Governance. The Board has considered the implications of the new Combined Code, published in July 2003, which applies to DCC for the financial year commencing on 1 April 2004 and is implementing appropriate changes and will report on compliance with its provisions in the 2005 Annual Report. 34 Corporate Governance - continued The Board of Directors Role There is an established procedure for Directors to take independent Directors’ Remuneration The Report of the Remuneration The Board of DCC is responsible for the professional advice in the furtherance Committee is set out on pages strategic direction and overall of their duties if they consider this 39 to 42. management of the Group and has a necessary. All Directors have access to formal schedule of matters specifically the advice and services of the Company reserved to it for decision, which covers Secretary who is responsible to the key areas of the Group’s business Board for ensuring that Board including approval of financial procedures are followed and that statements, budgets (including capital applicable rules and regulations are expenditure), acquisitions and complied with. dividends. Certain additional matters are delegated to Board Committees. The Board recognises the need for Composition Directors, in particular new Directors, to be aware of their legal responsibilities The Board consists of five executive and as directors and, in addition, the Board five non-executive Directors and the ensures that Directors are kept up to roles of the Chairman and Chief date on the latest corporate Executive are separate. Brief governance guidance and best practice. biographies of the Directors are set out There is a formal induction process on pages 2 and 3. The Board considers for new non-executive Directors which all of the non-executive Directors, Mr. includes detailed presentations on the Spain, Mr. Barry, Mr. Gallagher, Mr. Keane and Mr. Somers to be Group’s operations. The Board also gives consideration as to whether independent of management and free new Directors require other training of any relationships which could for their role. interfere with the exercise of their independent judgement. The Board has Board Committees appointed Maurice Keane as the Senior There are three Board Committees with Independent Director. formal terms of reference: the Audit Committee, the Remuneration All of the Directors bring independent Committee and the Nomination judgement to bear on issues of Committee. The Audit Committee strategy, risk, performance, resources, comprises three non-executive Directors key appointments and standards. At and its authority and duties are set out least one-third of the Directors retire at under ‘Accountability and Audit’ below. each Annual General Meeting and all The Remuneration Committee of the Directors are subject to re- election at least every three years. Board Procedures comprises three non-executive Directors and its report is set out on pages 39 to 42. The Nomination Committee, which comprises four non-executive Directors The Board holds regular meetings and and the Chief Executive/Deputy there is contact as required between Chairman, is responsible for making meetings in order to progress the recommendations to the Board on all Group’s business. During the year, the new Board appointments. Board held seven meetings. The Directors receive regular and timely information in a form and quality appropriate to enable the Board to discharge its duties. 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. All announcements including results announcements are published on the Company’s web site at www.dcc.ie immediately after their release by the Regulatory News Service. The web site 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 chairmen of the Audit, Remuneration and Nomination Committees are also available to answer questions at the Annual General Meeting. The 2003 Annual Report and Notice of Annual General Meeting were sent to shareholders 22 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 2004 Annual Report and Notice of Annual General Meeting. The 2004 Annual General Meeting will be held at 11 a.m. on 8 July 2004 at The Four Seasons Hotel, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland. 35 Corporate Governance - continued Accountability and Audit Audit Committee The written terms of reference of the Audit Committee deal clearly with its Such a system is designed to manage rather than eliminate the risk of failure (cid:2) an independent Enterprise Risk Management function, which to achieve business objectives and can incorporates Internal Audit and provide only reasonable and not Group Environmental, Health and authority and duties which include: absolute assurance against material Safety; and (cid:2) reviewing the half-year and annual misstatement or loss. financial statements before submission to the Board, focusing particularly on any changes in accounting policies and practices, major judgmental areas, significant adjustments resulting from the audit, the going concern assumption and compliance with accounting standards, Stock Exchange and legal requirements; (cid:2) reviewing the scope and results of the work performed by the Enterprise Risk Management function (incorporating Internal Audit); (cid:2) reviewing reports from the Risk Committee on internal control; 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 (cid:2) reviewing the scope and results of processes, include: the work performed by the external (cid:2) skilled and experienced Group and auditors; divisional management; (cid:2) a formally constituted Audit Committee which reviews the operation of the Risk Committee and the Enterprise 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 took account of the principal business risks facing the Group, the controls in place to manage those risks (including financial, operational and compliance controls and risk management) and the procedures in place to monitor them. Going Concern After making enquiries, the Directors have formed a judgement, at the time (cid:2) an organisation structure with of approving the financial statements, clearly defined lines of authority that there is a reasonable expectation and accountability; that the Company and the Group as a (cid:2) consideration of the appointment of the external auditors and their fees; and (cid:2) reviewing the nature and extent of non-audit services provided by the external auditors. (cid:2) a comprehensive system of financial reporting involving budgeting, monthly reporting and variance analysis; The Chief Executive/Deputy Chairman, (cid:2) the operation of approved risk Chief Financial Officer, Head of management policies (including Enterprise Risk Management and treasury and IT); representatives of the external auditors normally attend meetings of the Audit Committee. The Committee meets with the external auditors without executive management present at least once a year. Internal Control The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. (cid:2) a Risk Committee, comprising Group senior management, whose main responsibilities of the auditors are set out in their report on pages 44 and 45. 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; 36 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 43 and the reporting Report of the Directors for the year ended 31 March 2004 The Directors present their report and the audited financial statements for the year ended 31 March 2004. Principal Activities DCC is a value added sales & marketing and support services group focused on the energy, IT, healthcare, food and Dividends An interim dividend of 11.75 cent per share, amounting to €9.75 million, was paid on 1 December 2003. The Directors Research and Development Certain Group companies carry out development work aimed at improving the quality, competitiveness and range recommend the payment of a final of their products. This expenditure is dividend of 20.65 cent per share, amounting to €16.82 million. Subject to shareholders’ approval at the Annual not material in relation to the size of the Group and is written off to the profit and loss account as it is incurred. beverage and environmental markets. General Meeting on 8 July 2004, this A summary of the Group’s activities is shareholders on the register on 28 May set out on pages 16 to 19. 2004. The total dividend for the year dividend will be paid on 14 July 2004 to Subsidiary and Associated Companies Details of the Company’s principal operating subsidiaries are set out on pages 85 to 87. Details of its principal associated undertakings are set out on page 62, in note 18 to the financial statements. A full list of subsidiary and associated undertakings will be annexed to the Annual Return of the ended 31 March 2004 amounts to 32.40 cent per share, a total of €26.57 million. The balance of profit attributable to Group shareholders, which is retained in the business, amounts to €57.8 million. Share Buybacks and Treasury Shares The number of shares held in Treasury Company to be filed with the Irish at the beginning of the year was Registrar of Companies. Results and Business Review The profit for the financial year attributable to Group shareholders amounted to €84.3 million as set out in the Consolidated Profit and Loss Account on page 48. 4,517,005 (5.12% of the issued share capital) with a nominal value of €1.129 million. The maximum number of shares held in Treasury during the year was 6,790,129 (7.7% of the issued share capital) with a nominal value of €1.698 million. During the year, the Company The Chairman’s Statement on pages 8 purchased 2,305,875 of its own shares and 9, the Chief Executive’s Review on pages 10 to 13, the Financial Review on pages 22 to 25 and the Operating Review on pages 16 to 19 contain a (2.62% of the issued share capital) with a nominal value of €0.576 million at a total cost of €24.986 million. review of the development of the A total of 155,146 shares (0.18% of Group’s business during the year, of the state of affairs of the business at 31 March 2004, of recent events and of likely future developments. the issued share capital) with a nominal value of €0.039 million were re-issued during the year at prices ranging from €6.22 to €11.25, consequent to the exercise of share options, leaving a balance of 6,667,734 shares (7.56% of the issued share capital) held in Treasury at 31 March 2004. 37 Report of the Directors for the year ended 31 March 2004 - continued Substantial Shareholdings The Company has been advised of the following interests in its share capital as at 14 May 2004: Bank of Ireland Asset Management Limited* FMR Corp. and Fidelity International Limited and their direct and indirect subsidiaries* Schroder Investment Management Limited* First State Investment Management (UK) LImited and its associated companies* Jim Flavin No. of €0.25 Ordinary Shares % of Issued % of Listed Share Capital Share Capital ** 9,978,013 11.31% 12.23% 8,554,000 7,760,170 2,610,584 2,456,033 9.70% 8.80% 2.96% 2.78% 10.49% 9.51% 3.20% 3.01% * Notified as non-beneficial interests. ** Listed Share Capital excludes 6,667,734 shares held as Treasury Shares. The Company has not been notified of any other interest of 3% or more in its issued share capital. Directors The names of the Directors and a short biographical note on each Director appear on pages 2 and 3. Bernard Somers was co-opted to the Board on 29 September 2003. In accordance with Article 83(b) of the Articles of Association, he retires at the 2004 Annual General Meeting and being eligible, offers himself for re-election. In accordance with Article 80 of the Articles of Association, Alex Spain, Jim Flavin and Tony Barry retire by rotation at the 2004 Annual General Meeting and, being eligible, offer themselves for re-election. Morgan Crowe will retire from the Board at the conclusion of the Annual General Meeting on 8 July 2004. None of the retiring Directors has a service contract with the Company or with any member of the Group with a notice period in excess of one year or with provisions for predetermined compensation on termination which exceeds one year’s salary and benefits in kind. Details of the Directors’ interests in the share capital of the Company are set out in the Report of the Remuneration Committee on pages 39 to 42. Health and Safety It is the policy of the Group to ensure the safety, health and welfare of employees by maintaining a safe working environment and complying with the provisions and requirements of the Safety, Health and Welfare at Work Act, 1989 and all other statutory provisions and codes of practice. Each operating company in the Group has documented and implemented comprehensive safety policies and procedures which are kept under regular review by company management and by the Group Environmental, Health and Safety Function. Political Contributions There were no political contributions which require to be disclosed under the Electoral Act, 1997. Events Since the Year End Senior unsecured loan notes equivalent to €212.1 million were issued on 19 April 2004 in a private placement with US and UK institutional investors as detailed on page 68 in note 27(c) to the financial statements. 