Annual Report and Accounts 2014
DCC is an international sales, marketing, distribution and
business support services group, organised and managed
across five divisions with revenues of circa £11 billion and
employing over 10,000 people in 13 countries.
DCC’s objective is to build a growing, sustainable and cash
generative business which consistently provides returns on
capital employed significantly ahead of its cost of capital.
The Group is headquartered in Dublin, Ireland and is listed
under Support Services on the London Stock Exchange.
Contents
Strategic Report
Overview
02 2014 Highlights
04 Who We Are
06 Chairman’s Message
Strategy
08 Strategy
10 Business Model
12 Chief Executive’s Review
16 Risk Report
Performance
20 Group KPIs
22 Energy
30 Technology
38 Healthcare
46 Environmental
52 Food & Beverage
58 Financial Review
65 Sustainability Report
74 Senior Management
Governance
77 Chairman’s Introduction
78 Board of Directors
80 Corporate Governance Statement
85 Audit Committee Report
89 Remuneration Report
109 Nomination and Governance
Committee Report
112 Report of the Directors
Financial Statements & Notes
116 Statement of Directors’
Responsibilities
117 Report of the Independent Auditors
120 Financial Statements
Supplementary Information
202 Group Directory
207 Shareholder Information
210 Corporate Information
211 Non-GAAP Information
212 Five Year Review
213 Index
View this report online
www.dcc.annualreport14.com
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DCC Annual Report and Accounts 2014
01
Strategic
Report
Contents
Overview
02 2014 Highlights
04 Who We Are
06 Chairman’s Message
Strategy
08 Strategy
10 Business Model
12 Chief Executive’s Review
16 Risk Report
Performance
20 Group KPIs
22 Energy
30 Technology
38 Healthcare
46 Environmental
52 Food & Beverage
58 Financial Review
65 Sustainability Report
74 Senior Management
In Brief
An overview of our Group
and highlights of performance
in 2014.
Page 02
Chairman’s Message
Michael Buckley discusses
performance, strategic
developments and Board
activity.
Page 06
Strategy
A description of the Group’s
strategy and business model.
Page 08
Chief Executive's
Review
Tommy Breen comments on
performance in the year and
the outlook for 2015.
Page 12
How We Performed
A commentary on our progress
together with detailed analysis
of divisional performance.
Page 20
02
Strategic Report - Overview
2014 Highlights
• Revenue increased by 6.2% to £11.2 billion, driven by acquisitions,
particularly in DCC Energy, and excellent organic growth in DCC
Technology (formerly DCC SerCom).
• Operating profit increased by 11.5% to £208 million with profit
growth achieved across each of DCC’s five divisions.
• Adjusted earnings per share up 11.7% to 191.20 pence.
• Proposed 10% increase in the final dividend to give a total full
year dividend of 76.85 pence, an increase of 10% over the prior
year, representing the 20th consecutive year of dividend growth as
a listed company.
• Record cash generation:
- Operating cash flow of £349 million (£265 million in the prior year)
- Free cash flow (before interest and tax payments) of £278 million
(£207 million in the prior year)
- 2.8 day improvement in working capital days to a record low
level, primarily driven by a reduction in debtor days.
• Increase in return on capital employed to 16.3%, driven by profit
growth and excellent working capital management.
• Committed acquisition expenditure of £84 million, including the
recently completed acquisition of Qstar, a leading network of
unmanned petrol stations in Sweden.
• Committed US Private Placement market funding, arranged
in March 2014, of $750 million (£451 million). This committed
funding, together with available cash resources and committed
bank term facilities, ensures that the Group retains significant
financial capacity to support future growth.
• DCC anticipates continuing growth and development in the year to
31 March 2015.
Financial Highlights
Revenue
Operating profit*
03
£11,231.7m
UP 6.2%
2014
2013
£208.4m
UP 11.5%
2014
2013
Adjusted earnings per share*
Dividend per share
191.20 pence
76.85 pence
UP 11.7%
2014
2013
UP 10.0%
2014
2013
Operating cash flow
Return on capital employed
£348.7m
2013: £264.6m
2014
2013
16.3%
2013: 15.6%
2014
2013
* all references to ‘operating profit’ and ‘adjusted earnings per share’ included in the Strategic Report are stated excluding net exceptionals and amortisation of intangible assets
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 04
Strategic Report - Overview
Who We Are
DCC is an international sales, marketing, distribution and
business support services group. The Group is organised and
managed across five divisions and employs over 10,000 people
in 13 countries.
Group revenue by division
Group operating profit by division
73%
DCC Energy
20%
DCC Technology
4%
DCC Healthcare
DCC Environmental
1%
DCC Food & Beverage 2%
53%
DCC Energy
23%
DCC Technology
14%
DCC Healthcare
DCC Environmental
6%
DCC Food & Beverage 4%
Division
DCC Energy
DCC Technology
DCC Healthcare
DCC Environmental
DCC Food & Beverage
Description
Sales, marketing and distribution of oil
and liquefied petroleum gas.
Sales, marketing and distribution of
technology products.
Sales, marketing and distribution of
Provider of a broad range of recycling,
Sales, marketing and distribution of
pharmaceuticals and medical devices
waste management and resource
food and beverage products.
and outsourced services to brand owners
recovery services.
in the health and beauty sector.
Financial highlights
Revenue
£8,243.7m
Operating profit
£110.5m
Revenue
£2,264.0m
Operating profit
£48.1m
Revenue
£406.5m
Operating profit
£30.4m
Revenue
£130.6m
Operating profit
£11.7m
Revenue
£186.9m
Operating profit
£7.7m
Principal operating locations
Britain, Ireland, Sweden, Denmark,
Austria, Norway, the Netherlands,
Belgium and Germany.
Britain, Ireland, France, the Netherlands,
Belgium, Sweden, Poland, China and the
USA.
More information
Britain, Ireland and Sweden.
Britain and Ireland.
Britain and Ireland.
see pages 22 to 29
see pages 30 to 37
see pages 38 to 45
see pages 46 to 51
see pages 52 to 57
05
Principal operating locations
Division
DCC Energy
DCC Technology
DCC Healthcare
DCC Environmental
DCC Food & Beverage
Description
Sales, marketing and distribution of oil
Sales, marketing and distribution of
and liquefied petroleum gas.
technology products.
Sales, marketing and distribution of
pharmaceuticals and medical devices
and outsourced services to brand owners
in the health and beauty sector.
Provider of a broad range of recycling,
waste management and resource
recovery services.
Sales, marketing and distribution of
food and beverage products.
Financial highlights
Revenue
£8,243.7m
Operating profit
£110.5m
Revenue
£2,264.0m
Operating profit
£48.1m
Revenue
£406.5m
Operating profit
£30.4m
Revenue
£130.6m
Operating profit
£11.7m
Revenue
£186.9m
Operating profit
£7.7m
Principal operating locations
Britain, Ireland, Sweden, Denmark,
Britain, Ireland, France, the Netherlands,
Britain, Ireland and Sweden.
Britain and Ireland.
Britain and Ireland.
Austria, Norway, the Netherlands,
Belgium, Sweden, Poland, China and the
Belgium and Germany.
USA.
More information
see pages 22 to 29
see pages 30 to 37
see pages 38 to 45
see pages 46 to 51
see pages 52 to 57
USAChina1. Austria2. Belgium3. Britain4. Denmark5. France6. Germany7. Ireland8. Norway9. Poland10. Sweden11. The Netherlands1234567891011DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 06
Strategic Report - Overview
Chairman’s Message
STRONG RESULTS AND
STRATEGIC DEVELOPMENTS
Michael Buckley reviews DCC’s results, highlights strategic
developments, outlines key issues the Board has focussed upon,
summarises a busy year of investor contacts and shares his
outlook for the year to March 2015.
Dear Shareholder
Good Results and Strong Financial
Position to Support Further Growth
I am glad to be able to report to you that
the year ended 31 March 2014 was again
one of growth and development for DCC.
Business conditions in the countries
where we operate improved, even if
only slowly. Operating results were
strong, with profits up in each division,
and overall by 11.5%, notwithstanding
the impact on DCC Energy of winter
temperatures well above the ten year
average. Adjusted earnings per share
were up by 11.7%.
Profit growth came from a combination
of successful integration of businesses
we had acquired in previous years, cost
efficiency initiatives and some good
organic growth. Our return on average
capital employed was 16.3%, so once
again very substantive shareholder
value was added in the year. Our
conversion of operating profits to free
cash flow, always a DCC strong point,
was exceptional at 133%. Year end debt,
at £86.3 million, was only 9.1% of total
equity. DCC’s financial position remains
very strong, well funded and highly liquid.
My warm thanks to all 10,202 DCC
colleagues for those results. In his review
Tommy Breen, our Chief Executive, gives
a more detailed account of the results
and sets them in the context of DCC’s
performance over the 20 years since it
was first listed.
Operating results
were strong, with profits up
in each division, and overall
by 11.5%, notwithstanding
the impact on DCC Energy
of winter temperatures well
above the ten year average.
Adjusted earnings per share
were up by 11.7%
Dividend Increase
The Board is recommending a final
dividend of 50.73 pence per share. This
brings the total dividend to 76.85 pence
per share for the year ended 31 March
2014, up 10% on the previous year. We
have now had 20 years of uninterrupted
dividend growth since DCC first became
a publicly listed company.
Strategically Important Developments
Shareholders will already be aware that
we changed our listing arrangements
during the year. As a result, DCC became
part of the FTSE All Share Index and of
the FTSE 250 Index with effect from 24
June 2013. This important milestone
in the life of the Company has brought
the benefits we expected in terms of
significantly wider analyst coverage of
DCC and therefore a broader platform
for communicating with existing and
potential new shareholders. We are also
presenting our results in sterling for the
first time this year. The Group remains
headquartered and tax resident in the
Republic of Ireland.
After a record year in terms of
acquisition spend last year, the overall
acquisition spend was not particularly
high in the year under review. However
our acquisition of Qstar, a Swedish
network of 307 unmanned petrol stations
was important as a first step in delivering
on our intention to enter the unmanned
petrol station market and more broadly
to continue to expand significantly our
transport fuels business, both in the UK
and more widely.
DCC’s core business development
strategy has not changed. We are going
about building an international sales,
marketing, distribution and support
services business of scale that is
07
Shareholdings by Geography
North America
UK
Europe/Asia
Ireland
Retail1
32.2%
30.9%
5.2%
5.8%
25.9%
1. Retail includes private shareholders,
management and broker holdings
sustainable, cash generative, and which
provides our shareholders, year on
year, with returns on capital employed
substantially ahead of our cost of
capital. Our principal growth intentions
are focussed on three businesses that
already produce 90% of our profits – Oil
and LPG, Technology and Healthcare.
We continue to pursue development
and consolidation opportunities in each
of those areas, as well as working to
strengthen the partnership relationships
we have with our local, national and
global suppliers.
The Board and What It Has Focussed On
The Board appointed Dr. Pamela Kirby
as a non-executive Director, with effect
from 3 September 2013. Dr. Kirby has
extensive experience of doing business
at senior management and board levels
in the international pharmaceutical
and medical devices sectors, and also
brings FTSE 100 board experience to
our discussions. Our non-executive
Directors, as a group, have deep domain
knowledge relevant to DCC’s main
business sectors, as well as broad
experience in building businesses
internationally and in regulatory,
accounting and risk management
developments. They have lived in and are
experienced in doing businesses in many
jurisdictions. From a gender diversity
point of view, I am happy to say that 27%
of the Board are women. This benefits
greatly the quality of Board discussions
and, incidentally, already exceeds the
corporate governance targets set for
FTSE 100 companies for 2015. It is very
significantly ahead of the position in
FTSE 250 companies generally.
During the year, the Board devoted
considerable time to strategic
discussions, including carrying out
a number of ‘deep dives’ both into
individual businesses and into the long
term risks and opportunities associated
with possible significant development
opportunities. Organisational and
management talent development,
while protecting DCC’s distinct culture,
have also been big themes for Board
discussion.
DCC has grown very considerably over
the past ten years - operating profits are
now two and a half times what they were
ten years ago. Our aim is to ensure that
our future growth ambitions and ability to
reap the benefits of economies of scale
that come with having built a number of
leading market positions continue to be
well supported by capable management
teams that are imbued with that culture.
The corporate personality and culture
of DCC, and the common’language’
of how business is consistently done
across the Group, is a distinctive mix.
There is a very specific framework of
financial disciplines and an associated
framework of management practices,
both consistently applied. An emphasis
on building for the long run, and on
fostering an entrepreneurial and
ownership mind-set is backed up by
an intense and consistent rigour in
dealing with issues and making fact-
based decisions with a relentless focus
on value, whether in commercial or
acquisition negotiations.
Investor Communications
DCC has always had a very active
and consistent approach to investor
communications. Our investor relations
programme typically involves direct
conversations with 40% by value of our
shareholders several times a year, as
well as with significant long term debt
providers. In addition, in the year under
review, the transfer of our premium
listing to London involved an intense
special programme of investor activity.
A key part of this was an Investor Day
held in the London Stock Exchange on
6 June 2013, which was attended by
all executive Directors and the senior
management team, as well as by myself
and other non-executive Directors. In
addition, the recently completed and
very successful long term debt private
placement involved extensive road shows
to our long term debt investors in the US,
UK and Europe. Finally, Leslie Van de
Walle, as Chairman of the Remuneration
Committee, and I have recently engaged
in a wide-ranging consultation, covering
over 33% by value of our shareholder
base, as well as key institutional
shareholder bodies and proxy voting
agencies, in relation to the changes we
are proposing at the forthcoming Annual
General Meeting in DCC’s Long Term
Incentive Plan. I strongly believe that the
changes proposed are in the interests of
all shareholders.
Outlook
Continuing, if moderate, improvement in
DCC’s business environment seems to
be the most likely scenario for the year
ahead. Everyone here is clear on what we
plan to achieve by way of further growth,
and development on a 12 month view,
over the medium term and strategically.
Thank you for your support.
Michael Buckley
Chairman
20 May 2014
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 08
Strategic Report - Strategy
Strategy
Our Objective
To build a growing, sustainable and cash generative business
which consistently provides returns on capital employed
significantly ahead of its cost of capital.
Strategic
priority
Description
How we
did in 2014
Creating and sustaining leading
positions in each of the markets
in which we operate.
Continuously benchmarking and
improving the efficiency of our
operating model in each of our
businesses.
Carefully extending our
Maintaining financial strength
Attracting and empowering
geographic footprint, thereby
through a disciplined approach to
entrepreneurial leadership
providing new horizons for
balance sheet management.
teams, capable of delivering
growth.
outstanding performance,
through the deployment of a
devolved management structure.
DCC aims to be the number 1 or 2
operator in each of its markets. This is
achieved through a consistent focus on
increasing market shares organically
and via value enhancing acquisitions.
DCC has a long and successful track
record of bolt-on acquisitions which have
strengthened our market positions and
generated attractive returns on capital
invested.
DCC strives to be the most efficient
business in each of the sectors in which it
operates. We continuously benchmark our
businesses against those specific KPIs
which we judge are important indicators
in our drive for superior returns on capital
in the short, medium and longer term.
The Group continued to either maintain
or increase market shares in the primary
markets within which it operates. This
was achieved through good organic
growth, contributions from acquisitions
in the current year and the successful
integration of acquisitions completed in
prior years.
During the year the Group successfully
completed the integration of acquisitions
made in prior years, the most significant
of which were the integration of the
former Total and BP LPG businesses in
DCC Energy and Kent Pharma in DCC
Healthcare.
Following the rebranding of all the
businesses under the ‘Exertis’ brand,
DCC Technology is planning to further
integrate its operations and service
offering including an upgrade of its
logistics and IT infrastructure.
The Group successfully implemented a
number of cost efficiency initiatives during
the year including DCC Energy’s logistics
efficiency programme.
In the year ended 31 March 2014, 76%
In pursuing our strategic objective,
DCC strives to attract, motivate and
of DCC’s operating profits were derived
we will only do so in the context of
empower entrepreneurial leadership
from the UK, 13% from Continental
maintaining relatively low levels of
teams across the Group. Given the
Europe and the rest of the world and 11%
financial risk in the Group. We believe
diverse market sectors which we operate
from Ireland. In recent years we have
that this not only provides the greatest
in, we believe that providing appropriate
been expanding certain of the Group’s
likelihood of generating value for
short and long term incentives to these
businesses into Continental European
shareholders in the long term but also
leaders, based on the performance of
markets which we believe will provide
leaves the Group best placed to react
the businesses which they manage,
good opportunity for future growth. We
quickly to commercial opportunities as
is the best way to drive returns for
will look to further extend our business
they arise.
in these markets and to enter new
geographic markets in the coming years.
shareholders. Very often post-acquisition,
we retain entrepreneurial managers
who have sold their businesses to DCC
and through our devolved management
structure we ensure they are empowered
to continue to develop those businesses.
Following a record year of acquisition
The Group’s financial position remains
Some of the key acquisitions completed
expenditure in FY13, the current year saw
very strong, well funded and highly liquid.
during the year saw the Group retain and
more modest expenditure. DCC Energy
The Group ended the current year with a
incentivise key management teams who
completed its first significant investment
strengthened net debt:EBITDA ratio of 0.3
are capable of contributing to the further
into the transport fuels market in Europe
times (2013: 0.7 times).
success of the Group.
through the acquisition of Qstar, the fifth
largest petrol retailer in Sweden. DCC
In March 2014 the Group arranged
In addition, the Group continues to invest
Energy also completed the acquisition
committed US Private Placement market
in its talent programme and processes
of Bronberger & Kessler, a leading oil
funding of $750m with an average
which will be important to support the
distribution business based in southern
maturity of 10 years. This committed
continued development and retention of
Germany.
funding, together with available cash
high performing employees at Group,
resources and committed bank term
divisional and subsidiary levels.
Despite the lower levels of expenditure
facilities, ensures that the Group retains
in the current year, the Group remains
significant financial capacity to support
disciplined in its approach to acquisition
future growth.
spend and the development strategy
remains unchanged.
09
Successful delivery of this objective will result in:
• the creation of shareholder value through cash generation and share price growth;
• enhanced levels of customer service;
• strengthening of the relationship with our suppliers;
• increased employment and development opportunities for all our employees; and
• positively impacting on the wider communities in which we operate.
Strategic
priority
Creating and sustaining leading
Continuously benchmarking and
positions in each of the markets
improving the efficiency of our
in which we operate.
operating model in each of our
businesses.
Carefully extending our
geographic footprint, thereby
providing new horizons for
growth.
Maintaining financial strength
through a disciplined approach to
balance sheet management.
DCC aims to be the number 1 or 2
DCC strives to be the most efficient
operator in each of its markets. This is
business in each of the sectors in which it
achieved through a consistent focus on
operates. We continuously benchmark our
increasing market shares organically
businesses against those specific KPIs
and via value enhancing acquisitions.
which we judge are important indicators
DCC has a long and successful track
in our drive for superior returns on capital
record of bolt-on acquisitions which have
in the short, medium and longer term.
Description
strengthened our market positions and
generated attractive returns on capital
invested.
In the year ended 31 March 2014, 76%
of DCC’s operating profits were derived
from the UK, 13% from Continental
Europe and the rest of the world and 11%
from Ireland. In recent years we have
been expanding certain of the Group’s
businesses into Continental European
markets which we believe will provide
good opportunity for future growth. We
will look to further extend our business
in these markets and to enter new
geographic markets in the coming years.
In pursuing our strategic objective,
we will only do so in the context of
maintaining relatively low levels of
financial risk in the Group. We believe
that this not only provides the greatest
likelihood of generating value for
shareholders in the long term but also
leaves the Group best placed to react
quickly to commercial opportunities as
they arise.
Attracting and empowering
entrepreneurial leadership
teams, capable of delivering
outstanding performance,
through the deployment of a
devolved management structure.
DCC strives to attract, motivate and
empower entrepreneurial leadership
teams across the Group. Given the
diverse market sectors which we operate
in, we believe that providing appropriate
short and long term incentives to these
leaders, based on the performance of
the businesses which they manage,
is the best way to drive returns for
shareholders. Very often post-acquisition,
we retain entrepreneurial managers
who have sold their businesses to DCC
and through our devolved management
structure we ensure they are empowered
to continue to develop those businesses.
How we
did in 2014
The Group continued to either maintain
During the year the Group successfully
or increase market shares in the primary
completed the integration of acquisitions
markets within which it operates. This
made in prior years, the most significant
was achieved through good organic
of which were the integration of the
growth, contributions from acquisitions
former Total and BP LPG businesses in
in the current year and the successful
DCC Energy and Kent Pharma in DCC
integration of acquisitions completed in
Healthcare.
prior years.
Following the rebranding of all the
businesses under the ‘Exertis’ brand,
DCC Technology is planning to further
integrate its operations and service
offering including an upgrade of its
logistics and IT infrastructure.
The Group successfully implemented a
number of cost efficiency initiatives during
the year including DCC Energy’s logistics
efficiency programme.
Following a record year of acquisition
expenditure in FY13, the current year saw
more modest expenditure. DCC Energy
completed its first significant investment
into the transport fuels market in Europe
through the acquisition of Qstar, the fifth
largest petrol retailer in Sweden. DCC
Energy also completed the acquisition
of Bronberger & Kessler, a leading oil
distribution business based in southern
Germany.
Despite the lower levels of expenditure
in the current year, the Group remains
disciplined in its approach to acquisition
spend and the development strategy
remains unchanged.
The Group’s financial position remains
very strong, well funded and highly liquid.
The Group ended the current year with a
strengthened net debt:EBITDA ratio of 0.3
times (2013: 0.7 times).
Some of the key acquisitions completed
during the year saw the Group retain and
incentivise key management teams who
are capable of contributing to the further
success of the Group.
In March 2014 the Group arranged
committed US Private Placement market
funding of $750m with an average
maturity of 10 years. This committed
funding, together with available cash
resources and committed bank term
facilities, ensures that the Group retains
significant financial capacity to support
future growth.
In addition, the Group continues to invest
in its talent programme and processes
which will be important to support the
continued development and retention of
high performing employees at Group,
divisional and subsidiary levels.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 10
Strategic Report - Strategy
Business Model
DCC Business Model
Our business model is highly cash generative and offers
significant growth potential with high levels of profitability and
shareholder returns on capital employed significantly ahead of
its cost of capital.
O U P G O V E R NAN
C
E
R
G
Talent
retention
Strategic
direction
HSE
S
U
B
I N E S S U
N
I
T
Risk
management
• People
• Capital
• Business partners
• Facilities
• Business intelligence
• Products
Profit
generation
Convert
profits
into cash
INPUTS
SUSTAINABLE
GROWTH
Bolt on
acquisitions
Synergies &
operating
efficiencies
Market
leadership
positions
Ethics &
compliance
Performance
review &
management
Stakeholder
engagement
Optimal
funding
structures
Capital
allocation
Best
practice
How we win
Experienced management teams with deep industry knowledge
Strong supplier and customer relationships
Continual focus on cash generation and ROCE
Low levels of financial risk
High quality products and services
Operational excellence and resource efficiency
Ability to identify, execute, and integrate acquisitions
OUTPUTS
• Shareholder value creation
- cash generation
• dividends
• reinvestment
• acquisitions
- share price growth
• Enhanced customer service
• Strengthened supplier relationships
• Salaries and employment
• Taxes
• Socio economic
11
What’s Important to Us
Excellence
in everything we do
Integrity
ethics, honesty and responsibility
Business partnerships
create and maintain stakeholder relationships
Entrepreneurial spirit
continue to be agile and innovative
O U P G O V E R NAN
C
E
R
G
Talent
retention
Strategic
direction
HSE
I N E S S U
S
U
B
Risk
management
N
I
T
Convert
profits
into cash
Profit
generation
Optimal
funding
structures
Capital
allocation
Best
practice
Synergies &
operating
efficiencies
Market
leadership
positions
Ethics &
compliance
Performance
review &
management
Stakeholder
engagement
• People
• Capital
• Business partners
• Facilities
• Business intelligence
• Products
INPUTS
SUSTAINABLE
GROWTH
Bolt on
acquisitions
OUTPUTS
• Shareholder value creation
- cash generation
• dividends
• reinvestment
• acquisitions
- share price growth
• Enhanced customer service
• Strengthened supplier relationships
• Salaries and employment
• Taxes
• Socio economic
The Group’s Role
Each of our five divisions is supported by the Group Head Office which is based in Dublin, Ireland.
The Group Head Office adds value primarily through:
• providing strategic direction by setting and communicating the Group’s strategic priorities and
ensuring that divisional strategies are aligned with those of the Group;
• setting and maintaining the culture and values of the Group;
• sharing and embedding best practice across the Group;
• allocating resources to achieve clearly defined goals;
• engaging with shareholders and analysts;
• setting the risk management framework for the Group;
• identifying and exploiting synergies and economies of scale;
• maintaining a prudent capital structure; and
• maintaining a relentless focus on cash generation and ROCE.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
12
Strategic Report - Strategy
Chief Executive’s Review
CONTINUED GROWTH
AND DEVELOPMENT
Key Features of Results
Group operating profit increased by 11.5% to £208.4 million
while DCC’s free cash flow of £278.1 million reflected its
ongoing ability to convert its profits into cash which was a new
record for the Group. Return on capital employed increased
to 16.3% from 15.6% in the prior year, substantially ahead of
the Group’s cost of capital. The proposed 10% increase in the
dividend for the year would represent the 20th consecutive
year of dividend growth since the Group was listed as a
public company in May 1994. Over this 20 year period, total
shareholder return has been 2,970% compared to 691% for the
FTSE 250. DCC ended the financial year with net debt of only
£86.3 million and a net debt:EBITDA ratio of 0.3 times, leaving
the Group well placed to continue its growth and development.
The year to 31 March 2014, DCC’s 20th
as a public company, is the first year in
which DCC has presented its results in
sterling, a move designed to provide a
clearer understanding of DCC’s financial
performance by more closely reflecting
the profile of its operations.
It is pleasing to record operating
profit growth in the year ended 31
March 2014 of 11.5%, with growth
across all five divisions. DCC Energy’s
operating profit increased by 4.0%,
reflecting the successful integration of
acquisitions completed in prior years and
efficiency initiatives. This performance
demonstrated the resilience of the
operating model and was particularly
pleasing given the impact on volumes
and margins of the very mild weather
conditions across Northern Europe,
particularly in the months from
December 2013 to February 2014, when
average temperatures were well above
the ten year average. The performance
of DCC Technology was also very
strong with operating profit growth, of
15.9%, driven almost entirely by organic
growth as a result of strong market
share gains in its business in Britain.
Operating profit in DCC Healthcare was
substantially (36.9%) ahead of the prior
year, benefitting from the acquisition of
Kent Pharma, which was completed in
February 2013, and from a strong organic
performance in DCC Health & Beauty
Solutions.
Free cash flow of £278.1 million was a
new record for DCC and was boosted by
a 2.8 day reduction in net working capital
days, reflecting the relentless focus on
working capital efficiency across the
Group.
The Group’s return on capital employed,
a key metric for DCC, increased from
15.6% to 16.3%, driven primarily by the
increase in the Group’s operating profit
and strong working capital management
across all divisions.
It is proposed to increase the final
dividend for the year by 10.0% to 50.73
pence, resulting in a 10% increase in
the full year dividend to 76.85 pence.
DCC’s first dividend as a public company
was the equivalent of 4.8 pence and
the proposed current year dividend
would represent an unbroken 20 years
of dividend growth for DCC as a public
company with a compound annual
growth rate of 14.9%.
DCC’s total shareholder return in the
20 years since flotation was 2,970%
compared to 691% for the FTSE 250.
The Group’s financial position remains
strong with net debt of £86.3 million and
a net debt:EBITDA ratio at the year end
of 0.3 times.
13
It is pleasing to record
operating profit growth in the
year ended 31 March 2014 of
11.5%, with growth across all
five divisions.
2014
£
2013
£
11,231.7m
208.4m
187.0m
191.20 pence
76.85 pence
10,572.7m
186.9m
172.8m
171.20 pence
69.86 pence**
348.7m
278.1m
86.3m
946.3m
16.3%
264.6m
207.1m
186.0m
892.3m
15.6%
% Change
+6.2%
+11.5%
+8.2%
+11.7%
+10.0%
Results Highlights
Revenue
Operating profit*
Profit before net exceptional items, amortisation of intangible assets and tax
Adjusted earnings per share*
Dividend per share
Operating cash flow
Free cash flow***
Net debt
Total equity
Return on capital employed
*
**
*** after net capital expenditure and before interest and tax payments
excluding net exceptionals and amortisation of intangible assets
the total dividend in the prior year of 85.68 cent has been retranslated at the average euro/sterling exchange rate for the year ended 31 March 2013 of £0.815 = €1
DCC’s strategy has
remained unchanged and
we believe that we have
made further good progress
in the ongoing execution of
this strategy.
Continued Delivery against Strategy
DCC’s strategy has remained unchanged
and further good progress has been
made in the ongoing execution of this
strategy.
a strengthening of DCC Energy’s
market position in Scandinavia where
DCC already has growing oil and LPG
businesses and market leadership
positions in Sweden and Norway with a
number two position in Denmark.
A key element of DCC Energy’s strategy
is the continued growth of the business
within the transport fuels market,
in particular road transport. During
the year, DCC announced that it had
agreed to acquire Qstar, a business
focussed on unmanned petrol retailing
in Sweden. Unmanned petrol retailing
is a very important part of the market
in many European countries and the
business model fits well with DCC
Energy’s core fuel distribution skills,
allowing the business access to the
end user margin in the supply chain.
This acquisition represents a further
development of DCC Energy’s transport
fuels business in Europe and the first
material step in building a presence
in the unmanned retail petrol station
market. The acquisition also represents
In response to the very mild winter in the
year ended 31 March 2012, DCC Energy
management worked hard to optimise
the efficiency of its operating model and
ensure maximum flexibility in the cost
base to cope with unseasonably warm
weather. During the year, the business
generated significant savings by
driving further operational efficiencies,
particularly in the oil business in Britain.
These savings helped to offset the
impact of further mild winter weather
during the year and are expected to
continue to do so into the future.
DCC Technology grew its business
during the year with market share
gains in Britain in SME and consumer
IT products, reflecting its excellent
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 14
Strategic Report - Strategy
Chief Executive’s Review (continued)
Adjusted earnings per share (pence) - years ended 31 March
Group operating profit (£’m) - years ended 31 March
173.1
171.2
157.9
139.7
142.0
191.2
115.9
97.5
78.4
84.5
136
147
114
89
99
187
187
157
151
208
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
CAGR 10yrs 10.0%, CAGR 5yrs 6.5%
CAGR 10yrs 11.8%, CAGR 5yrs 7.8%
The success of DCC
in the last 20 years reflects
the talent and commitment
of all the employees across
the Group. I would like to
thank them for their ongoing
dedication and loyalty to
DCC.
supplier portfolio and proactive
market approach. The business has
developed its relationships with key
suppliers and has begun trading with
some significant new suppliers during
the year. In addition, DCC Technology
has broadened its product offering in
Britain with the acquisition of Cohort
Technologies, a specialist distributor in
security and unified communications.
The business also strengthened the
DCC Technology management team
during the year, especially in Continental
Europe. The year also saw a rebranding
of the businesses within the division to
Exertis, in order to help create a platform
for sustained growth into new market
sectors and geographies, and build
greater recognition from supplier and
customer partners as to the scale and
capability of the business.
In DCC Healthcare, the acquisition of
UPL, a British contract manufacturer
of creams and liquids, has helped to
cement DCC’s position as one of the
two leading British creams and liquids
contract manufacturers for brand
owners. Strong organic growth in DCC
Health & Beauty Solutions has also
helped to strengthen its market position
in the wider health and beauty contract
manufacturing market. Following on
from the acquisition of Kent Pharma in
the prior year and its integration into
DCC Healthcare’s existing infrastructure,
DCC Healthcare has strengthened its
devices business with the acquisition of
Leonhard Lang UK, which was integrated
into DCC Healthcare’s existing devices
business and brought new expertise
and expanded the product portfolio and
customer relationships in Britain.
Both DCC Environmental and DCC Food
& Beverage strengthened their market
positions in key areas and delivered
increased operating profit and return on
capital employed.