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 14 May 2004 38 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. The Company funded a pension for the Chairman, based on his annual fee. The funding ceased on 31 March 2004. Report of the Remuneration Committee Remuneration Committee The Remuneration Committee Directors’ Remuneration Executive Directors’ Remuneration comprises three independent non- The typical elements of the executive Directors - Tony Barry, remuneration package for executive Bernard Somers and Alex Spain. The Directors are basic salary, performance Committee is chaired by Tony Barry. related remuneration consisting of The terms of reference of the and share options, pension benefits Remuneration Committee are to and a company car. performance related annual bonuses determine the remuneration packages of the executive Directors and to Salaries approve the grant of share options. The salaries of executive Directors are The Chief Executive/Deputy Chairman is reviewed annually on 1 January having consulted about remuneration regard to personal performance, proposals for the other executive Company performance and competitive Directors and the Remuneration market practice. No fees are payable Committee is authorised to obtain to executive Directors. access to professional advice if deemed desirable. Remuneration Policy The Company’s remuneration policy Performance Related Annual Bonuses Performance related annual bonuses are payable to the executive Directors. The performance targets, which are recognises that employment and reviewed annually, are tailored to the remuneration conditions for the Group’s responsibilities of each executive senior executives must properly reward Director and include growth in Group and motivate them to perform in the operating profit, growth in divisional best interests of the shareholders. In operating profit, Group and divisional formulating this policy, the Committee development and an element related to has given due regard to the provisions individual performance and of the June 1998 Combined Code on contribution. The bonus potential, as a Corporate Governance. Directors’ Service Agreements Other than for the Chief Executive/Deputy Chairman, there are no percentage of basic salary, for each executive Director is reviewed and set annually and in the year ended 31 March 2004 ranged from 30% to 50%. service agreements between any Director Pension Benefits 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. The Company funds pension schemes which, for executive Directors, aim to provide, on the basis of actuarial advice, a pension of two thirds of pensionable salary at normal retirement date. Pensionable salary is calculated as 105% of basic salary and does not include any performance related bonuses or benefits. 39 Report of the Remuneration Committee - continued Directors’ Remuneration Details The table below sets out the details of the remuneration payable in respect of Directors who held office for any part of the financial year. Salary and Fees1 Bonus Benefits 2 Pension Contribution3 2003 2004 Total 2004 2003 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 2003 2004 2003 2004 2004 2003 Executive Directors Jim Flavin Tommy Breen Morgan Crowe Kevin Murray Fergal O’Dwyer 734 314 334 314 284 726 302 323 302 273 Total for executive Directors 1,980 1,926 Non-executive Directors Alex Spain Tony Barry Paddy Gallagher Maurice Keane Bernard Somers4 Total for non-executive Directors 118 49 49 49 24 111 46 46 46 - 289 249 Pension payment in respect of retired Director Total 220 140 167 140 130 797 - - - - - - 36 79 16 119 50 300 - - - - - - 35 18 20 18 14 31 20 21 20 15 105 107 - - - - - - - - - - - - 155 86 88 86 79 494 27 - - - - 27 117 89 93 89 80 468 28 - - - - 28 1,144 558 609 558 507 910 490 453 530 418 3,376 2,801 145 49 49 49 24 139 46 46 46 - 316 277 10 14 3,702 3,092 Notes 1 Fees are payable only to non-executive Directors and include Chairman’s and Board Committee fees. 2 In the case of the executive Directors, benefits relate principally to the use of a company car. 3 Executive Director pension contributions in the year to 31 March 2004 were made to a defined contribution arrangement for Jim Flavin and to a defined benefit scheme for the other executive Directors. 4 In respect of the year ended 31 March 2004, remuneration for Bernard Somers is included only for the period from the date of his appointment to the Board, on 29 September 2003, to 31 March 2004. Directors’ Defined Benefit Pensions The table below sets out the increase in the accrued pension benefits to which Directors have become entitled during the year ended 31 March 2004 and the transfer value of the increase in accrued benefit, under the Company’s defined benefit pension scheme: Increase in accrued pension benefit (excl inflation) during the year Transfer value equivalent to the increase in accrued pension benefit Accumulated accrued pension benefit at year end €’000 €’000 €’000 10 11 7 7 35 6 74 191 52 46 363 87 107 206 92 77 482 65 Executive Directors Tommy Breen Morgan Crowe 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 Company and not a sum paid to or due to the Director noted. 40 Report of the Remuneration Committee - continued Share Options with guidelines published by the Second tier options may normally be DCC plc 1998 Employee Share Option Scheme Executive Directors and other senior executives participate in the DCC plc institutional investment associations. exercised only if the growth in the The Scheme provides for the grant of adjusted earnings per share over a both basic and second tier options, in period of at least five years is such as each case up to a maximum of 5% of would place the Company in the top the Company’s issued share capital. quartile of companies on the ISEQ index 1998 Employee Share Option Scheme, Basic tier options may not normally be in terms of comparison of growth in which was approved by shareholders in exercised earlier than three years from adjusted earnings per share and if there 1998. The Scheme encourages identification with shareholders’ the date of grant and second tier has been growth in the adjusted options not earlier than five years from earnings per share of the Company interests by enabling management to the date of grant. build, over time, a shareholding in the equivalent to the increase in the Consumer Price Index plus 10%, Company which is material to their net Basic tier options may normally be compound, per annum in that period. worth. exercised only if there has been growth in the adjusted earnings per share of Directors are encouraged to hold their The percentage of share capital which the Company equivalent to the increase options beyond the earliest exercise date. can be issued under the Scheme, the in the Consumer Price Index plus 2%, phasing of the grant of options and the compound, per annum over a period of The following are details of share options limit on the value of options which may at least three years following the date granted to Directors under the DCC plc be granted to any individual comply of grant. 1998 Employee Share Option Scheme: At 31 March 2003 Granted in year At 31 March 2004 Weighted Average Exercise Price € Normal Exercise Period Executive Directors Jim Flavin Basic Tier Second Tier Tommy Breen Basic Tier Second Tier Morgan Crowe Basic Tier Second Tier Kevin Murray Basic Tier Second Tier Fergal O’Dwyer Basic Tier Second Tier 350,000 395,000 165,000 190,000 100,000 100,000 165,000 190,000 140,000 165,000 - - - - - - - - - - 350,000 395,000 165,000 190,000 100,000 100,000 165,000 190,000 140,000 165,000 7.8140 8.1063 June 2001 – Nov 2011 June 2003 – Nov 2012 8.4193 8.6786 June 2001 – Nov 2012 June 2003 – Nov 2012 7.0019 7.0045 June 2001 – Nov 2009 June 2003 – Nov 2009 8.4193 8.6786 June 2001 – Nov 2012 June 2003 – Nov 2012 8.0878 8.4366 June 2001 – Nov 2012 June 2003 – Nov 2012 No options were exercised by or allowed to lapse by Directors under the DCC plc 1998 Employee Share Option Scheme during the year. 41 Report of the Remuneration Committee - continued DCC Sharesave Scheme The Group established the DCC Sharesave Scheme in 2000. On 15 June 2001, options were granted under the Scheme to those Group employees, including executive Directors, who entered into associated savings contracts. The maximum number of options which could have been granted to any individual under the Scheme at that date, in accordance with relevant legislation and subject to the level and term of the savings contract, was 2,383. The options were granted at an option price of €8.79 per share, which represented a discount of 20% to the market price as permitted by the rules of the Scheme. These options are exercisable between June 2004 and February 2007. The following are details of the share options granted to executive Directors under the Scheme: Jim Flavin Tommy Breen Morgan Crowe Kevin Murray Fergal O’Dwyer No. of Ordinary Shares At 31 March 2004 and 2003 2,383 2,383 1,372 2,383 2,383 The market price of DCC shares on 31 March 2004 was €12.15 and the range during the year was €9.79 to €12.25. Additional information in relation to the DCC plc 1998 Employee Share Option Scheme and the DCC Sharesave Scheme appears in note 32 on page 75 of the financial statements. 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 2004, together with their interests at 31 March 2003, were: Alex Spain Jim Flavin Tony Barry Tommy Breen Morgan Crowe Paddy Gallagher Maurice Keane Kevin Murray Fergal O’Dwyer Bernard Somers No. of Ordinary Shares At 31 March 2004 At 31 March 2003 20,634 2,456,033 17,000 211,512 807,640 5,040 5,000 212,306 212,506 - 20,634 2,456,033 12,000 211,512 807,640 5,040 5,000 212,306 212,506 -* Gerard Whyte (Secretary) 124,667 124,667 * at date of appointment - 29 September 2003 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 2004 and 14 May 2004. Apart from the interests disclosed above, the Directors and the Company Secretary had no interests in the share capital or loan stock of the Company or any other Group undertaking at 31 March 2004. The Company’s Register of Directors Interests (which is open to inspection) contains full details of Directors’ shareholdings and share options. 42 Statement of Directors’ Responsibilities The following statement, which should going concern basis, the Company has to 2003 and the European be read in conjunction with the used appropriate accounting policies, Communities (Companies: Group statement of auditors’ responsibilities consistently applied and supported by Accounts) Regulations, 1992. The set out within their report on pages 44 reasonable and prudent judgements Directors have a general duty to act in and 45, is made with a view to and estimates, and that all accounting the best interests of the Company and distinguishing for shareholders the standards which they consider must, therefore, take such steps as are respective responsibilities of the applicable have been followed (subject reasonably open to them to safeguard Directors and of the auditors in relation to any explanations or material the assets of the Group and to prevent to the financial statements. departures disclosed in the notes to the and detect fraud and other financial statements). irregularities. The Directors are required by company law to ensure that the Company The Directors are required to take all prepares financial statements for each reasonable steps to secure compliance Books of Account The measures taken with regard to financial year which give a true and fair by the Company with its obligations in keeping proper books of account view of the state of affairs of the relation to the preparation and include the use of systems and Company and the Group and of the maintenance of proper books of procedures appropriate to the business profit or loss of the Group for that year. account and financial statements which and the employment of competent and disclose with reasonable accuracy at reliable persons. The books of account Following discussions with the auditors, any time the financial position of the are kept at DCC House, Stillorgan, the Directors consider that in preparing Company and to enable them to Blackrock, Co. Dublin. the financial statements on pages 46 to ensure that the financial statements 80, which have been prepared on the comply with the Companies Acts, 1963 43 Report of the Independent Auditors for the year ended 31 March 2004 To the Members of DCC plc We have audited the financial our audit and whether the Company balance sheet is in agreement with the Basis of audit opinion We conducted our audit in accordance statements on pages 46 to 80 and the books of account. We also report to with Auditing Standards issued by the detailed information on directors’ you our opinion as to: emoluments, pensions and interests in shares and share options on pages 39 to 42. The financial statements have been prepared under the historical cost convention and the accounting policies set out in the statement of accounting policies on pages 46 and 47. 