DCC is committed to attracting,
empowering and retaining
entrepreneurial leadership teams and
to deploying a devolved management
structure. Some of the key acquisitions
during the year saw DCC retain and
incentivise key management teams
who are capable of delivering a very
strong performance for their businesses
and contributing to the success of the
Group. DCC has also benefitted from its
ongoing talent retention programme,
strengthening the team in recent years
at Group, divisional and subsidiary levels,
allowing us to provide opportunities for
existing employees and also bring in new
talent to DCC.
The success of DCC in the last 20 years
reflects the talent and commitment of all
the employees across the Group. I would
like to thank them for their ongoing
dedication and loyalty to DCC.
Embedded in DCC’s strategy is a
commitment to maintaining financial
strength through a disciplined approach
to balance sheet management. It is
pleasing that in the year ended 31 March
2014, DCC ended the year with a net
debt:EBITDA ratio of 0.3x. This strong
financial position, along with the Group’s
liquidity position, leaves DCC well poised
for continuing development.
15
Adjusted earnings per share (pence) - years ended 31 March
Group operating profit (£’m) - years ended 31 March
173.1
171.2
157.9
139.7
142.0
191.2
115.9
97.5
78.4
84.5
136
147
114
89
99
187
187
157
151
208
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
CAGR 10yrs 10.0%, CAGR 5yrs 6.5%
CAGR 10yrs 11.8%, CAGR 5yrs 7.8%
DCC’s strong equity
base, long term debt
maturities and significant
cash and committed
funding resources leave
it well placed to continue
the development of its
business in existing and
new geographies.
Outlook
The outlook for the year to 31 March 2015
is based on the important assumption
that there will be normal winter weather
conditions. At this very early stage, the
Group anticipates that its operating profit
and adjusted earnings per share will be
approximately 10% ahead of the prior
year. Having regard to the unseasonably
colder start to the prior year, it is
anticipated that this growth in the year
to 31 March 2015 will be significantly
weighted towards the second half.
DCC’s strong equity base, long term
debt maturities and significant cash and
committed funding resources leave it
well placed to continue the development
of its business in existing and new
geographies.
Tommy Breen
Chief Executive
20 May 2014
Growth in the Group’s operating profit
(driven by both organic and acquisitive
growth) and strong working capital
management has contributed to an
increase in the Group return on capital
employed from 15.6% to 16.3%, well in
excess of DCC’s cost of capital.
Listing Changes
As announced last year, DCC sought
admission to the FTSE UK Index
Series and this change took effect in
June 2013. This move was designed
to increase awareness of DCC among
the international investor community
and, in particular, to help increase the
number of brokers in London covering
DCC. It is pleasing to note that there
are now twelve analysts covering DCC,
compared to five in March 2013. In
addition, DCC reviewed its corporate
broking arrangements and appointed
Jefferies Hoare Govett and reappointed
J.P. Morgan Cazenove to act alongside
Davy, its Dublin based broker.
Sustainability
Our approach to sustainability
continues to develop, led by our
Sustainability Committee. We are
confident that systematically identifying
and measuring the key economic,
environmental and social drivers of
our businesses and integrating them
into existing management processes
will support our objective to deliver
long term shareholder value. Details
of our approach are provided in the
Sustainability Report on pages 65 to 73.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 16
Strategic Report - Strategy
Risk Report
Risk Management
The Board of DCC is responsible for the Group’s risk
management and internal control systems, which are designed
to identify, manage and mitigate potential material risks to the
achievement of the Group’s strategic and business objectives.
The Board has approved a Risk Management Policy which sets out delegated
responsibilities and procedures for the management of risk across the Group.
It has also approved a Risk Appetite Statement specifying the levels of risk that
the Group is prepared to accept in key areas of activity. This Statement informs the
internal controls that are maintained in those areas.
The Board reviews the Risk Management Policy and Risk Appetite Statement at least
annually to ensure that they remain current.
The Board recognises that the effective management of risk requires the involvement
of people at every level of the organisation and seeks to encourage this through
a culture of open communication in addition to the operation of formal risk
management processes.
The framework in place to achieve this objective and the roles and responsibilities of
the key elements of the framework are set out below.
Framework
The risk management framework has been designed using a ‘three lines of defence’
model. The first line comprises subsidiary and divisional management, who have day-
to-day responsibility for designing, implementing and maintaining effective internal
controls within the individual subsidiaries and divisions. The second line comprises
Group oversight functions who provide expertise in regard to the management of
specific risks. The third line of defence principally comprises Group Internal Audit and
also includes the external auditors and specialist third party auditors/regulators.
Roles & Responsibilities
The detailed roles and responsibilities
assigned as part of the risk management
and control framework are summarised
below:
Board
The Board is responsible for the Group’s
Risk Management Policy and for
determining the Risk Appetite Statement
of the Group. The Board is also required
to report on the annual review of the
effectiveness of risk management and
internal control systems.
Audit Committee
The Audit Committee is responsible for
assisting the Board by taking delegated
responsibility for risk identification
and assessment and for reviewing
the Group’s risk management and
internal control systems and making
recommendations to the Board thereon.
It fulfils its responsibilities by reviewing
regular reports from Group Internal
Audit and from second line providers, in
particular the Executive Risk Committee,
Group Health, Safety and Environmental
('HSE') and Group Compliance.
The Chairman of the Audit Committee
reports to the Board at each Board
meeting on its activities, both in regard to
audit matters and risk management.
DCC plc Board
Audit Committee
Group Risk Register
Governance, Risk
and Compliance Report
Group Internal
Audit Report
Executive Risk Committee
First line of defence
(Subsidiary and
divisional management)
Second line of defence
(Group oversight
functions)
Third line of defence
(Group Internal Audit and
other independent
assurance providers)
17
The Audit Committee also reports to
the Board on the detailed work done by
management in respect of the annual
assessment of the operation of the
Group’s system of risk management and
internal control.
place in the Group’s businesses. The
Group HSE function also supports
divisional HSE committees in setting
objectives, reviewing HSE risk registers
and developing appropriate HSE
standards.
The activities of the Audit Committee are
set out in detail in its report on pages 85
to 88.
Executive Risk Committee
The Executive Risk Committee is
chaired by the Chief Executive and
comprises senior divisional and Group
management. Its responsibilities are
to analyse on a continuous basis the
principal risks facing the Group, the
controls in place to manage those risks
and the related monitoring procedures
and to consider any changes in business
strategy which impact on the Group’s
risk environment and material risks and
controls.
The Executive Risk Committee
maintains the Group Risk Register and
the Integrated Assurance Report and
reports on changes to these to the Audit
Committee. The Group Risk Register
process is detailed in this report.
The Executive Risk Committee also
evaluates all reports prepared by Group
Internal Audit, Group HSE and Group
Compliance and ensures prompt action
is taken to address control weaknesses
highlighted by these reports, prior to
these reports being considered by the
Audit Committee.
Group Oversight Functions
These functions include Group HSE,
Group Compliance and Group Finance,
which comprises finance, taxation and
treasury.
The Group HSE function has in place a
risk based HSE audit programme which
provides independent assurance on the
key HSE management processes (for
example leadership, risk assessment
and learning from events) that are in
The Group Compliance function is
responsible for ensuring that each Group
subsidiary has identified its material
compliance risks, in particular legal
and regulatory risks, and maintains
effective controls in respect of these
risks. Controls in this context will include
policies, procedures and training. These
controls are supported by a clear ‘tone
from the top’ from both the business
and the Group. Compliance audits
are conducted to ensure that controls
are being followed and are operating
effectively.
Group Internal Audit
Group Internal Audit is responsible for
reviewing the risk management and
internal control processes and identifying
areas for improvement and providing
independent and objective assurance
on risk matters to senior management
and the Audit Committee. Group Internal
Audit develop a risk-based internal audit
programme, which is approved by the
Audit Committee.
Risk Register Process
A risk register template, pre-populated
with the most relevant risks covering
strategic, operational, financial and
compliance areas, has been developed.
These risk registers are completed at
all levels of the Group with the impact
and probability of occurrence for each
risk determined and scored at both
a gross (before mitigation) and net
(after mitigation) basis. A risk scoring
matrix is used to ensure a consistent
approach is taken when completing the
probability and impact assessments.
New or emerging risks are added to the
risk register as they are identified and
the template is formally reviewed and
updated at least annually.
Subsidiary
Each subsidiary is required to maintain
a risk register, which is reviewed and
updated for submission to divisional
management twice a year, following
formal review and approval by the
subsidiary board.
Division
Subsidiary risk registers are reviewed
to update the divisional risk registers,
which are approved by the divisional
boards and submitted to the Executive
Risk Committee twice a year.
Group
The Group Risk Register is maintained
by the Executive Risk Committee
and updated to reflect any significant
changes noted in the reviews of
divisional risk registers. It is then
reviewed and formally approved by the
Audit Committee and the Board.
An Integrated Assurance Report (‘IAR’)
is maintained to identify the assurance
activities planned for the forthcoming
year, across the three lines of defence,
which are intended to address the key
risks and emerging risks identified by
the risk register process. The IAR is
updated and discussed by the Executive
Risk Committee before being formally
presented to the Audit Committee and
Board.
Reporting
Formal risk reporting timetables and
structures are in place across the Group
and in particular from the Executive
Risk Committee and the second line
of defence functions to the Audit
Committee, by way of the Governance,
Risk and Compliance report, and
from Group Internal Audit to the Audit
Committee.
This facilitates full, comprehensive
reporting by the Audit Committee to the
Board.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 18
Strategic Report - Strategy
Risk Report (continued)
Principal Risks and Uncertainties
The principal risks and uncertainties
facing the Group in the short to medium
term are set out below, together with the
principal mitigation measures. This is not
an exhaustive statement of all relevant
risks and uncertainties. Matters which
are not currently known to the Board or
events which the Board considers to be
of low likelihood could emerge and give
rise to material consequences.
The mitigation measures that are
maintained in relation to these risks are
designed to provide a reasonable and not
an absolute level of protection against
the impact of the events in question.
Risk and Impact
Principal Mitigation Measures
Legislation and regulation
DCC's operations across five divisions in
thirteen countries must comply with a broad
range of legal and regulatory requirements
which are subject to changes as well as
increasing levels of enforcement. Failure
to comply clearly with applicable legal
or regulatory obligations could result in
enforcement action, legal liabilities, costs and
damage to the Group’s reputation.
Health, safety and environmental
The principal health & safety and
environmental risks faced by the Group relate
to:
• fire, explosion or multiple vehicle accident
resulting in one or more fatalities;
• poor product quality control requiring
activation of our product recall procedures;
• an incident resulting in significant
environmental damage or compliance
breach; and
• a HSE or security event requiring the
activation of our crisis management plan
and / or business continuity plans.
All Group subsidiaries have recorded their key legal and regulatory obligations
and the controls they have in place to ensure those obligations are met. Primary
responsibility for compliance rests with subsidiary management, who are
supported by the Group Compliance function which provides detailed support on
legal and regulatory issues and audits compliance across the Group.
All Group subsidiaries operate health, safety and environmental (HSE)
management systems appropriate to the nature and scale of their risks. Within
the Energy division in particular there is a strong focus on process safety and
ongoing communication with the relevant safety authorities.
All manufacturing and product processing facilities operate quality management
systems, which are subject to regulatory review and licencing requirements.
Quality assurance processes are in place to ensure finished products
are produced in accordance with regulatory requirements and applicable
specifications. External independent resources are engaged where additional
assurance is required.
Emergency response and business continuity plans are also in place to minimise
the impact of any significant incidents that take place.
Such risks may give rise to legal liability,
significant costs and damage to the Group’s
reputation.
Inspection and auditing processes are in place in relation to HSE management
systems. These checks are conducted by the subsidiaries in question, by the
Group HSE function and by external assurance providers, as appropriate.
Insurance cover is maintained at Group level for all significant insurable risks.
Key supplier & customer relationships
Certain Group subsidiaries derive a significant
part of their revenue from key suppliers
and customers and the loss of any of those
relationships would have a material financial
impact on that subsidiary.
Strategic growth / Change management
A failure to identify, execute or properly
integrate acquisitions, change management
programmes or other growth opportunities
could impact on profit targets and impede the
strategic development of the Group.
The Group as a whole trades with a very broad supplier and customer base.
Close commercial relationships exist with all our suppliers and customers and
there is a constant focus on providing a value added service to them.
Group and divisional management teams engage in a continuous and active
review of potential acquisitions. All potential acquisitions are subject to an
assessment of their ability to generate a return on capital employed well in
excess of the cost of capital and their strategic fit within the Group.
The Group conducts a stringent internal evaluation process and external due
diligence prior to completing any acquisition. Group and subsidiary management
have significant expertise in, and experience of, integrating acquisitions.
Projects and change management programmes are resourced by dedicated and
appropriately qualified internal personnel, supported by external expertise.
19
Risk and Impact
Principal Mitigation Measures
Crime
The Group is potentially subject to a variety of
criminal threats including fraud, particularly in
relation to payments, and theft of product.
Information security
Maintaining adequate IT systems and
infrastructure to support growth and
development may be affected by:
• accidental exposure or deliberate theft of
sensitive information;
• loss of service or system availability;
• significant system changes or upgrades; and
• cybercrime.
The security of the Group’s IT and banking systems are subject to both
external and internal review and are updated and improved as needed. Other
internal controls against fraud are maintained in every subsidiary and are
monitored at Group level. Suitable controls are in place against physical
crime such as theft and vandalism.
The Group also maintains fidelity insurance in relation to risks in this area.
IT standards and policies have been subject to a comprehensive review
and update project over the last two years to ensure they are in line with
appropriate best practices.
Business continuity, IT disaster recovery and crisis management plans are in
place and tested.
Dedicated IT personnel with the appropriate technical expertise are in place
to oversee IT security. A dedicated IT audit resource was appointed during the
current year providing independent assurance with respect to the IT control
environment.
Access to credit
The continued growth and expansion of the
Group’s operations increases demand for credit
at a time when credit availability has become
more restricted globally.
The Group’s financial position remains strong with significant cash resources
and relatively long term debt maturities. There is a continued focus on
working capital management, cash generation and managing supplier and
customer relationships.
Talent management
The Group’s devolved management structure
has been fundamental to the Group’s success.
A failure to attract, retain or develop high quality
entrepreneurial management throughout the
Group will impede its strategic objectives.
Weather
Demand for some of the products sold by the
Group, most notably heating products sold by
the Energy division, is directly related to weather
conditions. The inherent uncertainty of weather
conditions therefore presents a risk to profits
generated by that division.
Pricing
The Group is exposed to commodity cost
price risk in its Energy division, in both its oil
distribution and LPG distribution businesses.
The ability to maintain margins by recovering
these costs on a timely basis may be adversely
impacted by external factors including changes to
consumer spending, competition and regulations.
The Group maintains a constant focus on this area with structured
succession planning, management development and remuneration
programmes, incorporating long and short term incentives, in place. A
graduate recruitment programme has also been established.
These programmes are reviewed regularly by Group Human Resources,
divisional management, the Chief Executive and the Board.
The Energy division is expanding its operations in the non-heating segments
of the market, primarily in transport fuels (with a particular emphasis on
retail petrol stations), in marine and in aviation.
Commodity cost price movements are immediately reflected in oil commodity
sales prices and within a short period in LPG commodity sales prices.
Approved matching forward contracts and hedges are used where price
movement exposures exist.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
20
Strategic Report - Performance
Measuring Our Progress - Group Key Performance Indicators
The Group employs financial and non-financial key performance indicators (‘KPIs’) which signify progress towards the
achievement of our strategy. Each division has its own KPIs which are in direct alignment with those of the Group and are included
in the divisional operating reviews on pages 22 to 57.
FINANCIAL KPIs
Strategic objective
KPI
Definition
FY14 performance
FY14 comment
FY15 outlook
Deliver superior shareholder
returns
Return on capital
employed (‘ROCE’)
ROCE is defined as the operating profit before amortisation
and exceptional items expressed as a percentage of the
average capital employed. Capital employed represents total
equity adjusted for net cash/debt, goodwill and intangibles
previously written off, deferred and contingent consideration
and investments in associates.
Drive for enhanced
operational performance
Operating profit growth Measures the change in operating profit before amortisation
and exceptional items achieved in the current year
compared to operating profit before amortisation and
exceptional items reported in the prior year.
Deliver superior shareholder
returns
Adjusted earnings per
share (‘eps’) growth
Measures the change in adjusted eps achieved in the
current year compared to adjusted eps reported in the prior
year.
Generate cash flows to fund
organic and acquisition
growth and dividends
Operating cash flow
Measures cash generated from operations.
Extend our business and
geographic footprint
Committed acquisition
expenditure
Measures cash spent and future deferred and contingent
consideration amounts for acquisitions committed to during
the year.
NON-FINANCIAL KPIs
Strategic objective
KPI
Definition
2014
FY14 performance
2014
2013
FY14 comment
FY15 outlook
Grow a sustainable business
Carbon emissions
Total Scope 1 and 2 carbon emissions expressed in
kilotonnes (kts) of CO2e.
Health and safety
Lost time injury rates
Lost Time Injury Frequency Rate (‘LTIFR’) measures the
number of lost time injuries per 200,000 hours worked.
Lost Time Injury Severity Rate (‘LTISR’) measures the
number of calendar days lost per 200,000 hours worked.
The increase in ROCE over the prior year
The achievement of returns on
Chief Executive’s
was driven by continued strong working
capital employed in excess of
Review. Financial
capital management and the increase in
the cost of capital will continue
Review.
the Group’s operating profit of 11.5%.
to be a key focus.
Link to other
disclosures
Approximately half of the growth in
The outlook for FY15 is based
Chief Executive’s
operating profit was organic, primarily
on the important assumption
Review. Financial
reflecting growth in DCC Technology
that there will be normal winter
Review.
in Britain and DCC Healthcare’s health
weather conditions. The Group
and beauty activities. Operating profit
anticipates that operating profit
growth in DCC Energy of 4.0% reflected
will be approximately 10%
the successful integration of acquisitions
ahead of FY14 with this growth
completed in prior years and cost
being significantly weighted
efficiency initiatives.
towards the send half.
The increase in adjusted eps was
The anticipated growth of 10.0%
Chief Executive’s
primarily driven by the factors mentioned
in adjusted eps is based on
Review. Financial
under the operating profit kpi.
the same assumptions as the
Review.
anticipated growth in operating
profit mentioned above.
The Group generated excellent operating
Cash generation and working
Chief Executive’s
cash flow of £348.7 million during the
capital management will
Review. Financial
year driven by operating profits of £208.4
remain a key focus of the
Review.
million and a reduction in working
Group.
capital of £86.9 million.
£84.1m
£84.1m
£84.1m
£84.1m
£84.1m
£84.1m
£84.1m
£84.1m
Committed acquisition expenditure
The Group will continue to
Chief Executive’s
during the year principally comprised
pursue attractive opportunities
Review.
DCC Energy (£50.5 million) and DCC
Healthcare (£25.4 million).
in our traditional markets as
well as looking to extend our
business into new geographic
markets.
Link to other
disclosures
Sustainability Report.
Increase in absolute emissions of
2% over the prior year was driven by
The Group anticipates
increases in absolute
acquisitions and organic growth which
emissions from acquisitions
were partially offset by improvements in
and organic growth. Carbon
operating efficiencies and energy saving
intensity metrics are expected
116.9kts
initiatives.
to decrease in line with targets.
Reductions of 12% and 14% in LTIFR
The Group is targeting a
Sustainability Report.
and LTISR respectively were driven by
continued improvement in both
initiatives on safety culture, awareness
LTI metrics.
and training.
2013
2013
2014 v 2013: +11.5%
2014 v 2013: +11.5%
2013
2014 v 2013: +11.5%
2014 v 2013: +11.5%
2014 v 2013: +11.5%
2014 v 2013: +11.5%
2012
2014 v 2013: +11.5%
2014
2014 v 2013: +11.5%
2013
2013
2014 v 2013: +11.7%
2014 v 2013: +11.7%
2013
2014 v 2013: +11.7%
2014 v 2013: +11.7%
2014 v 2013: +11.7%
2014 v 2013: +11.7%
2012
2014
2014 v 2013: +11.7%
2014 v 2013: +11.7%
2014
2014
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2014
2012
2014
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2014
2012
2013
2012
2012
2012
2014
2012
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2014
2012
2013
2012
2012
2012
2014
2012
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2014
2012
2014
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2014
2012
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2014
2012
2014
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2014
2012
2014
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2012
16.3%
16.3%
15.6%
16.3%
16.3%
15.6%
16.3%
16.3%
14.2%
15.6%
15.6%
16.3%
14.2%
15.6%
15.6%
16.3%
14.2%
14.2%
15.6%
14.2%
14.2%
15.6%
14.2%
14.2%
£208.4m
£208.4m
£186.9m
£186.9m
£208.4m
£208.4m
£208.4m
£208.4m
£160.7m
£160.7m
£186.9m
£186.9m
£208.4m
£186.9m
£186.9m
£208.4m
£160.7m
£160.7m
£186.9m
£160.7m
£160.7m
£186.9m
£160.7m
£160.7m
191.20p
191.20p
171.20p
171.20p
191.20p
191.20p
191.20p
191.20p
171.20p
171.20p
191.20p
171.20p
171.20p
191.20p
171.20p
171.20p
141.99p
141.99p
141.99p
141.99p
141.99p
141.99p
141.99p
141.99p
£348.7m
£348.7m
£348.7m
£348.7m
£348.7m
£348.7m
£348.7m
£348.7m
£264.6m
£264.6m
£240.8m
£264.6m
£264.6m
£240.8m
£264.6m
£264.6m
£240.8m
£240.8m
£264.6m
£240.8m
£240.8m
£264.6m
£240.8m
£240.8m
£169.0m
£169.0m
£146.8m
£146.8m
£169.0m
£169.0m
£169.0m
£169.0m
£146.8m
£146.8m
£146.8m
£146.8m
£169.0m
£169.0m
£146.8m
£146.8m
127.0kts
127.0kts
124.4kts
127.0kts
127.0kts
124.4kts
127.0kts
127.0kts
116.9kts
124.4kts
124.4kts
127.0kts
116.9kts
124.4kts
124.4kts
127.0kts
116.9kts
116.9kts
124.4kts
116.9kts
116.9kts
124.4kts
116.9kts
1.7
1.7
1.7
1.7
1.7
1.7
1.7
1.7
1.9
1.9
1.9
1.9
1.9
1.9
1.9
1.9
36 days
36 days
36 days
36 days
36 days
36 days
36 days
36 days
42 days
42 days
42 days
42 days
42 days
42 days
42 days
42 days
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
53 days
53 days
53 days
53 days
53 days
53 days
53 days
53 days
Strategic objective
KPI
Definition
FY14 performance
FY14 comment
FY15 outlook
21
Link to other
disclosures
Chief Executive’s
Review. Financial
Review.
Chief Executive’s
Review. Financial
Review.
The increase in ROCE over the prior year
was driven by continued strong working
capital management and the increase in
the Group’s operating profit of 11.5%.
The achievement of returns on
capital employed in excess of
the cost of capital will continue
to be a key focus.
Approximately half of the growth in
operating profit was organic, primarily
reflecting growth in DCC Technology
in Britain and DCC Healthcare’s health
and beauty activities. Operating profit
growth in DCC Energy of 4.0% reflected
the successful integration of acquisitions
completed in prior years and cost
efficiency initiatives.
The outlook for FY15 is based
on the important assumption
that there will be normal winter
weather conditions. The Group
anticipates that operating profit
will be approximately 10%
ahead of FY14 with this growth
being significantly weighted
towards the send half.
The increase in adjusted eps was
primarily driven by the factors mentioned
under the operating profit kpi.
The anticipated growth of 10.0%
in adjusted eps is based on
the same assumptions as the
anticipated growth in operating
profit mentioned above.
Chief Executive’s
Review. Financial
Review.
£348.7m
£348.7m
£348.7m
£348.7m
£348.7m
£348.7m
£348.7m
£348.7m
The Group generated excellent operating
cash flow of £348.7 million during the
year driven by operating profits of £208.4
million and a reduction in working
capital of £86.9 million.
Cash generation and working
capital management will
remain a key focus of the
Group.
Chief Executive’s
Review. Financial
Review.
£240.8m
£169.0m
£169.0m
£146.8m
£146.8m
£169.0m
£169.0m
£169.0m
£169.0m
Committed acquisition expenditure
during the year principally comprised
DCC Energy (£50.5 million) and DCC
Healthcare (£25.4 million).
The Group will continue to
pursue attractive opportunities
in our traditional markets as
well as looking to extend our
business into new geographic
markets.
Chief Executive’s
Review.
FY14 comment
FY15 outlook
Increase in absolute emissions of
2% over the prior year was driven by
acquisitions and organic growth which
were partially offset by improvements in
operating efficiencies and energy saving
initiatives.
The Group anticipates
increases in absolute
emissions from acquisitions
and organic growth. Carbon
intensity metrics are expected
to decrease in line with targets.
Link to other
disclosures
Sustainability Report.
Reductions of 12% and 14% in LTIFR
and LTISR respectively were driven by
initiatives on safety culture, awareness
and training.
The Group is targeting a
continued improvement in both
LTI metrics.
Sustainability Report.
2014
2014
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2014
2012
2014
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014 v 2013: +11.5%
2014
2014 v 2013: +11.5%
2012
2013
2012
2012
2012
2013
2014 v 2013: +11.5%
2014 v 2013: +11.5%
2012
2014 v 2013: +11.5%
2014 v 2013: +11.5%
2014
2012
2014 v 2013: +11.5%
2014
2013
2014 v 2013: +11.5%
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014 v 2013: +11.7%
2014
2014 v 2013: +11.7%
2012
2013
2012
2012
2012
2013
2014 v 2013: +11.7%
2014 v 2013: +11.7%
2012
2014 v 2013: +11.7%
2014 v 2013: +11.7%
2014
2012
2014
2014 v 2013: +11.7%
2013
2014 v 2013: +11.7%
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2014
2012
2014
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2014
2012
2014
2013
FY14 performance
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2014
2012
2014
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2014
2012
2014
2013
2014
2014
2013
2014
2014
2012
2013
2014
2013
2012
2013
2013
2014
2012
2013
2012
2012
2012
2013
2012
2012
£84.1m
£84.1m
£84.1m
£84.1m
£84.1m
£84.1m
£84.1m
£84.1m
16.3%
16.3%
15.6%
15.6%
16.3%
16.3%
16.3%
16.3%
16.3%
15.6%
15.6%
15.6%
15.6%
16.3%
15.6%
14.2%
14.2%
14.2%
14.2%
14.2%
14.2%
14.2%
15.6%
14.2%
£208.4m
£208.4m
£186.9m
£186.9m
£208.4m
£208.4m
£208.4m
£208.4m
£208.4m
£186.9m
£186.9m
£186.9m
£186.9m
£208.4m
£186.9m
£186.9m
191.20p
191.20p
171.20p
171.20p
191.20p
191.20p
191.20p
191.20p
191.20p
171.20p
171.20p
171.20p
171.20p
191.20p
171.20p
171.20p
£160.7m
£160.7m
£160.7m
£160.7m
£160.7m
£160.7m
£160.7m
£160.7m
141.99p
141.99p
141.99p
141.99p
141.99p
141.99p
141.99p
141.99p
£264.6m
£264.6m
£240.8m
£240.8m
£264.6m
£264.6m
£264.6m
£264.6m
£264.6m
£240.8m
£240.8m
£240.8m
£240.8m
£264.6m
£240.8m
£146.8m
£146.8m
£146.8m
£146.8m
£169.0m
£169.0m
£146.8m
£146.8m
127.0kts
127.0kts
124.4kts
124.4kts
127.0kts
127.0kts
127.0kts
127.0kts
116.9kts
116.9kts
124.4kts
124.4kts
124.4kts
124.4kts
127.0kts
127.0kts
124.4kts
116.9kts
116.9kts
116.9kts
116.9kts
124.4kts
116.9kts
116.9kts
1.7
1.7
1.7
1.7
1.7
1.7
1.7
1.7
1.9
1.9
1.9
1.9
1.9
1.9
1.9
1.9
36 days
36 days
42 days
42 days
36 days
36 days
36 days
36 days
36 days
36 days
42 days
42 days
42 days
42 days
42 days
42 days
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
53 days
53 days
53 days
53 days
53 days
53 days
53 days
53 days
FINANCIAL KPIs
Deliver superior shareholder
returns
Return on capital
employed (‘ROCE’)
ROCE is defined as the operating profit before amortisation
and exceptional items expressed as a percentage of the
average capital employed. Capital employed represents total
equity adjusted for net cash/debt, goodwill and intangibles
previously written off, deferred and contingent consideration
and investments in associates.
Drive for enhanced
operational performance
Operating profit growth Measures the change in operating profit before amortisation
and exceptional items achieved in the current year
compared to operating profit before amortisation and
exceptional items reported in the prior year.
Deliver superior shareholder
Adjusted earnings per
Measures the change in adjusted eps achieved in the
share (‘eps’) growth
current year compared to adjusted eps reported in the prior
returns
year.
Generate cash flows to fund
organic and acquisition
growth and dividends
Operating cash flow
Measures cash generated from operations.
Extend our business and
geographic footprint
Committed acquisition
Measures cash spent and future deferred and contingent
expenditure
consideration amounts for acquisitions committed to during
the year.
NON-FINANCIAL KPIs
Strategic objective
KPI
Definition
Grow a sustainable business
Carbon emissions
Total Scope 1 and 2 carbon emissions expressed in
kilotonnes (kts) of CO2e.
Health and safety
Lost time injury rates
Lost Time Injury Frequency Rate (‘LTIFR’) measures the
number of lost time injuries per 200,000 hours worked.
Lost Time Injury Severity Rate (‘LTISR’) measures the
number of calendar days lost per 200,000 hours worked.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report DCC Technology – What We Do
350+
Technology brands
& manufacturers
DCC Technology’s activities are highlighted in blue
Pro-active sales & marketing
Category, product & technical expertise
End-user fulfillment, white-label
services & in-store product positioning
Kitting, localisation
& customisation of products
Demand & logistics management,
including import/export
Stock hubbing, bundling
& returns management
Product sourcing, website
& category management
OPEN
Specialist
retailers
Grocers
Etailers
Resellers
DCC Healthcare – What We Do
Pharma brand owners/
OEM manufacturers
Medical device brand
owners/OEM
manufacturers
DCC Vital
Sales, marketing &
distribution
New product
development
Procurement
Vendor management
Supply chain
management
& logistics services
DCC Health & Beauty Solutions
Health & Beauty brand owners
Specialist Health & Beauty retailers
Direct sales/mail order companies
DCC Healthcare’s activities are highlighted in blue
Hospitals
Pharma retailers
and wholesalers
Pharma homecare
Product development,
contract manufacturing
and packing of health
& beauty products
DCC Healthcare – What We Do
DCC Vital
Pharma brand owners/
OEM manufacturers
Sales, marketing &
distribution
Hospitals
22
Medical device brand
owners/OEM
manufacturers
Strategic Report - Performance
Operating Review - DCC Energy
New product
development
Procurement
Vendor management
Supply chain
management
& logistics services
Pharma retailers
and wholesalers
Pharma homecare
GPs
DCC Healthcare’s activities are highlighted in blue
DCC Energy is the leading oil and liquefied petroleum gas (LPG) sales, marketing and distribution
business in Europe. In oil, DCC Energy is the market leader in Britain and Sweden and one of
the leading oil distribution businesses in Austria, Denmark and Ireland. In LPG, DCC Energy is
market leader in Norway and Sweden, joint leader in the Netherlands and is a strong number two
player in both Britain and Ireland.
DCC Food & Beverage – What We Do
In the year ended 31 March 2014,
DCC Energy sold 10.2 billion litres of
product from its extensive network of
400 facilities to its customer base of
approximately one million customers.
3rd party brands
Own brands
Markets and Market Position
Oil
DCC Energy’s oil distribution business
supplies transport fuels, heating oils and
fuel oils to commercial, retail, domestic,
agricultural, industrial, aviation and
marine customers in Britain, Ireland,
Denmark, Sweden, Austria and Germany.
In Britain, DCC Energy rebranded its
oil distribution business during the
year as Certas Energy, bringing a new
identity to the businesses which have
been acquired since 2001. Certas Energy
continues to sell oil under a large
portfolio of brands, including Bayford,
DCC Food & Beverage’s activities are highlighted in red
Proactive sales
& marketing
Category
management
& product
education
Brogan, Butler Fuels, Carlton Fuels,
CPL Petroleum, Gulf, Pace Fuelcare,
Scottish Fuels, Shell and Texaco. Outside
of Britain, DCC Energy sells oil under
the leading brands of Emo Oil (Ireland),
Swea (Sweden), DCC Energi (Denmark),
Energie Direct (Austria), Top Oil (Austria),
Top Oil Bayern and Bronberger &
Kessler (Bavaria, Germany).
Supply chain
services
New product
development
DCC Energy is one of the leading sales
and marketing businesses for branded
fuel cards in Britain. The business
sells approximately 750 million litres
of transport fuels annually through its
portfolio of fuel cards under the BP,
Esso, Shell, Texaco and Diesel Direct
brands. Fuel cards are an essential tool
for commercial organisations to manage
their transport fuel costs.
NEW
Multiples
How we win
Convenience stores
Strong health and safety ethos,
delivering potentially hazardous
products safely and reliably.
Wholesale
Passionate, experienced and
committed team of people.
Customer focussed.
Food service
Quality of service at competitive
prices.
Pharmacy
Scale provides security of supply
and ability to tailor contracts to
customers’ requirements.
DCC Energy – What We Do
Inbound
logistics
Inland depots
Agriculture
Domestic
Aviation
Marine
Commercial/
industrial
Retail
forecourts
L
E
U
F
D
R
A
C
Exploration, production
and refinery
Importation terminal
Outbound
logistics
DCC Energy’s activities are highlighted in orange
DCC Environmental – What We Do
Commercial and industrial
waste
Landfill
Material recycling facility
Energy
Construction and demolition
waste
Raw material
for manufacturing
DCC Annual Report and Accounts 2014
23
Revenue
£8,243.7m
2013: £8,112.1m
Operating profit
£110.5m
2013: £106.2m
UP 1.6%
UP 4.0%
Return on capital employed
17.5%
2013: 18.5%
Brands
Oil - Bayford, Brogan*, Bronberger & Kessler*, Butler
Fuels*, Carlton Fuels*, CPL Petroleum, DCC Energi*, Emo
Oil*, Energie Direct*, Gulf, Pace Fuelcare, Qstar*, Scottish
Fuels*, Shell, Swea*, Texaco, Top Oil*(in Austria).
LPG - Flogas*, MacGas*, Benegas*.
Fuel card - BP, Diesel Direct, Esso, Fastfuels, Gulf, Shell.
* DCC owned brands
Supplementary Information Financial Statements & Notes Governance Strategic Report 24
Strategic Report - Performance
Operating Review - DCC Energy (continued)
DCC Energy is
now, by far, the largest oil
distributor in Britain. DCC’s
addressable market in
Britain comprises transport
fuels and heating oils to
commercial, industrial,
domestic, agricultural and
dealer owned petrol
stations.
DCC Energy provides its customers
with access to the breadth of the
British retail petrol station and bunker
networks through its portfolio of branded
fuel cards, while giving them detailed
information on fuel utilisation to assist
in minimising their spend on transport
fuels.
Oil - Britain
DCC Energy has been the consolidator
of what was, and continues to be,
a highly fragmented oil distribution
market in Britain. DCC Energy first
entered the market in September 2001
with the acquisition of BP’s business in
Scotland and since then has acquired
and integrated 38 businesses including
the oil distribution businesses of
Shell (2004), Chevron Texaco (2008),
and Total (2011). DCC Energy is now,
by far, the largest oil distributor in
Britain. DCC’s addressable market in
Britain comprises transport fuels and
heating oils to commercial, industrial,
domestic, agricultural and dealer owned
petrol stations. This is a market of
approximately 30 billion litres and DCC
sold approximately 5.6 billion litres of
product to this market, giving a market
share of approximately 18%. The total
retail petrol station market in Britain is
approximately 35 billion litres. This is
split 40% hyper markets, 30% company
owned and operated stations and 30%
independent dealer owned. DCC Energy
has approximately 4% of the total market
and supplies to approximately 10% of the
dealer market. DCC Energy operates in
the independent dealer owned segment
of the retail market and today is the
largest supplier to this segment, based
on the 1,600 sites we supply.
Oil - Ireland
Emo Oil is one of the leading oil
distributors in Ireland with a market
share of 11%. DCC’s addressable oil
market in Ireland is estimated at 9 billion
litres.
Oil - Continental Europe
DCC’s Swedish oil distribution business
(Swea) is the market leader in Sweden
with a share of approximately 19%
of the addressable market which
is estimated at 2 billion litres. The
addressable oil distribution market
in Denmark is estimated at 2 billion
litres of which DCC Energi Danmark
has a market share of 12% and is
the number two oil distributor. The
addressable oil distribution market in
Austria is estimated at 5 billion litres
and DCC’s business Energie Direct is
the number two in this market with
a share of 12%. With the oil majors
continuing to divest of oil distribution
assets, DCC Energy is well placed to
continue its growth by acquisition. In
February 2014 DCC announced that it
had reached agreement to acquire Qstar,
the fifth largest petrol station operator
in Sweden, which sells 300 million
litres of product through a network of
307 unmanned and 72 dealer operated
petrol stations. The business which is
based in Norrköping also operates an oil
distribution business of 70 million litres.
LPG
DCC Energy, through the Flogas
Group, is the second largest LPG sales,
marketing and distribution business
in Britain and Ireland, the largest LPG
distributor in Sweden and Norway
and the joint leading distributor in the
Netherlands. The Flogas Group supplies
propane and butane in both bulk and
cylinders to domestic, commercial,
agricultural and industrial customers for
heating, cooking, transport and industrial
processes.
In Britain, the business operates from
a nationwide infrastructure comprising
63 facilities, while in Ireland the
infrastructure comprises 6 depots
throughout the country. In Sweden and
Norway, the business operates from
10, mostly third party owned, locations
while in the Netherlands the business
operates from one central depot.
The LPG business also distributes a wide
range of LPG fuel appliances, such as
mobile heaters and barbeques. Beyond
LPG, Flogas in Britain now provides
customers with renewable energy
products such as biomass boilers, solar
panels and heat pumps, through its
recent integration of DCC’s New Energy
businesses Clearpower and UFW. It has
also started to provide liquefied natural
gas (‘LNG’) as an energy solution for
large industrial businesses with no
access to natural gas, whilst Flogas
Ireland has developed a strong position
as a distributor of natural gas.
25
Case Study
THE QSTAR BUSINESS
A key part of DCC Energy’s strategy is to build a larger
presence in the transport fuels market in Europe with a
particular emphasis on growth in the retail forecourt sector.
Over recent years DCC Energy has become the largest
supplier to independent dealer owned retail petrol stations
in Britain and also operates a leading fuel card marketing
business in that market.
The first significant investment in the execution of this
strategy, is the acquisition of Qstar, the fifth largest petrol
retailer in Sweden, which sells approximately 300 million
litres of product per annum. Qstar provides national coverage
through a network of 307 unmanned forecourts which is
complemented by an additional 72 dealer operated petrol
stations operating under the Billisten and Pump brands.
The Qstar business was founded in 1990 by the Bergstrom
family and has grown from its single site origins near
Norrköping to become a national network of distinctive
forecourts offering quality fuel and fast service under the
bright red Qstar branding.
This acquisition gives DCC Energy a 4% market share in the
retail market in Sweden and an 18% share of the unmanned
network in Sweden, a sector which represents 62% of the
total forecourt market in Sweden. The business is fully
supported by in-house systems and operational capability
which will be very valuable to DCC Energy in pursuing our
strategy of growing in the unmanned forecourt sector of the
retail market in Europe.
Britain represents DCC Energy’s largest
LPG market at approximately 1 million
tonnes. Trading under the Flogas brand,
DCC Energy is the number two LPG
distributor in Britain and Ireland with
market shares of approximately 28%
and 40% respectively. In Sweden and
Norway, DCC Energy (trading under
the Flogas brand) is market leader with
approximately 49% and 47% market
shares respectively. In the Netherlands
where DCC Energy trades under the
Benegas brand, the business has an
overall market share of 20% (excluding
the autogas market which DCC Energy
entered during the year, the business
has a market share of approximately
27%). Unlike the oil distribution market
which remains highly fragmented, the
LPG markets in Britain, Ireland, Sweden,
Norway and the Netherlands are
relatively consolidated.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report Through the
acquisition of the Qstar
forecourt network in
Sweden, DCC Energy
has taken its first major
step in building a Retail
business across Europe in
pursuit of our strategy of
capturing greater share of
the consumer margin in
the transport sector of the
market.
26
Strategic Report - Performance
Operating Review - DCC Energy (continued)
Strategy and Development
DCC Energy’s vision is to be a global
leader in the marketing, sale and
distribution of fuels and related products
and the provision of services to energy
consumers:
• with strong local market shares;
• operating under multiple brands;
• consolidating fragmented markets;
• selling a broad range of related
products and services;
• building a position in new geographies;
• continuing the development of its
presence in the green/renewable
energy sector;
• generating high levels of ROCE; and
• while maintaining a strong balance
sheet.
Oil
In oil distribution, DCC Energy’s strategy
is to be the leading oil distribution
business in its chosen addressable
markets by continuing to consolidate
existing markets, driving targeted
growth particularly in the non-heating
dependent segments of the market,
expanding into new geographies
through acquisition and driving organic
profit growth by leveraging the scale of
the business by selling differentiated
products and cross selling add-on
products and services such as lubricants
and boiler maintenance services to its
extensive customer base.
Key to DCC Energy’s expansion into the
non-heating segments of the market is
the intention to build a larger presence
in the transport fuels segment of the
market, with particular emphasis
on growing its presence in the retail
forecourt sector of the market by
expanding its supply to independent
dealers, growing its unmanned and
bunker site presence, by leveraging
its existing supply infrastructure and
scale and developing industry leading
propositions for its dealers and retail
consumers.
DCC Energy’s strategy in Britain is
to continue to grow its market share
(currently 18%) to in excess of 20% of its
addressable market. Key to achieving
this target is growth in non-heating
dependent segments of the market
with a particular focus on retail petrol
stations and the marine and aviation
sectors. DCC Energy is now the largest
supplier to independent dealer owned
retail petrol stations in Britain, selling
to approximately 1,600 sites across
the country. The business has been
actively rolling out the Gulf brand across
this network and currently supplies
approximately 425 dealer owned sites
operating under the Gulf brand. The
business distributes to approximately
150 Total branded dealer owned sites
and also supplies dealer owned sites
under a range of other brands including
Pace, Power, Scottish Fuels, Texaco and
Regent.
Through the acquisition of the Qstar
forecourt network in Sweden, DCC
Energy has taken its first major step in
building a retail business across Europe
in pursuit of our strategy of capturing
greater share of the consumer margin in
the transport sector of the market.
In fuel cards, DCC Energy is continuing
to target high levels of organic growth
through its extensive telesales team
and cross selling fuel cards to its broad
oil distribution customer base. The
fuel cards business has expanded its
customer offering through providing
innovative products to customers such as
‘CO2Count’ and ‘Mileage Capture’ which
provide customers with key information
on fuel consumption and emissions
to allow them to better manage their
businesses.
LPG
DCC Energy will continue to leverage
its strong LPG market positions in
the Flogas group to drive organic
profit growth on a sector by sector
basis in all of its markets. Similar to
the oil business, the LPG business is
targeting growth in the non-heating
dependent segments of the market,
primarily through organic volume
growth. This will be achieved by
promoting LPG to industrial and
commercial entities looking to switch
to more environmentally friendly and
competitively priced energy sources.
Operationally, the business will look
to gain further efficiencies in Britain
following the successful integration of
BP’s LPG business in 2014, and through
a number of business improvement
initiatives across the Flogas group.
27
Suppliers
As with its customer base, DCC
Energy’s supplier portfolio is broadly
based. The top five suppliers represent
approximately 59% of total volumes
supplied with no one individual supplier
accounting for more than 20% of
volumes supplied in the year to 31
March 2014. The major suppliers to the
division are BP, Essar, Ineos, Mabanaft,
Philips66, Shell, Statoil and Valero
Energy.
Our People
DCC Energy’s business is a people
business at its core. Therefore we are
very focussed on developing processes
and practices that ensure we are
focussed on the well being, development
and engagement of our people across all
areas of the business and to ensure that
we have the necessary resources, talent
and skills to deliver the service levels
expected by our customers in a safe way,
every day.
Continuous improvement of our safety
performance is a key priority and
responsibility for all line managers
and directors who are supported by
experienced health and safety functions
in each business. Occupational safety
and process safety (relating to the larger
terminals which have the potential for
a major accident) is managed through
systems and processes which identify,
control and monitor health and safety
risks. Monthly KPIs are reviewed by the
DCC Energy Board which sets annual
objectives to drive improvements in
near miss reporting, safety awareness,
competence and overall safety culture.
DCC Energy has strong management
teams with an in depth knowledge and
years of experience in the markets in
which the businesses operate. As our
businesses have grown we have looked
to augment the existing management
teams with experienced personnel in
senior roles and we will continue to
develop the management teams as the
businesses grow.
In the year to March 2013, Safety F1rst,
a safety culture initiative focussed on
improving attitudes and behaviour
towards safety and led by senior
management, was adopted in Certas
Energy UK. Following the successful
adoption in Certas Energy UK, Safety
F1rst has been rolled out to all
companies in the Oil and LPG businesses
during the year.
DCC Energy currently employs 4,711
people.
Key Risks
DCC Energy has a broad customer base
across a number of geographies and
many of the economies in which the
division operates are showing signs of
recovery. However, a deterioration in this
economic recovery and its impact on
consumer spending and confidence is a
key risk faced by the division.
A significant proportion of DCC Energy’s
volumes are generated through the
sale of heating dependent product and,
accordingly, as noted in previous years
the division can be impacted by extreme
movements in weather conditions. As
discussed earlier in this report, the
development focus has been to reduce
the heating dependence of the division
through the development of the non-
heating segments of the business. The
acquisition of Qstar in Sweden has been
a key building block in this strategy,
which will continue in the coming year.
DCC Energy sold 10.2 billion litres of
product during the year ended 31 March
2014 and the businesses operate with
inherent risks to the environment and
people. Ensuring that our businesses
maintain rigorous health, safety and
environmental standards is one of our
core business principles. The rollout
of the Safety F1rst campaign during
the year has demonstrated senior
management’s commitment to this
principle.
Customers
DCC Energy has a very broad customer
base with approximately 1 million
customers across the geographies
in which the businesses operate.
Customers are primarily spread over the
commercial, retail, industrial, domestic,
agricultural and marine markets. DCC
Energy has no material customer
dependencies.
The volume split by customer type for the
year ended 31 March 2014 is as follows:
Volume split by customer type
Commercial & industrial
Volume split by customer type
Retail
Domestic
Commercial & industrial
Agricultural
Retail
Marine
Domestic
Other
Agricultural
Marine
Other
63%
16%
11%
63%
4%
16%
3%
11%
3%
4%
3%
3%
The volume split by type of product for
the year ended 31 March 2014 is as
follows:
Volume split by product
Volume split by product
Oil
Transport
Heating
Oil
Fuel
Transport
Heating
LPG
Fuel
LPG
48%
20%
19%
48%
20%
13%
19%
13%
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 28
Strategic Report - Performance
Operating Review - DCC Energy (continued)
DCC Energy’s
approach to sustainability
recognises the reality of
climate change and the
physical challenges arising
from changing weather
patterns and more
frequent extreme weather
events.
DCC Energy has been highly acquisitive
over the last number of years and
ensuring the smooth integration of
these acquisitions is critical to the
success of the division. This is achieved
through close monitoring of the acquired
businesses and ongoing management
development.
Environment
DCC Energy’s approach to sustainability
recognises the reality of climate change
and the physical challenges arising
from changing weather patterns
and more frequent extreme weather
events. Government responses to
climate change include levies and
taxes on carbon emissions, incentives
for renewables and energy efficiency
technologies and setting long term
carbon reduction targets. At the same
time the economy relies on energy
(primarily from fossil fuels) to function
and grow. DCC Energy is committed to
assisting our customers reduce their
environmental impact. This is being
achieved through offering our customers
cleaner, more efficient fuels and
innovative solutions, enabling customers
to monitor their own energy use and
quantify carbon emissions.
The potential for oil spills to impact
on the environment is a risk that is
managed on a daily basis. From domestic
deliveries to large storage facilities in
coastal locations, a range of controls are
in place to minimise the potential of this
becoming a reality. Controls include the
design and maintenance of vehicles and
depots, the implementation of effective
operational procedures and, critically,
the engagement of competent, trained
employees who are handling product
every day.
No significant spills occurred in the
period. However all spills have the
potential to cause local damage so in the
event of any spill occurring, immediate
action is taken to contain and recover
the product to minimise impact to the
surroundings. Detailed investigations are
completed to identify the root causes of
any incidents to identify learning points
and opportunities for improvement.
DCC Energy’s businesses operate on a
very local footprint in all the markets in
which we have a presence. Therefore it
is crucial to our long term strategy that
we have a high degree of trust within the
communities in which we operate. All
our businesses operate to the highest
standards, invest heavily in infrastructure
and training, and encourage our staff to
participate actively in the communities
within which they work.
Performance for the Year Ended 31
March 2014
DCC Energy delivered a robust
performance with operating profit 4.0%
ahead of the prior year as the business
benefitted from acquisitions, integration
synergies and operational efficiencies
which were partly offset by the effect
on profitability of the very mild winter
weather conditions which impacted
all geographies in which DCC Energy
operates.
DCC Energy sold 10.2 billion litres of
product during the year, an increase of
6.1% over the prior year. Organically,
volumes were 3.0% lower, primarily due
to a decrease in heating related volumes
of approximately 11% as the average
temperatures in Northern Europe during
the second half of the year, particularly
December through to February, were
significantly milder than both the prior
year and the 10 year average.
The oil business made good progress,
notwithstanding the impact of the
mild winter weather conditions. The
business in Britain benefitted from
the implementation of its logistics
efficiency programme and from the
successful integration of the former
Total distribution business. In addition,
it benefitted from its focus on transport
fuels, with particularly strong organic
growth in fuel cards. Adjusting for the
weather impact, the oil businesses
in Continental Europe performed
satisfactorily and delivered strong
returns, with the exception of the
business in Sweden which was impacted
by significant competition. Good progress
was made in DCC’s strategy to build a
larger presence in the transport fuels
market, particularly in unmanned retail
petrol stations, through the agreement to
acquire Qstar.
29
10.2 bn litres
10.2 bn litres
10.2 bn litres
10.2 bn litres
10.2 bn litres
10.2 bn litres
9.6 bn litres
9.6 bn litres
9.6 bn litres
9.6 bn litres
9.6 bn litres
9.6 bn litres
£110.5m
£110.5m
£110.5m
£110.5m
£110.5m
£110.5m
£106.2m
£106.2m
£106.2m
£106.2m
£106.2m
£106.2m
1.09 pence
1.09 pence
1.09 pence
1.09 pence
1.09 pence
1.09 pence
1.11 pence
1.11 pence
1.11 pence
1.11 pence
1.11 pence
1.11 pence
17.5%
17.5%
17.5%
17.5%
17.5%
17.5%
18.5%
18.5%
18.5%
18.5%
18.5%
18.5%
£197.9m
£197.9m
£197.9m
£197.9m
£197.9m
£197.9m
£122.3m
£122.3m
£122.3m
£122.3m
£122.3m
£122.3m
13.4%
13.4%
13.4%
13.4%
13.4%
13.4%
12.2%
12.2%
12.2%
12.2%
12.2%
12.2%
12.7%
12.7%
12.7%
12.7%
12.7%
12.7%
14.9%
14.9%
14.9%
14.9%
14.9%
14.9%
Performance
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2014 v 2013: +6.1%
2013
2013
2014 v 2013: +6.1%
2014 v 2013: +6.1%
2014 v 2013: +6.1%
2014 v 2013: +6.1%
2014 v 2013: +6.1%
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2014 v 2013: +4.0%
2013
2013
2014 v 2013: +4.0%
2014 v 2013: +4.0%
2014 v 2013: +4.0%
2014 v 2013: +4.0%
2014 v 2013: +4.0%
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2013
2013
DCC Energy: Key Financial Performance Indicators
Strategic objective
Drive increase in sales volumes
KPI
Volumes
Drive for enhanced operational
performance
Operating profit growth
Grow operating profit per litre
Operating profit per litre
Deliver superior shareholder returns
Return on capital employed
Generate cash flows to fund organic and
acquisition growth and dividends
Operating cash flow
Deliver superior shareholder returns
10 year operating profit CAGR
DCC Energy now
operates across nine
countries in Europe and
remains well positioned to
grow in those markets and
to continue to expand into
new geographies.
The LPG business performed strongly,
benefitting from the acquisitions of BP’s
businesses in Britain, the Netherlands
and Belgium and SFR’s businesses
in Sweden and Norway, all of which
were completed in the prior year. In
particular, the business in Britain
benefitted from the achievement of the
targeted cost synergies following the
successful integration of the former BP
LPG business. The LPG operations as a
whole achieved good organic growth in
the industrial and commercial sector of
the market which more than offset the
impact on volumes of the mild winter
weather.
DCC Energy now operates across nine
countries in Europe and remains well
positioned to grow in those markets
and to continue to expand into new
geographies.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
30
Strategic Report - Performance
Operating Review - DCC Technology
DCC Technology is a leading sales, marketing, distribution and supply chain business providing a
broad range of consumer and SME focussed products and services in Europe.
Markets and Market Position
DCC Technology (which has changed
its name from DCC SerCom) sells a
range of consumer and SME focussed
technology products to a very wide
customer base of technology retailers,
etailers and resellers, primarily
in Britain, France, Ireland and the
Netherlands. The products distributed
include a broad range of computing
products (including tablets, PC’s and
servers), communications products
(including smartphones, accessories
and unified communications), printers,
peripherals, consumables and
networking and security products. In
addition, the business sells a diverse
range of consumer technology products
including games consoles and software,
wearable technology, consumer
electronics and AV accessories
and peripherals. The business is a
distribution and supply chain partner of
many of the world’s leading technology
brands.
DCC Technology provides technology
brand owners and manufacturers with
an exceptionally broad customer reach
and proactively markets their products
through product and customer focussed
sales teams. The business provides a
range of value-added services in the
SME and consumer channels to both its
customers and suppliers, including end-
user fulfillment, digital distribution, third
party logistics, web site development and
management, category management
How we win
Pro-active sales and marketing
approach to a very broad
customer base.
Excellent supplier portfolio.
Agile, responsive and service
focussed.
Cost effective and tailored solutions
for customers and suppliers.
Technical, supply chain and
value-added services expertise.
Financial strength.
DCC Technology – What We Do
Pro-active sales & marketing
Category, product & technical expertise
Product sourcing, website
& category management
OPEN
Specialist
retailers
Grocers
Etailers
Resellers
End-user fulfillment, white-label
services & in-store product positioning
Kitting, localisation
& customisation of products
Demand & logistics management,
including import/export
Stock hubbing, bundling
& returns management
350+ Global
technology brands
& manufacturers
DCC Technology’s activities are highlighted in blue
DCC Healthcare – What We Do
3rd party
brand owners
Own brand/
licence products
DCC Vital
Sales, marketing &
distribution
Portfolio development
and product licensing
Procurement
Vendor management
Supply chain
management
& logistics services
DCC Health & Beauty Solutions
Health & beauty brand owners
Specialist health & beauty retailers
Direct sales/mail order companies
DCC Healthcare’s activities are highlighted in blue
DCC Healthcare – What We Do
Hospitals
Pharma retailers
and wholesalers
Pharma homecare
GPs
Product development,
contract manufacturing
and packing of health
& beauty products
DCC Vital
Sales, marketing &
distribution
Portfolio development
and product licensing
Procurement
Hospitals
Pharma retailers
and wholesalers
Vendor management
Pharma homecare
Supply chain
management
& logistics services
GPs
Proactive sales
& marketing
Category
management
& product
education
Supply chain
services
NEW
New product
development
Multiples
Convenience stores
Wholesale
Food service
Pharmacy
Inland depots
Agriculture
Domestic
Aviation
Marine
Commercial/
industrial
Retail
forecourts
L
E
U
F
D
R
A
C
DCC Healthcare’s activities are highlighted in blue
DCC Food & Beverage – What We Do
3rd party
brand owners
Own brand/
licensed products
3rd party brands
Own brands
DCC Food & Beverage’s activities are highlighted in red
DCC Energy – What We Do
Inbound
logistics
Outbound
logistics
Exploration, production
Importation terminal
and refinery
DCC Energy’s activities are highlighted in orange
DCC Environmental – What We Do
Commercial and industrial
Landfill
Material recycling facility
Energy
Construction and demolition
Raw material
for manufacturing
DCC Annual Report and Accounts 2014
31
Revenue
£2,264.0m
2013: £1,850.3m
Operating profit
£48.1m
2013: £41.5m
UP 22.4%
UP 15.9%
Return on capital employed
21.1%
2013: 16.4%
Brands
Acer, Aliph, APC, Apple, Asus, Belkin, Cisco, Dell,
Devolo, D-Link, Fujitsu, Huawei, IBM, Lenovo, LG,
Logitech, Microsoft, Netgear, Nokia, Plantronics,
Samsung, Sony, Take-Two, TomTom, Toshiba
and Western Digital.
Supplementary Information Financial Statements & Notes Governance Strategic Report 32
Strategic Report - Performance
Operating Review - DCC Technology (continued)
DCC Technology
provides it’s suppliers with
an exceptionally broad
customer reach and
proactively markets their
products through product
and customer focussed
sales teams.
and merchandising, kitting, product
customisation, security tagging and
cross supplier bundling. Reflecting the
global nature of the technology supply
chain, DCC Technology provides global
supply chain management services
through its dedicated supply chain
operations in Western Europe, Poland,
China and the USA, and employs state
of the art IT systems and procurement
processes. These services include
supplier hubbing, consignment stock
programmes, supplier identification
and qualification, quality assurance
and compliance and supplier and
customer fulfillment and are designed
to effectively reduce its partners’ cost
of production. It also delivers a range
of post-manufacturing supply chain
services designed to bring technology
products to market in the most efficient
manner possible, including localisation,
customisation and other services.
In October 2013 all of the operating
businesses within DCC Technology were
rebranded under the ‘Exertis’ brand.
The name has been well received by our
employees, customers and suppliers.
The case study on page 33 provides
further information on the new brand.
During the year, the business in Britain
and Ireland further strengthened
its position and offering in security,
unified communications and managed
services with the acquisition of Cohort
Technology. The addition of Cohort
Technology further enhances the
technical sales capability of the business
and will assist in further developing
its offering of managed services to our
reseller partners. As highlighted in
recent years, the business in Britain
continued to expand its market position
in the communications market, and in
the past year, has further developed
its product and service offerings
(particularly with smartphones and
tablet computers) to take advantage of
the growing convergence of the IT and
communications markets and channels.
DCC Technology’s principal addressable
markets are the retail and reseller
channels for technology products in
Britain, France and Ireland. The value
of the technology distribution market in
these three territories is estimated to
be €22.5 billion and we estimate that
this market grew by 4% in the year to
31 December 2013. DCC Technology
also operates in the market for global
outsourced supply chain management
services.
In Britain, DCC Technology is the second
largest distributor of technology products
and is the market leader in Ireland. The
business is also a leading distributor of
technology products in France where the
business historically has been focussed
on the retail channel. In the Netherlands
the business is focussed on unified
communications. DCC Technology is the
fourth largest distributor of technology
products in Europe.
DCC Technology’s revenue for the year
ended 31 March 2014 by product type is
as follows:
Revenue by product type
Computing (incl. tablets, PC’s & servers) 33%
Communications & mobile
16%
Printers, consumables & IT peripherals 16%
Gaming consoles, software & peripherals 11%
7%
Consumer electronics
17%
Other
Principal Distribution Markets:
Analysis of revenue by customer type
Britain & Ireland
Consumer retail/etail
SME reseller
68%
32%
Continental Europe
Consumer retail/etail
SME reseller
89%
11%
33
Case Study
DCC TECHNOLOGY REBRANDS ITS OPERATING BUSINESSES AS ‘EXERTIS’
During the year DCC Technology launched a new brand for
each of the operating units within the division. The decision
to develop a new brand was reached following a period of
significant growth for the business, where it has grown to
become the fourth largest technology sales, marketing,
distribution and supply chain business in Europe. The launch
of a common brand name for the operating units within the
division was undertaken to gain more recognition from our
supplier and customer partners as to the scale and capability
of our operations, to assist in transacting with our partners
across multiple product areas and geographies and to create
a platform to enable further expansion of the business
into new territories. The name ‘Exertis’ was selected as
the operating name, with each of the businesses adopting
a co-branded structure initially, to ensure the significant
goodwill vested in the existing names was transferred to
the new name. ‘Exertis’ reflects the ambition and drive of
the business to work harder for each of our customer and
supplier partners. The new name was formally launched in
October 2013 and has been well received by our employees,
customers and suppliers and positions the business for its
next phase of growth and development.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 34
Strategic Report - Performance
Operating Review - DCC Technology (continued)
Strategy and Development
DCC Technology’s vision is to become
the leading sales, marketing, distribution
and supply chain business for consumer
and SME focussed technology products
in Europe, delivering an industry-leading
service offering, whilst delivering
consistent long-term profit growth
and industry leading returns on capital
employed.
DCC Technology’s principal medium
term strategic objectives are:
• to broaden the range of sales
channels and products addressed by
the business in its existing markets,
including emerging technology
segments;
• to develop and deliver a range of
industry leading services supported by
best in class infrastructure; and
• to extend the geographic footprint of
the business in Continental Europe
through complementary acquisitions.
DCC Technology will continue to invest
in product and market capabilities
where we see particular opportunities
for growth. In addition to the areas
highlighted in the medium term strategic
objectives of the business, a clear focus
is placed on ensuring that the business
is innovative in the services it brings to
the market and is operating as efficiently
as possible.
The business in Britain and Ireland is
currently investing significantly in its
back-office infrastructure to support the
constant demand for further services
and to ensure the business generates
leverage from its scale as a very
significant player in its market.
DCC Technology is constantly reviewing
trends and innovations in the technology
industry and is focussed on ensuring that
growing areas of the industry, such as
the trend towards increased technology
in sports and leisure, lead to further
opportunities.
Customers
The business has a very broad customer
base, selling to approximately 14,000
customers. The largest customer
accounted for approximately 10% of
revenues in the year ended 31 March
2014 and the ten largest customers
accounted for 45% of total revenues in
that year.
DCC Technology seeks to provide the
highest possible standard of customer
service combining an unrivalled range
of services with a commitment to
identify the most cost effective and
flexible solutions to our customers’
requirements. By constantly focussing
on building the breadth of our SME
and consumer-facing customer base
we ensure that our service offering
is always developing to adapt to their
growing demands, as well as delivering
an exceptional route to market for our
suppliers.
Our supply chain services customers
include IT equipment manufacturers,
outsourced equipment manufacturers,
consumer electronics companies
and telecommunications equipment
manufacturers. Customer relationships
in this area of our business tend to be
long term in nature and several of our
customers have been dealing with us for
over ten years.
DCC Technology is
committed to conducting its
business in a sustainable
manner and this
commitment is reflected
Revenue by product type
in how it interacts with
Computing (incl. tablets, PC’s & servers) 33%
customers, suppliers,
Communications & mobile
16%
Printers, consumables & IT peripherals 16%
Gaming consoles, software & peripherals 11%
employees and the
7%
Consumer electronics
17%
Other
communities in which it
operates.
Principal Distribution Markets:
Analysis of revenue by customer type
Britain & Ireland
Consumer retail/etail
SME reseller
68%
32%
Continental Europe
Consumer retail/etail
SME reseller
89%
11%
35
DCC Technology
employs 1,850 people in 9
countries and recognises
that they are fundamental to
the ongoing success of the
business.
Suppliers
DCC Technology has a diverse supplier
base and partners with hundreds of
suppliers including many of the world’s
leading technology brands, such as Acer,
Aliph, APC, Apple, Asus, Belkin, Cisco,
Dell, Devolo, D-Link, Fujitsu, Huawei,
IBM, Lenovo, LG, Logitech, Microsoft,
Netgear, Nokia, Plantronics, Samsung,
Sony, Take-Two, TomTom, Toshiba and
Western Digital. The largest supplier
accounted for 23% of total purchases in
the year ended 31 March 2014 and the
top ten suppliers represented 57% of
total purchases.
The business adopts a proactive
approach to the identification and
recruitment of new suppliers and
technologies and seeks to position
itself as the obvious choice for owners
of growing brands to access the retail
and reseller channels. In addition, we
seek to ensure that we have a position
of strategic relevance with our principal
sales, marketing and distribution
suppliers.