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 43 in the statement (cid:2) whether the Company has kept proper books of account; (cid:2) whether the directors’ report is consistent with the financial statements; and (cid:2) whether at the balance sheet date there existed a financial situation 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 which may require the Company to appropriate to the Company’s convene an extraordinary general circumstances, consistently applied and meeting; such a financial situation adequately disclosed. may exist if the net assets of the Company, as stated in the Company We planned and performed our audit so balance sheet, are not more than half as to obtain all the information and of its called-up share capital. of directors’ responsibilities. We also report to you if, in our opinion, Our responsibility is to audit the Listing Rules regarding directors’ financial statements in accordance with remuneration and transactions is not information specified by law or the relevant legal and regulatory disclosed. requirements, auditing standards issued by the Auditing Practices Board We read the other information applicable in Ireland and the Listing contained in the Annual Report and Rules of the Irish Stock Exchange. This consider the implications for our report report, including the opinion, has been if we become aware of any apparent prepared for and only for the misstatements or material Company’s members as a body in inconsistencies with the financial accordance with Section 193 of the statements. The other information 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. Opinion In our opinion, the financial statements give a true and fair view of the state of affairs of the Company and the Group Companies Act 1990 and for no other comprises only the directors’ report, the at 31 March 2004 and of the profit and purpose. We do not, in giving this chairman’s statement, the chief opinion, accept or assume responsibility executive’s review, the operating review, for any other purpose or to any other the corporate social responsibility cash flows of the Group for the year then ended and have been properly prepared in accordance with the person to whom this report is shown or statement, the financial review and the Companies Acts, 1963 to 2003, and the into whose hands it may come save corporate governance statement. where expressly agreed by our prior consent in writing. We review whether the statement on page 36 reflects the Company’s We report to you our opinion as to compliance with the seven provisions of whether the financial statements give a the Combined Code specified for our 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 true and fair view and are properly review by the Listing Rules, and we been kept by the Company. The prepared in accordance with Irish report if it does not. We are not Company balance sheet is in agreement statute comprising the Companies Acts, required to consider whether the with the books of account. 1963 to 2003, and the European Communities (Companies: Group board’s statements on internal control cover all risks and controls or to form an Accounts) Regulations, 1992. We state opinion on the effectiveness of the whether we have obtained all the Company’s or Group’s corporate information and explanations we governance procedures or its risk and consider necessary for the purposes of control procedures. 44 Report of the Independent Auditors - continued In our opinion, the information given in the Report of the Directors on pages 37 and 38 is consistent with the financial statements. The net assets of the Company, as stated in the balance sheet on page 51, 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 2004 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 14 May 2004 45 Accounting Policies Accounting Convention The financial statements have been that undertaking is included in the determination of the profit or loss on Turnover Turnover comprises the invoiced value, prepared under the historical cost disposal. convention and in accordance with including excise duty and excluding value added tax, of goods supplied and applicable accounting standards. The In the case of interests acquired by the services rendered. currency used in these financial Group in associated undertakings, 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 2003. 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. 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 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. provision for any impairment in value. Net realisable value represents the Basis of Consolidation The consolidated financial statements include the Company and all its subsidiaries. Associated Undertakings Associated undertakings are companies other than subsidiaries in which the estimated selling price less costs to completion and appropriate selling and distribution costs. Group holds, on a long-term basis, a Provision is made, where necessary, for The results of subsidiary and associated participating interest in the voting slow moving, obsolete and defective undertakings acquired or disposed of equity share capital and exercises stocks. during the year are included in the significant influence. consolidated profit and loss account from the date of their acquisition or up Associated undertakings are included in Tangible Fixed Assets Tangible fixed assets are stated at cost to the date of their disposal. the Company balance sheet at cost less less accumulated depreciation. provision for any impairment in value. Goodwill Goodwill comprises the excess of consideration paid to acquire new Income from associated undertakings Depreciation is provided on a straight included in the Company profit and loss line basis at the rates stated below, account comprises dividends received which are estimated to reduce the businesses over the fair value of the and receivable. identifiable net assets acquired. assets to their residual level values by the end of their expected working lives: Goodwill arising on the acquisition of subsidiaries prior to 1 April 1998 was eliminated from the balance sheet The appropriate share of results of associated undertakings is included in Annual Rate the consolidated profit and loss account Freehold and long term by way of the equity method of leasehold buildings 2% through reserves in the year in which it accounting. Associated undertakings Plant and machinery 5 - 331/3% arose. Goodwill arising on the are stated in the consolidated balance Cylinders acquisition of subsidiaries since 1 April sheet at cost plus the attributable Motor vehicles 1998 is capitalised on the balance sheet portion of their retained reserves from Fixtures, fittings & 62/3% 10 - 331/3% 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 the date of acquisition less goodwill office equipment 10 - 331/3% amortised. Provision is made, where appropriate, where the Directors Land is not depreciated. consider there has been an impairment eliminated against reserves in respect of in value. 46 Accounting Policies - continued Leased Assets Tangible fixed assets, acquired under a Foreign Currencies Assets and liabilities denominated in lease which transfers substantially all of foreign currencies are translated into As part of exchange rate risk management, foreign currency swap agreements are used to convert US the risks and rewards of ownership to euro at the exchange rates ruling at the dollar borrowings into euro and sterling the Group, are capitalised as fixed balance sheet date or at contracted borrowings. Gains and losses on these assets. Amounts payable under such rates, where appropriate. leases (finance leases), net of finance charges, are shown as short, medium The trading results of overseas or long term lease obligations, as subsidiaries are translated into euro at appropriate. Finance charges on the average rate of exchange for the finance leases are charged to the profit year. and loss account over the term of the lease on an actuarial basis. Profits and losses arising on The annual rentals under operating during the year are included in the transactions in foreign currencies derivatives are deferred and are 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 leases are charged to the profit and profit and loss account at the exchange adjustments to interest expense over loss account as incurred. rate ruling on the date of the the period of the contracts. transactions. Deferred Consideration Where acquisitions involve further payments which are deferred or Exchange differences arising from a re- translation of the opening net Liquid Resources Liquid Resources comprise short term deposits which are readily disposable contingent on levels of performance investment in subsidiary and associated stores of value. These deposits are achieved in the years following the undertakings are dealt with in the typically placed on money markets for acquisition, a discounted deferred acquisition creditor is accrued. Statement of Total Recognised Gains periods of up to six months. and Losses net of differences on related Notional interest is charged to the currency borrowings. 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. Derivative Financial Instruments The Group is a party to derivative financial instruments (derivatives), Deferred Taxation Deferred tax is recognised in respect of primarily to manage its exposure to fluctuations in foreign currency all timing differences that have exchange rates and interest rates and originated but not reversed at the to manage its exposure to changes in balance sheet date where transactions the prices of certain commodity or events that result in an obligation to products. pay more tax in the future or a right to pay less tax in the future have occurred Gains and losses on derivative contracts 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. 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 at the balance sheet date. used to hedge foreign exchange and variations from regular cost are spread commodity price trading exposures are over the expected average remaining Timing differences are temporary recognised in the profit and loss differences between profit as computed account when the hedged transactions for taxation purposes and profit as occur. 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. 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’ are shown in note 31(b). 47 Consolidated Profit and Loss Account for the year ended 31 March 2004 Notes 2004 €’000 2003 €’000 Turnover Group turnover Share of turnover of associated undertakings Total turnover - continuing activities Discontinued activities Total turnover Group turnover Continuing activities Acquisitions Cost of sales Gross profit Net operating costs before operating exceptional items and goodwill amortisation Operating profit before operating exceptional items and goodwill amortisation - parent and subsidiary undertakings Share of operating profit before goodwill amortisation - associated undertakings Operating profit before operating exceptional items and goodwill amortisation Continuing activities Acquisitions Discontinued activities Operating exceptional items Goodwill amortisation Operating profit Non-operating 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 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) Alex Spain, Jim Flavin, Directors 1 1 1 1 2 2 2 1 1 7 6 2 7 8 9 10 11 12 13 14 14 35 15 15 15 15 2,074,465 123,500 2,197,965 - 2,111,066 131,818 2,242,884 29,490 2,197,965 2,272,374 2,051,441 23,024 2,063,783 47,283 2,074,465 (1,739,395) 2,111,066 (1,776,929) 335,070 (233,395) 334,137 (237,514) 101,675 96,623 19,201 17,709 120,876 120,708 168 120,876 - 120,876 (2,288) (8,282) 110,306 (5,897) 114,332 105,928 5,165 111,093 3,239 114,332 (2,898) (7,340) 104,094 (1,756) (3,693) (3,766) (1,109) 99,607 (14,509) 85,098 (771) 84,327 (9,748) (16,824) 57,755 101.98c 100.42c 121.89c 120.03c (1,204) 97,368 (15,311) 82,057 (1,248) 80,809 (8,542) (15,017) 57,250 96.66c 95.50c 111.00c 109.67c 48 Statement of Total Recognised Gains and Losses for the year ended 31 March 2004 Profit for the financial year Exchange adjustments - associated companies Exchange adjustments - subsidiaries Total recognised gains for the financial year 2004 €’000 84,327 (210) 6,652 90,769 2003 €’000 80,809 (1,761) (17,871) 61,177 Note of Historical Cost Profits and Losses for the year ended 31 March 2004 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 48. 49 Consolidated Balance Sheet as at 31 March 2004 Notes 16 17 18 20 21 22 23 28 14 23 23 2004 €’000 129,566 212,252 53,780 395,598 110,577 330,385 320,616 761,578 143,732 362,688 36,077 16,824 559,321 2003 €’000 132,044 209,432 40,330 381,806 103,030 321,650 353,986 778,666 218,419 334,997 29,291 15,017 597,724 202,257 180,942 597,855 562,748 16,555 97,612 6,799 21,250 94,258 11,887 120,966 127,395 29 2,084 1,157 123,050 128,552 32 33 34 35 36 37 38 22,035 124,438 1,400 321,739 469,612 4,081 1,112 474,805 22,035 124,444 1,400 281,400 429,279 3,632 1,285 434,196 597,855 562,748 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 50 Company Balance Sheet as at 31 March 2004 Fixed Assets Tangible fixed assets Financial assets - associated undertakings - subsidiary undertakings Current Assets Debtors Cash and term deposits Creditors: Amounts falling due within one year Bank and other debt Trade and other creditors 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 Alex Spain, Jim Flavin, Directors Notes 17 18 19 21 22 23 28 14 2004 €’000 983 1,300 145,814 148,097 291,088 367 291,455 - 15,669 16,824 32,493 2003 €’000 1,055 1,300 106,653 109,008 280,457 333 280,790 4,067 6,536 15,017 25,620 258,962 255,170 407,059 364,178 187,711 2,016 189,727 178,188 4,350 182,538 29 827 552 190,554 183,090 32 33 34 35 22,035 124,438 344 69,688 216,505 22,035 124,444 344 34,265 181,088 407,059 364,178 51 Consolidated Cash Flow Statement for the year ended 31 March 2004 Cash flow from operating activities Returns on investments and servicing of finance Taxation paid Capital expenditure Acquisitions and disposals Equity dividends paid Cash inflow/(outflow) before management of liquid resources and financing Increase in liquid resources Financing (Decrease)/increase in cash for the year Notes 40 41 41 41 42 41 42 2004 €’000 141,246 (3,609) (5,295) (28,092) (14,460) (24,765) 65,025 (27,105) (90,239) 2003 €’000 92,467 (4,864) (2,923) (34,832) (73,483) (21,258) (44,893) (61,222) 143,819 (52,319) 37,704 Reconciliation of Net Cash Flow to Movement in Net Cash for the year ended 31 March 2004 (Decrease)/increase in cash for the year Increase in liquid resources Net loans repaid/(drawn down) Capital element of finance lease payments Changes in net cash resulting from cash flow Exchange movements Net inflow/(outflow) in the year Net cash at start of year Net cash at end of year Notes 42 42 42 42 42 42 42 2004 €’000 (52,319) 27,105 61,551 4,976 41,313 1,345 42,658 20,059 2003 €’000 37,704 61,222 (145,836) 2,248 (44,662) 1,648 (43,014) 63,073 62,717 20,059 52 Notes to the Financial Statements for the year ended 31 March 2004 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: Turnover €’000 841,344 859,441 148,961 170,665 24,131 153,423 2,197,965 2004 Profit Before Taxation €’000 45,791 31,274 13,595 10,876 5,044 14,296 120,876 - (8,282) (8,185) (4,802) (i) Summary Energy IT Distribution Healthcare Food and Beverage Environmental Other Continuing activities Discontinued activities Goodwill amortisation Net exceptional items (note 7) Interest (net) Net cash Amounts due in respect of acquisitions Investments Capitalised goodwill - subsidiaries Capitalised goodwill - associates Minority interests Proposed dividend Net Assets €’000 105,434 78,949 37,129 27,634 10,239 43,230 302,615 62,717 (11,477) 100 129,566 6,996 (4,081) (16,824) Turnover €’000 845,032 894,897 161,647 185,159 19,215 136,934 2,242,884 29,490 2003 Profit Before Taxation €’000 42,239 32,289 11,415 11,756 3,219 10,175 111,093 3,239 (7,340) (4,654) (4,970) Net Assets €’000 127,042 70,503 36,407 24,099 9,623 37,354 305,028 20,059 (18,833) 2,370 132,044 7,260 (3,632) (15,017) 2,197,965 99,607 469,612 2,272,374 97,368 429,279 (ii) Split between Subsidiary Undertakings and Associated Undertakings Subsidiary 2004 Associated Undertakings Undertakings €’000 €’000 2003 Associated Total Undertakings Undertakings €’000 €’000 €’000 Subsidiary Total €’000 Turnover - continuing - discontinued activities Operating profit before goodwill amortisation - continuing - discontinued activities Goodwill amortisation Operating profit Net exceptional items (note 7) Interest (net) 2,074,465 - 123,500 - 2,197,965 - 2,111,066 - 131,818 29,490 2,242,884 29,490 2,074,465 123,500 2,197,965 2,111,066 161,308 2,272,374 101,675 - 101,675 (7,794) 19,201 - 19,201 (488) 93,881 18,713 (8,185) - (1,109) (3,693) 120,876 - 120,876 (8,282) 112,594 (8,185) (4,802) 96,623 - 96,623 (6,794) 14,470 3,239 17,709 (546) 89,829 (4,492) (3,766) 17,163 (162) (1,204) 111,093 3,239 114,332 (7,340) 106,992 (4,654) (4,970) Profit before taxation 82,003 17,604 99,607 81,571 15,797 97,368 Net assets (including capitalised goodwill) 415,832 53,780 469,612 388,949 40,330 429,279 53 Notes to the Financial Statements for the year ended 31 March 2004 1. Segmental Information - continued (iii) Other Other, which includes Homebuilding and Supply Chain Management, is analysed as follows: 2004 Profit Before Taxation €’000 15,188 (892) 14,296 Turnover €’000 65,406 88,017 153,423 Net Assets €’000 29,018 14,212 43,230 Turnover €’000 47,016 89,918 136,934 2003 Profit Before Taxation €’000 9,588 587 10,175 Net Assets €’000 20,273 17,081 37,354 Homebuilding Supply Chain Management Services (iv) Acquisitions Acquisitions in the year contributed turnover of €23.024 million (2003: €47.283 million), operating profit before goodwill amortisation of €0.168 million (2003: €5.165 million) and profit before taxation of €87,000 (2003: €4.878 million). (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 Turnover by Origin €’000 700,036 1,374,429 2,074,465 123,500 2,197,965 2004 Profit Before Taxation €’000 39,473 62,202 101,675 19,201 120,876 - (8,282) (8,185) (4,802) Turnover by Origin €’000 719,503 1,391,563 2,111,066 131,818 2,242,884 29,490 2003 Profit Before Taxation €’000 38,983 57,640 96,623 14,470 111,093 3,239 (7,340) (4,654) (4,970) Net Assets €’000 62,414 193,417 255,831 46,784 302,615 62,717 (11,477) 100 129,566 6,996 (4,081) (16,824) Net Assets €’000 76,037 195,921 271,958 33,070 305,028 20,059 (18,833) 2,370 132,044 7,260 (3,632) (15,017) 2,197,965 99,607 469,612 2,272,374 97,368 429,279 Ireland Rest of the World Associated undertakings Continuing activities Discontinued activities Goodwill amortisation Net exceptional items (note 7) Interest (net) Net cash Amounts due in respect of acquisitions Investments Capitalised goodwill - subsidiaries Capitalised goodwill - associates Minority interests Proposed dividend (ii) Turnover by Destination – Continuing Activities Ireland United Kingdom Rest of Europe USA Other Share of associated undertakings 54 2004 €’000 2003 €’000 682,055 1,226,136 153,011 10,256 3,007 123,500 711,905 1,222,464 159,750 13,450 3,497 131,818 2,197,965 2,242,884 Notes to the Financial Statements for the year ended 31 March 2004 2. Cost of Sales and Net Operating Costs Continuing Continuing 2004 2003 Activities Acquisitions €’000 €’000 Total €’000 Activities Acquisitions €’000 €’000 Total €’000 (1,718,370) (21,025) (1,739,395) (1,745,385) (31,544) (1,776,929) 333,071 1,999 335,070 318,398 15,739 334,137 (120,270) (113,421) (17) (233,708) 2,144 (231,564) (2,288) (7,720) (1,093) (738) - (1,831) - (1,831) - (74) (121,363) (114,159) (17) (235,539) 2,144 (233,395) (2,288) (7,794) (113,924) (117,014) (78) (231,016) 4,076 (226,940) (2,898) (6,527) (6,801) (3,787) - (10,588) 14 (10,574) - (267) (120,725) (120,801) (78) (241,604) 4,090 (237,514) (2,898) (6,794) Cost of sales Gross profit Operating costs Distribution Administrative Other operating expenses Other operating income Operating exceptional items Goodwill amortisation Net operating costs (241,572) (1,905) (243,477) (236,365) (10,841) (247,206) Operating profit - parent and subsidiaries - associated undertakings (note 1(a)) 91,499 18,713 ,94 - 91,593 18,713 110,212 , 94 110,306 82,033 17,163 99,196 4,898 - 4,898 86,931 17,163 104,094 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: 2004 Number 2003 Number Energy IT Distribution Healthcare Food and Beverage Environmental Supply Chain Management Services The staff costs for the above were: Wages and salaries Social welfare costs Pension costs 1,414 773 685 350 141 405 3,768 2004 €’000 124,540 13,621 7,242 145,403 5. Directors’ Emoluments and Interests Directors’ emoluments and interests are given in the Report of the Remuneration Committee on pages 39 to 42. 1,259 803 776 302 107 438 3,685 2003 €’000 125,274 13,239 6,199 144,712 55 Notes to the Financial Statements for the year ended 31 March 2004 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 Operating exceptional items Reorganisation and restructuring costs - subsidiary undertakings Net gains on disposals of interests in subsidiary undertakings and associated undertakings and investments Non-operating net exceptional items Net exceptional items 2004 €’000 2003 €’000 7,794 6,794 488 8,282 546 7,340 2004 €’000 2003 €’000 2,288 2,898 6,343 6,079 (446) 5,897 (4,323) 1,756 8,185 4,654 Operating exceptional items and non-operating net exceptional items in the year amounted to €8.185 million. The net operating exceptional items of €2.288 million are non-recurring costs incurred on restructuring and redundancy, in a drive for improved efficiencies across the Group. Non-operating exceptional costs of €4.827 million were incurred on the termination of operations associated with the Shoprider distribution contract. These costs relating to legal, restructuring and redundancy costs associated with the breach of a contract to supply powered mobility products to DCC’s subsidiary Days Medical Aids Limited (DMA) by Pihsiang Machinery Manufacturing Company Limited (a Taiwanese public company) have been recognised in these accounts. However, damages of Stg£10.2 million and an interim cost award of Stg£2.0 million – in total Stg£12.2 million (€18.3 million) – against Pihsiang, its Chairman and major shareholder Mr Donald Wu and his wife and Director Mrs Jenny Wu following a successful London High Court action by DMA have not yet been recognised in the accounts as the amount has not yet been received. The defendants are in breach of a London High Court order in respect of the non-payment of the damages and the interim cost award. Collection of the amount outstanding and interest accruing thereon at 8% per annum (per Court order) is being vigorously pursued. The remaining non-operating exceptional costs of €1.070 million primarily related to the termination of SerCom Solutions’ operations in Scotland. 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 On finance leases Other interest Notional interest on deferred consideration 2004 €’000 8,534 33 8,567 (10,454) - (315) (29) (1,143) (319) (12,260) - (12,260) 2003 €’000 13,358 145 13,503 (6,424) (28) (8,733) (113) (1,439) (412) (17,149) (120) (17,269) (3,693) (3,766) 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. 56 Notes to the Financial Statements for the year ended 31 March 2004 10. Profit on Ordinary Activities Before Taxation Profit on ordinary activities before taxation is stated after charging/(crediting): Auditors’ remuneration - audit fees Revenue grants Amortisation of capital grants Operating leases - land and buildings - plant and machinery - motor vehicles Depreciation - owned assets - leased assets 2004 €’000 2003 €’000 804 - (173) 4,144 138 2,174 25,926 3,475 795 (55) (285) 3,639 29 1,183 24,986 4,509 Fees paid to the auditors, PricewaterhouseCoopers, for non-audit services amounted to €1.257 million (2003: €1.028 million). 11. Taxation Current Tax Irish Corporation Tax principally at 12.5% (2003: 15.125%) Less manufacturing relief United Kingdom Corporation Tax at 30% Other overseas tax (Over)/under provision in respect of prior years Total current taxation Deferred Tax Irish at 12.5% United Kingdom at 30% Other overseas deferred tax Under/(over) provision in respect of prior years Total deferred tax Total subsidiary undertakings tax charge Associated undertakings Manufacturing relief is scheduled to expire in the year 2010. Effective tax rate Profit on ordinary activities before taxation Goodwill amortisation (note 6) Net exceptional items (note 7) Taxation as a percentage of profit before goodwill amortisation, net exceptional items and taxation The following table relates the applicable Republic of Ireland statutory tax rate to the effective tax rate of the Group: Irish Corporation Tax rate Manufacturing relief Higher rates of tax on overseas earnings (Over)/under provision in respect of prior years Other timing differences Adjustments for earnings taxed at lower rates and other 2004 €’000 5,636 (533) 7,207 339 (619) 2003 €’000 6,516 (964) 6,743 727 2,897 12,030 15,919 519 (1,158) 339 67 (233) 11,797 2,712 14,509 2004 €’000 99,607 8,282 8,185 167 (2,175) - (3,218) (5,226) 10,693 4,618 15,311 2003 €’000 97,368 7,340 4,654 116,074 109,362 12.5% 14.0% 2004 % 12.5 (0.5) 11.0 (0.6) (0.3) (9.6) 12.5 2003 % 15.1 (1.0) 9.5 3.0 (5.4) (7.2) 14.0 57 Notes to the Financial Statements for the year ended 31 March 2004 12. Minority Interests Subsidiary undertakings Associated undertakings 2004 €’000 341 430 771 2003 €’000 513 735 1,248 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 €85.853 million (2003: €48.009 million). 14. Dividends Per Ordinary Share Interim dividend of 11.75 cent per share (2003: 10.217 cent per share) Dividend attaching to shares bought-back Proposed final dividend of 20.65 cent per share (2003: 17.958 cent per share) 2004 €’000 9,823 (75) 9,748 16,824 26,572 2003 €’000 8,542 - 8,542 15,017 23,559 The reduction in the interim dividend paid during the year ended 31 March 2004 of €75,000 relates to the dividend not required to be paid on 644,077 ordinary shares bought back by the Company on 12 November 2003. 15. Earnings per Ordinary Share and Adjusted Earnings per Ordinary Share Profit after taxation and minority interests Net exceptional items (note 7) Goodwill amortisation (note 6) Adjusted profit after taxation and minority interests Basic earnings per ordinary share Basic earnings per ordinary share Net exceptional items (note 7) Goodwill amortisation (note 6) Adjusted basic earnings per ordinary share Weighted average number of shares in issue during the year (’000) Diluted earnings per ordinary share Diluted earnings per ordinary share Net exceptional items (note 7) Goodwill amortisation (note 6) Adjusted diluted earnings per ordinary share 2004 €’000 84,327 8,185 8,282 100,794 cent 101.98 9.90 10.01 2003 €’000 80,809 4,654 7,340 92,803 cent 96.66 5.57 8.77 121.89 111.00 82,690 83,603 cent 100.42 9.75 9.86 120.03 cent 95.50 5.50 8.67 109.67 Diluted weighted average number of ordinary shares (’000) 83,974 84,617 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. 