When providing supply chain services
to technology manufacturers and
brand owners, a core element of the
services provided by the business
is the identification of appropriate
component and supply chain partners
for the manufacturer or brand owner
and carrying out the quality assurance
on those suppliers to ensure that they
conform to required quality, regulatory
and ethical standards.
With the aim of promoting long-term
sustainable relationships with each of
our suppliers and delivering a best-in-
class service, the operating principles
we adopt with our suppliers has been
formalised and communicated during
the year to our suppliers in our ‘Code of
Practice’.
Our People
DCC Technology employs 1,850 people in
9 countries and recognises that they are
fundamental to the ongoing success of
the business. At all levels, employees are
encouraged to adopt a service orientated
approach to meeting the demands of
suppliers and customers.
At senior management level, our
operating businesses are run by some
of the best regarded entrepreneurial
management teams in the industry. DCC
Technology seeks to foster and maintain
an entrepreneurial culture, coupled
with a commitment to ensuring that the
highest ethical standards in business
conduct are maintained.
DCC Technology is committed to
conducting its business in a sustainable
manner and this commitment is
reflected in how it interacts with
customers, suppliers, employees and
the communities in which it operates. In
common with the rest of the DCC Group,
the business has processes to assess
and control health and safety risks and
aims to provide the best possible working
environment for our employees.
DCC Technology has benefited from
our participation in the DCC Graduate
Programme. In addition, we also
operate a wide variety of employee
training programmes within individual
businesses to promote the ongoing
development of staff. Employee
training encompasses both personal
development and task specific training,
in addition to formal training for
personnel in areas such as health and
safety, risk and compliance.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 36
Strategic Report - Performance
Operating Review - DCC Technology (continued)
DCC Technology is
committed to conducting its
business in a sustainable
manner and this
commitment is reflected
in how it interacts with
customers, suppliers,
employees and the
communities in which it
operates.
Key Risks
DCC Technology faces a number of
strategic, operational, compliance
and financial risks. The business
supplies products in the business and
consumer markets in Western Europe
and the concentration of activity in this
geographic area means that further
economic downturns and disruption in
these markets remains a key risk for the
business.
DCC Technology works with a broad
range of suppliers and customers with
whom we have built excellent trading
relationships. However, the business
would be significantly impacted by the
loss of a small number of key suppliers
or customers.
The breadth of suppliers and customers
within the business is also critical in
ensuring that DCC Technology is in
a position to capture opportunities in
respect of new technologies, as the
industry is particularly fast-paced. The
ever-changing nature of technology,
whilst presenting opportunities,
also presents risk as the growth or
emergence of new technologies may
impact on our customers or suppliers
over time.
Given that the business has a diverse
product and supplier portfolio, managing
the potential risk of stock obsolescence
is a critical success factor in the day
to day operations of the business.
The length and significance of our
relationships with our suppliers and the
existence of formal contractual stock
rotation and price protection provisions
with the vast majority of our suppliers
assists in mitigating this risk.
Performance for the Year Ended
31 March 2014
DCC Technology achieved an excellent
result, increasing operating profit by
15.9%, reflecting very strong organic
growth in both mobile computing and
communications products, and increased
its return on capital employed to 21.1%.
DCC Technology continues to develop its
service offering to enhance its position
as a leading route to market partner for
connected devices and to develop new
sales channels in the sports and lifestyle
sectors.
The business in Britain, which accounted
for 81% of total revenues in the period,
generated excellent operating profit
growth across its principal product
lines. The performance was particularly
strong in mobile computing and
communications products such as
smartphones, laptops and tablets, with
increased market share achieved in both
the retail and reseller channels.
The business continues to invest in
broadening its product and service
portfolio, including the provision of
accessories, airtime and outsourced
fulfilment and category management
solutions. Excellent organic growth
was achieved in 'data room' products,
such as servers, storage and security,
and the business benefitted from the
additional technical capability introduced
through the acquisition, in October 2013,
of Cohort Technology, a specialist in
security, unified communications and
managed services. The launch of the
latest generation of gaming consoles in
advance of Christmas 2013, as well as
major software releases during the year,
was also a feature of the performance in
Britain.
37
Performance
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2014 v 2013: +22.4%
2013
2013
2014 v 2013: +22.4%
2014 v 2013: +22.4%
2014 v 2013: +22.4%
2014 v 2013: +22.4%
2014 v 2013: +22.4%
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2014 v 2013: +15.9%
2013
2013
2014 v 2013: +15.9%
2014 v 2013: +15.9%
2014 v 2013: +15.9%
2014 v 2013: +15.9%
2014 v 2013: +15.9%
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2013
2014
2013
2013
2013
2013
2013
£2,264.0m
£2,264.0m
£2,264.0m
£2,264.0m
£2,264.0m
£2,264.0m
£1,850.2m
£1,850.2m
£1,850.2m
£1,850.2m
£1,850.2m
£1,850.2m
£48.1m
£48.1m
£48.1m
£48.1m
£48.1m
£48.1m
£41.5m
£41.5m
£41.5m
£41.5m
£41.5m
£41.5m
2.1%
2.1%
2.1%
2.1%
2.1%
2.1%
2.2%
2.2%
2.2%
2.2%
2.2%
2.2%
21.1%
21.1%
21.1%
21.1%
21.1%
21.1%
16.4%
16.4%
16.4%
16.4%
16.4%
16.4%
£82.6m
£82.6m
£82.6m
£82.6m
£82.6m
£82.6m
£99.6m
£99.6m
£99.6m
£99.6m
£99.6m
£99.6m
10.3%
10.3%
10.3%
10.3%
10.3%
10.3%
12.7%
12.7%
12.7%
12.7%
12.7%
12.7%
14.9%
14.9%
14.9%
14.9%
14.9%
14.9%
4.8%
4.8%
4.8%
4.8%
4.8%
4.8%
DCC Technology: Key Financial Performance Indicators
Strategic objective
Drive for enhanced operational
performance
KPI
Revenue growth
Drive for enhanced operational
performance
Operating profit growth
Grow operating margin
Operating margin
Deliver superior shareholder returns
Return on capital employed
Generate cash flows to fund organic and
acquisition growth and dividends
Operating cash flow
Deliver superior shareholder returns
10 year operating profit CAGR
In Continental Europe, the business
was impacted by a weak demand
environment and margins declined due
to a changed product mix. The business
is focussed on broadening its product
portfolio and extending the range of
customer channels serviced.
The supply chain services business
traded ahead of expectations. These
activities have now been integrated with
DCC Technology’s sales, marketing
and distribution activities to allow the
provision of a consolidated end-to-end
service offering.
DCC Technology,
which has changed its
name from DCC SerCom,
achieved an excellent result,
increasing operating profit
by 15.9%, reflecting very
strong organic growth in
both mobile computing and
communications products,
and increased its return
on capital employed
to 21.1%.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
Comprehensive range of high quality
own and third party brand/ licence
pharmaceuticals and medical devices.
Extensive market coverage across
primary and secondary care in Britain
and Ireland.
Expert industry knowledge.
Highly efficient logistics
infrastructure.
Full range of contract manufacturing
services for Health & Beauty brand
owners.
Hospitals
Pharma retailers
and wholesalers
Pharma homecare
GPs
Product development,
contract manufacturing
and packing of health
& beauty products
DCC Technology – What We Do
Pro-active sales & marketing
Category, product & technical expertise
38
Strategic Report - Performance
Product sourcing, website
& category management
OPEN
Specialist
retailers
Operating Review - DCC Healthcare
End-user fulfillment, white-label
services & in-store product positioning
350+ Global
technology brands
& manufacturers
Grocers
Etailers
DCC Healthcare is focussed on the sales, marketing and distribution of pharmaceuticals
and medical devices in the British and Irish markets and the provision of outsourced product
development, manufacturing, packing and other services to Health and Beauty brand owners,
principally in the areas of nutrition and beauty products.
Demand & logistics management,
including import/export
Kitting, localisation
& customisation of products
Resellers
brands including BioRad, Diagnostica
Stock hubbing, bundling
Stago, ICU Medical, Mölnlycke, Oxoid and
& returns management
Smiths Medical.
How we win
DCC Technology’s activities are highlighted in blue
Markets and Market Position
DCC Vital
DCC Vital sells, markets and distributes
a broad range of third party and
own-branded products (including
pharmaceuticals, medical, surgical
and laboratory products) through its
specialist field sales teams. DCC Vital
is also a leading provider of value added
logistics services in Britain, providing
innovative stock management and
distribution services to hospitals and
healthcare brand owners/manufacturers,
focussed principally on theatre
products. DCC Vital works with leading
pharma companies such as Actavis,
Cipla, Fresenius Kabi, Grifols, Hikma,
Martindale Pharma, Medac, Rosemont,
Sandoz and Teva as well as representing
leading medical, surgical and scientific
Pharma
DCC Vital sells, markets and distributes
innovative and generic pharma products
in Britain and Ireland through the
hospital, retail pharmacy and homecare
channels and has extensive market
coverage into these channels. DCC
Vital’s portfolio of pharmaceuticals
encompasses a range of therapy
areas including oncology, antibiotics,
anaesthesia, pain management,
haematology, respiratory, addiction and
emergency medicine. DCC Vital has
a substantial pharma business with
aggregate revenues of approximately
£100 million and a leading position in the
British generics market.
DCC Healthcare – What We Do
3rd party
brand owners
Own brand/
licence products
DCC Vital
Sales, marketing &
distribution
Portfolio development
and product licensing
Procurement
Vendor management
Supply chain
management
& logistics services
DCC Health & Beauty Solutions
Health & beauty brand owners
Specialist health & beauty retailers
Direct sales/mail order companies
DCC Healthcare’s activities are highlighted in blue
DCC Healthcare – What We Do
DCC Vital
Sales, marketing &
distribution
Portfolio development
and product licensing
Procurement
Hospitals
Pharma retailers
and wholesalers
Vendor management
Pharma homecare
Supply chain
management
& logistics services
GPs
Proactive sales
& marketing
Category
management
& product
education
Supply chain
services
NEW
New product
development
Multiples
Convenience stores
Wholesale
Food service
Pharmacy
Inland depots
Agriculture
Domestic
Aviation
Marine
Commercial/
industrial
Retail
forecourts
L
E
U
D
R
A
F
C
DCC Healthcare’s activities are highlighted in blue
DCC Food & Beverage – What We Do
3rd party
brand owners
Own brand/
licensed products
3rd party brands
Own brands
DCC Food & Beverage’s activities are highlighted in red
DCC Energy – What We Do
Inbound
logistics
Outbound
logistics
Exploration, production
Importation terminal
and refinery
DCC Energy’s activities are highlighted in orange
DCC Environmental – What We Do
Commercial and industrial
Landfill
Material recycling facility
Energy
Construction and demolition
Raw material
for manufacturing
39
UP 26.8%
UP 36.9%
Revenue
£406.5m
2013: £320.6m
Operating profit
£30.4m
2013: £22.2m
Return on capital employed
14.2%
2013: 13.1%
Brands
DCC Vital’s Brands - Biorad, Cipla, Diagnostica Stago,
Fannin*, Fresenius Kabi, Grifols, Hikma, ICU Medical, Kent
Pharmaceuticals*, Martindale Pharma, Mölnlycke, Neolab*,
Oxoid, Smiths Medical.
DCC Health & Beauty Solutions’ Customers -
The Body Shop, Elder Pharmaceuticals, Forest Labs, GSK,
Healthspan, Merck (Seven Seas, Natures Best, Lamberts),
Omega Pharma, PZ Cussons, Reckitt Benckiser, Space NK,
Unilever, Vitabiotics.
* DCC owned brands
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 40
Strategic Report - Performance
Operating Review - DCC Healthcare (continued)
DCC Vital has a
leading position in the
sales, marketing and
distribution of medical
devices into hospitals in
Ireland and Britain with an
extensive, highly trained
field sales force and strong
relationships with senior
management, clinicians and
procurement
professionals.
DCC Vital has been active in the
pharmaceutical market since 2002,
initially focussed on intravenous hospital
products. Following the acquisitions in
recent years of Kent Pharma (February
2013) and Neolab (May 2011), DCC
Vital now also has a strong presence
in the retail pharmacy channel. At the
time of acquisition, Neolab was a small
British generic pharma business with a
focus on pharma products particularly
those in the respiratory therapy area.
Similarly, Kent Pharma was a leading
provider of generic pharma products
to the British market. Kent brought
a highly complementary product and
product licence portfolio to DCC Vital.
The Kent portfolio of own licensed
products has a particular focus on beta
lactam antibiotics including penicillin
V, flucloxacillin and amoxicillin, which
are long established antibiotics typically
used to treat bacterial infections such
as throat, ear and respiratory tract
infections. Today, DCC Vital’s pharma
business remains the market leader
in these products in Britain, which are
manufactured in its own specialist beta
lactam manufacturing facility located in
Roscommon, Ireland.
DCC Vital also provides outsourced
pharma compounding services to
hospitals in Ireland, through its licensed
compounding facility in Dublin, which is
involved in the aseptic filling of oncology,
pain management, antibiotic and
paediatric nutrition products into patient
ready dosage forms i.e. syringes or IV
bags.
Devices
DCC Vital has a leading position in the
sales, marketing and distribution of
medical devices into hospitals in Ireland
and Britain with an extensive, highly
trained field sales force and strong
relationships with senior management,
clinicians and procurement
professionals. DCC Vital sells and
markets a broad range of medical
devices and consumables in areas such
as wound care, urology, procedure packs,
critical care (anaesthesia, endovascular,
cardiology, and IV access), diagnostics,
orthopaedics and neurology. Products
are typically single use/consumable in
nature. Capital equipment represents
a small element of total sales and
typically relates to generating sales of
consumable products, for example the
sale (or placing) of diagnostic testing
equipment in order to drive sales of
the consumable test kits used in the
equipment. The business is building
a significant position in the medical
devices sector in Britain which was
enhanced in the year by the acquisition
of Leonhard Lang UK (acquired in July
2013), the market leader in electrodes
and diathermy consumables.
DCC Vital operates in the pharma and
medical device markets which are
primarily government funded. Fiscal
budgets in Britain and Ireland have
tightened and, in common with the
majority of developed economies, the
burden of care, particularly to support
ageing populations, is growing. As
a result, healthcare providers are
increasing their focus on cost saving
opportunities and value for money.
Public and private healthcare payers and
providers are leveraging procurement
scale through increased use of
tendering, framework agreements,
reference pricing and generic
pharmaceuticals. They are switching to
equivalent quality, lower cost medical
and pharma products as well as
outsourcing activities deemed to be non-
core. DCC Vital is well placed to benefit
from these trends.
Competitors in this market sector
include global healthcare companies
such as Johnson & Johnson and Baxter
as well as a large number of small
and medium sized medical, surgical
and pharmaceutical manufacturers
and distributors. DCC Vital’s largest
competitor in the Irish market is
the medical and scientific business
within UDG Healthcare plc, principally
through a range of competing agencies.
Competitors in the value-added
distribution sector in Britain include NHS
Supply Chain (operated by DHL Logistics)
and Bunzl plc.
41
Case Study
DEVELOPMENT OF DCC’S OWN BRANDED OFFERING – A KEY DEVELOPMENT AREA FOR THE FUTURE
DCC Vital’s vision is to build a substantial and sustainable
healthcare business focussed on the sales, marketing and
distribution of pharmaceuticals and medical devices. An
important element of DCC Vital’s strategy to deliver on
this vision is to increase the ownership of the intellectual
property in the business, as reflected in the proportion of
profits generated from sales of own brand/licence generic
pharmaceuticals and medical devices. In recent years, and
in particular over the last 15 months, DCC Vital has made
significant progress in the execution of this strategy through
both organic and acquisitive development.
In FY2013, approximately 35% of DCC Vital’s gross margins
were derived from own branded/licensed products. Today,
based on current run rates, this percentage has grown to in
excess of 50%.
In the pharma area, this development was significantly
accelerated by the acquisition of Kent Pharma which brought
a range of own licence products, in particular in the antibiotic
area. In addition, the acquisition of product licences in recent
years (principally focussed on the therapy areas of pain
management, respiratory and IV hospital pharmaceuticals)
and the leveraging of these products through DCC Vital’s
deep market network has played a key role. While beta
lactam antibiotics are manufactured in-house in DCC
Vital’s specialist facility in Ireland, the majority of the
manufacturing of own licence pharmaceuticals is outsourced
to a range of MHRA approved European and Indian contract
manufacturers. A small but growing element of the range is
outsourced to DCC Health & Beauty Solutions, particularly in
the creams and liquids area.
In the devices area, sales of own brand, high quality, right
price products have been growing strongly in areas such
as anaesthesia, airway management, medical textiles and
gloves under Fannin and other DCC Vital brands. Pictured
above is DCC Vital’s branded laryngeal mask airway which is
used for airway management in anaesthetics.
The growth of own brand device sales was further boosted
through the acquisition of Leonhard Lang UK (‘LLUK’) in
July 2013. LLUK sells and markets a range of electrodes
and electrosurgical consumables under its own Skintact
brand and is the market leader in these product categories
in Britain. Also in FY2014 the business launched a range of
own brand products targeted at the community care sector
including compression hosiery (used in the treatment of
conditions such as venous leg ulcers and lymphedema) and
urology products. DCC Vital sources its own brand devices
from a range of OEM manufacturers in Europe, the USA and
the Far East.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 42
Strategic Report - Performance
Operating Review - DCC Healthcare (continued)
DCC Healthcare’s
strategy is to build a
substantial healthcare
business focussed on the
pharma, medical device
and health and beauty
sectors.
DCC Health & Beauty Solutions
DCC Health & Beauty Solutions is one
of Europe’s leading outsourced service
providers to the health and beauty
sector with a customer base across the
continent serviced from our operations
in Britain and Scandinavia. DCC Health
& Beauty Solutions’ range of outsourced
services is focussed principally on the
areas of nutrition (vitamin and health
supplements) and beauty products
(skin care and bath and body care). The
service offering encompasses product
development, formulation, stability and
other testing and regulatory compliance,
as well as manufacturing and packing.
In January 2014, DCC Health & Beauty
Solutions further strengthened its
business through the acquisition of
Universal Products Manufacturing
(Lytham) Limited (‘UPL’), a British
contract manufacturer of creams and
liquids. UPL develops, manufactures
and packs a wide range of skincare,
haircare and pharmaceutical products.
DCC Health & Beauty Solutions is now
one of the two leading British creams
and liquids contract manufacturers for
brand owners. The business operates
six licensed manufacturing facilities
(four in Britain and two in Sweden)
and contract manufactures in a wide
variety of product formats (tablets, soft
gel and hard shell capsules, creams
and liquids). The business continues
to enhance its reputation and market
share in Continental Europe, especially
in Scandinavia, the Benelux region and
Germany.
Consumer demand for nutrition and
beauty products has been robust through
the economic downturn with continued
demand for product innovation. The
trend for health and beauty brand
owners to outsource non-sales and
marketing activities (including product
development) and to streamline their
supply chains is a more important
factor in driving demand in the contract
manufacturing sector. There is also a
trend towards increased regulation and
higher manufacturing standards in the
health and beauty sector. These trends
are favouring well-funded contract
manufacturers like DCC Health & Beauty
Solutions which has the resources to
invest in regulatory expertise and high
quality facilities. Our main competitors
include Catalent, Aenova, Brunel and
Ayanda in nutrition and LF Beauty and
Swallowfield in creams/liquids.
Revenue split by product/service area
Pharma
Devices
Logistics
Health & Beauty Solutions
24%
24%
23%
29%
Strategy and Development
DCC Healthcare’s vision is to build
a substantial healthcare business
focussed on the pharma, medical device
and health and beauty sectors.
DCC Vital
In pharma, the business is focussed
on strengthening its market positions
and expanding its product portfolio
organically and through bolt on
acquisitions. DCC Vital has a strong
regulatory capability in the pharma
area including product in-licensing
quality control and assurance and
pharmacovigilance. This capability,
together with strength in sourcing and
the uniformity of European Union product
licensing regulations will open up
opportunities for the business to extend
its pharma activities into new geographic
markets over the coming years.
In medical devices, the business is
continually seeking to strengthen its
market positions and develop its portfolio
of products both organically and through
bolt-on acquisitions. The medical
devices market is increasingly polarising
between high tech products in specialist
therapy areas and value for money
commodity products. DCC Vital seeks to
attract quality specialist agencies while
also selectively launching commodity
products under its own brands.
43
place, DCC Health & Beauty Solutions
is strengthening its relationships with
blue chip companies such as Apoteket,
Merck, Omega Pharma, Oriflame and
Unilever.
DCC Healthcare has a broad customer
base and its ten largest customers
account for approximately 29% of
revenue in the year ended 31 March
2014.
Suppliers
DCC Vital works with leading innovative
and generic pharma companies like
Cipla, Fresenius Kabi, Grifols, Hikma,
Martindale Pharma, Medac and
Rosemont as well as having its own
specialist manufacturing plant for beta
lactam antibiotics in Ireland, which was
acquired as part of the acquisition of
Kent Pharma.
DCC Vital represents leading medical,
surgical and scientific device brands
including BioRad, Diagnostica Stago, ICU
Medical, Mölnlycke, Oxoid and Smiths
Medical.
DCC Vital’s British value added
distribution services business has a very
broad supplier/client base including
Baxter, Covidien, Gambro, J&J and
Mölnlycke.
DCC Health & Beauty Solutions sources
from high quality raw materials and
ingredient suppliers across the globe
in order to provide its customers with
high quality and cost effective solutions
and is increasingly focussed on sourcing
sustainability-certified raw materials,
such as fish oils.
DCC Healthcare's supplier portfolio is
broadly based with the top ten suppliers
representing approximately 25% of
revenue in the year ended 31 March
2014.
The acquisitions of Forth Medical in
2012 and Leonhard Lang UK in 2013
increased the business’ sales and
marketing capability in Britain, providing
an enhanced platform for further
development of its medical device
portfolio in this territory.
During the year, DCC Healthcare
disposed of Virtus Inc., a US based
contract manufacturing business which
supplies a range of finished surfaces
for hospital beds and stretchers. The
business was acquired by Hill Rom
Manufacturing.
In logistics, DCC Vital is building
a growth platform in Britain in the
provision of stock management and
distribution services, acting as a neutral
wholesaler and providing services
to both brand owners, hospitals and
buying groups. DCC Vital believes that
this is a potentially interesting growth
sector as British acute care hospitals
seek cost savings and operating
efficiencies from customised just-in-
time distribution solutions which reduce
stock obsolescence and improve product
availability.
DCC Health & Beauty Solutions
DCC Health & Beauty Solutions has
grown to become one of Europe’s leading
outsourced service providers to the
health and beauty sector. Its high quality
facilities, together with the strength
and depth of its business development,
product development and technical
resources, has enabled DCC Health &
Beauty Solutions to build a reputation
for providing a highly responsive and
flexible service to its customers and
for assisting customers in rapidly
bringing new products from marketing
concept through to finished, shelf-ready
products. This service typically involves
product development, formulation,
stability and other testing and regulatory
compliance, as well as manufacturing
and packing. DCC will continue to
leverage this capability across a
broader customer base by expanding
its European customer base both
organically and by acquisition while also
continuing to expand its service offering
in related areas such as sports nutrition
and OTC pharma. DCC has invested in
increasing its capability in healthcare
creams and liquids and the acquisition of
UPL will accelerate the development in
this area.
Customers
DCC Vital’s market coverage in pharma
extends beyond the hospital sector into
retail pharmacy, pharma wholesalers
and the homecare channel, as well
as international distributors. Kent
Pharma provided DCC Vital with a
broader platform and the integration of
Kent and DCC Vital’s existing pharma
business has strengthened the key
account relationships with the major
retail/wholesale pharmacy groups in
Britain including Alliance Boots, Celesio,
Phoenix and The Co-op.
DCC Vital has deep market coverage
in the sales and distribution of medical
devices into the hospital sector in
Ireland and Britain and enjoys strong
relationships with the HSE in Ireland, the
NHS in Britain as well as individual acute
care hospitals, procurement groups and
private hospital groups.
DCC Vital’s British value added logistics
services business services a broad
customer base of brand owners,
hospitals and procurement groups
including Guys & St Thomas’s Hospital,
the Sheffield Hospital Trust and HCA.
DCC Health & Beauty Solutions
principally focuses on providing services
to leading premium brand owners in the
areas of nutrition (vitamin and health
supplements) and beauty products
(skin care and bath and body care).
Other customers include mail order
companies, specialist health and beauty
retailers and private label suppliers in
Britain, Continental Europe and other
markets. The acquisition of UPL in
January 2014 has strengthened DCC
Healthcare’s presence in the beauty
sector in both Britain and Europe, while
the acquisition of Vitamex Manufacturing
AB in June 2012 strengthened its
presence in the broader European
market in the nutritional arena. Today
approximately half of the output
from DCC’s facilities is consumed
in international markets outside of
Britain. As the lines between pharma
and consumer healthcare become
increasingly blurred in the market
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report DCC Healthcare
achieved excellent operating
profit growth across its
two businesses, DCC Vital
and DCC Health & Beauty
Solutions. The division
benefitted from acquisitions
completed in the year under
review and in the prior year
and from very strong organic
growth in DCC Health &
Beauty Solutions.
44
Strategic Report - Performance
Operating Review - DCC Healthcare (continued)
Our People
DCC Healthcare employs 1,777 people,
principally based in Britain and
Ireland, led by strong, entrepreneurial
management teams. In DCC Vital, the
senior management team has been
further strengthened during the year,
including the appointment of a new
managing director to lead the next phase
of expansion. Training and education
is critical in the healthcare sector and
DCC Healthcare continually invests in
ensuring that its people are experts in
their respective product or service areas
and are fully conversant with the relevant
regulatory frameworks within which the
business operates. DCC Healthcare’s
businesses continue to benefit from
their ongoing participation in the DCC
Graduate Programme.
Key Risks
DCC Healthcare operates in geographic
markets where healthcare spending
is predominantly funded (directly
or indirectly) by governments. The
economic downturn experienced over
the last number of years has resulted
in fiscal pressures and this has
influenced governments’ healthcare
budgets. DCC Healthcare’s competitive
product portfolio, strength in generics,
growing range of value for money own
brand products and outsourced service
offering mitigates this risk and indeed
is providing DCC Healthcare with new
growth opportunities.
Product quality and regulatory
compliance are critical matters for DCC
Healthcare - poor product quality could
have consequences for customer or
public safety. DCC Healthcare continually
invests in its technical and regulatory
resources, quality systems, staff training
and facilities to ensure quality standards
are consistently maintained and the
requirements of the relevant regulatory
authorities are met or surpassed. All
DCC Healthcare’s manufacturing sites
are licensed and subject to ongoing
regular internal and external third party
audit reviews.
DCC Healthcare trades with a very
broad supplier and customer base
and its constant focus on providing
a value added service ensures
excellent commercial relationships.
Recent acquisitions, for example Kent
Pharma, have included new sourcing
relationships, an extended portfolio and
greater customer reach. In the case of
a very small number of key suppliers,
principals and customers, their loss
could have a serious operational and
financial impact on the business.
Environment
DCC Healthcare is focussed on improving
the environmental sustainability of
its businesses and range of products
and services. Customers increasingly
monitor progress in this area. To this
end DCC Health & Beauty Solutions has
been focussed on minimising impacts in
its supply chain operations through the
procurement of sustainable ingredients
such as fish oils certified by the Marine
Stewardship Council and bee friendly
borage, a high quality plant based
source of the fatty acid gamma-linolenic
acid (‘GLA’). At an operational level,
minimising the use of process materials
(for example butyl acetate), identification
of reuse markets for waste streams and
the implementation of energy efficiency
projects have reduced environmental
impacts.
Performance for the Year Ended 31
March 2014
DCC Healthcare achieved excellent
operating profit growth across its two
businesses, DCC Vital and DCC Health &
Beauty Solutions. The division benefitted
from acquisitions completed in the year
under review and in the prior year and
from very strong organic growth in DCC
Health & Beauty Solutions.
DCC Vital, recorded strong profit growth
driven by recent acquisition activity.
DCC Vital completed the integration of
Kent Pharma, combining the product
portfolios and the commercial and
regulatory teams, and realised the
planned synergies. Kent Pharma
achieved strong growth in the respiratory
area while experiencing increased
competitive pressures for certain
antibiotic products. The pharma
performance in Ireland was impacted by
slower than projected growth in volumes
in DCC Vital’s compounding activity as
the National OPAT (Outpatient Parenteral
Antimicrobial Therapy) service contract
was rolled out.
45
£406.5m
£406.5m
£406.5m
£406.5m
£406.5m
£406.5m
£320.6m
£320.6m
£320.6m
£320.6m
£320.6m
£320.6m
£30.4m
£30.4m
£30.4m
£30.4m
£30.4m
£30.4m
£22.2m
£22.2m
£22.2m
£22.2m
£22.2m
£22.2m
7.5%
7.5%
7.5%
7.5%
7.5%
7.5%
6.9%
6.9%
6.9%
6.9%
6.9%
6.9%
14.2%
14.2%
14.2%
14.2%
14.2%
14.2%
13.1%
13.1%
13.1%
13.1%
13.1%
13.1%
£39.8m
£39.8m
£39.8m
£39.8m
£39.8m
£39.8m
13.0%
13.0%
13.0%
13.0%
13.0%
13.0%
£20.6m
£20.6m
£20.6m
£20.6m
£20.6m
£20.6m
7.7%
7.7%
7.7%
7.7%
7.7%
7.7%
Performance
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2014 v 2013: +26.8%
2013
2013
2014 v 2013: +26.8%
2014 v 2013: +26.8%
2014 v 2013: +26.8%
2014 v 2013: +26.8%
2014 v 2013: +26.8%
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2014 v 2013: +36.9%
2013
2013
2014 v 2013: +36.9%
2014 v 2013: +36.9%
2014 v 2013: +36.9%
2014 v 2013: +36.9%
2014 v 2013: +36.9%
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2013
DCC Healthcare: Key Financial Performance Indicators
Strategic objective
Drive for enhanced operational
performance
KPI
Revenue growth
Drive for enhanced operational
performance
Operating profit growth
Grow operating margin
Operating margin
Deliver superior shareholder returns
Return on capital employed
Generate cash flows to fund organic and
acquisition growth and dividends
Operating cash flow
Deliver superior shareholder returns
10 year operating profit CAGR
Health & Beauty Solutions’ existing
creams and liquids activities is under
way and is enabling the business to
offer customers enhanced product
development, manufacturing and
packing capability across its high quality,
licensed facilities. DCC is now one of
the two leading British creams and
liquids contract manufacturers for brand
owners. In the nutrition area, the planned
process to integrate the Swedish tablet
manufacturing operations into DCC’s
larger tablet manufacturing facility in
Britain has also commenced. The sales,
development, customer service and
regulatory teams in Sweden will remain
in situ to service DCC Health & Beauty
Solutions’ Scandinavian customer base.
DCC Vital achieved excellent growth
in medical devices in Britain, with
good organic growth augmented by
the strong performance of Leonhard
Lang UK, which was acquired in July
2013. Leonhard Lang UK is the market
leading supplier of electrodes and
diathermy consumables, under its
own Skintact brand, to hospitals and
emergency services in Britain. DCC
Vital’s British value added logistics
business performed satisfactorily with
new customer wins on the back of
continued market interest in its range of
customised stock management and just-
in-time logistics solutions for hospitals
and manufacturers.
DCC Health & Beauty Solutions achieved
very strong organic profit growth and
benefitted from a first time contribution
from UPL, acquired in January 2014.
Excellent organic growth was achieved
across both the nutrition (vitamins
and health supplements) and beauty
categories. The business benefitted from
successful new product development for
existing customers and from a number
of new business wins, particularly in
healthcare creams and liquids. The
process of combining UPL with DCC
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
DCC Technology – What We Do
350+
Technology brands
& manufacturers
DCC Technology’s activities are highlighted in blue
Pro-active sales & marketing
Category, product & technical expertise
End-user fulfillment, white-label
services & in-store product positioning
Kitting, localisation
& customisation of products
Demand & logistics management,
including import/export
Stock hubbing, bundling
& returns management
Product sourcing, website
& category management
OPEN
Specialist
retailers
Grocers
Etailers
Resellers
DCC Healthcare – What We Do
Pharma brand owners/
OEM manufacturers
Medical device brand
owners/OEM
manufacturers
DCC Vital
Sales, marketing &
distribution
New product
development
Procurement
Vendor management
Supply chain
management
& logistics services
DCC Health & Beauty Solutions
Health & Beauty brand owners
Specialist Health & Beauty retailers
Direct sales/mail order companies
DCC Healthcare’s activities are highlighted in blue
DCC Healthcare – What We Do
DCC Vital
Hospitals
Pharma retailers
and wholesalers
Pharma homecare
Product development,
contract manufacturing
and packing of health
& beauty products
Pharma brand owners/
OEM manufacturers
Medical device brand
owners/OEM
manufacturers
Sales, marketing &
distribution
Hospitals
New product
development
Procurement
Vendor management
Supply chain
management
& logistics services
Pharma retailers
and wholesalers
Pharma homecare
GPs
DCC Healthcare’s activities are highlighted in blue
DCC Food & Beverage – What We Do
3rd party brands
Own brands
Proactive sales
& marketing
Category
management
& product
education
Supply chain
services
New product
development
Multiples
Convenience stores
Wholesale
Food service
NEW
Pharmacy
46
DCC Food & Beverage’s activities are highlighted in red
Strategic Report - Performance
Operating Review - DCC Environmental
DCC Energy – What We Do
DCC Environmental is a leading British and Irish provider of recycling, waste management
and resource recovery services to the industrial, commercial, construction and public sectors,
operating in both the non-hazardous and hazardous segments of the market. This year DCC
Environmental handled approximately 1.4 million tonnes of waste through its twenty one facilities
in Britain and Ireland.
Domestic
Inbound
logistics
Inland depots
Agriculture
Importation terminal
Outbound
logistics
Markets and Market Position
Britain
DCC Environmental is a market leader
in non hazardous waste management
Exploration, production
in both Scotland and the East Midlands.
and refinery
In Scotland, operating under the
William Tracey brand, DCC operates a
comprehensive recycling infrastructure
across the central belt, including
one of the largest material recycling
facilities in Britain in Linwood, close to
Glasgow airport. During the year, DCC
Environmental strengthened its position
in the Edinburgh market through the
acquisition of Oran, a waste collection
business. In the East Midlands, operating
under the Wastecycle brand, DCC
DCC Energy’s activities are highlighted in orange
Environmental operates three material
recycling facilities in Nottingham and
Leicester along with a civic amenity site
on behalf of Nottingham City Council.
The facilities process waste collected
by both company owned and third party
vehicles into valuable commodities
which can be used as a substitute for
virgin materials. In addition, in the East
Midlands, DCC Environmental has the
added capacity to process waste not
suitable for recycling into a fuel which is
used by the cement industry.
In hazardous waste management, also
operating under the William Tracey
brand, DCC Environmental is a market
leader in Scotland and the north of
England with three dedicated facilities
providing a wide range of treatment
solutions for hazardous waste. During
the year the range of services offered
was broadened by entering the sludge
treatment sector. In addition, operating
under the Oakwood Fuels brand DCC
Environmental is a leading national
collector of waste oils, which are brought
back to its facility in Nottingham where
they are converted into a fuel which can
How we win
Aviation
Clear understanding of customers
requirements.
Provider of innovative solutions for
Marine
customers.
Respond quickly to opportunities
arising from new regulations.
Commercial/
industrial
Absolute focus on recycling/recovery
without the distraction of legacy
Retail
landfill assets.
forecourts
L
E
U
F
D
R
A
C
DCC Environmental – What We Do
Commercial and industrial
waste
Landfill
Material recycling facility
Energy
Construction and demolition
waste
Raw material
for manufacturing
DCC Annual Report and Accounts 2014
47
Revenue
£130.6m
2013: £116.1m
Operating profit
£11.7m
2013: £10.9m
Return on capital employed
UP 12.5%
8.6%
2013: 8.3%
Brands
Enva*, Wastecycle*, Tracey*, Oakwood*.
* DCC owned brands
UP 7.8%
Supplementary Information Financial Statements & Notes Governance Strategic Report 48
Strategic Report - Performance
Operating Review - DCC Environmental (continued)
DCC Environmental is
constantly looking to reduce
the proportion of waste
that cannot be recycled
or utilised for its energy
content. In this regard, as
highlighted in the case study,
DCC Environmental has
recently commenced the
export of processed material
to Sweden for energy
recovery.
be used as a substitute for heavy fuel oil.
Waste management businesses are
at the heart of the burgeoning circular
economy and DCC Environmental have
pioneered such development. One such
example is its relationship with British
Gypsum whereby waste gypsum is
collected nationally and brought back to
DCC Environmental's Nottingham site
where it is processed and then sent back
to British Gypsum’s facilities to be used
to manufacture new gypsum.
DCC Environmental is constantly
looking to reduce the proportion of
waste that cannot be recycled or utilised
for its energy content. In this regard,
as highlighted in the case study, DCC
Environmental has recently commenced
the export of processed material to
Sweden for energy recovery.
Overall, the British business handles 1.3
million tonnes of material, the majority
of which is collected by its own fleet
of 231 vehicles, and 71% of all waste
volumes are diverted from landfill.
Recovery percentages depend on the mix
of material with the highest percentage
achieved from construction material.
The pickup in economic activity,
particularly in the construction sector,
has translated into an improved market
backdrop in the non hazardous sector
with increased activity particularly
evident in the East Midlands. Recyclate
prices however remain relatively
low compared to historic highs. The
hazardous market remains challenging
with excess capacity evident.
2017 and 15% by 2025. Also, Scotland
recently passed legislation for the
introduction of its own landfill tax which
will replace the current UK system from
2015 and is expected to provide further
impetus to the development of the
Scottish waste industry.
At the recent Awards for Excellence
in Waste Management and Recycling,
a highly respected British ceremony,
William Tracey won Recycling Business
of the Year for its promotion of the new
regulations.
Ireland
Operating under the Enva brand, DCC
Environmental’s Irish business is
recognised as Ireland’s leading hazardous
waste treatment company. Enva
operates from six EPA/NIEA licensed
sites in both the Republic of Ireland and
Northern Ireland, offering technically
innovative solutions to a wide range of
waste streams for both multinational
and indigenous clients. It has an in-
house infrastructure to treat a broad
range of materials including waste oil,
contaminated soils, bulk chemicals and
contaminated packaging. In cases where
it is unable to treat the waste itself, it has
relationships with a network of European
based companies to provide a range of
solutions for hazardous waste which
are not available in Ireland. Enva’s water
treatment division provides specialised
chemicals, equipment and professional
services to the drinking, industrial
and waste water sectors. The division
operates an in-house manufacturing
facility as well as an INAB accredited
laboratory to support these services.
DCC is fortunate that Scotland is such an
important market noting the country’s
continuous focus on developing and
improving waste management through
its Zero Waste agenda. From 1 January
2014, all businesses in Scotland had
to present metals, plastics, glass and
card for separate collection. In addition,
businesses in non-rural areas which
produce over 50kg of food waste per
week must also present this for separate
collection. This will broaden to include all
businesses producing 5kg of food waste
per week from January 2016.
In October 2013 plans were published
to reduce all waste in Scotland by 7% by
Enva works closely with Oakwood in
developing new treatment processes
for hazardous waste and also with DCC
Energy who provide a route to market for
the Processed Fuel Oil produced from
waste oil.
The Irish waste market is valued at
approximately €1 billion. The sector
was severely impacted by the economic
recession, in particular the collapse in
the construction sector which hit the
non hazardous waste sector particularly
hard. Whilst DCC Environmental’s Irish
business was somewhat protected
through its focus on the niche hazardous
sector and through developing innovative
49
Case Study
TRACEY COMMENCES EXPORT OF REFUSE DERIVED FUEL
During the year, Tracey commenced the manufacture of
Refuse Derived Fuel which is exported to Sweden. Refuse
Derived Fuel is produced from residual waste where
recyclable material has already been separated. The residual
waste is processed to remove any remaining recyclable
material and then shredded and bailed to allow it to be
shipped abroad. There is currently a lack of ‘Energy from
Waste’ plants in Britain whereas there was significant
investment in such infrastructure in Continental Europe.
By producing and exporting Refuse Derived Fuel, Tracey is
assisting Scotland in meeting its landfill diversion targets as
part of its continued journey to a Zero Waste society and is
also producing a fuel used to generate renewable energy in
Sweden. In due course, as further infrastructure is developed
in Britain, such material will be redirected to plants in Britain
which will assist in achieving its renewable energy targets.
solutions for hazardous waste, it is intent
on ensuring that it fully benefits from the
improving economic backdrop.
Strategy and Development
DCC Environmental’s strategy continues
to be to grow as a leading broadly based
waste management and recycling
business in Britain and Ireland by
positioning itself to take advantage of the
trend towards more sustainable waste
management, with a particular emphasis
on resource recovery and recycling.
DCC Environmental will ensure that
it harnesses the opportunities arising
from the recovery in the economies
it operates in. The strategy includes
delivering superior value adding services
to all its customers by way of a deep
understanding of their requirements and
the development of innovative solutions
to their problems. Furthermore, DCC
Environmental is aligning its business
to support the transition to both a low
carbon economy and the emerging
circular economy through a focus on
resource rather than waste, developing
internal climate change expertise and
continually improving its recycling
capability.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report DCC Environmental’s
management have deep
industry knowledge with
the former owners of the
businesses still with the
Group. Each company seeks
to develop their employees
as illustrated by a policy
of promoting from within
the organisation wherever
possible.
50
Strategic Report - Performance
Operating Review - DCC Environmental (continued)
Customers
DCC Environmental provides recycling,
waste management and resource
recovery services to the industrial and
commercial, construction and public
sectors.
Revenue split by customer
Industrial and commercial
Construction and demolition
Public sector
67%
19%
14%
The customer base is quite fragmented,
with the ten largest customers
accounting for approximately 20% of
total revenue in the year ended 31 March
2014. Many of the customers have been
with DCC Environmental for a long
time, in some cases over 30 years, and
the business has developed a clear
understanding of their requirements.
Our People
DCC Environmental’s management
have deep industry knowledge with the
former owners of the businesses still
with the Group. Each company seeks to
develop their employees as illustrated
by a policy of promoting from within
the organisation wherever possible.
Employee engagement is critical
and employee surveys are regularly
undertaken.
The businesses constantly strive for
excellence in health and safety to ensure
that a safe place of work is provided to
all employees. In this regard, external
consultants have been recently appointed
across the division to provide assistance
in the development of a safety culture
awareness program.
DCC Environmental currently employs
1,005 people.
Key Risks
Similar to all businesses within the
Group, DCC Environmental faces a
number of strategic, operational,
compliance and financial risks.
As highlighted in previous years,
every effort is made to minimise the
interaction of heavy plant and people but
given the nature of its operations, it is
impossible to eliminate entirely and this
gives rise to the risk of accidents.
The construction sector is an important
market for DCC Environmental and
this sector is particularly sensitive to
changes in the economic backdrop, as
has been the case in recent years.
DCC Environmental has an exposure
to movements in both recyclate and oil
commodity prices.
Noting the significant degree of
regulation of the sector, it is important
that there is uniform enforcement of
the regulations. In addition changes in
regulations can create opportunities
but also risks to business models. The
sector attracts a relatively high degree
of media scrutiny which also creates a
heightened risk of negative publicity.
A number of IT projects are being
undertaken to enhance the IT
environment and related operational
efficiencies which gives rise to particular
implementation risks which are being
managed.
51
£130.6m
£130.6m
£130.6m
£130.6m
£130.6m
£130.6m
£130.6m
£116.1m
£116.1m
£116.1m
£116.1m
£116.1m
£116.1m
£116.1m
£11.7m
£11.7m
£11.7m
£11.7m
£11.7m
£11.7m
£11.7m
£10.9m
£10.9m
£10.9m
£10.9m
£10.9m
£10.9m
£10.9m
9.0%
9.0%
9.0%
9.0%
9.0%
9.0%
9.4%
9.4%
9.4%
9.4%
9.0%
9.4%
9.4%
9.4%
8.6%
8.6%
8.6%
8.6%
8.6%
8.6%
8.3%
8.3%
8.3%
8.3%
8.6%
8.3%
8.3%
8.3%
68%
68%
68%
68%
68%
68%
69%
69%
69%
69%
68%
69%
69%
69%
£17.2m
£17.2m
£17.2m
£17.2m
£17.2m
£17.2m
£17.5m
£17.5m
£17.5m
£17.5m
£17.2m
£17.5m
£17.5m
£17.5m
14.9%
14.9%
14.9%
14.9%
14.9%
14.9%
14.9%
12.7%
12.7%
12.7%
12.7%
12.7%
12.7%
12.7%
DCC Environmental: Key Financial Performance Indicators
Strategic objective
Drive for enhanced operational
performance
KPI
Revenue growth
Drive for enhanced operational
performance
Operating profit growth
Grow operating margin
Operating margin
Deliver superior shareholder returns
Return on capital employed
Drive for enhanced margins
Recycling/recovery%
Generate cash flows to fund organic and
acquisition growth and dividends
Operating cash flow
Deliver superior shareholder returns
10 year operating profit CAGR
Performance
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2014
2014 v 2013: +12.5%
2013
2013
2014 v 2013: +12.5%
2014 v 2013: +12.5%
2014 v 2013: +12.5%
2013
2014 v 2013: +12.5%
2014 v 2013: +12.5%
2014 v 2013: +12.5%
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2014
2014 v 2013: +7.8%
2013
2013
2014 v 2013: +7.8%
2014 v 2013: +7.8%
2014 v 2013: +7.8%
2013
2014 v 2013: +7.8%
2014 v 2013: +7.8%
2014 v 2013: +7.8%
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2014
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2014
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2014
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2014
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2014
2013
2013
2013
Performance for the Year Ended
31 March 2014
DCC Environmental’s operating profit
increased by 7.8%, driven by improved
market conditions in the non-hazardous
waste market and a continued focus on
operational efficiency.
In Britain, the non-hazardous waste
business benefitted from improved
economic conditions with a pickup
in construction sector activity. In the
hazardous sector, price competition
continues to be intense, with the
improved economic backdrop yet to
translate into an increase in demand.
Environment
The businesses continue to focus
on energy efficiency initiatives to
generate cost savings and reduce
carbon emissions. During the year both
rainwater harvesting and solar panels
were installed at a number of sites.
Tracey have invested in vehicles which
have the ability to maintain separate
waste streams in one collection vehicle
thereby reducing the carbon impact of
these uplifts. Wastecycle was re-certified
for another two years to the Carbon Trust
Standard.
During the year there have been a
number of routine inspections by
environmental regulatory agencies.
No major non-conformances with
licensing were recorded and all minor
non-conformances or observations
were actioned as a priority. DCC
Environmental's 21 sites continue to
maintain excellent or good ratings from
their respective regulators.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
DCC Technology – What We Do
350+ Global
technology brands
& manufacturers
DCC Technology’s activities are highlighted in blue
Pro-active sales & marketing
Category, product & technical expertise
End-user fulfillment, white-label
services & in-store product positioning
Kitting, localisation
& customisation of products
Demand & logistics management,
including import/export
Stock hubbing, bundling
& returns management
Product sourcing, website
& category management
OPEN
Specialist
retailers
Grocers
Etailers
Resellers
DCC Healthcare – What We Do
3rd party
brand owners
Own brand/
licence products
DCC Vital
Sales, marketing &
distribution
Portfolio development
and product licensing
Procurement
Vendor management
Supply chain
management
& logistics services
Hospitals
Pharma retailers
and wholesalers
Pharma homecare
GPs
DCC Health & Beauty Solutions
52
Health & beauty brand owners
Strategic Report - Performance
Specialist health & beauty retailers
Operating Review - DCC Food & Beverage
Direct sales/mail order companies
Product development,
contract manufacturing
and packing of health
& beauty products
DCC Healthcare’s activities are highlighted in blue
DCC Food & Beverage is principally focussed on the sales, marketing and distribution of food and
beverage products in Ireland.
offering and company owned brands now
account for approximately 33% of total
revenue.
How we win
Markets and Market Position
In Ireland, DCC Food & Beverage
markets, sells and distributes a range
DCC Healthcare – What We Do
of own and third party agency brands
and provides category management
and merchandising services to a broad
range of customers including grocery
multiples, symbol and independent
retailers, pharmacies, off-licences,
hotels, restaurants and cafes.
3rd party
brand owners
The majority of DCC Food & Beverage’s
operations are focussed on the Irish
grocery market which has shown some
contraction over recent years due to
the general economic downturn. As
economic conditions remain challenging,
consumers continue to search for value
both in the grocery and out of home
markets.
Own brand/
licensed products
While private label now accounts for
approximately 36% of all sales by value,
brands continue to be important to the
Irish consumer. DCC Food & Beverage
continues to develop its own branded
DCC Healthcare’s activities are highlighted in blue
DCC Vital
DCC Food & Beverage’s businesses
enjoy a number of leading market
positions in the categories in which they
operate.
Sales, marketing &
distribution
Procurement
In Ireland, the business is the leading
and most comprehensive supplier
Portfolio development
and product licensing
of healthy foods and beverages, fine
foods and vitamins, minerals and
supplements (‘VMS’), selling owned
and agency brands directly to both the
grocery and pharmacy sectors. DCC
Food & Beverage’s healthfood brand,
Kelkin, is recognised as the leading
brand in the ambient health/’better for
Vendor management
you’ food sector and offers a healthy
choice in many food categories. Kelkin
has developed its presence in the fast
Supply chain
growing gluten free category in Britain
management
and has achieved listings with key
& logistics services
multiples. The Kelkin brand is also a
strong and developing brand in the VMS
sector in Ireland.
Comprehensive range of leading own
brand and agency products.
Focussed on attractive and growing
product segments.
Highly effective and efficient
distribution network and supply chain.
Hospitals
Wide range of customers including
retail, food service and pharmacy.
Category management focus.
Pharma retailers
and wholesalers
Sales and marketing expertise.
Continued focus on operational
efficiency.
Pharma homecare
GPs
DCC Food & Beverage – What We Do
3rd party brands
Own brands
Proactive sales
& marketing
Category
management
& product
education
Supply chain
services
NEW
New product
development
Multiples
Convenience stores
Wholesale
Food service
Pharmacy
DCC Food & Beverage’s activities are highlighted in red
DCC Energy – What We Do
Inbound
logistics
Outbound
logistics
Exploration, production
Importation terminal
and refinery
DCC Energy’s activities are highlighted in orange
DCC Environmental – What We Do
Inland depots
Agriculture
Domestic
Aviation
Marine
Commercial/
industrial
Retail
forecourts
L
E
D
R
U
F
A
C
Commercial and industrial
Landfill
Material recycling facility
Energy
Construction and demolition
Raw material
for manufacturing
53
UP 7.7%
UP 25.9%
Revenue
£186.9m
2013: £173.6m
Operating profit
£7.7m
2013: £6.1m
Return on capital employed
11.8%
2013: 9.5%
Brands
Healthfood - Alpro, Biofreeze, Celtic Chocolates,
Filippo Berio, Fry Light, Hipp, Jakemans, Kallo, Kalms,
Kelkin*, Nairns, Nanny Care, Ocean Spray, Olbas, Ortis,
Pomegreat, Popz, St Dalfour, Vitabiotics, Whole Earth.
Indulgence - Andrew Peace, Antinori, Beringer,
Bollinger, Chapoutier, Cono Sur, Elizabeth Shaw,
French Connection*, Freixenet, Glenfiddich, Goodalls*,
Hula Hoops, KP, Lemons*, Lindemans, Louis Jadot,
McCoys, Masi, Mateus, Meanies, Moreau, Oatfield,
Penfolds, Rancheros, Robert Roberts*, Sacla, Sea
Dog*, Skips, Stolichnaya, Sutter Home, Topps, Torres,
Tullamore Dew, Wakefield, Wilton Candy*, Wolfblass,
YR*.
Logistics - Allied Foods*, Mr. Food*.
* DCC owned brands
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 54
Strategic Report - Performance
Operating Review - DCC Food & Beverage (continued)
DCC Food &
Beverage is also a leading
temperature controlled
supply chain service
provider in Ireland. It offers
a full range of temperature
controlled supply chain
solutions to major retailers,
manufacturers and food
service customers.
Also in Ireland, the business is a leading
value added distributor of indulgence
products in the grocery, impulse and
food service sectors with a strong,
complementary range of company owned
and agency brands, specialising in wine,
hot beverages (coffee and tea), home
cooking (herbs, spices and colourings),
snacks and confectionery.
DCC Food & Beverage is now the leading
distributor of wine in Ireland to both the
on and off-trade, providing an extensive
portfolio of international wine brands. It
is also focussed on further developing its
spirits portfolio and offers its principals
significant on-trade reach in the Irish
marketplace.
In Britain, the business is a leading
supplier of branded (both company
owned and agency) and exclusive retail
wine solutions to the multiple off-trade
as well as the on-trade sector (principally
through regional wholesalers).
DCC Food & Beverage is also a leading
temperature controlled supply chain
service provider in Ireland. It offers a
full range of temperature controlled
supply chain solutions to major retailers,
manufacturers and food service
customers.
KSG, which is 50% owned by DCC,
provides catering and hospitality services
to a range of clients in the At Work,
Healthcare, Education and Travel sectors
in Ireland. KSG serves approximately 10
million customer meals annually.
Strategy and Development
The strategy of DCC Food & Beverage
is to develop into a leading added
value sales, marketing and distribution
business, building number 1 or number 2
branded positions in focussed segments
and delivering an above average return
on capital. This will be achieved by
building on current positions in the
healthfood, indulgence and logistics
markets, both organically and through
acquisition.
The business will continue to increase
its focus on brands. During the year
the business acquired the Gateaux
brand to add to its existing portfolio
which includes Kelkin, Robert Roberts,
Goodall’s, YR and Lemon’s. Through
organic growth and acquisition the
business will also continue to actively
develop its extensive range of third party
agency brands across its healthfoods
and indulgence categories with a
particular focus on selling, marketing,
education, training and category
management.
The wine and spirits business in Ireland
will continue to develop its range and
grow its market share. During the year
the business generated significant
incremental sales from the full year
effect of new wine agencies added in the
prior year.
A continued focus on product
stewardship including healthy eating,
sustainable sourcing, responsible
advertising, packaging and labelling
compliance is central to the strategy of
the business.
55
Case Study
KELKIN – FREE FROM
Kelkin has seen a dramatic increase in sales in the Free
From category over the last two years in Ireland and Britain.
This strong growth is as a result of Kelkin’s leadership in
providing a comprehensive range of gluten free products
augmented by a constant flow of innovative new products.
Kelkin also works closely with trade partners in Ireland
advising on category growth strategies for Free From. This
has led to an improved position, increased space allocation
and choice within multiple retail customers and more
recently in convenience retailers as well.
Kelkin, as category partners in Free From, is working
closely with retailers to share its wider vision on health and
wellbeing. The company prides itself on its wide range of
great tasting, Free From products and is constantly working
to improve quality and choice for its consumers. Kelkin has
a long standing relationship with coeliacs, who assist with
product improvements and new product testing. Research
carried out in conjunction with Bord Bia in February 2014
found that the most important factor to those buying Free
From foods was taste, followed by price.
Another important element of this strong growth is that
more and more people are choosing to cut allergens like
gluten, wheat and dairy from their diets and it is no longer
just coeliacs who are buying gluten free foods. It has become
a lifestyle choice for many as they feel better and have more
energy when they remove these foods from their diets. In
the UK in 2012, 49% of gluten free shoppers were new to
the category and of these, 97% were not coeliac sufferers,
according to research.
Some of Kelkin’s most successful Free From products (which
benefit from the highest brand awareness in the category)
include unique sourdough breads, made from a traditional
recipe. The brands wide range of treats like Jaffa Cakes
and Teacakes means that there are more delicious choices
available for everyone and its growing range of cereals is in
keeping with Kelkin’s mission to "make the healthy choice
the easy choice".
Kelkin’s website (www.kelkin.ie) provides consumers with
advice on Free From living and coeliac disease.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 56
Strategic Report - Performance
Operating Review - DCC Food & Beverage (continued)
Suppliers
DCC Food & Beverage deals with a
broad base of almost 2,000 suppliers.
The supply base is quite fragmented
and the top ten suppliers only account
for approximately 27% of total revenues.
A key to success in its businesses is
remaining close to new trends and
developments in the categories in which
it operates, and as a result, DCC Food &
Beverage remains in constant contact
with its supply base to ensure that it
brings the best of what is new to its
customers.
Our People
DCC Food & Beverage currently employs
859 people. It employs management
teams with deep category and industry
knowledge, combined with strong
operational capability. This depth of
knowledge is continually enhanced by
a focus on product training particularly
in wine, hot beverages and healthfoods.
The wellbeing of all employees remains
a key priority and there has been a 40%
reduction in the lost time injury rate
across the division during the year.
Key Risks
DCC Food & Beverage is made up
of a number of consumer focussed
businesses where changing market
demand for certain products and product
substitution remain key risks faced
by the division. The potential loss of a
number of key suppliers or customers
represents a risk for the division but this
is mitigated by the division’s increased
focus on developing its range of own
brand products while continuing to
provide a full service route to market for
key agencies. Product quality is central
to success and remains under constant
review with focussed quality assurance
undertaken within each business.
DCC Food &
Beverage currently employs
859 people. It employs
management teams with
deep category and industry
knowledge, combined
with strong operational
capability.
Customers
DCC Food & Beverage’s business is
primarily based in Ireland, with a modest
wine business in Britain. The ten largest
customers accounted for 47% of total
revenue in the year ended 31 March
2014.
The proforma revenue split by customer
type for the year ended 31 March 2014 is
as follows:
Pro forma revenue split by customer type
Pro forma revenue split by customer type
Grocery multiples
Symbol retailers
Wholesale
Grocery multiples
Food service
Symbol retailers
Independent retailers
Wholesale
Food service
Independent retailers
35%
25%
14%
35%
13%
25%
13%
14%
13%
13%
DCC Food & Beverage’s operating
companies each have their own focussed
sales teams that regularly interact with
their customers on developing joint
business plans that focus on sales,
marketing, category management,
advertising, promotions, new product
development and product quality.
The proforma revenue split by category
type for the year ended 31 March 2014 is
as follows:
Pro forma revenue split by category
Pro forma revenue split by category
Wine
Health foods
Confectionery & grocery
Wine
Snack foods
Health foods
Hot beverages/equipment
Confectionery & grocery
Other
Snack foods
Hot beverages/equipment
Other
49%
16%
12%
49%
9%
16%
7%
12%
7%
9%
7%
7%
57
£186.9m
£186.9m
£186.9m
£186.9m
£186.9m
£186.9m
£173.6m
£173.6m
£173.6m
£173.6m
£173.6m
£173.6m
£6.1m
£6.1m
£6.1m
£6.1m
£6.1m
£6.1m
3.5%
3.5%
3.5%
3.5%
3.5%
3.5%
9.5%
9.5%
9.5%
9.5%
9.5%
9.5%
£7.7m
£7.7m
£7.7m
£7.7m
£7.7m
£7.7m
4.1%
4.1%
4.1%
4.1%
4.1%
4.1%
11.8%
11.8%
11.8%
11.8%
11.8%
11.8%
£11.1m
£11.1m
£11.1m
£11.1m
£11.1m
£11.1m
2.1%
2.1%
2.1%
2.1%
2.1%
2.1%
12.7%
12.7%
12.7%
12.7%
12.7%
12.7%
14.9%
14.9%
14.9%
14.9%
14.9%
14.9%
Performance
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2014 v 2013: +7.7%
2013
2014 v 2013: +7.7%
2014 v 2013: +7.7%
2014 v 2013: +7.7%
2014 v 2013: +7.7%
2014 v 2013: +7.7%
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2014 v 2013: +25.9%
2013
2014 v 2013: +25.9%
2014 v 2013: +25.9%
2014 v 2013: +25.9%
2014 v 2013: +25.9%
2014 v 2013: +25.9%
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
2013
£4.5m
£4.5m
£4.5m
£4.5m
£4.5m
£4.5m
-2.2%
-2.2%
-2.2%
-2.2%
-2.2%
-2.2%
DCC Food & Beverage: Key Financial Performance Indicators
Strategic objective
Drive for enhanced operational
performance
KPI
Revenue growth
Drive for enhanced operational
performance
Operating profit growth
Grow operating margin
Operating margin
Deliver superior shareholder returns
Return on capital employed
Generate cash flows to fund organic and
acquisition growth and dividends
Operating cash flow
Deliver superior shareholder returns
10 year operating profit CAGR
Performance for the Year Ended
31 March 2014
Operating profit in DCC Food & Beverage
increased by 25.9% with growth in
each of its major product areas. The
Indulgence and Health Foods businesses
delivered growth in company owned
brands, while also benefitting from the
full year effect of some agency wins.
The Kelkin healthy foods brand achieved
good sales growth, especially in gluten
free products, and benefitted from
increased listings in multiples in Britain.
Operating profit
in DCC Food & Beverage
increased by 25.9% with
growth in each of its
major product areas. The
Indulgence and Health
Foods businesses delivered
growth in company
owned brands, while also
benefitting from the full
year effect of some agency
wins.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
58
Strategic Report - Performance
Financial Review
Despite the challenge of a mild winter, the Group had a
good year with revenue increasing by 6.2%, operating profits
increasing 11.5%, adjusted earnings per share increasing by
11.7%, operating cash flow increasing to £349 million, free
cash flow (before interest and tax payments) increasing to £278
million and a cash conversion ratio of 133%.
This Financial Review provides an overview of the Group’s
financial performance for the year ended 31 March 2014 and of
the Group’s financial position at that date.
Table 1: Performance Metrics
Growth:
Operating profit* growth (%)
Volume growth - DCC Energy (%)
Revenue growth - excl. DCC Energy (%)
Operating profit margin % - excl. DCC Energy (%)
Adjusted earnings per share growth (%)
Return:
Return on average capital employed (%)
Operating cash flow (£’m)
Working capital days (days)
Debtor days (days)
Free cash flow (before interest and tax payments)
Conversion of operating profits to free cash flow (%)
Financial Strength/Liquidity/Financial Capacity for Development
EBIT:net interest (times)
EBITDA:net interest (times)
Cash balances (net of overdrafts) (£’m)
Net debt (£’m)
Net debt as a % of total equity (%)
Net debt:EBITDA (times)
* Excluding exceptionals and amortisation of intangible assets
** Based on continuing activities i.e. excluding DCC Technology’s Enterprise distribution business which was disposed of in June 2012
2014
2013
11.5%
6.1%
21.4%
3.3%
11.7%
16.3%
348.7
(0.6)
31.4
278.1
133.4%
9.7
12.4
814.6
86.3
9.1%
0.3
27.5%**
21.8%
19.4%**
3.3%
32.6%
15.6%
264.6
2.2
36.9
207.1
110.9%
13.3
17.1
431.1
186.0
20.8%
0.7
Overview of Results
Revenue
Operating profit
DCC Energy
DCC Technology
DCC Healthcare
DCC Environmental
DCC Food & Beverage
Group operating profit
Finance costs (net)
Profit before exceptional items, amortisation of intangible assets and tax
Amortisation of intangible assets
Exceptional charge (net)
Profit before tax
Taxation
Non-controlling interests
Net earnings
Adjusted earnings per share (pence)
59
2014
£’m
2013
£’m
Change on
prior year
%
11,231.7
10,572.7
+6.2%
110.5
48.1
30.4
11.7
7.7
208.4
(21.4)
187.0
(20.4)
(15.4)
151.2
(27.3)
(2.7)
121.2
191.2
106.2
41.5
22.2
10.9
6.1
186.9
(14.1)
172.8
(14.4)
(25.5)
132.9
(26.3)
(0.3)
106.3
171.2
+4.0%
+15.9%
+36.9%
+7.8%
+25.9%
+11.5%
+8.2%
+13.7%
+14.1%
+11.7%
Revenue
Revenue increased by 6.2% to £11.2
billion driven by acquisitions, particularly
in DCC Energy, and excellent organic
growth in DCC Technology. DCC Energy
increased its sales volumes by 6.1%
driven by acquisitions, with organic
volumes decreasing by 3.0% primarily
due to the impact of a very mild winter.
Excluding DCC Energy, Group revenue
was 21.4% ahead of the prior year. Most
of this growth was organic and was
driven by the growth in DCC Technology,
particularly in Britain.