58 Notes to the Financial Statements for the year ended 31 March 2004 15. Earnings per Ordinary Share and Adjusted Earnings per Ordinary Share - continued The weighted average number of ordinary shares used in calculating the diluted earnings per share for the year ended 31 March 2004 was 83.974 million (2003: 84.617 million). A reconciliation of the weighted average number of ordinary shares used for the purposes 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 2004 ’000 82,690 1,240 2003 ’000 83,603 949 44 65 83,974 84,617 The earnings used for the purpose of the diluted earnings per share calculations were €84.327 million (2003: €80.809 million) and €100.794 million (2003: €92.803 million) for the purposes of the adjusted diluted earnings per share calculation. 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) Disposals Other movements At 31 March Amortisation At 1 April Amortisation for the year (note 6) At 31 March Net Book Value At 31 March 2004 €’000 151,868 7,881 (265) (2,300) 157,184 2003 €’000 131,362 20,506 - - 151,868 19,824 7,794 27,618 13,030 6,794 19,824 129,566 132,044 59 Notes to the Financial Statements for the year ended 31 March 2004 17. Tangible Fixed Assets (a) Group Freehold & long term leasehold land & buildings €’000 Plant & machinery & cylinders €’000 Fixtures & fittings & office equipment €’000 78,177 - 4,583 ,225 (1,795) 1,086 82,276 11,917 - 1,607 - (263) ,140 13,401 68,875 66,260 243,103 ,141 12,809 ,166 (1,718) 5,956 260,457 145,562 , 2 13,245 ,131 (1,652) 3,431 160,719 99,738 97,541 44,629 17 4,860 (391) (2,225) ,720 47,610 26,002 - 6,250 (131) (1,744) ,526 30,903 16,707 18,627 Motor vehicles €’000 56,329 ,588 8,281 - (4,945) 1,517 61,770 29,325 ,7 8,299 - (3,661) ,868 34,838 26,932 27,004 Total €’000 422,238 ,746 30,533 - (10,683) 9,279 452,113 212,806 9 29,401 - (7,320) 4,965 239,861 212,252 209,432 Cost At 1 April 2003 Acquisitions (note 39) Additions Reclassifications Disposals Exchange adjustments At 31 March 2004 Depreciation At 1 April 2003 Acquisitions (note 39) Charge for year Reclassifications Disposals Exchange adjustments At 31 March 2004 Net Book Value At 31 March 2004 At 31 March 2003 The net book value of tangible fixed assets includes an amount of €7.121 million (2003: €9.972 million) in respect of assets held under finance leases. Fixtures & fittings & office equipment €’000 1,607 , 65 (384) 1,288 1,102 ,162 (351) ,913 ,375 ,505 Motor vehicles €’000 1,138 ,304 (272) 1,170 Total €’000 2,745 ,369 (656) 2,458 ,588 ,225 (251) 1,690 , 387 (602) ,562 ,608 ,550 1,475 ,983 1,055 (b) Company Cost At 1 April 2003 Additions Disposals At 31 March 2004 Depreciation At 1 April 2003 Charge for year Disposals At 31 March 2004 Net Book Value At 31 March 2004 At 31 March 2003 60 Notes to the Financial Statements for the year ended 31 March 2004 18. Financial Assets - Associated Undertakings (a) Group At 1 April Additions Disposals Retained profits less dividends Exchange adjustments Amortisation of goodwill (note 6) At 31 March The carrying value of associated undertakings is analysed as follows: Interest in net assets Share of post acquisition reserves Goodwill (net of amortisation) 2004 €’000 40,330 ,484 - 13,664 (210) (488) 53,780 2004 €’000 4,739 42,045 46,784 6,996 53,780 2003 €’000 38,976 ,112 (7,766) 11,315 (1,761) (546) 40,330 2003 €’000 4,656 28,414 33,070 7,260 40,330 At 31 March 2004 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 in associated undertakings is as follows: Cost At 1 April Additions Disposals At 31 March Amortisation At 1 April Amortisation for the year Disposals At 31 March Net Book Value At 31 March 2004 €’000 13,565 65,732 (14,007) (18,506) 46,784 2003 €’000 12,738 63,030 (17,951) (24,747) 33,070 2004 €’000 2003 €’000 9,890 224 - 10,114 2,630 488 - 3,118 10,583 - (693) 9,890 2,341 546 (257) 2,630 6,996 7,260 61 Notes to the Financial Statements for the year ended 31 March 2004 18. Financial Assets - Associated Undertakings - continued Details of the Group’s principal associated undertakings at 31 March 2004 are set out below. All of these companies are incorporated and operate in Ireland. Name and Registered Office Nature of Business % Shareholding 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 par bake bread manufacture. Millais Investments Limited, Kinsale Road, Cork, Ireland. Holding company for Allied Foods Limited, a distributor of frozen and chilled foods. * The Group holds 50% of the voting share capital of Millais Investments Limited. Other Activities Manor Park Homebuilders Limited, The Gables, Torquay Road, Foxrock, Dublin 18, Ireland. Residential homebuilding and property development. (b) Company At 31 March 19. Financial Assets - Subsidiary Undertakings Company At 1 April Additions Disposals At 31 March 50.0% 50.0% 51.5%* 49.0% 2004 €’000 2003 €’000 1,300 1,300 2004 €’000 106,653 53,116 (13,955) 145,814 2003 €’000 101,178 5,475 - 106,653 The Group’s principal operating subsidiary undertakings are shown on pages 85 to 87. All of these subsidiaries are wholly owned except Broderick Bros. Limited (88.8%), Virtus Limited (51.0%), Distrilogie SA (97.5%) where put and call options exist to acquire the remaining 2.5%, DCC Environmental Limited (94.3%) where put and call options exist to acquire the remaining 5.7% and Fannin Limited (96.6%) where put and call options exist to acquire the remaining 3.4%. The Group’s principal overseas holding company subsidiaries are DCC 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 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. 62 Notes to the Financial Statements for the year ended 31 March 2004 20. Stocks Group Raw materials and consumables Work in progress Finished goods and goods for resale 2004 €’000 3,591 1,049 105,937 110,577 2003 €’000 3,951 916 98,163 103,030 The replacement cost of stocks is not considered to be materially different from the amounts shown above. 21. Debtors Amounts falling due within one year: Trade debtors Amounts owed by subsidiary undertakings Corporation tax recoverable Deferred tax asset (note 29) Value added tax recoverable Prepayments and accrued income Other debtors Amounts falling due after more than one year: Amounts owed by subsidiary undertakings Investments Prepayments and other debtors 22. Cash and Term Deposits Cash in hand and at bank Term deposits 2004 €’000 290,084 - - 4,527 1,517 17,160 1,877 315,165 - 100 15,120 15,220 Group Company 2003 €’000 280,153 - - 3,021 5,109 14,704 1,163 304,150 - 2,370 15,130 17,500 2004 €’000 - 2,019 5 - - 1,390 - 3,414 2003 €’000 - 2,050 4 - - 1,448 - 3,502 278,233 - 9,441 287,674 268,676 - 8,279 276,955 330,385 321,650 291,088 280,457 Group Company 2004 €’000 115,198 205,418 320,616 2003 €’000 181,397 172,589 353,986 2004 €’000 - 367 367 2003 €’000 - 333 333 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. 63 Notes to the Financial Statements for the year ended 31 March 2004 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 2004 €’000 137,446 827 22,014 160,287 97,612 257,899 143,732 16,555 97,612 257,899 2003 €’000 2004 €’000 211,111 2,287 26,271 239,669 94,258 333,927 218,419 21,250 94,258 333,927 - - - - - - - - - - 2003 €’000 3,997 70 - 4,067 - 4,067 4,067 - - 4,067 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 two and five years After five years The above amounts are further analysed as follows: Wholly repayable within one year Repayable other than by instalments: - between two and five years - after five years 25. Loan Notes Group Company 2004 €’000 2003 €’000 2004 €’000 2003 €’000 137,446 90,291 7,321 235,058 211,111 - 94,258 305,369 137,446 211,111 90,291 7,321 - 94,258 235,058 305,369 - - - - - - - - 3,997 - - 3,997 3,997 - - 3,997 Group Company 2004 €’000 2003 €’000 2004 €’000 2003 €’000 The loan notes are repayable as follows: Within one year 827 2,287 - 70 The above loan notes are unsecured and €0.827 million (2003: €2.287 million) 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 in turn guaranteed by the banks. 64 Notes to the Financial Statements for the year ended 31 March 2004 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 2004 €’000 2003 €’000 5,459 5,021 5,960 10,595 16,555 5,316 15,934 21,250 22,014 26,271 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 of 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 exposures in relation 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 and currency swaps, forward foreign exchange and commodity contracts) are designed to manage risks without engaging in speculative transactions. (a) Interest Rate Risk Profile of Financial Assets and Financial Liabilities The following table analyses 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: 2004 € equivalent 2003 € equivalent Financial Assets €’000 - 67,959 Financial Liabilities €’000 - (91,964) Net €’000 - (24,005) Financial Assets €’000 - 62,534 Financial Liabilities €’000 - (11,207) Net €’000 - 51,327 67,959 (91,964) (24,005) 62,534 (11,207) 51,327 91,605 153,670 (91,605) (74,330) 245,275 (165,935) - 79,340 79,340 88,457 198,057 (88,457) (234,242) - (36,185) 286,514 (322,699) (36,185) - 7,382 7,382 - - - - 7,382 7,382 - 4,938 4,938 - (21) (21) - 4,917 4,917 320,616 (257,899) 62,717 353,986 (333,927) 20,059 € Fixed € Floating € Total Stg£ Fixed Stg£ Floating Stg£ Total US$ Fixed US$ Floating US$ Total Total 65 Notes to the Financial Statements for the year ended 31 March 2004 27. Derivative and Other Financial Instruments - continued The Group’s deferred acquisition consideration of €11.477 million (2003: €18.833 million), as stated on the balance sheet, consists of €9.859 million of € floating rate financial liabilities (2003: €18.833 million of € floating rate financial liabilities) and €1.618 million of Stg£ floating rate financial liabilities (2003: Nil) payable as follows: Within one year Between one and two years Between two and five years 2004 €’000 4,678 3,391 3,408 2003 €’000 6,946 6,507 5,380 11,477 18,833 The Group’s floating rate financial assets and financial liabilities primarily bear interest rates based on: (cid:2) 1-6 month Euribor (cid:2) 1-6 month Sterling Libor (cid:2) 0-1 month US$ Libor Details of the fixed interest rates and corresponding time periods for the Group’s fixed rate financial assets and financial liabilities, after taking interest rate swaps into account, are as follows: 2004 Weighted average interest rate % 2003 Weighted average interest rate % Fixed rate financial assets n/a 8.0% Fixed rate financial liabilities n/a 8.8% Fixed rate financial assets n/a 8.0% Fixed rate financial liabilities n/a 8.8% 2004 Weighted average period for which rate is fixed 2003 Weighted average period for which rate is fixed Fixed rate financial assets n/a 4.5 years Fixed rate financial liabilities n/a 4.5 years Fixed rate financial assets n/a 5.5 years Fixed rate financial liabilities n/a 5.5 years € Stg£ € Stg£ The maturity profile of the Group’s financial liabilities is set out in notes 24 to 26 and can be summarised as follows: 2004 €’000 143,732 5,960 100,886 7,321 257,899 2003 €’000 218,419 5,316 15,934 94,258 333,927 Within one year Between one and two years Between two and five years After five years 66 Notes to the Financial Statements for the year ended 31 March 2004 27. Derivative and Other Financial Instruments - continued (b) Gains and Losses on Hedges The Group enters into forward foreign exchange contracts to eliminate the currency exposures that arise on revenues and costs denominated in foreign currencies. The Group also enters into commodity 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 Gains €’000 6,398 (4,658) 116 1,856 2004 Losses €’000 (1,188) 1,161 (536) (563) Total €’000 5,210 (3,497) (420) 1,293 Gains €’000 1,673 (1,462) 6,187 2003 Losses €’000 (847) ,321 (662) Total €’000 ,826 (1,141) 5,525 6,398 (1,188) 5,210 Of which, expected to be recognised: - within one year - after one year 1,856 - 1,856 (563) - (563) 1,293 - 1,293 4,658 1,740 6,398 (1,161) (27) (1,188) 3,497 1,713 5,210 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 the Unsecured Notes 2008/11 or the Unsecured Notes 2014/16 as described in the accounting policy for derivative financial instruments and detailed in note 27(c). (c) Fair Value of Financial Instruments The carrying amounts and estimated fair values of the financial assets and financial liabilities of the Group are as follows: Assets: Cash and short term deposits Liabilities: Deferred acquisition consideration Short term debt Medium and long term debt Unsecured Notes due 2008/11 Derivative financial instruments: Commodity swaps Forward foreign exchange contracts Interest rate contracts 2004 2003 Carrying amount €’000 Fair value €’000 Carrying amount €’000 Fair value €’000 320,616 320,616 353,986 353,986 (11,477) (143,732) (16,555) (97,612) (11,477) (143,732) (16,555) (97,612) (18,833) (218,419) (21,250) (94,258) (18,833) (218,419) (21,250) (94,258) - - - 51,240 12 1,281 - 52,533 - - - 1,226 (560) 5,770 - 6,436 67 Notes to the Financial Statements for the year ended 31 March 2004 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: (cid:2) 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. (cid:2) 