Operating Profit
Group operating profit increased by
11.5%. Approximately half of this
growth was organic, primarily reflecting
excellent growth in DCC Technology in
Britain and in DCC Healthcare’s health
and beauty activities.
Operating profit in DCC Energy, the
Group’s largest division, was 4.0%
ahead of the prior year. This growth
reflected the successful integration
of acquisitions completed in prior
years and cost efficiency initiatives,
offset to some extent by the impact on
volumes and margins of the very mild
weather conditions across Northern
Europe, particularly in the months from
December 2013 to February 2014 when
average temperatures were well above
the 10 year average.
Operating profit in DCC Technology,
the Group’s second largest division,
was strongly (15.9%) ahead of the prior
year primarily based on very strong
organic growth in mobile computing and
communications products in Britain.
Table 2: Revenue
DCC Energy
DCC Technology
DCC Healthcare
DCC Environmental
DCC Food & Beverage
Total
Weighting %
H1
£’m
4,093.4
959.2
195.1
64.9
107.3
5,419.9
48.3%
2014
H2
£’m
4,150.3
1,304.8
211.4
65.7
79.6
5,811.8
51.7%
FY
£’m
H1
£’m
8,243.7
2,264.0
406.5
130.6
186.9
11,231.7
100.0%
3,827.6
742.8
150.7
58.2
96.9
4,876.2
46.1%
2013
H2
£’m
4,284.6
1,107.4
169.9
57.9
76.7
5,696.5
53.9%
FY
£’m
H1
%
8,112.2
1,850.2
320.6
116.1
173.6
10,572.7
100.0%
+6.9%
+29.1%
+29.5%
+11.5%
+10.8%
+11.1%
Change
H2
%
-3.1%
+17.8%
+24.4%
+13.6%
+3.8%
+2.0%
FY
%
+1.6%
+22.4%
+26.8%
+12.5%
+7.7%
+6.2%
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
60
Strategic Report - Performance
Financial Review (continued)
Table 3: Operating Profit
DCC Energy
DCC Technology
DCC Healthcare
DCC Environmental
DCC Food & Beverage
Total
Weighting %
H1
£’m
33.5
14.1
12.6
6.3
2.9
69.4
33.3%
2014
H2
£’m
77.0
34.0
17.8
5.4
4.8
139.0
66.7%
FY
£’m
110.5
48.1
30.4
11.7
7.7
208.4
100.0%
H1
£’m
18.9
12.7
9.7
6.3
2.7
50.3
26.9%
2013
H2
£’m
87.3
28.8
12.5
4.6
3.4
136.6
73.1%
FY
£’m
106.2
41.5
22.2
10.9
6.1
186.9
100.0%
Change
H2
%
H1
%
-11.9%
+77.8%
+10.9%
+18.2%
+29.3% +42.9 %
+18.2%
+40.6%
+1.8%
+0.2%
+7.0%
+38.0%
FY
%
+4.0%
+15.9%
+36.9%
+7.8%
+25.9%
+11.5%
Operating profit in DCC Healthcare was
substantially (36.9%) ahead of the prior
year, benefitting from the acquisition of
Kent Pharma, which was completed in
February 2013 and from a very strong
performance in DCC Health & Beauty
Solutions.
DCC Environmental and DCC Food &
Beverage, DCC’s two smaller divisions,
traded ahead of the prior year as early
signs of economic recovery became
evident in Britain and Ireland.
Although DCC’s operating margin on a
continuing basis (excluding exceptionals)
was 1.9%, compared to 1.8% in 2013, it is
important to note that this measurement
of the overall Group margin is of
limited relevance due to the influence
of changes in oil product costs on the
percentage. While changes in oil product
costs will change percentage operating
margins, this has little relevance in the
downstream energy market in which
DCC Energy operates, where profitability
is driven by absolute contribution per
litre (or tonne) of product sold and not
by a percentage margin. Excluding
DCC Energy, the operating margin on a
continuing basis (excluding exceptionals)
for the Group’s other divisions was 3.3%
(3.3% in 2013), with some of the sales
growth in DCC Technology being at
relatively lower margins.
Finance Costs (net)
Net finance costs increased to £21.4
million (2013: £14.1 million) primarily
as a result of the incremental interest
cost of the US Private Placement debt
drawn down in April 2013 and higher
average net debt during the year of £366
million compared to £279 million in
the prior year. The increase in average
net debt arose primarily from seasonal
increases in working capital in DCC
Technology, as a result of the significant
organic increase in its revenue. Interest
was covered 12.4 times by Group
operating profit before depreciation and
amortisation of intangible assets (17.1
times in 2013).
An analysis of the performance for the
first half, the second half and the full
year ended 31 March 2014 is set out in
Tables 2 and 3.
A detailed review of the operating
performance of each of DCC’s divisions
is set out on pages 22 to 57.
The compound growth rate in DCC’s
operating profits over the last 20,15,10
and 5 years is as follows:
20 years (i.e. since 1994)
15 years (i.e. since 1999)
10 years (i.e. since 2004)
5 years (i.e. since 2009)
CAGR %
13.4%
12.3%
11.4%
6.9%
Reconciliation of Adjusted Earnings to
Profit Attributable to Shareholders
Adjusted earnings
Amortisation of intangible assets after tax
Non-trading items after tax and minority interests
Profit attributable to shareholders
Adjusted EPS
Amortisation of intangible assets after tax
Non-trading items after tax
Basic EPS
2014
£’m
160.2
(16.3)
(22.7)
121.2
pence
191.20
(19.38)
(27.12)
144.70
2013
£’m
143.1
(11.3)
(25.5)
106.3
pence
171.20
(13.56)
(30.47)
127.17
Change on
prior year
+11.9%
+14.1%
+11.7%
+13.8%
61
There was a tax charge of £5.3 million,
as referred to above, for Taiwanese
withholding tax, which is being
challenged by DCC and a non-controlling
interest charge of £2.1 million relating
to these exceptional items. The cash
impact in the year of exceptional charges
relating to the year to 31 March 2014 and
the prior year was £21.1 million.
Profit Before Tax
Profit before tax increased by 13.7% to
£151.2 million.
Taxation
The effective tax rate for the Group was
14% compared to 17% in the prior year.
Adjusted Earnings Per Share
Adjusted earnings per share increased
by 11.7% to 191.20 pence. The compound
annual growth rate in DCC’s adjusted
earnings per share over the last 20,15,10
and 5 years is as follows:
20 years (i.e. since 1994)
15 years (i.e. since 1999)
10 years (i.e. since 2004)
5 years (i.e. since 2009)
CAGR %
12.3%
11.4%
10.0%
6.5%
Dividend
The Board is recommending a final
dividend of 50.73 pence per share, which
when added to the interim dividend of
26.12 pence per share, gives a total
dividend for the year of 76.85 pence per
share. This represents a 10% increase
over the total prior year dividend of 69.86
pence per share (85.68 cent per share
translated at the average euro/sterling
exchange rate for the year ended 31
March 2013 of £0.815 = €1). The dividend
is covered 2.5 times by adjusted earnings
per share (2.5 times in 2013). It is
proposed to pay the final dividend on 24
July 2014 to shareholders on the register
at the close of business on 30 May 2014.
Over the last 20 years, DCC has an
unbroken record of dividend growth at a
compound annual growth rate of 14.9%.
Profit before Net Exceptional Items,
Amortisation of Intangible Assets
and Tax
Profit before net exceptional items,
amortisation of intangible assets and tax
increased by 8.2% to £187.0 million.
Net Exceptional Charge and
Amortisation of Intangible Assets
The Group incurred a net exceptional
charge before tax and non-controlling
interests of £15.4 million as follows:
Restructuring costs
Acquisition and related costs
Mark to market loss
Gain arising from legal claim
Gain on disposal of non core
activities
Write back of deferred and
contingent acquisition consideration
less asset impairments
Other (net)
Total
£’m
19.7
5.6
2.1
(7.0)
(5.3)
(1.7)
2.0
15.4
The Group incurred an exceptional
charge of £19.7 million in relation to
restructuring of acquired and existing
businesses. Most of this related to
the costs of integration of previously
acquired oil and LPG businesses, the
relocation of DCC Healthcare’s Swedish
health and beauty manufacturing
activities to Britain, which was planned
for at the time of the acquisition of
those assets, and the closure of DCC
Technology’s Irish DVD business.
Acquisition and related costs include
the professional and tax costs (such as
stamp duty) relating to the evaluation and
completion of acquisition opportunities.
During the year, acquisition and related
costs amounted to £5.6 million.
Most of the Group’s debt has been raised
in the US Private Placement market
and swapped, using long term interest,
currency and cross currency derivatives,
to both fixed and floating rate sterling
and euro. The level of ineffectiveness
calculated under IAS 39 on the fair
value and cash flow hedge relationships
relating to fixed rate debt, together with
gains or losses arising from marking to
market swaps not designated as hedges
offset by foreign exchange translation
gains or losses on the related fixed
rate debt, is charged or credited as an
exceptional item. In the year to 31 March
2014 this amounted to a total exceptional
loss of £2.1 million.
In January 2004, the High Court in
London awarded £12.2 million in
damages and associated interim
costs, together with interest, to DCC’s
former British based mobility and
rehabilitation subsidiary for breach of
an exclusive supply agreement by a
Taiwanese supplier. A further amount
in respect of costs of £2.9 million was
subsequently determined by the High
Court to be payable. In order to enforce
the High Court judgments, it has been
necessary to pursue the collection of
all outstanding amounts through the
Taiwanese courts. In March 2012, DCC
received the initial £12.2 million referred
to above which was accounted for in
DCC’s financial year ended 31 March
2012. In December 2013 and January
2014 a further aggregate amount of
£7.0 million was recovered in respect of
the accumulated interest on the £12.2
million from which there was a deduction
of £5.3 million for Taiwanese withholding
tax which is being challenged by DCC.
The recovery of the £2.9 million, plus
interest, continues to be pursued through
the Taiwanese courts. DCC has not
accrued the amount of this outstanding
claim.
In March 2014, DCC Healthcare disposed
of a small US based subsidiary which
contract manufactures a range of
mattress covers for hospital beds and
stretchers and in February 2014 DCC
Food & Beverage disposed of part of
its chilled and frozen food distribution
activities. The business activities
disposed of accounted for less than 1%
of DCC’s operating profit for the year
ended 31 March 2014. The net cash
inflow from these transactions was £11.1
million and resulted in a gain on disposal
(before a non-controlling interest charge)
on their book carrying values of £5.3
million.
There was a non cash credit of £16.2
million for deferred and contingent
acquisition consideration over provided
in previous years. This non-cash credit
was offset by a non-cash charge of £14.5
million for the impairment of subsidiary
goodwill and a property asset.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
62
Strategic Report - Performance
Financial Review (continued)
Return on Capital Employed
The creation of shareholder value
through the delivery of consistent, long
term returns well in excess of the cost
of capital is one of DCC’s core strategic
aims. Return on capital employed
increased from 15.6% to 16.3% driven
primarily by the increase in the Group’s
operating profit and strong working
capital management. The reduction
in return on capital employed in DCC
Energy arose as a result of the impact on
operating profit of the mild winter.
Table 4: Return on Capital Employed
2014
ROCE
2013
ROCE
DCC Energy
DCC Technology
DCC Healthcare
8.6%
DCC Environmental
DCC Food & Beverage 11.8%
Group
17.5% 18.5%
21.1% 16.4%
14.2% 13.1%
8.3%
9.5%
16.3% 15.6%
Cash Flow
The Group generated excellent operating
and free cash flow during the year, as
summarised in Table 5.
Table 5: Summary of Cash Flows
Operating cash flow in 2014 was £348.7
million compared to £264.6 million in
2013. Working capital was reduced by
£86.9 million with overall working capital
days improving by 2.8 days. Working
capital improvements were achieved
across all of the Group’s divisions with
overall Group debtor days reducing from
36.9 days to 31.4 days. The primary driver
of the improvement was a reduction in
debtor days in DCC Energy and DCC
Technology. DCC Technology selectively
uses supply chain financing solutions to
sell on a non-recourse basis, a portion
of the receivables relating to certain
larger supply chain/sales and marketing
activities, thereby mitigating the impact
of the higher levels of inventories that
are required to affect this business. This
accounted for 3.3 days of the reduction
in Group debtor days and having regard
to the related higher inventory levels,
the net impact on the Group net working
capital days was a reduction of 1.0 day
(or £30 million).
After capital expenditure of £70.6
million (2013: £57.5 million) free cash
flow before interest and tax payments
amounted to £278.1 million compared
to £207.1 million in the prior year. After
interest and tax payments of £53.0
million (2013: £45.6 million) the net
cash generated by the Group was £225.1
million compared to £161.5 million in the
prior year.
Net capital expenditure in the year
of £70.6 million (2013: £57.5 million)
compares to a depreciation charge of
£56.1 million (2013: £54.2 million).
The increase in capital expenditure over
the prior year was driven primarily by
ongoing investment in upgrading truck
and depot infrastructure in DCC Energy,
particularly in the oil business in Britain.
With a cash impact of acquisitions in
the year of £50.1 million and dividend
payments of £62.1 million, there was an
overall net inflow of £104.9 million in the
year, leaving net debt at 31 March 2014
at £86.3 million (31 March 2013: £186.0
million).
The conversion rate of operating
profits to free cash flow (i.e. operating
cash flow less capital expenditure but
before interest and tax payments) is an
important measure as to how the
Group’s operating profits translate into
cash flow.
Operating profit
Decrease in working capital
Depreciation and other
Operating cash flow
Capital expenditure (net)
Free cash flow (before interest and tax payments)
Interest and tax paid
Free cash flow
Acquisitions
Disposals
Dividends
Exceptional items
Share issues
Net outflow
Opening net debt
Translation
Closing net debt
2014
£’m
208.4
86.9
53.4
348.7
(70.6)
278.1
(53.0)
225.1
(50.1)
11.1
(62.1)
(21.1)
2.0
104.9
(186.0)
(5.2)
2013
£’m
186.9
28.2
49.5
264.6
(57.5)
207.1
(45.6)
161.5
(168.2)
11.7
(54.7)
(25.2)
1.7
(73.2)
(106.9)
(5.9)
(86.3)
(186.0)
63
The recent debt fundraising, together
with available cash resources and
committed bank term loan facilities,
ensures that the Group retains
significant financial capacity to support
its future growth and development plans.
Further analysis of DCC’s cash, debt
and financial instrument balances at 31
March 2014 is set out in notes 27 to 30 in
the financial statements.
Financial Risk Management
Group financial risk management is
governed by policies and guidelines
which are reviewed and approved
annually by the Board of Directors.
These policies and guidelines primarily
cover foreign exchange risk, commodity
price risk, credit risk, liquidity risk
and interest rate risk. The principal
objective of these policies and guidelines
is the minimisation of financial risk
at reasonable cost. The Group does
not trade in financial instruments
nor does it enter into any leveraged
derivative transactions. DCC’s Group
Treasury function centrally manages
the Group’s funding and liquidity
requirements. Divisional and subsidiary
The Group has a high conversion rate which is summarised on a 1, 5, 10 and 20 year
basis as follows:
Operating profit
Operating cash flow
Free cash flow*
Cash conversion %
*Operating cash flow less capital expenditure
1 Year
£‘m
208
349
278
133%
5 Years
£‘m
891
1,302
1,029
116%
10 Years
20 Years
£‘m
£‘m
1,476
1,968
1,510
102%
1,968
2,595
1,959
100%
Key financial ratios as of 31 March
2014, including the principal financial
covenants included in the Group’s
various lending agreements, are as
follows:
2014
Actual
2013
Actual
Lender
Covenants
Net debt:
EBITDA
EBITDA:net
interest
EBIT:net
interest
Total equity
(£’m)
0.3
0.7
12.4
17.1
9.7
13.3
3.5
3.0
3.0
946.3
892.3
425.0
Balance Sheet and Group Financing
DCC’s financial position remains very
strong, well-funded and highly liquid.
At 31 March 2014 the Group had net
debt of £86 million and total equity of
£946 million. In late March 2014, the
Group arranged committed US Private
Placement market funding of $750
million (£451 million) with maturity
terms of seven, ten, twelve and fifteen
years (average maturity of ten years)
which will be drawn down in May
2014 (£403.4 million) and September
2014 (£48 million). This committed
funding, together with available cash
resources and committed bank term
facilities, ensures that the Group retains
significant financial capacity to support
its future growth. Pending deployment of
these funds on acquisitions and future
debt repayments, the funds raised add
to DCC’s cash resources and increase
the average maturity on the Group’s debt
to nearly eight years with an average
credit spread over euribor/libor of
1.66%. The Group will incur an annual
interest holding cost on this incremental
debt until it is deployed on scheduled
debt repayments and acquisition and
development opportunities.
The Group’s pro-forma funding and
liquidity position at 31 March 2014
is summarised in Table 6. This table
adjusts the Group’s net debt at 31 March
2014 for the above fund raising of £451.4
million, US Private Placement debt
maturing in the year to 31 March 2015
of £181.9 million and the acquisition
of Qstar for £40 million which was
completed in early May 2014.
Table 6: Summary of Net Debt at 31 March 2014
Cash and short term bank deposits
Overdrafts
Cash and cash equivalents
Bank debt repayable within 1 year
US Private Placement debt repayable:
Y/e 31/3/2015
Y/e 31/3/2016
Y/e 31/3/2017
Y/e 31/3/2018
Y/e 31/3/2020
Y/e 31/3/2021
Y/e 31/3/2022
Y/e 31/3/2024
Y/e 31/3/2025
Y/e 31/3/2026
Y/e 31/3/2027
Y/e 31/3/2030
Other miscellaneous debt
Debt
At
31 March 2014
Committed net
fundraising &
acquisitions
Pro-forma
£’m
£’m
£’m
963.1
(148.6)
814.5
229.5
-
229.5
1,192.6
(148.6)
1,044.0
(0.5)
-
(0.5)
(181.9)
(12.9)
(93.9)
(47.0)
(180.2)
(50.1)
(37.4)
(218.2)
-
(74.5)
-
-
(4.2)
(900.8)
181.9
-
-
-
-
-
(93.0)
-
(257.6)
-
(84.2)
(16.9)
0.3
(269.5)
-
(12.9)
(93.9)
(47.0)
(180.2)
(50.1)
(130.4)
(218.2)
(257.6)
(74.5)
(84.2)
(16.9)
(3.9)
(1,170.3)
Net debt
(86.3)
(40.0)
(126.3)
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 64
Strategic Report - Performance
Financial Review (continued)
management, in conjunction with Group
Treasury, manage foreign exchange
and commodity price exposures within
approved policies and guidelines. Further
detail in relation to the Group’s financial
risk management and its derivative
financial instrument position is contained
in note 46 to the financial statements.
Foreign Exchange Risk Management
DCC’s presentation currency is
sterling. Exposures to other currencies,
principally euro and the US dollar, arise
in the course of ordinary trading.
A proportion of the Group’s profits
and net assets are denominated in
euro. The sterling/euro exchange rate
strengthened by 2.1% from 0.8456 at
31 March 2013 to 0.8282 at 31 March
2014. However the average sterling/
euro exchange rate at which the
Group translates its euro denominated
operating profits weakened by 3.5% from
0.8154 in 2013 to 0.8441 in 2014.
Approximately 14% of the Group’s
operating profit for the year ended
31 March 2014 was denominated in
currencies other than sterling, primarily
the euro. DCC does not hedge the
translation exposure on the profits of
non-sterling subsidiaries on the basis and
to the extent that they are not intended
to be repatriated. The 3.5% weakening in
the average translation rate of sterling,
referred to above, positively impacted the
Group’s reported operating profit in a very
modest way (£0.9 million) in the year ended
31 March 2014.
DCC has investments in non-sterling,
primarily euro denominated, operations
which are cash generative and cash
generated from these operations is
reinvested in development activities
rather than being repatriated into
sterling. The Group seeks to manage the
resultant foreign currency translation
risk through borrowings denominated
in or swapped (utilising currency swaps
or cross currency interest rate swaps)
into the relevant currency, although this
hedge is offset by the strong ongoing
cash flow generated from the Group’s
non-sterling operations, leaving DCC
with a net investment in non-sterling
assets. The 2.1% strengthening in the
value of sterling against the euro during
the year ended 31 March 2014, referred
to above, was the main element of the
translation loss of £7.6 million arising
on the translation of DCC’s non-sterling
denominated net asset position at 31
March 2014 as set out in the Group
Statement of Comprehensive Income in
the financial statements.
Where sales or purchases are invoiced
in other than the local currency and
there is not a natural hedge with other
activities within the Group, DCC generally
hedges between 50% and 90% of those
transactions for the subsequent two
months.
Commodity Price Risk Management
The Group is exposed to commodity
cost price risk in its oil distribution and
LPG businesses. Market dynamics are
such that these commodity cost price
movements are immediately reflected
in oil commodity sales prices and,
within a short period, in LPG commodity
sales prices and in the resale prices
of recycled oil products. Fixed price
oil supply contracts are occasionally
provided to certain customers for
periods of less than one year. To manage
this exposure, the Group enters into
matching forward commodity contracts
which are designated as hedges under
IAS 39. The Group hedges a proportion of
its anticipated LPG commodity exposure,
with such transactions qualifying as
‘highly probable’ forecast transactions
for IAS 39 hedge accounting purposes.
In addition, to cover certain customer
segments for which it is commercially
beneficial to avoid price increases, a
proportion of LPG commodity price
and related foreign exchange exposure
is hedged. All commodity hedging
counterparties are approved by the Chief
Executive and Chief Financial Officer and
reviewed by the Board.
Credit Risk Management
DCC transacts with a variety of high
credit rated financial institutions for the
purpose of placing deposits and entering
into derivative contracts. The Group
actively monitors its credit exposure to
each counterparty to ensure compliance
with limits approved by the Board.
Interest Rate Risk and Debt/Liquidity
Management
DCC maintains a strong balance sheet
with long-term debt funding and cash
balances with deposit maturities
up to three months. In addition, the
Group maintains both committed
and uncommitted credit lines with its
relationship banks. DCC borrows at both
fixed and floating rates of interest. At 31
March 2014, 91% of the Group’s drawn
fixed rate borrowings were swapped to
floating interest rates, using interest
rate and cross currency interest rate
swaps which qualify for fair value hedge
accounting under IAS 39. 75% of the
fixed rate US Private Placement debt
which was committed in March 2014 was
similarly swapped to floating interest
rates. The Group mitigates interest rate
risk on its borrowings by matching, to
the extent possible, the maturity of its
cash balances with the interest rate
reset periods on the swaps related to its
borrowings.
Investor Relations
DCC’s senior management team are
committed to interacting with the
international financial community to
ensure a full understanding of DCC’s
strategic plans and its performance
against those plans. With the
cancellation of DCC’s listing on the Irish
Stock Exchange, and its inclusion in the
FTSE All-Share Index and the FTSE 250
in June 2013, DCC stepped up its investor
relations efforts in order to increase
the awareness of DCC among the
international equity investor community.
In particular DCC commenced a process
to attract additional broker analyst
coverage in the UK and there are now 12
analysts covering DCC, including eight
in the UK and four in Ireland. During
the year, the executive management
presented at six capital market
conferences, conducted 176 institutional
investor one-on-one and group meetings
and presented to 16 broking firms.
For the Group’s debt investors,
in February 2014 the executive
management presented a 'Deal' road
show in London, Continental Europe and
the US to 53 of its existing and potential
debt holders, which culminated in the
successful £451 million ($750 million)
fundraising referred to above.
Share Price and Market Capitalisation
The Company’s shares traded in the
range £22.45 to £32.89 during the year.
The share price at 31 March 2014 was
£32.60 (28 March 2013: £22.70) giving
a market capitalisation of £2.73 billion
(2013: £1.90 billion). Based on the
Company’s share price at 31 March
2014, total shareholder return since
the Group’s flotation in May 1994 was
2,970%.
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DCC Annual Report and Accounts 2014
65
reporting periods in the scope, boundary
or measurement methods applied in this
Report and there is no restatement of
data from the 2013 Sustainability Report.
Within this Sustainability Report
and in the wider Annual Report we
address the issues that are material
to the sustainability of our business.
These include our people, health and
safety, business ethics, environment
and economic contributions. Given
the diversity of the Group’s business
activities, at a subsidiary level some
issues are more material, for example
raw material supply chains in the health
and beauty businesses and process
safety within the energy businesses.
The Operating Reviews at pages 22 to
57 include commentary on the issues
that are material to ongoing business
sustainability – including stakeholder
relationships and key risks.
This Report meets the requirements of
the level C+ standard, as identified in
the content table at page 72. Summary
criteria for the recording and reporting of
lost time injuries and carbon emissions
are available on the DCC website3.
Feedback on this Report is welcome and
should be addressed to John Barcroft,
Head of Group Sustainability or David
Byrne, Deputy Chairman and Senior
Independent Director.
Governance, Structures and Processes
The Sustainability Committee, chaired
by the Chief Executive, met four times
during the year. The Committee includes
divisional and subsidiary managing
directors and senior Group executives
and is tasked with identifying how the
concepts of corporate sustainability can
be used to augment and strengthen our
businesses.
During the year we benchmarked our
sustainability report against a group
of over 100 companies within the
FTSE350. Adherence to a reporting
standard and external assurance placed
us high on transparency. However
there are improvement opportunities
in relation to materiality assessment
and engagement. The results from
this benchmarking study will inform
the development of our sustainability
reporting in the current period, within
the context of a devolved organisational
structure and the trend towards more
integrated reporting.
Sustainability Report
Statement from the Chief Executive
For DCC, sustainability is seen as being integral to our overall
strategy to build a long term, profitable business. It is not a
standalone topic and we continue to integrate objectives and
metrics in respect of material sustainability issues into internal
reporting and planning processes.
The UK Companies Act 2006 (Strategic
Report and Directors Report)
Regulations 2013 introduced mandatory
reporting of gender ratios and carbon
emissions for large quoted companies
incorporated in the UK. Although these
are not legal requirements for DCC,
being incorporated in Ireland, they are
addressed in this Report.
DCC is a high performing and dynamic
international business. Our devolved
management structure and diverse
businesses require a high level of
ambition, flexibility, entrepreneurial spirit
and skill; we are very fortunate to have
these qualities in our employees. Their
continued commitment and performance
will be fundamental to the future success
of our businesses.
Health and safety continues to be a
key management focus at all levels of
the organisation. Investing in effective
training, safety controls and a strong
safety culture is an ethical, legal and
fiduciary responsibility which we take
very seriously. We are pleased to report
that both lost time injury1 (LTI) metrics
(frequency rate and severity rate) have
continued to decrease: by 12% and
14% respectively against the prior year.
While the trend is positive we remain
committed to our ultimate objective of
zero LTIs, as stated in the DCC Group
Health & Safety Policy which is available
on our website.
The implementation of a Group wide
energy and carbon reporting IT platform
and the use of engine monitoring
systems in HGVs has increased our
ability to track and manage energy
usage more effectively and to identify
opportunities to achieve further energy
savings. At a Group level, over the past
three years carbon intensity has reduced
by 28% on a per revenue basis and by
14% on a per employee basis while
increasing by 2% on a per profit basis.
The G42 guidelines for sustainability
reporting were issued in May 2013,
updating the previous G3 guidelines
which may continue to be used for
reports published before 31 December
2015. The Sustainability Committee has
formally discussed the changes arising
from the G4 guidelines to identify the
steps necessary for DCC to meet the new
requirements. The strong emphasis on
materiality within the new guidelines is a
positive step. We will consult more widely
LTIFR
with investors and other stakeholders to
assess their expectations and the value
Number of lost time injuries per
of reporting to this new standard.
200,000 hours worked
2.3
1.9
2.8
Profile, Boundary and Scope of
Sustainability Reporting
2.5
This Sustainability Report follows the
same reporting cycle and fiscal year as
the Annual Report, to 31 March 2014,
and includes all Group subsidiaries.
Joint ventures are not included in the
carbon emissions or LTI data. There are
2012
2014*
no significant changes from previous
2011
2013
2010
1.7
LTIFR
LTISR
Number of lost time injuries per
200,000 hours worked
Number of calendar days lost per
200,000 hours worked
2.8
2.5
2.3
1.9
1.7
53
48
42
42
36
2010
2011
2012
2013
2014*
2010
2011
2012
2013
2014*
LTISR
Number of calendar days lost per
200,000 hours worked
53
48
42
42
36
2010
2011
2012
2013
2014*
66
Strategic Report - Performance
Sustainability Report (continued)
Specific issues that have been identified
as material to the long term sustainability
of the Group’s businesses are reported
on and reviewed at regular subsidiary and
divisional board meetings.
Stakeholder Engagement
Stakeholder input is important to our
work on sustainability and we welcome all
opportunities to engage in that regard.
Our People
DCC continues to grow its employment
numbers and develop its international
employment reach. During the year
ended 31 March 2014 we increased our
employment numbers by 399 to 10,202
people, approximately 90% of whom are
in permanent employment. This overall
increase is due to continued acquisition
activity and ongoing organic growth.
We continue to respond to SRI
questionnaires on environmental, social
and governance issues4. To date, direct
investor interest and feedback has been
limited. We anticipate and welcome
increased engagement arising from our
listing in the FTSE250 and the likelihood
of more integrated reporting in the future.
Subsidiary management are also key
stakeholders and our relatively flat
organisational structure supports close
engagement with subsidiary, divisional
and Group management.
Material Aspects
Material aspects were initially determined
by the Corporate Sustainability
Working Group (the forerunner to the
Sustainability Committee), following
consultations with senior executives
around the Group. A materiality matrix,
with levels of importance to stakeholders
and to DCC forming the two axes,
was used to rate a wide spectrum of
sustainability issues, allowing those
that ranked highly on both axes to be
prioritised for reporting. Over time these
have remained consistent with people,
health and safety, business compliance
and ethics, environment and economic
contribution considered to be material
issues at a Group level. As in previous
years, qualitative and quantitative data
relating to these issues is provided
in this Report as detailed in the GRI
content table on page 72. Policies on
these aspects and on related areas are
available on our website.
Individual divisions and subsidiaries
have additional aspects that are of
particular relevance to them depending
on their business sector – for example
customer engagement, supply chains,
waste reduction, water conservation and
resource scarcity.
An analysis of DCC employment by division
and by geographic area is as follows:
Division
Employee
numbers
31 March
2014
DCC Energy
DCC Technology
DCC Healthcare
DCC Environmental
DCC Food & Beverage
DCC Corporate
Total
4,685
1,841
1,765
999
854
58
10,202
%
46
18
17
10
8
1
100
Geography
UK
Ireland
Continental Europe
Other
Total
Employee
numbers
31 March
2014
7,606
1,755
814
27
10,202
%
75
17
8
<1
100
Diversity and Equal Opportunities
This continues to be an area of focus for
DCC in recognition of the value we place
on the variety of characteristics which
make individuals unique and embrace the
benefits of a workforce with diverse skills,
qualities and experience.
In 2013, we published and distributed
the DCC Group policy statement on
diversity and equal opportunities to all
Group companies and since then we
have been focusing on actions to improve
the diversity of our workforce. We
acknowledge that the business sectors
in which the Group operates have not
supported the achievement of the gender
balance we aspire to, either at employee
or at senior management level. All our
businesses are focussed to address
this and, to gain momentum, one of the
actions we took in 2013 was becoming a
member of the Employers Network for
Equality and Inclusion (ENEI). ENEI is the
UK’s leading employer network, covering
all aspects of equality and inclusion
issues in the workplace, and also
operates in the other countries where
we have a presence. Membership gives
all DCC companies access to a range of
practical support services, including:
• Access to learning and development
– master classes, workshops and
training courses
• Access to advice and guidance on
equality and inclusion issues
• Opportunities to benchmark and share
good practice
• An advice and guidance helpline
• Developing and promoting thought
leadership
Following the introduction of reporting
of gender ratios by the UK Companies
Act 2006 (Strategic Report and Directors
Report) Regulations 2013 we include
an analysis of DCC’s gender ratios as
follows:
Employment
Numbers
Gender Ratio
Male:Female
All employees
Senior managers5
Board members
10,202
177
11
67:33
85:15
73:27
67
Talent Development
The talent, innovation and
entrepreneurial flair of our employees
have been essential to our strong growth
to date.
In light of our ambitious growth plans
we are revising our approach to the
development of talent in the year
ahead in order to identify and develop
people with the skills and capability to
drive and support the achievement of
these plans, particularly as we expand
our geographic reach.