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. (cid:2) Medium and long term debt: The carrying amount reported in the balance sheet approximates to fair value because interest rates on these instruments frequently reset to short term market rates. (cid:2) 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 2004, the cross currency interest rate swap had a fair value equating to a loss of €1.855 million (2003: gain of €15.323 million) and the fair value of the Unsecured Notes 2008/11 was higher (2003: lower) than the book value by the same amount. (cid:2) Unsecured Notes due 2014/16: On 19 February 2004, the Group committed to the issuance of US$200.0 million and Stg£30.0 million senior unsecured notes in a private placement with US and UK institutional investors. Of these amounts, US$157.0 million and Stg£30.0 million are due in 2014 and US$43.0 million is due in 2016 (together the “Unsecured Notes 2014/16”). The Unsecured Notes 2014/16 were subsequently issued on 19 April 2004 with funding equivalent to €212.1 million drawn down on that date. On 19 February 2004, the Group entered into currency and interest rate swaps with the effect that (i) the dollar denominated funds were swapped to euro at a margin over six month Euribor and (ii) the sterling denominated funds were swapped to a margin over six month sterling Libor. At 31 March 2004, the currency and interest rate swaps had a fair value equating to a gain of €2.306 million and the fair value of the Unsecured Notes 2014/16 was lower by the same amount. (cid:2) Commodity and forward foreign exchange contracts: The fair value of these instruments is based on the estimated replacement cost of equivalent instruments at the balance sheet date. (cid:2) Interest rate contracts: The fair value of these instruments is based on the estimated replacement cost of equivalent instruments at the balance sheet date. The Group uses interest rate contracts to swap floating rate assets and liabilities into fixed rate assets and liabilities. The fair value of the interest rate contracts attributable to financial assets is offset by the fair value of the interest rate contracts attributable to financial liabilities. (d) Undrawn Borrowing Facilities While the Group had various bank borrowing facilities available at 31 March 2004, it had no undrawn committed bank facilities. As detailed in note 27(c), the Group issued Unsecured Notes 2014/16 on 19 April 2004 pursuant to commitments entered into on 19 February 2004. (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 2004, after taking into account the effects of forward foreign exchange contracts, the Group had no material currency exposures in relation to revenues and costs denominated in foreign currencies. (g) Treasury Policy The Group’s treasury policy and management of derivatives and financial instruments is discussed in the financial review on pages 22 to 25. 68 Notes to the Financial Statements for the year ended 31 March 2004 28. Trade and Other Creditors Amounts falling due within one year: Trade creditors Other creditors and accruals Deferred acquisition consideration PAYE and National Insurance Value added tax Capital grants (note 38) Interest payable Amounts due in respect of fixed assets Amounts due to subsidiary undertakings Amounts due to associated undertakings 29. Provisions for Liabilities and Charges (a) Group Group Company 2004 €’000 297,501 35,588 4,678 3,799 12,951 129 1,617 566 - 5,859 362,688 2003 €’000 265,905 38,308 6,946 3,039 12,161 128 1,355 2,117 - 5,038 334,997 2004 €’000 - 1,836 1,885 268 619 - - - 11,061 - 15,669 2003 €’000 72 1,423 3,924 231 110 - - - 776 - 6,536 2004 Pension Deferred and similar taxation obligations (note 31) (note 30) €’000 €’000 (1,875) (233) (346) (2,454) (4,527) 2,073 (2,454) 11 - - 11 - 11 11 Total €’000 (1,864) (233) (346) (2,443) (4,527) 2,084 (2,443) At 1 April Credited to profit and loss account Exchange adjustments and other At 31 March Disclosed as: Deferred tax asset (note 21) Provisions for liabilities and charges (b) Company At 1 April Charged to profit and loss account At 31 March 2003 Pension and similar Deferred taxation obligations (note 31) (note 30) €’000 €’000 2,773 (5,226) ,578 (1,875) (3,021) 1,146 (1,875) Total €’000 2,816 (5,258) ,578 (1,864) 43 (32) - 11 - 11 11 (3,021) 1,157 (1,864) 2004 €’000 552 275 827 2003 €’000 4 548 552 69 Notes to the Financial Statements for the year ended 31 March 2004 30. Deferred Taxation The net deferred taxation (asset)/liability 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 2004 €’000 ,361 (2,815) (2,454) 2004 €’000 4 823 827 2003 €’000 (2,158) ,283 (1,875) 2003 €’000 4 548 552 31. Pension and Similar Obligations The Group has continued to account for pensions in accordance with SSAP 24 and the relevant disclosures are given in note (a) below. Financial Reporting Standard 17 - Retirement Benefits (FRS 17) was issued by the Accounting Standards Board in November 2000 and represents a significant change in the method of accounting for pension costs compared with the previous rules as set out in SSAP 24. Full implementation of the new accounting rules prescribed by FRS 17 has been deferred by the Accounting Standards Board. The Group has elected to avail of transitional provisions outlined in the standard which, for 2004, permit the use of the SSAP 24 regulations for determining pension cost but require the additional disclosure of the impact of the adoption of FRS 17 as at 31 March 2004, as 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 €7.242 million (2003: €6.199 million) of which €4.152 million (2003: €3.409 million) was paid in respect of defined benefit 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 September 2000 to 1 April 2003. 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 €45.350 million (2003: €40.435 million). After allowing for expected future increases in earnings and pension payments, the actuarial values of the various schemes’ assets were sufficient to cover between 68% and 116% (Group weighted average cover: 81%) 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 2004, €200,000 (2003: €30,000) was included in creditors in respect of pension liabilities and €10.719 million (2003: €8.981 million) 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. 70 Notes to the Financial Statements for the year ended 31 March 2004 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 September 2000 and 1 April 2003 and updated to 31 March 2004 for Financial Reporting Standard 17 disclosure purposes by a qualified independent actuary. The main financial assumptions used in the valuations were: Irish Schemes 2004 2003 2002 Rate of increase in salaries Rate of increase in pensions in payment Discount rate Inflation assumption 4.00% 2.25% - 5.00% 5.25% 2.25% 4.00% 2.25% - 5.00% 5.50% 2.25% 4.00% 2.00% - 5.00% 6.00% 2.25% UK Schemes 2004 2003 2002 Rate of increase in salaries Rate of increase in pensions in payment Discount rate Inflation assumption 3.75% 2.75% - 4.00% 5.60% 2.75% 3.75% 2.25% - 4.00% 4.00% 2.25% - 4.00% 6.25% 2.25% 5.25% 2.25% The expected long term rates of return on the assets of the schemes were as follows: Irish Schemes Equities Bonds Property Cash UK Schemes Equities Bonds Property Cash 2004 7.50% 4.50% 5.50% 3.00% 2004 7.50% 4.50% 5.50% 3.00% 2003 2002 7.75% 4.75% 5.75% 4.00% 8.50% 5.50% 7.00% 4.00% 2003 2002 7.50% 5.00% 6.00% 4.00% 8.50% 5.50% 7.00% 4.00% 71 Notes to the Financial Statements for the year ended 31 March 2004 31. Pension and Similar Obligations - continued The market value of the assets of the schemes were as follows: RoI €’000 29,020 7,502 2,145 7,580 46,247 (58,035) (11,788) RoI €’000 19,777 7,753 2,045 6,383 35,958 (49,614) (13,656) RoI €’000 26,966 7,488 2,419 1,165 38,038 (40,317) (2,279) 2004 UK €’000 6,504 1,161 9 159 7,833 (13,036) (5,203) 2003 UK €’000 4,633 998 9 167 5,807 (10,531) (4,724) 2002 UK €’000 7,061 848 79 364 8,352 (9,237) (885) Total €’000 35,524 8,663 2,154 7,739 54,080 (71,071) (16,991) 2,124 (14,867) Total €’000 24,410 8,751 2,054 6,550 41,765 (60,145) (18,380) 2,573 (15,807) Total €’000 34,027 8,336 2,498 1,529 46,390 (49,554) (3,164) 443 (2,721) Equities Bonds Property Cash Total market value at 31 March 2004 Present value of scheme liabilities Related deferred tax asset Net pension funding deficit at 31 March 2004 Equities Bonds Property Cash Total market value at 31 March 2003 Present value of scheme liabilities Related deferred tax asset Net pension funding deficit at 31 March 2003 Equities Bonds Property Cash Total market value at 31 March 2002 Present value of scheme liabilities Related deferred tax asset Net pension funding deficit at 31 March 2002 72 Notes to the Financial Statements for the year ended 31 March 2004 31. Pension and Similar Obligations - continued If FRS 17 had been adopted in the financial statements, the Group’s shareholders’ funds and profit and loss reserve would be as follows: 2004 2003 2002 €’000 €’000 €’000 €’000 €’000 €’000 469,612 (14,867) 429,279 (15,807) 391,430 (2,721) (10,538) 1,317 (8,951) 1,119 (4,104) ,216 (9,221) (7,832) (3,888) 445,524 405,640 384,821 (10,538) 1,317 321,739 (14,867) (9,221) 297,651 281,400 (15,807) 243,565 (2,721) (8,951) 1,119 (4,104) ,216 (7,832) (3,888) 257,761 236,956 Shareholders’ Funds Group shareholders’ funds excluding pension deficit Net pension funding deficit Net pension prepayment Related deferred tax asset Net pension prepayment Group shareholders’ funds including pension deficit and pension prepayment Profit and Loss Reserve Profit and loss reserve excluding pension deficit Net pension funding deficit Net pension prepayment Related deferred tax asset Net pension prepayment Profit and loss reserve including pension deficit and pension prepayment Impact of FRS 17 on reported profit The following is a pro-forma indication of the impact on the Group profit and loss account if the Group had implemented FRS 17 in full in relation to its defined benefit pension schemes: 2004 Total net Incremental SSAP 24 pension cost under pension FRS 17 expense €’000 €’000 profit impact of FRS 17 €’000 SSAP 24 pension expense €’000 2003 Total net pension cost under FRS 17 €’000 Incremental profit impact of FRS 17 €’000 Impact on Group operating profit Pension cost/current service cost Past service cost (benefit enhancements) (4,152) - Total operating charge (4,152) (2,355) (30) (2,385) 1,797 (30) 1,767 (3,409) - (3,409) (2,160) (141) (2,301) 1,249 (141) 1,108 Impact on other finance income Expected return on pension scheme assets Interest on pension scheme liabilities Net return - - - 2,848 (3,303) (455) 2,848 (3,303) (455) - - - 3,643 (2,971) ,672 3,643 (2,971) ,672 Total net impact on reported profits (4,152) (2,840) 1,312 (3,409) (1,629) 1,780 73 Notes to the Financial Statements for the year ended 31 March 2004 31. Pension and Similar Obligations - continued Statement of total recognised gains and losses Actual return less expected return on pension scheme assets Experience gains and losses arising on the scheme liabilities Changes in assumptions underlying the present value of the scheme liabilities 2004 €’000 5,362 (3,424) (2,764) 2003 €’000 (13,394) (3,005) (5,869) Actuarial loss recognised in the statement of total recognised gains and losses (826) (22,268) Movement in deficit during the year Deficit in scheme at 1 April Movement in year: Current service cost Past service cost Contributions paid Other finance (expense)/income Actuarial loss Exchange Deficit in scheme at 31 March Experience gains and losses Difference between the expected and actual return on scheme assets Percentage of scheme assets Experience gains and losses on scheme liabilities Percentage of the present value of the scheme liabilities Total recognised in statement of total recognised gains and losses Percentage of the present value of the scheme liabilities 2004 €’000 2003 €’000 (18,380) (3,164) (2,355) (30) 5,237 (455) (826) (182) (2,160) (141) 8,275 ,672 (22,268) ,406 (16,991) (18,380) 2004 €’000 5,362 10% 2003 €’000 (13,394) (32%) (3,424) 5% (3,005) 5% (826) 1% (22,268) 37% 74 Notes to the Financial Statements for the year ended 31 March 2004 32. Called up Equity Share Capital Group and Company Authorised 152,368,568 ordinary shares of €0.25 each Issued 88,139,404 ordinary shares (including 6,667,734 ordinary shares held as Treasury Shares) of €0.25 each, fully paid (2003: 88,139,404 ordinary shares (including 4,517,005 ordinary shares held as Treasury Shares) of €0.25 each, fully paid) 90,000 ordinary shares of €0.25 each, €0.0025 paid (2003: 90,000 ordinary shares of €0.25 each, €0.0025 paid) 2004 €’000 2003 €’000 38,092 38,092 22,035 22,035 - 22,035 - 22,035 Movements during year Ordinary shares of €0.25 each At 31 March 2004 and 31 March 2003 No of shares (’000) €’000 88,229 22,035 During the year the Group purchased 2,305,875 of its own ordinary shares of €0.25 each at a total cost of €24.986 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, Group employees hold basic tier options to subscribe for 2,456,500 ordinary shares and second tier options to subscribe for 2,647,584 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 the total number of shares in issue in each case. Under the DCC Sharesave Scheme, Group employees hold options to subscribe for 528,746 ordinary shares. These options are exercisable between June 2004 and February 2007. Under the terminated DCC Employee Partly Paid Share Scheme, at 31 March 2004, 90,000 shares (2003: 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. 33. Share Premium Account Group and Company At 1 April Premium on issue of shares Share issue expenses At 31 March 2004 €’000 2003 €’000 124,444 - (6) 124,438 124,431 13 - 124,444 75 Notes to the Financial Statements for the year ended 31 March 2004 34. Other Reserves (a) Group Capital Conversion Other Reserve Fund €’000 Reserves €’000 Total €’000 At 31 March 2004 and 31 March 2003 344 1,056 1,400 (b) Company At 31 March 2004 and 31 March 2003 35. Profit and Loss (a) Group At 1 April Profit retained for the year Share buybacks (inclusive of costs) Re-issue of Treasury Shares (net of expenses) Exchange adjustments - associated undertakings Exchange adjustments - subsidiaries At 31 March Capital Conversion Reserve Fund €’000 344 2004 €’000 2003 €’000 281,400 57,755 (24,986) 1,128 (210) 6,652 243,565 57,250 - ,217 (1,761) (17,871) 321,739 281,400 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. (b) Company At 1 April Profit retained Share buybacks (inclusive of costs) Re-issue of Treasury Shares (net of expenses) At 31 March 2004 €’000 34,265 59,281 (24,986) 1,128 2003 €’000 9,598 24,450 - ,217 69,688 34,265 The cost to the Group of €67.133 million to acquire the 6,667,734 shares held in Treasury has been deducted from the Group and Company Profit and Loss Reserves. These shares were acquired at prices ranging from €9.25 to €10.80 each between 28 July 2000 and 27 November 2003. 36. Reconciliation of Movements in Equity Shareholders’ Funds Group Profit for the financial year Dividends Equity share capital issued (net of expenses) Share buybacks (inclusive of costs) Exchange adjustments - associated undertakings Exchange adjustments - subsidiaries Net movement in shareholders’ funds Opening equity shareholders’ funds Closing equity shareholders’ funds 76 2004 €’000 2003 €’000 84,327 (26,572) 57,755 1,122 (24,986) (210) 6,652 40,333 429,279 469,612 80,809 (23,559) 57,250 ,231 - (1,761) (17,871) 37,849 391,430 429,279 Notes to the Financial Statements for the year ended 31 March 2004 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 minorities Exchange and other adjustments At 31 March 38. Capital Grants Group At 1 April Received in year Acquisitions Amortisation in year Exchange and other adjustments At 31 March Disclosed as due within one year (note 28) 2004 €’000 3,632 - 341 (151) 259 4,081 2004 €’000 1,413 - - (173) 1 1,241 (129) 1,112 2003 €’000 4,010 (200) 513 (764) 73 3,632 2003 €’000 1,255 69 380 (285) (6) 1,413 (128) 1,285 39. Acquisitions of Subsidiary Undertakings The principal acquisitions completed during the year were DWS (a wine and spirits wholesaler), Savoury Foods (a foods distributor), Varcity (IT software distributor) and a number of small oil and LPG distributors. A summary of the effect of acquisitions is as follows: Tangible fixed assets Stocks Debtors Creditors Net assets acquired Goodwill Cost Satisfied by: Cash (note 41(c)) Deferred consideration The fair value of the net assets acquired equalled the book value of net assets acquired. Fair value of subsidiary undertakings at acquisition €’000 ,737 1,512 5 (1,215) , 1,039 7,881 8,920 7,302 1,618 8,920 77 Notes to the Financial Statements for the year ended 31 March 2004 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)/decrease in stocks (Increase)/decrease in debtors Increase/(decrease) in creditors Other Operating cash flow before exceptional costs Exceptional redundancy and restructuring costs Cash flow from operating activities 2004 €’000 2003 €’000 120,876 (19,201) 3,094 29,401 (173) (879) (3,905) (539) 25,050 (1,808) 151,916 (10,670) 141,246 114,332 (17,709) 1,317 29,495 (285) (1,285) 4,346 2,658 (32,744) (1,642) 98,483 (6,016) 92,467 41. Analysis of Cashflows for Headings netted in the Consolidated Cash Flow Statement 2004 €’000 2003 €’000 8,540 (11,998) (151) 13,594 (17,694) (764) (3,609) (4,864) (32,084) 3,992 - (39,166) 4,265 , 69 (28,092) (34,832) (7,302) (484) - - - (6,674) (79,834) (112) (320) 1,126 13,606 (7,949) (14,460) (73,483) 1,122 (24,986) (4,976) (61,551) ,152 ,231 - (2,248) 145,836 - (90,239) 143,819 (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 acquired) (note 39) Investment in associated undertakings (note 18) Purchase of minority interests Sale of subsidiary Sale of associated undertakings 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 buybacks Capital element of finance lease payments Loans (repaid)/drawn down Investment by minorities Net cash outflow from financing 78 Notes to the Financial Statements for the year ended 31 March 2004 42. Analysis of Movement in Net Funds Cash in hand and at bank Overdrafts Term deposits Bank loans and loan notes Unsecured Notes 2008/11 Finance leases Total 43. Capital Commitments Group Capital expenditure that has been contracted for but has not been provided for in the financial statements Capital expenditure that has been authorised by the Directors but has not yet been contracted for 44. Operating Lease Commitments At 1 April 2003 €’000 Cash Exchange Flow Movements €’000 €’000 At 31 March 2004 €’000 181,397 (64,392) 117,005 172,589 (149,006) (94,258) (26,271) (68,545) 16,226 (52,319) 27,105 61,551 - 4,976 2,346 (3,619) (1,273) 5,724 ,967 (3,354) (719) 115,198 (51,785) 63,413 205,418 (86,488) (97,612) (22,014) 20,059 41,313 1,345 62,717 2004 €’000 2003 €’000 3,732 1,545 28,758 21,680 At 31 March 2004 the Group had annual commitments under operating leases expiring as follows: 2004 Land & buildings €’000 Other €’000 Total €’000 Land & buildings €’000 2003 Other €’000 Expiring within one year Expiring between two and five years Expiring after five years 436 1,109 3,331 4,876 752 1,743 - 2,495 1,188 2,852 3,331 7,371 82 556 2,670 374 696 - 3,308 1,070 Total €’000 456 1,252 2,670 4,378 45. Contingent Liabilities (a) Bank and Other Loans The Company and certain subsidiaries have given guarantees of up to €256.036 million (2003: €331.115 million) in respect of borrowings by the Company and other Group undertakings. (b) Other Included in trade creditors is an amount of approximately €8.616 million (2003: €9.435 million) 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 Healthcare Limited, DCC SerCom Limited, Emo Oil Limited and Flogas Ireland Limited, and, as a result, these companies will be exempted from the filing provisions of Section 7, Companies (Amendment) Act, 1986. 79 Notes to the Financial Statements for the year ended 31 March 2004 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)* * Average exchange rates adjusted for the impact of profit and loss hedges. 2004 €1=Stg£ 0.666 0.647 2003 €1=Stg£ 0.690 0.593 47. Transactions with Related Parties On 9 June 2003, the Company acquired 0.3% of the share capital of SerCom Distribution Limited through the acquisition of shares from the management of that company at a cost of €1.012 million. Put and call options exist over the remaining shares exercisable in 2004. On 8 September 2003, the Company increased its shareholding in Envirotech to 80.0% by acquiring 10.0% of the issued share capital from the minority shareholders in Envirotech. The consideration amounted to €1.108 million and was satisfied in cash. The remaining 20.0% shareholding was transferred as consideration for a 5.7% shareholding in DCC Environmental Limited and is subject to put and call options up to 2005. The Company increased its shareholding in TechnoPharm to 100.0% through the acquisition of 16.7% of the issued share capital from minority shareholders on 31 October 2003. The total value of the consideration amounted to €4.507 million which was satisfied in cash. 48. Approval of Financial Statements The financial statements were approved by the Board of Directors on 14 May 2004. 80 81 82 “ DCC has the business platforms, the management capacity and the financial strength to pursue ambitious organic and acquisition growth. ” 83 Group Directory Shareholder Information Corporate Information Index 84 Group Directory Energy DCC Energy Limited DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland DCC Energy Limited Airport Road West, Sydenham, Belfast BT3 9ED, Northern Ireland Emo Oil Limited Clonminam Industrial Estate, Portlaoise, Co. Laois, Ireland Holding and divisional management company Marketing and distribution of petroleum products Marketing and distribution of petroleum products Flogas UK Limited 81 Raynsway, Syston, Leicester LE7 1PF, England Processing and distribution of liquified petroleum gas Flogas Ireland Limited Dublin Road, Drogheda, Co. Louth, Ireland Scottish Fuels Callendar Boulevarde, Callendar Business Park, Falkirk FK1 1XR, Scotland IT Distribution DCC SerCom Limited DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland Distrilogie SA 12, Rue des Frères Caudron, 78147 Vélizy Cedex, France Manufacture and distribution of liquified petroleum gas Marketing and distribution of petroleum products Holding and divisional management company Distribution of computer storage products Gem Distribution Limited St. George House, Parkway, Harlow Business Park, Harlow, Essex CM19 5QF, England Micro Peripherals Limited Shorten Brook Way, Altham Business Park, Altham, Accrington, Lancashire BB5 5YJ, England SerCom Distribution Limited DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland Sharptext Limited M50 Business Park, Ballymount Road Upper, Dublin 12, Ireland Distribution of computer software Distribution of computer products Holding and divisional management company Distribution of computer products and office equipment Tel: + 353 1 2799 400 Fax: + 353 1 2831 017 email: energy@dcc.ie www.dcc.ie Tel: + 44 28 9073 2611 Fax: + 44 28 9073 2020 email: enquiries@emooil.com www.emooil.com Tel: + 353 502 747 00 Fax: + 353 502 747 75 email: info@emo.ie www.emo.ie Tel: + 44 116 2649000 Fax: + 44 116 2649001 email: info@flogas.co.uk www.flogas.co.uk Tel: + 353 41 9831 041 Fax: + 353 41 9834 652 email: info@flogas.ie www.flogas.ie Tel: + 44 1324 408 000 Fax: + 44 1324 408 109 email: info@scottishfuels.net www.scottishfuels.com Tel: + 353 1 2799 400 Fax: + 353 1 2831 017 email: sercom@dcc.ie www.dcc.ie Tel: + 33 1 34 58 47 00 Fax: + 33 1 34 58 47 27 email: info@distrilogie.com www.distrilogie.com Tel: + 44 1279 822 800 Fax: + 44 1279 416 228 email: info@gem.co.uk www.gem.co.uk Tel: + 44 1282 776 776 Fax: + 44 1282 770 001 email: info@micro-p.com www.micro-p.com 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 4193 111 email: sharptext@sharptext.com www.sharptext.com Company Name & Head Office Address Principal Activity Tel/Fax/Email/Web 85 Group Directory - continued Healthcare CasaCare GmbH & Co KG Gewerbestraße 13, 32584 Löhne, Germany Days Medical Aids Limited Litchard Industrial Estate, Bridgend, Mid Glamorgan CF31 2AL, Wales DCC Healthcare Limited DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland EuroCaps Limited Crown Business Park, Dukestown, Tredegar, Gwent NP22 4EF, Wales Fannin Limited Blackthorn Rd., Sandyford Industrial Estate, Foxrock, Dublin 18, Ireland TechnoPharm Limited Pharmapark, Chapelizod, Dublin 20, Ireland Manufacture and distribution of rehabilitation and mobility products Manufacture and distribution of rehabilitation and mobility products Holding and divisional management company Contract manufacture of soft gel capsule nutraceuticals Distribution of medical and scientific equipment and consumables Distribution of pharmaceutical products and medical devices Thompson and Capper Limited 9-12 Hardwick Road, Astmoor Industrial Estate, Runcorn, Cheshire WA7 1PH, England Contract manufacture and packing of tablet and hard gel capsule nutraceuticals Virtus Limited Adamstown, Lucan, Co. Dublin, Ireland Manufacture and distribution of pneumatic healthcare appliances Tel: + 49 5731 786 50 Fax: + 49 5731 786 520 email: sales@casacare.de www.casacare.de Tel: + 44 1656 657 495 Fax: + 44 1656 767 178 email: sales@daysmedical.com www.daysmedical.com Tel: + 353 1 2799 400 Fax: + 353 1 2831 017 email: healthcare@dcc.ie www.dcc.ie Tel: + 44 1495 308 900 Fax: + 44 1495 308 990 email: enquiries@softgels.co.uk www.softgels.co.uk 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 1928 573734 Fax: +44 1928 580694 email: enquiries@tablets2buy.com www.tablets2buy.com Tel: + 353 1 628 0571 Fax: + 353 1 628 0572 email: info@virtus.ie www.virtus.ie Company Name & Head Office Address Principal Activity Tel/Fax/Email/Web 86 Group Directory - continued Manufacture, distribution and service of food equipment Tel: + 353 1 4291 500 Fax: + 353 1 4509 570 email: info@broderickbros.ie Food and Beverage Broderick Bros. Limited Cloverhill Industrial Estate, Clondalkin, Dublin 22, Ireland DCC Foods Limited DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland Kelkin Limited Unit 1, Crosslands Industrial Park, Ballymount Cross, Dublin 12, Ireland Robt. Roberts Limited 79 Broomhill Road, Tallaght, Dublin 24, Ireland Environmental Atlas Environmental Ireland Limited Clonminam Industrial Estate, Portlaoise, Co. Laois, Ireland DCC Environmental Limited DCC House, Stillorgan, Blackrock, Co. Dublin, Ireland Environmental Technology Manufacturing Limited Ballycurreen Industrial Estate, Kinsale Road, Cork, Ireland Holding and divisional management company Marketing and distribution of branded healthfood products Distribution of food and beverages Waste treatment / remediation and oil reprocessing Holding and divisional management company Manufacture and distribution of water treatment chemicals Tel: + 353 1 2799 400 Fax: + 353 1 2831 017 email: foods@dcc.ie www.dcc.ie Tel: + 353 1 4600 400 Fax: + 353 1 4600 411 email: info@kelkin.ie www.kelkin.ie Tel: + 353 1 4047 300 Fax: + 353 1 4599 369 email: info@robt-roberts.ie www.robt-roberts.ie Tel: + 353 502 786 00 Fax: + 353 502 747 57 email: info@atlasireland.ie www.atlasireland.ie Tel: + 353 1 2799 400 Fax: + 353 1 2831 017 email: environmental@dcc.ie www.dcc.ie Tel + 353 21 496 2554 Fax: + 353 21 496 2345 email: info@envirotech.ie www.envirotech.ie Tel: + 353 61 707 400 Fax: + 353 61 707 401 email: info@ses-shannon.ie Shannon Environmental Services Limited Waste treatment Smithstown Industrial Estate, Shannon, Co. Clare, Ireland Supply Chain Management SerCom Solutions Limited Cloverhill Industrial Estate, Clondalkin, Dublin 22, Ireland Provision of supply chain services Tel: + 353 1 405 6500 Fax: + 353 1 405 6555 email:sales@sercomsolutions.com www.sercomsolutions.com Company Name & Head Office Address Principal Activity Tel/Fax/Email/Web 87 Shareholder Information Shareholder Analysis at 14 May 2004 Range of shares held Over 250,000 100,001 – 250,000 10,001 – 100,000 Less than 10,000 Total Number of shares* % of shares 81.4 5.8 7.4 1 5.4 66,390,634 4,725,247 6,019,960 4,425,829 Number of accounts % of accounts 1.3 43 0.9 30 71 5.1 92.7 3,119 81,561,670 100.0 3,363 100.0 * Excludes 6,667,734 shares held as Treasury Shares. Share Price Data – closing prices (€) Year ended 31 March 2004 Year ended 31 March 2003 High 12.25 13.25 Low 9.79 9.10 31 March 12.15 9.75 The market capitalisation of DCC plc at 31 March 2004 was €991 million (2003: €816 million) and at 14 May 2004 was €1,011 million (€12.40 per share). 