The DCC Graduate Programme
is another element on our talent
development strategy. This programme
commenced four years ago with the
objective of creating a pipeline of high
potential emerging talent to complement
the development of future business
leaders for DCC.
This two year programme offers our
graduates an exceptional opportunity
to participate in three placements
across three different industry sectors
and usually in at least two different
geographies. The programme is
differentiated by the content and
pace of the placements which ensure
that graduates work on complex,
critical and demanding projects.
These, along with the diverse industry
nature of the placements and regular
learning modules, provide significantly
accelerated development.
Employee Engagement
Employee engagement has also been
a critical element of our growth to
date. Our larger businesses have been
monitoring employee engagement
over the last few years and developing
actions plans as a result. Certas
Energy has used the results of their
engagement survey to improve internal
communication and support the
company rebranding exercise.
Certas Energy – 2014 Winner of Best Internal
Communication of a Rebrand Awarded by Transform
Award Europe
An internal survey showed GB Oils that, having built its business through
acquisitions, there was an opportunity to improve internal communications
and to create a single brand identity among its employees. The company’s
2013 rebrand as Certas Energy was the culmination of a project which built
upon the learnings from the survey and sought to introduce a new business
strategy, way of working and corporate identity.
Certas created a set of brand values and adopted “Doing it right, together,
keeps our customer happy” as an employee mantra. The new brand identity
was first introduced to 250 senior managers at a conference with the board
of directors. The rebrand was then launched to the rest of Certas’ employees
through a UK-wide roadshow that consisted of 90 separate events. An
e-learning course and video were also made available to any employee who
could not attend an event. Other methods included a company intranet, email
and news bulletins, branded merchandise distributed amongst employees
and redecoration of the head office and some depots in a style designed to
reflect the core values of the rebrand.
A Transform judge says “The success is in the results; the employees were
engaged, management was happy and the new brand was integrated”.
Established by Communicate magazine, the Transform Awards Europe have
recognised excellence in brand development since 2010. The programme is
the industry benchmark for brand evolution, brand development and brand
transformations.
Compliance and Business Ethics
DCC seeks to achieve the highest
standards of business ethics and legal
compliance in all our activities. The
Group Compliance function supports
leadership teams in ensuring that our
activities are carried out in a legal and
ethical manner.
The key message of our Compliance
Programme is that managers and
employees across the Group should be
Doing the Right Thing at all times. This
means not merely following the laws and
policies that apply to their work: it also
means exercising good judgement to
ensure that their actions are seen as fair
and reasonable.
Our Group Business Conduct Guidelines,
which are available on our website, set
out the standards that are expected of
employees across the Group in a range
of areas, including conflicts of interest,
bribery and corruption, and dealings with
customers and suppliers. More specific
policies and guidelines are provided
where needed.
During the year, over 80% of employees
in management, commercial, sales,
finance and related roles across the
Group completed detailed online training
on our Business Conduct Guidelines.
Other employees were provided with
briefings tailored to their roles. In
addition, employees in certain positions
received further training and guidance
on competition law, data protection,
anti-bribery & corruption and other
compliance risks.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
68
Strategic Report - Performance
Sustainability Report (continued)
Every business assessed its exposure
to bribery and corruption risks during
the year as part of the risk assessment
process undertaken by all Group
subsidiaries. In addition, more detailed
risk assessments were carried out in
relevant business units which deal with
organisations in recognised high risk
jurisdictions or areas of industry.
The Group did not pay any significant
fines or incur any non-monetary
sanctions in respect of non-compliance
with applicable laws or regulations
or relating to the use of products or
services during the year.
Employees across the Group are
encouraged to raise a concern if any of
our activities is being undertaken in a
manner that may not be legal or ethical.
Concerns can be raised to a member
of management in the business where
the employee works or to our Head
Office using a dedicated confidential
whistleblowing line. Our internal
policies make clear that retaliation
against any employee who raises a
concern is prohibited.
We have recently revised our Business
Conduct Guidelines to reflect changes
in the Group and in our operating
environment. These Guidelines will be
rolled-out across the Group in 2014 and
will restate our commitment to Doing
the Right Thing. In addition, we will be
enhancing our existing whistleblowing
facility, providing the option to employees
of the Group to raise their concerns with
an independent party if they wish to do so.
Each business maintains appropriate
health, safety and environmental
management systems and, in some
instances, these are accredited to
international standards such as
ISO140016 and/or OHSAS180017 where
there is a strong business case to do so.
Risk control measures – engineering,
procedural and behavioural – are
implemented and monitored to confirm
their effectiveness and to identify
improvement opportunities.
An IT platform is being rolled out to
increase the reach of existing HSE forums
and facilitate greater communication
of best practice and collaboration on
HSE standards across the Group. The
extensive depth and range of HSE
experience and expertise is a significant
strength and benefits both individual
subsidiaries and the Group as a whole.
Health and Safety Performance
Both lost time injury metrics have
continued to decrease against the prior
period as shown in the chart on page 65.
Key themes for maintaining our objective
of further reductions in LTIs include
active encouragement of near miss
reporting, safety awareness programmes
and demonstrable leadership by line
managers.
In the Energy and Environmental
divisions, which have higher HSE risk
profile, specific metrics and targets
(for example in relation to driving
performance, spills, near miss reporting,
process safety indicators) are in place
and reviewed on a monthly basis.
Health & Safety
The safety of our employees, contractors,
customers and others who may
be affected by our operations is of
paramount importance. The DCC Group
Health and Safety Policy sets out the
Board’s commitment to continually
improving H&S management systems
and safety cultures – viewed as positive
drivers of business performance.
Dedicated board level HSE committees
are established to provide additional
oversight of HSE.
Certas Energy’s Safety F1rst initiative
continues to strengthen safety culture.
High levels of awareness are maintained
through specific themed interventions
and prominence in communication
channels.
The Safety F1rst brand and approach has
now been adopted and localised by all
businesses within the Energy division.
DIT VALG
DIN SIKKERHED
Environment
Carbon Emissions
From 1 October 2013, carbon reporting
has become mandatory for large quoted
companies incorporated in the UK. DCC
have been publicly reporting carbon
emissions since 2011 and are well
positioned to meet this new standard.
The DCC Energy and Carbon Reporting
Guidelines, based on the Greenhouse
Gas Protocol, set out in detail the scope
and sources included in the DCC Group
carbon footprint.8
As part of our Climate Change Strategy,
we have committed to reducing carbon
intensity by 15% in 2015 against a
baseline of FY2011. At a Group level,
carbon intensity has reduced by 28%
since FY2011 on a tonnes CO2e per
revenue basis. This has been achieved by
operational efficiencies minimising the
increase in absolute carbon emissions
(9% since FY2011) against a background
of significant revenue growth. Group
wide carbon intensity metrics can also
be expressed in terms of per employee
(reduction of 14%) and on operating profit
basis (increase of 2%). However, given
the diversity of our business activities,
Group level carbon intensity metrics
are of limited value. Instead our focus is
on subsidiary specific carbon intensity
metrics that can be more clearly aligned
with operating efficiencies, for example
emissions per unit of product delivered
or manufactured. Subsidiaries continue
to identify opportunities to reduce energy
usage through greater efficiency in
vehicle routing and engine monitoring,
installation of energy efficient
technologies and careful analysis of
energy consumption patterns. The case
study opposite highlights the initiatives
undertaken by EuroCaps.
69
In the prior year a new energy and
carbon reporting IT platform was
successfully rolled out across the Group.
The web based system increases the
efficiency of data collection, supports
mandatory and voluntary carbon
reporting requirements and provides
a tool to analyse energy consumption
patterns with a view to identifying cost
savings.
Details of our carbon emissions are
set out in the charts. Total emissions
increased by 2% from the prior year.
New acquisitions and organic growth
have increased emissions, offset by
increasing operational efficiencies
and management focus on reducing
energy consumption. Over the past
four years transport fuels (principally
from the energy and environmental
divisions) have consistently been the
biggest single contributor at 72% of total
emissions. Electricity use is highest
in the processing and manufacturing
operations within the environmental and
healthcare divisions.
Absolute CO2e emissions
(’000 tonnes) by division
Absolute CO2e emissions
(’000 tonnes) by source
116
117
124
127
116
117
124
127
2011
2012
2013
2014*
2011
2012
2013
2014*
Absolute CO2e emissions
(‘000 tonnes) by source
Year ended 31
March 2011
Year ended 31
March 2012
Year ended 31
March 2013
Year ended 31
March 2014*
Scope 1
Scope 2
On site fuel use
Company transport
Electricity
Totals
9
83
24
116
8%
71%
21%
8%
73%
19%
9
85
23
117
8%
73%
19%
10
91
23
124
11
92
24
127
9%
72%
19%
Absolute CO2e emissions
(‘000 tonnes) by division
Year ended 31
March 2011
Year ended 31
March 2012
Year ended 31
March 2013
Year ended 31
March 2014*
DCC Energy
DCC Technology9
DCC Healthcare
DCC Environmental
DCC Food & Beverage
Totals
54%
5%
10%
19%
12%
62
6
11
23
14
116
53%
5%
10%
24%
8%
63
6
11
28
9
117
58%
5%
10%
22%
5%
72
7
12
27
6
124
74
6
14
27
6
127
58%
5%
11%
21%
5%
EuroCaps is one of Europe’s leading softgel
contract manufacturers. Manufacturing and
supplying over two billion softgels annually
to customers across the globe, the company
specialises in providing total solutions for its
customers through partnership, innovation
and excellent customer service.
In 2010 Eurocaps, entered into a Climate Change Agreement
(CCA) in partnership with the UK Food and Drink Federation
which committed the company to reducing carbon emissions
in return for an exemption from the climate change levy
applied to utility bills. Since then, EuroCaps has taken a
proactive approach to managing energy consumption and
have met their CCA annual target for the third consecutive
year.
Following an internal study involving localised monitoring
and data logging equipment, a number of potential low
cost, quick win initiatives were identified and successfully
implemented. Software modifications of our building
management system allowed managers to remotely
shutdown HVAC systems for predetermined periods
reducing energy use by 11%. In the warehouse, installing
energy efficient light fittings and PIR’s reduced electricity
consumption by 14%. Additional projects such as timed
shutdown of compressed air equipment and the introduction
of standard weekend shutdown operating procedures have
resulted in an absolute decrease in carbon emissions from
2,975 to 2,562 (14%) tonnes CO2e since 2011. In relative
terms, their carbon intensity metric (CO2e per unit produced)
has reduced by 9% over the same period and they are
confident of meeting the FY2015 target with new projects
planned for the current year. Carbon reduction and cost
savings – a win win for the environment and the company.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
70
Strategic Report - Performance
Sustainability Report (continued)
Transport and heating fuels from
non-renewable sources make up
the direct sources of primary energy
purchased within the Group. In total
they represented 1,259,458 Gigajoules
(GJ) of energy with road diesel, natural
gas, gas oil and other fuels accounting
for 81%, 9%, 8% and 2% respectively.
Indirect energy consumption amounted
to 196,424 GJ from electricity purchased.
Green tariff electricity accounts for less
than 1% of indirect energy purchased.
Scope 3 emissions are indirect emissions
outside of our immediate operational or
financial control, for example air travel,
extraction of raw materials, supplier
emissions, consumption of products
and waste disposal. While we have
not systematically quantified Scope 3
emissions, the use of products sold
within the Energy division is a significant
source of carbon emissions. The use
of oils, LPG and natural gas sold by
DCC Energy subsidiaries accounted for
approximately 26.0M tonnes of CO2e
emissions, a slight increase from 25.6M
tonnes in the prior year reflecting an
overall increase in the total volume of
products sold in the reported period.
Upstream, indirect emissions of 5.3M
tonnes are also generated from the
extraction, refining and transport of
these fuels to the point of combustion.
CDP (formally the Carbon Disclosure
Project)
In November 2013, DCC was again
included in the Irish Climate Disclosure
Leaders index which is based on
responses to the CDP investor
questionnaire. The CDP is a global
initiative, funded by the investment
community, which encourages
companies to publicly report their carbon
emissions and the steps they are taking
to address the challenge of climate
change. From 2014 DCC will be included
in the FTSE350 CDP Report.
Environmental Compliance and Spills
No fines for non-compliance with
environmental laws and regulations (for
example in relation to waste packaging,
waste electronic and electrical
equipment, pollution or environmental
licencing) have been incurred in the
reporting period and no environmental
cases have been brought through dispute
resolution mechanisms.
Economic Contributions
A key measure of our sustainability is
the economic value generated from
our activities over the long term. Other
sections of the Annual Report present
detailed financial information, which
is summarised in the graphic below to
represent the principal value added to
stakeholders.
Potential for significant environmental
impact from loss of containment of
products arises principally in our oil
businesses, specifically from sea fed
oil terminals. These terminals are
regulated under the EU Seveso II
Directive and are subject to regular
inspection by the regulatory authorities.
Containment controls include regular
tank inspections, alarm systems and
operating procedures. No significant
spills from storage facilities were
recorded in the reporting period.10
However, given the potential impact on
the environment from even a relatively
small quantity of oil, all spills are treated
seriously and responded to appropriately
in accordance with established
emergency procedures.
Ozone depleting substances (ODS)
As ODS continue to be phased out
in accordance with international
agreements, fugitive emissions of
ODS from DCC subsidiaries remain
at immaterial levels. From 1 January
2015, the use of R22 (a widely used
refrigerant gas) will not be permitted
and the installation of new equipment is
planned for the current year to ensure
compliance with this requirement.
In the reporting period, a total of 36kgs
of R22 was lost to the atmosphere as
fugitive emissions from air conditioning
systems in DCC subsidiaries. This is
equivalent to 0.00198 tonnes of CFC-11
(0.00121 in prior year), the international
metric for measuring ODS. Ammonia gas
and other refrigerants used (e.g. R404A,
R410A, R407C) in the businesses have an
ozone depletion potential of zero.
Revenue
£11,281m
(2013: £10,617m)
Goods and
Services
£10,684m
(2013: £10,083m)
Value
Added
£597m
(2013: £534m)
Corporate Taxes
£22m
(2013: £26m)
Interest
£51m
(2013: £39m)
Employees
£359m
(2013: £322m)
Retained
£100m
(2013: £88m)
Dividends to
Shareholders
£65m
(2013: £59m)
In the year ended 31 March 2014, £597
million of added value was created,
taking account of the cost of inputs from
suppliers of £10,684 million and revenue
of £11,281 million. This value added is
distributed in the form of remuneration
to employees of £359 million, corporate
taxes of £22 million, interest to lenders
of £51 million and dividends11 to
shareholders of £65 million. £100 million
is retained in the business to fund
further growth.
71
Krystian Fikert established MyMind with the goal of
offering flexible, affordable and accessible mental health
care for all. Using both web-based and in-person supports
MyMind delivers early intervention and prevention,
resulting in substantial improvements for the users of
its service. In addition, MyMind implements an innovative
pricing structure for its services, with those who can afford
to pay higher rates subsidising clients who do not have the
financial means to pay for the help they need.
MyMind currently works with over 80 fully qualified and accredited
professionals, operating out of four centres in Ireland. Since it began its work
MyMind has supported over 5,000 clients, running in excess of 800 sessions
per month and has already made massive strides in reducing the stigma
attached to mental illness.
Community Support
Across the DCC Group, subsidiaries are
involved in activities to support local
communities and charities. Employees
are actively involved in fundraising and
giving their time and effort to these
campaigns, supported by direct financial
contributions.
Last year we renewed our multi-year
partnership with Social Entrepreneurs
Ireland (SEI). SEI is an independent,
non-profit organisation which identifies
and supports social entrepreneurs in
growing their ideas from concept to
reality on a national scale. The 2013
Awards ceremony was addressed by the
President of Ireland, Michael D Higgins
with all the eight finalists demonstrating
innovative solutions to address national
social issues. Krystian Fikert, one of the
finalists, is profiled above.
Laleham Health and Beauty in the Community
Laleham Health and Beauty actively supports initiatives to attract young people
to the fields of science and technology. Company employees have presented
at local schools and participated in road shows organised by TeenTech, an
organisation which encourages young students to consider a career in the world
of science and technology. A team from Laleham set up a working production
line at the TeenTech annual event at the Copperbox arena, Olympic Park, London
attended by 500 school children and 30 national companies – such as Rolls
Royce, JVC and Sony.
In addition, the Company is a longstanding supporter of Bath University,
providing one year placement opportunities to both chemical and mechanical
engineering students. Laleham also sponsors the Skillstree programme run
by Basingstoke Consortium, a local charitable organisation, which is designed
to raise the skills and aspirations of local school children and prepare them for
working life. Laleham recently received the Skillstree award for Best Supporting
Employer for work place involvement.
1. A Lost Time Injury is defined as any injury that
results in at least one day off work following the
day of the accident.
2. Issued by the Global Reporting Initiative (www.
globalreporting.org), a not for profit organisation
that has developed the leading sustainability
reporting framework.
3. http://www.dcc.ie/~/media/Files/D/DCC-Corp/
pdfs/carbon-LTI-reporting-criteria-a.pdf
4. For example Sustainalytics, EIRIS, Manifest.
5. Senior managers are defined as subsidiary
senior executives whose remuneration
arrangements are reviewed and approved at
Group level and the Group and divisional senior
executives listed on page 74 of the Annual
Report.
6. Exertis Supply Chain, Squadron Medical, TPS
and all businesses within the Environmental
division.
7. Exertis Supply Chain and all businesses within
the Environmental division.
8. Carbon dioxide emissions make up over 99%
of the Group’s greenhouse gas emissions. Other
greenhouse gases emissions include fugitive
refrigerant gases (185 tonnes CO2e) and fugitive
landfill gas emissions from a closed landfill in
Scotland where 80% of the methane is captured
to generate renewable energy (801 tonnes CO2e).
These are not included in the reported DCC
Group carbon emissions.
9. Including DCC head office emissions (117
tonnes CO2e)
10. Significant is defined as a major
environmental event which exceed EC reporting
thresholds under Control of Major Accident
Hazards (COMAH) regulations.
11. Paid and proposed for the year ended 31
March 2014
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
72
Strategic Report - Performance
Sustainability Report (continued)
s
e
r
u
s
o
l
c
s
i
D
d
r
a
d
n
a
t
S
Report Application Level
C
C+
B
B+
A
A+
G3 Profile
Disclosures
G3 Management
Approach
Disclosures
Report on:
1.1
2.1 - 2.10
3.1- 3.8,3.10 - 3.12
4.1 - 4.4, 4.14 - 4.15
Not Required
Report on all criteria listed
for level C plus:
1.2
3.9, 3.13
4.5 -4.13, 4.16 - 4.17
Same as requirement for
Level B
Management Approach
Disclosures for each
Indicator Category
Management Approach
Disclosures for each
Indicator Category
G3 Performance
Indicators & Sector
Supplement
Performance
Indicators
Report on a minimum of 10
Performance Indicators,
including at least one from
each of Economic, Social and
Environmental
Report on a minimum of 20
Performance Indicators, at
least one from each of
Economic, Environmental,
Human Rights, Labor, Society,
Product Responsibility
Report on each core G3 and
Sector Supplement*
Indicator with due regard to
the Materiality Principle by
either: a)reporting on the
Indicator or b) explaining the
reason its omission
*Sector supplement in final version
Content table for GRI Level C
Standard Disclosure
GRI Section No.
Reported
Report Page
1.1
2.1 – 2.10
3.1 – 3.8
3.10 – 3.12
4.1 – 4.4
4.14 – 4.15
EC1
EN3
EN4
EN16
EN17
EN19
EN23
EN28
LA1
LA7
SO2
SO6
SO8
PR9
Statement from Chief Executive
Organisational Profile
Profile, Boundary and Scope
Restatement
Governance
Stakeholder Engagement
Direct Economic Value
Direct Energy Consumption
Indirect Energy Consumption
Greenhouse Gases
Other Indirect Sources
Ozone Depleting Substances
Spillage
Environmental Compliance
Workforce
Rates of Injury
Corruption
Political Contributions
General Compliance
Product Compliance
Fully
Fully
Fully
Fully
Fully
Fully
Fully
Fully
Fully
Fully
Fully
Fully
Fully
Fully
Partially
Partially
Fully
Fully
Fully
Fully
65
4-5
65
65
80-84
66
70
70
70
69
70
70
70
70
66
65
68
114
68
68
Independent Assurance
Report to the Directors of
DCC plc
We have been engaged by the
directors of DCC plc (DCC)
to perform an independent
assurance engagement in
respect of selected aspects
of DCC’s sustainability
performance, disclosed in its
Sustainability Report for the
year ended 31 March 2014
(‘the Report’).
What we did and our conclusions
We planned and performed our work,
summarised below, to obtain the
evidence we considered necessary to
reach our assurance conclusions on the
Selected Sustainability Data.
What we are assuring (Selected
Sustainability Information)
• The selected sustainability data for the
year ended 31 March 2014 marked with
the symbol * presented in the Report
(the Selected Sustainability Data).
• DCC’s declared Global Reporting
Initiative (GRI) application level of C+
of the GRI 'G3' Guidelines as stated on
page 65 of the Report.
The scope of our work was restricted to
the Selected Sustainability Information
for the year ended 31 March 2014
and does not extend to information in
respect of earlier periods or to any other
information in the Report.
How the information is assessed
(Reporting Criteria)
DCC’s Reporting Criteria at http://www.
dcc.ie/~/media/Files/D/DCC-Group-Plc/
pdfs/carbon-LTI-reporting-criteria-a.
pdf and the GRI G3 Guidelines at https://
www.globalreporting.org/reporting/
guidelines-online/G3Online/Pages/
default.aspx set out how the Selected
Sustainability Data is measured,
recorded and reported.
73
This report, including our conclusions,
has been prepared solely for the
directors of DCC as a body in accordance
with the agreement between us, to
assist the directors in reporting DCC’s
sustainability performance and activities.
We permit this report to be disclosed
in the Annual Report for the year
ended 31 March 2014, to enable the
directors to show they have addressed
their governance responsibilities by
obtaining an independent assurance
report in connection with the Selected
Sustainability Data. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other
than the directors as a body and DCC plc
for our work or this report except where
terms are expressly agreed between us
in writing.
PricewaterhouseCoopers
Chartered Accountants
Dublin, Ireland
20 May 2014
Notes
1. International Standard on Assurance Engagements
3000 (Revised) – ‘Assurance Engagements other
than Audits and Reviews of Historical Financial
Information’ issued by the IAASB. International
Standard on Assurance Engagements 3410 – ‘Assurance
Engagements on Greenhouse Gas Statements’ issued
by the IAASB.
2. Assurance, defined by the International Auditing and
Assurance Standards Board (IAASB), gives the user
confidence about the subject matter ('Sustainability
Information') assessed against the Reporting Criteria.
Reasonable assurance gives more confidence than
limited assurance. The evidence gathered to support a
reasonable assurance conclusion is greater than that
gathered to support a limited assurance conclusion.
3. We comply with the applicable independence and
competency requirements of the Chartered Accountancy
Regulatory Board (CARB) Code of Ethics.
Assurance standard applied1
ISAE 3000 and ISAE3410.
Level of assurance2
Limited Assurance.
Understanding DCC’s reporting and
measurement methodology
There is not yet an established
practice for evaluating and measuring
sustainability performance information.
The range of different, but acceptable,
techniques used can result in materially
different reporting outcomes which
may affect comparability with other
organisations. It is therefore important
to read and understand the Reporting
Criteria at http://www.dcc.ie/~/media/
Files/D/DCC-Group-Plc/pdfs/carbon-
LTI-reporting-criteria-a.pdf and the
GRI G3 Guidelines at https://www.
globalreporting.org/reporting/guidelines-
online/G3Online/Pages/default.aspx that
DCC has used to evaluate and measure
the Selected Sustainability Data.
Limited assurance work performed on
the Selected Sustainability Information
We performed the following activities:
• Evaluated the design and
implementation of key processes
and controls over the Selected
Sustainability Data;
• Assessed the source data used to
prepare the Selected Sustainability
Data for 2013/2014, including re-
performing a sample of calculations;
• Carried out analytical procedures over
the Selected Sustainability Data;
• Examined on a sample basis the
preparation and collation of the
Selected Sustainability Data, as well as
making inquiries of management and
others;
• Performed site visits to ten sites to
review systems and processes in
place for managing and reporting on
sustainability activities, and examined
source documentation on a sample
basis;
• With respect to the carbon figures
disclosed on page 69 of the Report, we
evaluated the methodology and basis
of converting the original reported
unit into carbon emission equivalent
tonnes. We agreed a sample of
emission factors back to the stated
source (as detailed in the Reporting
Criteria);
• Reviewed the Selected Sustainability
Data disclosures; and
• Assessed the GRI Index on page 72 of
the Report for compliance with the GRI
application level requirements for C+.
This consisted of examining supporting
documentation, on a sample basis,
where relevant.
Our conclusions
As a result of our procedures nothing
has come to our attention that indicates:
• The Selected Sustainability Data for
the year ended 31 March 2014 is not
prepared in all material respects with
the Reporting Criteria; and
• DCC’s declared GRI application level of
C+ on page 65 of the Report is not fairly
stated in all material respects.
DCC’s responsibilities
The directors of DCC are responsible for:
• designing, implementing and
maintaining internal controls over
information relevant to the Selected
Sustainability Data;
• establishing objective assessment and
Reporting Criteria for preparing the
Selected Sustainability Data;
• measuring DCC’s performance based
on the Reporting Criteria; and
• the content of the Annual Report.
Our responsibilities
We are responsible for:
• forming independent conclusions,
based on our limited assurance
procedures;
• reporting our conclusions to the
directors of DCC; and
• reading the other information included
in the Report as well as the Chief
Executive's Review, Who We Are,
Strategy, Business Model, Corporate
Governance Statement and Report of
the Directors sections of the DCC plc
Annual Report, and considering the
consistency of that other information
with the understanding gained
from our work, and considering
the implications for our report if
we become aware of any material
inconsistencies. Our responsibilities
do not extend to any information other
than the Selected Sustainability Data in
the Report.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 74
Strategic Report - Performance
Senior Management
Group and Divisional
Chief Executive
Chief Financial Officer
DCC Energy
Managing Director
Managing Director - Oil
Managing Director - LPG
Finance Director
Development Director
DCC Technology
Managing Director
Finance & Development Director
Chief Operating Officer & Head of Supply Chain
DCC Healthcare
Managing Director
Finance & Development Director
DCC Environmental
Finance & Development Director
DCC Food & Beverage
Managing Director
Finance & Development Director
Company Secretary & Head of Enterprise Risk Management
Managing Director, DCC Corporate Finance
Head of Group Accounting
Head of Group Compliance
Head of Group HR
Head of Internal Audit
Chief Information Officer
Head of Group Sustainability
Head of Group Tax
Head of Group Treasury
* Appointed on 3 June 2014
Tommy Breen
Fergal O’Dwyer
Donal Murphy
Eddie O’Brien
Henry Cubbon
Conor Murphy
Clive Fitzharris
Niall Ennis
Kevin Lucey
Cormac Watters
Conor Costigan
Redmond McEvoy
Thomas Davy
Frank Fenn
Stephen Casey
Ger Whyte
Michael Scholefield
Gavin O’Hara
Darragh Byrne
Ann Keenan
Stephen Johnston
Peter Quinn*
John Barcroft
Yvonne Divilly
Niall Kelly
75
Principal Businesses and Joint Venture
DCC Energy
Oil
Managing Director
Certas Energy UK
Managing Director
Oil Ireland
DCC Energi Danmark
Managing Director
Energie Direct, Austria and Bronberger & Kessler, Bavaria Managing Director
Managing Director
Swea Energi
Managing Director
Qstar Retail
Managing Director
Fuel Card Services
Card Network Solutions
Managing Director
LPG
Flogas Britain
Flogas Ireland
Flogas Scandinavia
Benegas
Managing Director
Managing Director
Managing Director
Managing Director
Paul Vian
Tom Walsh
Christian Heise
Hans-Peter Hintermayer
Magnus Nyfjäll
Maria Hadd
Steve Chesworth
Ben Jordan
Lee Gannon
Richard Martin
Jan Wahlquist
Bauke van Kalsbeek
DCC Technology
Exertis UK & Ireland
Exertis UK & Ireland
Exertis Continental Europe
DCC Healthcare
DCC Vital
DCC Health & Beauty Solutions
DCC Environmental
DCC Environmental Britain and William Tracey
Wastecycle
Oakwood
Enva Ireland
DCC Food & Beverage
Kelkin
Robert Roberts
Bottle Green
Allied Foods
KSG*
* Joint venture
Managing Director
Deputy Managing Director
Managing Director
Gerry O’Keeffe
Chris Peacock
Patrice Arzillier
Managing Director
Managing Director
David Armstrong
Stephen O’Connor
Managing Director
Managing Director
Managing Director
Managing Director
Managing Director
Managing Director
Managing Director
Managing Director
Chief Executive Officer
Michael Tracey
Paul Needham
Steve Tooley
Declan Ryan
Frank Fenn
Tom Gray
Jon Eagle
John Raleigh
Brian Hogan
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 76
Governance
Governance
Contents
77 Chairman’s Introduction
78 Board of Directors
80 Corporate Governance Statement
85 Audit Committee Report
89 Remuneration Report
109 Nomination and Governance
Committee Report
112 Report of the Directors
Leadership
A profile of the non-executive
and executive Directors of
DCC plc.
Page 78
Good Governance
The steps we take to ensure
the Company is managed to
the highest standards.
Page 80
Remuneration
How we align what
management is paid with our
performance and with the
interests of shareholders.
Page 89
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Chairman’s Introduction
DCC Annual Report and Accounts 2014
77
Split of Directors
Board Time Allocation
Chairman
Non-executive Directors
Executive Directors
1
7
3
Business Issues
Governance Issues
86%
14%
Dear Shareholder,
On behalf of the Board of
DCC, I am happy to report full
compliance with the 2012 UK
Corporate Governance Code
(‘the Code’). We believe that
we have robust systems of
governance and that they are
well applied.
The Board sets clear expectations for
conduct across the whole business. At
the heart of these expectations are three
unambiguous principles:
• do the right thing
• be honest and open
• deal with difficult issues and work as a
team to resolve them.
We keep a close watch on developing
best practice in corporate governance
and take every opportunity to get
feedback from our shareholders on their
expectations of us in our approach to
governance. We are early adopters of
emerging practice where we believe it
will enhance transparency and improve
our long term business performance.
The concept of the unitary Board is
fundamental to the way we operate, but
open debate is the order of the day. The
non-executive Directors constructively
challenge the management team
on strategic and key operational
performance issues and on matters
related to ensuring that the organisation
remains fit for purpose as we grow.
Board Membership, Board Diversity and
Board Effectiveness
We have a balanced, diverse and
experienced Board. Dr. Pamela Kirby
joined the Board on 3 September 2013
and brought to us substantial senior
management and non-executive director
experience in UK, European and US
business development, especially in
the healthcare sector. The ‘Women on
Boards Davies Review Annual Report
2014’ lists DCC as one of only 17 FTSE
250 companies with three or more
women on their boards.
Earlier in 2014, David Byrne, the Deputy
Chairman and Senior Independent
Director, and I facilitated an internal
evaluation of the effectiveness of the
DCC Board, which covered individual and
collective effectiveness and efficiency
and dealt with Board committees as
well as the Board as a whole. The
results of actions implemented following
recent evaluations are showing that
the significantly greater diversity of
experience and expertise brought to
the table as a result of new Board
appointments over the past six years is
paying dividends, in terms of the quality
of Board discussion and its decision-
making. As was the case last year, the
2014 review generated a number of
worthwhile suggestions for improvement
in the way we operate, which we have
agreed to address over the balance
of this financial year. The comparable
list from last year’s evaluation was
substantially implemented. Next year,
we will again commission a leading
independent Board evaluation firm
to facilitate the evaluation, as we did
in 2012, in accordance with the Code
provision.
The non-executive Directors made
a number of site visits to Group
subsidiaries during the year ended
March 2014, as part of their ongoing
training and development.
Independence and Re-Election
There are eight non-executive Directors
and three executive Directors on our
Board. We recently conducted our
annual review of the independence
of non-executive Directors. I am
pleased to report that each fulfilled the
independence requirements of the Code.
As noted in the Code, the test is not
appropriate to myself, but I did fulfil the
independence requirements up to the
date of my appointment as Chairman.
All of the Directors will be presenting
themselves for re-election at the
forthcoming Annual General Meeting.