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. ISIN: IE0002424939 ISE Xetra: DCC Bloomberg: DCC ID, DCC LN Reuters: DCC.I, DCC.L Website - www.dcc.ie DCC’s website provides comprehensive corporate and financial information to the investment community and other interested parties. It incorporates a variety of useful features which enable users to access, analyse and download current and archived financial data and annual reports, register for news and other announcements and view interactive audio and slideshow investor presentations. Investor Relations For investor enquiries please contact: Kieran Conlon, Investor Relations Manager, DCC plc, DCC House, Brewery Road, Stillorgan, Blackrock, Co Dublin, Ireland. + 353 1 2799 400 Tel: + 353 1 2799 418 Fax: investorrelations@dcc.ie email: 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: Fax: email: web.queries@computershare.ie + 353 1 216 3100 + 353 1 216 3151 Annual General Meeting The Annual General Meeting will be held at The Four Seasons Hotel, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland on Thursday 8 July 2004 at 11.00 a.m. The Notice of Meeting together with an explanatory letter from the Chairman and a proxy card accompany this Report. Financial Calendar Preliminary results announced 17 May 2004 Ex-dividend date for the final dividend 26 May 2004 Record date for the final dividend 28 May 2004 Annual Report posted 3 June 2004 Annual General Meeting 8 July 2004 Proposed payment date for final dividend 14 July 2004 Interim results announced early November 2004 Payment date for the interim dividend early December 2004 Amalgamation of Accounts Shareholders who receive duplicate sets of Company mailings owing to multiple accounts in their names should write to the Company’s Registrar to have their accounts amalgamated. Dividends Shareholders are offered the option of having dividends paid in 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 – General 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 www.revenue.ie/pdf/dwtinfv3.pdf Declaration forms for claiming an exemption are available from the Company’s Registrar. 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. 88 Corporate Information Solicitors Auditors Registrar William Fry Solicitors Fitzwilton House Wilton Place Dublin 2 Ireland PricewaterhouseCoopers Chartered Accountants & Registered Auditors George’s Quay Dublin 2 Ireland Computershare Investor Services (Ireland) Limited Heron House Corrig Road Sandyford Industrial Estate Dublin 18 Ireland Stockbrokers Registered and Head Office Bankers DCC House Stillorgan Blackrock Co. Dublin Ireland Davy Stockbrokers 49 Dawson Street Dublin 2 Ireland Cazenove 20 Moorgate London EC2R 6DA England ABN AMRO Bank Allied Irish Banks Bank of Ireland BNP Paribas Deutsche Bank IIB Bank KBC Bank Royal Bank of Scotland Ulster Bank 89 Index Accounting Convention Accounting Policies Acquisitions and Development Acquisitions of Subsidiary Undertakings Amalgamation of Accounts Annual General Meeting Approval of Financial Statements Associated Undertakings Audit Committee Auditors’ Report Bank and Other Debt Board Changes Board Committees Capital Commitments Capital Grants Cash and Term Deposits Chairman’s Statement Chief Executive’s Review Commodity Price Risk Management Company Balance Sheet Consolidated Balance Sheet Consolidated Cash Flow Statement Consolidated Profit and Loss Account Contingent Liabilities Corporate Governance Corporate Information Corporate Social Responsibility Cost of Sales and Net Operating Costs Creditors, Trade and Other Credit Risk Management CREST Currency Risk Management Page 46 46 9 77 88 88 80 61 36 44 64 9 35 79 77 63 8 10 25 51 50 52 48 79 34 89 28 55 69 25 88 25 90 Debtors Deferred Tax Depreciation Derivative Financial Instruments Directors’ and Company Secretary’s Interests Directors of the Company Directors’ Remuneration Directors’ Report Directors’ Share Options Dividend Cover Dividends Dividend Withholding Tax Earnings Per Share Employee Information Employees and Management Environment, health and safety Events Since the Year End Exceptional Items Page 63 57, 70 60 65 42 2 39 37 41 24 58, 88 88 58 55 31 30 38 56 Fair Value of Financial Instruments Finance Leases Financial Assets Financial Calendar Financial Review Financial Snapshot Five Year Summary and Key Ratios Fixed Assets Forward Contracts - currency and commodity 67 65 61 88 22 Inside Back Cover Inside Back Cover 60 67 Index - continued Going Concern Goodwill Group at a Glance Group Directory Health and Safety Page 36 56, 59 Inside Front Cover 85 Interest Payable & Similar Charges Interest Rate Risk Management Internal Control Investor Relations Minority Interests Net Cash Note of Historical Cost Profits and Losses Notes to the Financial Statements Operating Cash Flow Operating Lease Commitments Operating Reviews Energy IT Distribution Healthcare Food and Beverage Environmental Other 38 56 25, 65 36 88 58, 77 79 49 53 78 79 17 17 18 18 19 19 Pension and Similar Obligations Pensions - Directors Private Placement Provisions for Liabilities and Charges 70 39 38, 64 69 Reconciliation of Movements in Equity Shareholders’ Funds Reconciliation of Net Cash Flow to Movement in Net Cash Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities Registrar Related Party Transactions Remuneration Committee Report Reporting Currency Reserves Return on Capital Employed (ROCE) Page 76 52 78 88 80 39 80 76 24 53 Segmental Information Senior Group and Subsidiary Company 4, 5 Management 8 Share Buybacks 75 Share Capital 88 Share Listings 75 Share Premium 88 Share Price Data 88 Shareholder Information 76 Shareholders’ Funds Statement of Directors’ Responsibilities 43 Statement of Total Recognised Gains and Losses 49 63 Stocks 62 Subsidiary Undertakings 38 Substantial Shareholdings Taxation Treasury Policy and Management Undrawn Bank Borrowing Facilities Website 57 25 68 88 91 Operating profit from continuing activities (€’m) 50 40 30 20 10 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 15.6% ENERGY 35 30 25 20 15 10 5 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 29.1% IT DISTRIBUTION 20 15 10 5 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 23.1% HEALTHCARE 12 10 8 6 4 2 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 15.5% FOOD AND BEVERAGE 6 5 4 3 2 1 0 99 00 01 02 03 04 5 Year CAGR 126.3% ENVIRONMENTAL 15 12 9 6 3 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 9.0% OTHER (HOMEBUILDING AND SUPPLY CHAIN MANAGEMENT) 2004 3 2 1 Geographical analysis of operating profit from continuing activities: 1 UK 2 Rep of Ireland 3 Other 2004 50% 47% 3% Market sector analysis of operating profit from continuing activities Compound annual growth rate: 5 years 10 years Continuing Reported 16.3% 13.7% 17.8% 16.1% Growth Reported Constant currency* +8.4% -3.1% +19.1% -7.5% +56.7% +16.1% +3.8% +21.2% -7.9% +63.7% 2004 €’m 45.8 31.3 13.6 10.9 5.0 14.3 +40.5% +40.5% Energy IT Distribution Healthcare Food and Beverage Environmental Other (Homebuilding and Supply Chain Management) Total 120.9 +8.8% +14.1% * All constant currency figures quoted in this report are based on retranslating current year figures at prior year translation rates Adjusted earnings per share Compound annual growth rate: 5 years 10 years 16.3% 17.3% €'m 120 100 80 60 40 20 0 cent 120 100 80 60 40 20 0 Operating profit from continuing activities (€’m) 50 40 30 20 10 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 15.6% ENERGY 35 30 25 20 15 10 5 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 29.1% IT DISTRIBUTION 20 15 10 5 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 23.1% HEALTHCARE 12 10 8 6 4 2 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 15.5% FOOD AND BEVERAGE 6 5 4 3 2 1 0 99 00 01 02 03 04 5 Year CAGR 126.3% ENVIRONMENTAL 15 12 9 6 3 0 95 96 97 98 99 00 01 02 03 04 10 Year CAGR 9.0% OTHER (HOMEBUILDING AND SUPPLY CHAIN MANAGEMENT) 2004 3 2 1 Geographical analysis of operating profit from continuing activities: 1 UK 2 Rep of Ireland 3 Other 2004 50% 47% 3% Market sector analysis of operating profit from continuing activities Compound annual growth rate: 5 years 10 years Continuing Reported 16.3% 13.7% 17.8% 16.1% Growth Reported Constant currency* +8.4% -3.1% +19.1% -7.5% +56.7% +16.1% +3.8% +21.2% -7.9% +63.7% 2004 €’m 45.8 31.3 13.6 10.9 5.0 14.3 +40.5% +40.5% Energy IT Distribution Healthcare Food and Beverage Environmental Other (Homebuilding and Supply Chain Management) Total 120.9 +8.8% +14.1% * All constant currency figures quoted in this report are based on retranslating current year figures at prior year translation rates Adjusted earnings per share Compound annual growth rate: 5 years 10 years 16.3% 17.3% €'m 120 100 80 60 40 20 0 cent 120 100 80 60 40 20 0 Financial Snapshot 5 Year Summary Profit & Loss Account Year ended 31 March Turnover Operating profit before operating exceptional items Operating exceptional items Operating profit Net interest payable Profit on ordinary activities before goodwill amortisation, non-operating net exceptional items and tax Goodwill amortisation Non-operating net exceptional items Profit before taxation Taxation Minority interests Profit attributable to Group shareholders Earnings per share - Basic (cent) - Basic adjusted (cent) Dividend per share (cent) Dividend cover (times) Interest cover (times) Consolidated Balance Sheet As at 31 March Tangible fixed assets Associated undertakings Goodwill Net current assets Net cash Shareholders' funds Minority interests Other long term creditors/provisions Movement in working capital Capital expenditure Acquisitions Development expenditure Operating cash flow 2000 €’m 2001 €’m 2002 €’m 2003 €’m 2004 €’m 1,527.0 1,870.1 2,048.9 2,272.4 2,198.0 77.7 - 77.7 (6.4) 71.3 (3.5) 71.4 139.2 (18.7) (0.7) 119.8 137.39 68.80 17.60 3.9 12.1 2000 €’m 123.1 34.6 75.6 233.3 30.6 89.2 353.1 329.1 3.3 20.7 353.1 (15.8) 29.0 39.1 52.3 96.3 91.7 - 91.7 (4.4) 87.3 (4.9) - 82.4 (13.1) (1.2) 68.1 78.98 84.69 21.12 4.0 20.8 2001 €’m 135.2 38.5 84.5 258.2 31.1 83.2 372.5 353.7 3.5 15.3 372.5 19.9 34.1 20.2 74.2 83.4 102.7 - 102.7 (5.0) 97.7 (5.7) (1.1) 90.9 (13.7) (0.9) 76.3 90.26 98.30 24.50 4.0 20.5 2002 €’m 159.2 39.0 118.3 316.5 38.7 63.1 418.3 391.4 4.0 22.9 418.3 (6.9) 37.3 65.6 96.0 120.3 114.3 (2.9) 111.4 (5.0) 106.4 (7.3) (1.7) 97.4 (15.3) (1.3) 80.8 120.9 (2.3) 118.6 (4.8) 113.8 (8.3) (5.9) 99.6 (14.5) (0.8) 84.3 96.66 111.00 101.98 121.89 28.18 32.40 3.9 23.0 2003 €’m 209.4 40.3 132.1 381.8 45.3 20.1 447.2 429.3 3.6 14.3 447.2 25.7 40.7 80.3 146.7 98.5 3.8 25.2 2004 €’m 212.3 53.8 129.6 395.7 25.3 62.7 483.7 469.6 4.1 10.0 483.7 (20.6) 30.5 9.2 19.1 151.9 Return on tangible capital employed (%) Return on total capital employed (%) 40.6% 20.9% 48.1% 23.7% 46.3% 23.1% 42.2% 22.0% 39.8% 21.3% Average number of employees 2,933 3,056 3,361 3,685 3,768 4 0 0 2 s t n u o c c A & t r o p e R l a u n n A C C D e i . g o d d e r . w w w : n g i s e D . t n e t n o c d e l c y c e r r e m u s n o c - e r p % 0 3 - 5 1 i i g n n a t n o c r e p a p e e r f e n i r o h c l n o d e t n i r p s i t r o p e r s i h T e i . c c d . w w w e i . c c d @ o f n i : l i a m E 7 1 0 1 3 8 2 1 3 5 3 + : x a F 0 0 4 9 9 7 2 1 3 5 3 + : l e T . d n a l e r I , n i l b u D . o C , k c o r k c a B l , n a g r o l l i t S , d a o R y r e w e r B , e s u o H C C D c l P C C D 

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