Board Meeting Balance
The intention at Board meetings is to
achieve an appropriate balance between
strategic, operational, regulatory and
other matters. I regularly monitor the
amount of time devoted to each category
of business, to ensure that we maintain
an appropriate balance.
Board Committees
Our Board committees have continued to
perform effectively. You will find on pages
85 to 111 a detailed Report introduced by
the Chairman of each Committee, setting
out its membership and an overview of
its activities during the year.
And finally...
in the pages that follow there is a
detailed account of our corporate
governance systems and how they
operate, which I hope you will find
helpful.
Michael Buckley
Chairman
78
Governance
Board of Directors
1.
2.
3.
4.
5.
6.
1. Michael Buckley MA, LPh, MCSI
Non-executive Chairman
3. Róisín Brennan BCL, FCA
Non-executive Director
Chairman, Nomination and Governance
Committee
Member, Nomination and Governance
Committee
Member, Remuneration Committee
Member, Remuneration Committee
Age: 69
Nationality: Irish
Age: 49
Nationality: Irish
Joined Board: Mr. Buckley joined the Board
in September 2005 and was appointed non-
executive Chairman in May 2008.
Key strengths: Mr. Buckley has senior
management and board level experience over 25
years in stockbroking, mergers and acquisitions,
banking, enterprise software, internationally
traded services, work-out and healthcare
businesses in Ireland, the UK, Central Europe,
the USA and the Far East.
Previous board and management experience:
He was Group Chief Executive of Allied Irish
Banks plc from 2001 to 2005 having served
as Managing Director of AIB Capital Markets
and AIB Poland. Previously, he was Managing
Director of NCB Group and prior to that a senior
public servant in Ireland and the EU. From 2003
to 2012, he was a non-executive director of M and
T Bank Corporation, listed on the New York Stock
Exchange. From 2008 to 2011, he was a non-
executive director of Enterprise Ireland.
External commitments: Non-executive
director of UK Asset Resolution Limited and
senior advisor to a number of privately owned
companies in Ireland and the USA. An adjunct
professor and chairs the Advisory Board at
the Department of Economics in the National
University of Ireland, University College Cork and
chairs the Board of the Irish Chamber Orchestra.
A Companion of the Chartered Management
Institute (UK).
2. Tommy Breen B Sc (Econ), FCA
Chief Executive
Age: 55
Nationality: Irish
Joined Board: Mr. Breen joined the Board in
February 2000.
Key strengths: Mr. Breen has worked across a
broad range of sectors and businesses during his
28 years within the DCC Group. During this time
he has gained significant experience of growing
businesses organically and by acquisition.
Previous management experience: He joined
DCC in 1985, having previously worked with
KPMG, and has held a number of senior
management positions within the Group,
including Managing Director of the Energy,
Technology and Environmental divisions. He
was appointed Chief Operating Officer of DCC
in March 2006 and subsequently became
Group Managing Director in July 2007. He was
appointed Chief Executive in May 2008.
External commitments: No external director
appointments.
Joined Board: Ms. Brennan joined the Board in
September 2005.
Key strengths: Ms. Brennan has over 20 years’
experience advising companies on mergers and
acquisitions, takeovers, disposals, fundraisings
and initial public offerings.
Previous board and management experience:
She is a former Chief Executive of IBI Corporate
Finance where she worked from 1990 until 2011.
She is a former non-executive director of The
Irish Takeover Panel.
External Commitments: A non-executive director
of Coillte Teo (the Irish State Forestry Company).
4. David Byrne SC
Non-executive Deputy Chairman and Senior
Independent Director
Member, Nomination and Governance
Committee
Member, Remuneration Committee
Age: 67
Nationality: Irish
Joined Board: Mr. Byrne joined the Board and
was appointed Deputy Chairman and Senior
Independent Director in January 2009.
Key strengths: Mr. Byrne has practised at the
top of the legal profession. His international
commercial experience at board and advisory
level ranges across the food, healthcare and
environmental sectors.
Previous board and management experience:
Following 27 years of practice as a barrister,
he was Attorney General of Ireland from
1997 to 1999. Mr. Byrne served as the first
EU Commissioner for Health and Consumer
Protection from 1999 to 2004. Following this, he
served as Special Envoy of the Director-General
of the World Health Organisation advising on
the International Health Regulations. He has
previously been a member of the boards of public
and private companies, including Kingspan Group
plc, The National Concert Hall (Chairman) and
Irish Life & Permanent plc. He is the immediate
past chair of the National Treasury Management
Agency Advisory Committee and is Chancellor
Emeritus of Dublin City University.
External commitments: A member of the
Kikkoman International Advisory Board. Chair of
the European Alliance for Personalised Medicine
in Brussels and a Council Member of the Royal
College of Physicians in Ireland.
5. Jane Lodge B Sc, FCA
Non-executive Director
Chairman, Audit Committee
Age: 59
Nationality: British
Joined Board: Ms. Lodge joined the Board in
October 2012.
Key strengths: Ms. Lodge, as a senior audit
partner for 25 years, has extensive experience
with multinational manufacturing companies and
her strategic work with Deloitte has given her a
substantial international business perspective.
She has very strong and recent financial skills to
bring to the Audit Committee.
Previous board and management experience:
Until 2011, Ms. Lodge was a senior audit partner
with Deloitte, where she spent over 25 years
advising global manufacturing companies. She
was also the Deloitte partner in charge of the
firm’s UK manufacturing industry sector, where
she was responsible for strategy and marketing,
and was a member of the Deloitte Global
Manufacturing Executive. She was a member of
the CBI Manufacturing Council until 2011. While
at Deloitte, she served a term on the Board of
Partners of Deloitte UK and also co-chaired a
global team of partners to review the strategy of
the Global Deloitte Firm.
External commitments: A non-executive director
of Devro plc and of Costain Group PLC and a
director of a number of private companies.
6. Pamela Kirby BSc, PhD.
Non-executive Director
Age: 60
Nationality: British
Joined Board: Dr. Kirby joined the Board in
September 2013.
Key strengths: Dr. Kirby has extensive knowledge
of the international healthcare sector, having
worked in the pharmaceutical industry for
more than twenty five years. Dr. Kirby serves
on the board of a FTSE 100 company and is the
chairman of a company listed on the NASDAQ
stock exchange.
Previous board and management experience:
She held senior UK and global management
positions in AstraZeneca PLC and in F. Hoffman-
La Roche Ltd., where she was Director of Global
Strategic Marketing. Dr. Kirby is also a former
CEO of Quintiles Transnational Corporation
in the USA, the leading global provider of
biopharmaceutical development and commercial
outsourcing services. She was also previously a
non-executive director of Novo Nordisk A/S and
of Curalogic A/S.
External commitments: Non-executive Chairman
of Scynexis Inc and a non-executive director of
Victrex plc, Smith and Nephew plc and Informa
plc.
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DCC Annual Report and Accounts 2014
79
7.
8.
9.
10.
11.
7. Kevin Melia FCMA, JDipMA
Non-executive Director
9. Donal Murphy B Comm, BFS, MBA
Executive Director
11. Leslie Van de Walle
Non-executive Director
Chairman, Remuneration Committee
Member, Nomination and Governance
Committee
Member, Audit Committee
Age: 58
Nationality: French
Joined Board: Mr. Van de Walle joined the Board
in November 2010.
Key strengths: Mr. Van de Walle has a very wide
range of international senior management
business experience, as well as experience as a
non-executive director, in the oil and gas sector,
in the food and drinks industry, in manufacturing,
in building materials and in the insurance sector.
Previous board and management experience:
He is a former non-executive director of Aviva plc
and former Chief Executive Officer of Rexam plc.
He previously held a number of senior executive
roles in Royal Dutch Shell plc, including Executive
Vice President of Retail for Oil Products and Head
of Oil Products, Shell Europe. He has also held
a number of senior management positions with
Cadbury Schweppes plc and United Biscuits plc
where he was CEO. He was also a non-executive
director of Aegis Group plc from 2003 to 2009.
External commitments: Non-executive Chairman
of SIG plc and of Robert Walters plc and a non-
executive director of Cape plc.
Age: 48
Nationality: Irish
Joined Board: Mr. Murphy joined the Board in
December 2008.
Key strengths: Mr. Murphy has extensive
experience in managing DCC businesses in
a number of industry sectors and in leading
the acquisition and integration of numerous
businesses, particularly in the Energy sector.
Previous management experience: He joined
DCC as Head of Group IT in 1998, having
previously worked with Allied Irish Banks plc.
He was Managing Director of DCC Technology
from 2004 to 2006, when he was appointed
Managing Director of DCC Energy.
External commitments: No external director
appointments.
10. Fergal O’Dwyer FCA
Executive Director
Age: 54
Nationality: Irish
Joined Board: Mr. O’Dwyer joined the Board in
February 2000.
Key strengths: He has worked in DCC in senior
management positions for over 24 years and
during that time he has worked closely with all
of the Group’s material operating companies on
a range of financial management, treasury and
strategic and development matters.
Previous management experience: Mr. O’Dwyer
joined DCC in 1989 and was appointed Chief
Financial Officer in 1994, having worked in that
role in the lead up to DCC’s flotation in that
year. Prior to joining DCC, he previously worked
with KPMG and Price Waterhouse in audit and
corporate finance.
External commitments: No external director
appointments.
Member, Audit Committee
Age: 66
Nationality: American
Joined Board: Mr. Melia joined the Board in
December 2008.
Key strengths: Mr. Melia has long experience
across the IT sector, including hardware
manufacturing and distribution and software
development, as a corporate executive, an
entrepreneur and as a non-executive director in
listed companies. Additionally, he has experience
as a principal in the private equity sector and as
a non-executive director in the financial services
sector.
Previous board and management experience:
He is a former non-executive Chairman of Vette
Corp, Iona Technologies and Authorize. Net
and was the Co-founder, Chairman and Chief
Executive Officer of Manufacturers Services
Ltd. Previous positions held include Chief
Financial Officer and Executive Vice President of
Operations of Sun Microsystems and President
of its computer hardware division. He is a former
Joint Managing Director of Boulder Brook
Partners, a private investment company. Mr.
Melia also held a number of senior management
positions at Digital Equipment Corporation.
External commitments: Non-executive director
of Merrion Capital, Newtide Acquisitions,
Analogic Corporation, Greatbatch IncRadiSys
Corp and a member of the advisory board of C&S
Wholesale Grocers and Distributors.
8. John Moloney B.Agr.Sc., MBA
Non-executive Director
Member, Audit Committee
Age: 59
Nationality: Irish
Joined Board: Mr. Moloney joined the Board in
February 2009.
Key strengths: Mr. Moloney has extensive
top management and board level experience
internationally and domestically in the dairy,
meat and nutritionals sectors, covering
processing, manufacturing and distribution.
Previous board and management experience:
He is a former Group Managing Director of
Glanbia plc. He worked with the Department of
Agriculture, Food and Forestry as well as in the
meat industry in Ireland. He is a former council
member of the Irish Business and Employers
Confederation.
External commitments: Chairman of Coillte
Teo (the Irish State Forestry Company) and
a non-executive director of Greencore Group
plc, Smurfit Kappa plc and a number of private
companies.
80
Governance
Corporate Governance Statement
This statement describes DCC’s governance principles and
practices.
It also describes how DCC has applied the principles set out in
the UK Corporate Governance Code (‘the Code’), the current
edition of which was issued by the Financial Reporting Council
(‘FRC’) in September 2012 and applied to DCC for the year
ended 31 March 2014.
A copy of the Code can be obtained from the FRC’s website,
www.frc.org.uk.
DCC plc - Corporate Governance Framework
Board of Directors
Nomination and
Governance
Committee
Remuneration
Committee
Audit
Committee
Chief Executive
Executive Risk
Committee
Senior
Management
Group
Sustainability
Committee
accurate, timely and understandable
information is provided about the Group
to shareholders, debt providers and
regulators.
The Board has delegated responsibility
for management of the Group to the
Chief Executive and his executive
management team. The main areas
where decisions remain with the Board
are summarised in the table below.
The Board has delegated some of its
responsibilities to Committees of the
Board. The composition and activities
of these Committees are detailed in
their individual reports on pages 85 to
111. The Board receives reports at its
meetings from the Chairmen of each
of the Committees on their current
activities.
A clear division of responsibility exists
between the Chairman, who is non-
executive, and the Chief Executive. Each of
their responsibilities have been set out in
writing and have been approved by the Board.
There is an established procedure
for Directors to take independent
professional advice in the furtherance
of their duties, if they consider this
necessary.
Chairman
The Chairman’s primary responsibility is
to lead the Board, to ensure that it has a
common purpose, is effective as a group
and at individual Director level and that
it upholds and promotes high standards
of integrity, probity and corporate
governance.
The Board of Directors
Role
The Board of DCC comprises the
non-executive Chairman, seven other
non-executive Directors and three
executive Directors, including the Chief
Executive. It is collectively responsible for
the long term success of the Group. Its
role is to provide leadership, to oversee
management and to ensure that the
Company provides its stakeholders
with a balanced and understandable
assessment of the Group’s current
position and prospects.
The Board’s leadership responsibilities,
in the interest of delivering long term
value to shareholders, involve working
with management to set corporate
values and to develop strategy, including
deciding which risks it is prepared to
take in pursuing its strategic objectives.
Its oversight responsibilities involve
it in constructively challenging the
management team in relation to
operational aspects of the business,
including approval of budgets, and
probing whether risk management
and internal controls are sound. It
also is responsible for ensuring that
Schedule of Matters Reserved for the Board
The approval of the following matters is reserved for the Board:
• Group Strategy.
• The annual Budget, including capital expenditure plans.
• The Interim and the Annual Accounts.
• Dividend Policy.
• Treasury Policy.
• Acquisitions, with an enterprise value in excess of €20 million, after deducting net
cash or adding net debt, and any acquisition under this threshold in a totally new and
unrelated business area or in a geographic area that is considered high risk.
• Disposals of assets/businesses for a consideration (inclusive of net debt) in excess of
€20 million.
• Capital expenditure proposals in excess of €20 million over approved budgeted levels.
• Planned capital and working capital expenditure by a Group company in a totally new
and unrelated business area in aggregate in excess of €20 million.
• The settlements of matters in legal disputes with third parties in excess of €5 million.
The Chairman is the link between
the Board and the Company. He is
specifically responsible for establishing
and maintaining an effective working
relationship with the Chief Executive,
for ensuring effective and appropriate
communications with shareholders and
for ensuring that members of the Board
develop and maintain an understanding
of the views of shareholders.
Before the beginning of the financial
year, having consulted with the other
Directors and the Company Secretary,
the Chairman sets a schedule of Board
and Committee meetings to be held
in the following twelve months, which
includes the key agenda items for
each meeting. Further details on these
agenda items are outlined under ‘Board
Meetings’ on page 82.
Deputy Chairman and Senior
Independent Director
The duties of the Deputy Chairman
(who is also the Senior Independent
Director) are set out in writing and
formally approved by the Board. The
Deputy Chairman chairs meetings of the
Board if the Chairman is unavailable or
is conflicted in relation to any agenda
item. He also leads the annual Board
evaluation of the performance of the
Chairman.
appointment process is set out in the
Nomination and Governance Committee
Report on page 110.
Following appointment by the Board, all
Directors are, in accordance with the
Articles of Association, subject to re-
election at the following Annual General
Meeting (‘AGM’). In accordance with our
practice since 2008 and the provisions
of the Code, all Directors submit to re-
election at each AGM.
The expectation is that non-executive
Directors would serve for a term of
six years and may also be invited to
serve an additional period thereafter,
generally not extending beyond nine
years in total. After three years’ service,
and again after six years’ service, each
non-executive Director’s performance
is reviewed by the Nomination and
Governance Committee, with a view to
recommending to the Board whether a
further period of service is appropriate,
subject to the usual annual approval by
shareholders at the AGM.
The terms and conditions of appointment
of non-executive Directors are set out in
their letters of appointment, which are
available for inspection at the Company’s
registered office during normal office
hours and at the AGM of the Company.
The Senior Independent Director is
available to shareholders who may have
concerns that cannot be addressed
through the Chairman or Chief Executive.
Details of the length of tenure of each
Director on the Board is set out in the
Nomination and Governance Committee
Report on page 110.
Induction and Development of Directors
New non-executive Directors undertake
a rigorous induction process which
includes a series of meetings with Group
and divisional management, detailed
divisional presentations, visits to key
subsidiary locations and a briefing with
the external auditor.
The Chairman invites external experts
to attend certain Board meetings to
address the Board on developments in
corporate governance, risk management
and executive remuneration and on
relevant industry and sectoral matters.
Company Secretary
The Directors have access to the
advice and services of the Company
Secretary, whose responsibilities
include ensuring that Board procedures
are followed, assisting the Chairman
in relation to corporate governance
matters and ensuring compliance by the
Company with its legal and regulatory
requirements.
Appointment of Directors
The Nomination and Governance
Committee formally agrees criteria
for new non-executive Director
appointments, including experience of
the industry sectors and geographies
in which the Group operates and
professional background, and has regard
to the need for a balance in relation to
diversity, including gender. The detailed
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DCC Annual Report and Accounts 2014
81
The Chairman and Company Secretary
review Directors’ training needs, in
conjunction with individual Directors,
and match those needs with appropriate
external seminars and speakers. The
Chairman also discusses individual
training and development requirements
for each Director as part of the annual
evaluation process and Directors are
encouraged to undertake appropriate
training on relevant matters. In addition,
a non-executive director electronic
library is available which is regularly
updated with relevant publications and
changes in legislation.
Non-executive Directors are expected to
meet individually during the year, outside
of Board meetings, with members
of senior management throughout
the Group and to visit a number of
subsidiaries to familiarise themselves
with the business in more detail than is
possible during Board meetings.
All Directors are encouraged to avail of
opportunities to hear the views of and
meet with the Group’s shareholders
and analysts. The section on ‘Relations
with Shareholders’ on page 84 gives
further information on opportunities
for Directors to meet with the Group’s
shareholders.
Independence
The Board has carried out its annual
evaluation of the independence of each
of its non-executive Directors, taking
account of the relevant provisions of the
Code, namely whether the Directors
are independent in character and
judgment and free from relationships
or circumstances which are likely to
affect, or could appear to affect, the
Directors’ judgment. Each of the current
non-executive Directors fulfilled the
independence requirements of the Code.
Michael Buckley has been Chairman
of the Company since May 2008. On his
appointment as Chairman, Mr Buckley
met the independence criteria as set out
in the Code. Thereafter, as noted in the
Code, the test of independence is not
appropriate in relation to the Chairman.
While Mr Buckley holds several other
directorships outside of the DCC Group,
the Board considers that these do not
interfere with the discharge of his duties
to DCC.
82
Governance
Corporate Governance Statement (continued)
Board Meetings
During the year ended 31 March 2014,
the Board held eight meetings. Individual
attendance at these meetings and
attendance at Committee meetings is set
out in the table opposite. There is regular
contact as required between meetings in
order to progress the Group’s business.
A schedule of Board and Committee
meetings is circulated to the Board in
advance of the calendar year, which
includes the key agenda items for each
meeting. Board papers are circulated
electronically in the week preceding the
meeting.
The key recurrent Board agenda themes
are divided into normal business (which
includes budgets, financial statements,
investor relations, human resources and
governance, risk and compliance) and
developmental issues, (which include
strategy, acquisitions, sectoral and
divisional reviews, succession planning,
management talent development and
Directors’ education).
One and a half days of a two day Board
meeting each December are devoted
exclusively to strategy and three year
plans. During the year under review, the
Board devoted substantial time outside
its December meeting to strategic
development issues, including an Energy
strategy update, an operational and
development review of its Technology
business, pharmaceutical strategy
development, several specific acquisition
proposals and a review of post-
acquisition business performance.
The Board schedule includes a
significant agenda item on succession
planning and management talent
development. Against a template
agreed by the Chief Executive and the
Nomination and Governance Committee,
the Chief Executive brings a detailed
plan for review by that Committee. At an
immediately subsequent Board meeting
the plan is presented to the Board,
discussed and approved.
The non-executive Directors meet a
number of times each year without
executives being present.
Board of Directors: Attendance at meetings during the year ended 31 March 2014:
Director
Board
A
B
Audit
Committee
A
B
Remuneration
Committee
Nomination and
Governance
Committee
A
B
A
B
5
Michael Buckley
-
Tommy Breen
5
Róisín Brennan
5
David Byrne
-
Jane Lodge
Pamela Kirby1
-
-
Kevin Melia
-
John Moloney
-
Donal Murphy
-
Fergal O’Dwyer
5
Leslie Van De Walle
Column A indicates the number of meetings held during the period the Director was a member of the Board and/or
Committee.
Column B indicates the number of meetings attended during the period the Director was a member of the Board and/
or Committee.
6
-
6
6
-
-
-
-
-
-
6
6
-
6
6
-
-
-
-
-
-
6
5
-
5
5
-
-
-
-
-
-
5
8
8
8
8
8
5
8
8
8
8
8
8
8
8
8
8
5
8
8
8
8
8
-
-
-
-
4
-
4
4
-
-
4
-
-
-
-
4
-
4
4
-
-
4
Note 1 Pamela Kirby was appointed to the Board on 3 September 2013. She did not serve on any Committees during
the year ended 31 March 2014.
Audit Committee
The primary function of the Audit
Committee is to assist the Board in
fulfilling its financial and risk oversight
responsibilities. Further details of the
activities of the Audit Committee are set
out in their Report on pages 85 to 88.
Remuneration Committee
The Remuneration Committee is
responsible for determining the
Remuneration Policy and conditions of
employment for Executive Directors and
senior management. Further details
of the activities of the Remuneration
Committee are set out in their Report on
pages 89 to 108.
Nomination and Governance Committee
The Nomination and Governance
Committee is responsible for considering
the size, composition and structure
of the Board and succession planning
requirements and for monitoring the
Company’s compliance with corporate
governance, legal and best practice
requirements. Further details of
the activities of the Nomination and
Governance Committee are set out in
their Report on pages 109 to 111.
Chief Executive
The Chief Executive has day to day
management responsibility for the
running of the Group’s operations and
for the implementation of Group strategy
and policies agreed by the Board. The
Chief Executive also has a key role in
the process for the setting and review
of strategy. The Chief Executive instils
the Company’s culture and standards,
which include appropriate corporate
governance throughout the Group. In
executing his responsibilities, the Chief
Executive is supported by the Chief
Financial Officer and the Company
Secretary, who, together with the Chief
Executive, are responsible for ensuring
that high quality information is provided
to the Board on the Group’s financial and
strategic performance.
Executive Directors
The executive Directors support
the Chief Executive in devising and
executing strategy and in overseeing the
operational performance of the whole
business.
Executive Risk Committee
The responsibilities of the Executive Risk
Committee are set out in the Risk Report
on page 17.
Senior Management Group
The Senior Management Group reports
to the Chief Executive at weekly
management meetings.
Sustainability Committee
The responsibilities of the Sustainability
Committee are set out in the
Sustainability Report on page 65.
Remuneration
It has been the Company’s practice
since 2009 to put the Remuneration
Report to an advisory, non-binding
shareholder vote at the AGM. At the
2014 AGM, we will propose two advisory
non-binding votes in respect of approval
of the Remuneration Policy Report
and approval of the Annual Report on
Remuneration.
Share Ownership and Dealing
Details of the Directors’ interests in DCC
shares are set out in the Remuneration
Report on pages 105 to 107.
The Board has adopted the DCC Share
Dealing Policy which applies to dealings
in DCC shares by the Directors and
Company Secretary of DCC, directors
of all Group companies and all DCC
Head Office employees. The Policy is
based on the Model Code, as set out
in the Listing Rules of the UK Listing
Authority. Under the Policy, Directors
and relevant executives are required to
obtain clearance from the Chairman or
Chief Executive before dealing in DCC
shares and are prohibited from dealing in
the shares during prohibited periods as
defined by the Listing Rules.
The Policy specifies preferred periods’
for share dealing by Directors and
relevant executives, being the four 21
day periods following the updating
of the market on the Group’s trading
position through the preliminary results
announcement in May, the Interim
Management Statement in July (at the
AGM), the interim results announcement
in November and the Interim
Management Statement in January/
February.
Risk Management and Internal Control
The Board is responsible for the Group’s
system of risk management and internal
control. It is designed to manage rather
than eliminate the risk of failure to
achieve business objectives and provides
reasonable but not absolute assurance
against material misstatement or loss.
Details in relation to the Group’s risk
management structures are set out in
the Risk Report on page 16.
The Board has delegated responsibility
for the ongoing monitoring of the
effectiveness of this system to the Audit
Committee. Details in relation to the
Audit Committee’s work in this regard
are set out in the Audit Committee
Report on page 87.
In accordance with the revised FRC
guidance for directors on internal
control published in October 2005,
‘Internal Control: Revised Guidance for
Directors on the Combined Code’, the
Board confirms that there is an ongoing
process for identifying, evaluating and
managing any 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 Board receives regular reports from
the Chairman of the Audit Committee
on its activities during the year and in
addition has considered a report from the
Audit Committee on the conduct of and
the findings and agreed actions from the
annual assessment of risk management
and internal control.
The consolidated financial statements
are prepared subject to the oversight
and control of the Group Chief Financial
Officer, ensuring correct data is
captured from Group locations and all
required information for disclosure in
the consolidated financial statements
is provided. A control framework has
been put in place around the recording
of appropriate eliminations and other
adjustments. The consolidated financial
statements are reviewed by the Audit
Committee and approved by the Board.
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DCC Annual Report and Accounts 2014
83
Board Performance Evaluation
The Board conducts an annual evaluation
of its own performance, that of each
of its principal committees, the Audit,
Nomination and Governance and
Remuneration Committees, and that
of Committee Chairmen and individual
Directors.
In 2012, the entire performance
evaluation process was externally
defined and conducted in accordance
with the requirement to have it externally
facilitated every three years under
Provision B.6.2 of the UK Corporate
Governance Code. It is intended that the
2015 Board evaluation process will be
externally facilitated.
In 2014, as in 2013, the process was
internally facilitated and comprised the
following steps:
• A questionnaire covering key aspects
of board effectiveness, including the
composition of the Board, the content
and running of Board and Committee
meetings, corporate governance, risk,
succession planning and the Directors’
continuing education process, was
circulated to all Directors.
• Completed questionnaires,
including views on performance and
recommendations for improvement,
were returned directly to the Chairman
or the Senior Independent Director.
• Follow up discussions were held with
each of the Directors individually
to clarify any points raised in the
questionnaire and the Chairman and
Senior Independent Director then
prepared summary reports on the
Board and its Committees.
• The Chairman, on behalf of the Board,
conducted evaluations of performance
individually with each of the non-
executive and the executive Directors
and also enquired if they had any
views they wished to express on the
performance of any other Director.
• The Senior Independent Director
conducted an evaluation of
performance of the Chairman by firstly
speaking with each of the Directors
individually and then meeting with the
non-executive Directors, without the
Chairman present, to formally evaluate
and conclude on the Chairman’s
performance.
84
Governance
Corporate Governance Statement (continued)
The Board Chairman and the Chairman
of the Remuneration Committee
also engaged in a consultation with
major shareholders and shareholder
representative bodies and proxy advisors
on proposed changes to the Company's
long term incentive plan, as described
in the Remuneration Report on page 98,
which will be submitted for shareholder
approval at the AGM.
Going Concern
The Company’s business activities,
together with the factors likely to affect
its future development, performance
and position are set out in the Chief
Executive’s Review on pages 12 to 15.
The financial position of the Company,
its cash flows, liquidity position and
borrowing facilities are described in the
Financial Review on pages 58 to 64.
The Company Secretary engages
annually with proxy advisors in advance
of the AGM and shareholder queries are
welcomed by the Chairman at the AGM.
The Company’s AGM provides
shareholders with the opportunity to
question the Chairman and the Board.
Further details on the Company’s AGM is
set out in the Report of the Directors on
page 113.
Business Conduct Guidelines
DCC’s Business Conduct Guidelines
set out the Group’s commitment to
the highest standards of integrity and
compliance. They have been circulated
to employees across the Group and are
also available on the Company’s website
www.dcc.ie. Further detail on this is
provided in the Sustainability Report on
page 67.
Report of the Directors
For the purposes of the European
Communities (Directive 2006/46/EC)
Regulations 2009, details of substantial
shareholdings in the Company and
details in relation to the purchase of the
Company’s own shares are set out in the
Report of the Directors on pages 112 to
114.
In addition, note 46 to the financial
statements include the Company’s
objectives, policies and processes for
managing its capital, its financial risk
management objectives, details of its
financial instruments and hedging
activities and its exposures to credit
risk and liquidity risk. The Company has
considerable financial resources and a
broad spread of businesses with a large
number of customers and suppliers
across different geographic areas and
industries.
Having assessed the relevant business
risks, the Directors believe that the
Company is well placed to manage
its business risks successfully. The
Directors have a reasonable expectation
that the Company, and the Group as
a whole, have adequate resources
to continue in operational existence
for the foreseeable future. For this
reason, they continue to adopt the going
concern basis in preparing the financial
statements.
Compliance Statement
DCC has complied, throughout the year
ended 31 March 2014, with the provisions
set out in the Code.
Michael Buckley, Tommy Breen
Directors
20 May 2014
• The non-executive Directors also
evaluated the performance of each
executive Director.
• Each Board Committee considered the
summary report as part of its annual
review of its own performance and
terms of reference and recommended
any changes it considered necessary to
the Board for approval.
The Board formally concluded that it and
its principal Committees were operating
effectively. A number of agreed actions,
including the review of reports to the
Board, discussions on gender diversity
and Board composition, and external
presentations to the Board on selected
topics, will be implemented by the
Chairman during the current year.
All action items arising from the 2013
evaluation were substantially completed
during the year ended 31 March 2014.
Relations with Shareholders
DCC recognises the importance of
communications with shareholders.
Presentations are made to both
existing and prospective institutional
shareholders, principally after the
release of the interim and annual
results. DCC issues an Interim
Management Statement twice yearly,
typically in January/February and July.
Major acquisitions are also notified to
the market and the Company’s website
www.dcc.ie provides the full text of
all press releases. The website also
contains annual and interim reports
and incorporates audio and slide show
investor presentations.
The Board is kept informed of the views
of shareholders through the executive
Directors’ attendance at investor
presentations and results presentations.
Furthermore, relevant feedback from
such meetings, investor relations reports
and brokers notes are provided to the
entire Board on a regular basis.
In June 2013, an Investor Day took place
in London which was attended by the
Chairman and a number of the non-
executive Directors. Most of DCC’s top
shareholders as well as various brokers,
analysts and fund managers were
present at this Investor Day.
Audit Committee Report
DCC Annual Report and Accounts 2014
85
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Dear Shareholder,
As Chairman of DCC’s Audit Committee,
I am pleased to present the report of the
Committee for the year ended 31 March
2014 which has been prepared by the
Committee and approved by the Board.
In September 2012, the FRC issued
the 2012 edition of the UK Corporate
Governance Code (‘the Code’) and the
Guidance on Audit Committees, which
apply to DCC’s year ended 31 March 2014.
The Code requires the Audit Committee,
where requested by the Board, to advise on
whether the Annual Report and Accounts,
taken as a whole, is fair, balanced
and understandable and provides the
information necessary for shareholders
to assess the Company’s performance,
business model and strategy. The Audit
Committee is satisfied that the Annual
Report meets these criteria and the work
done in meeting this responsibility is set
out in the table on page 86.
Secondly, the Code requires the Audit
Committee to report on the significant
issues it has considered in relation to the
financial statements and how these issues
were addressed, having regard to matters
communicated to it by the external auditor.
The work done by the Audit Committee in
meeting this responsibility is set out in the
table on page 86.
The Code requires all FTSE 350 companies
to put the external audit out to tender at
least every ten years. DCC concluded a
formal audit tender process in the year
ended 31 March 2012, following which
PricewaterhouseCoopers ('PwC') were
re-appointed as auditors to the Company.
The Audit Committee has also noted that
a Regulation and a Directive have been
approved by the European Parliament
which are intended to reform the audit
market in the EU and which contain
measures which would require a change of
auditor after a maximum term of 10 years
and the prohibition or cap of non-audit
services. The Regulation and Directive are
subject to ratification by the EU Council
of Ministers and the Audit Committee will
keep developments in this regard under
close review.
One of the Audit Committee’s key
responsibilities is to review the Company’s
internal control and risk management
systems. In addition to financial risks
and controls, the Audit Committee is also
responsible for the oversight of risks and
controls in relation to Health, Safety and
Environmental, Compliance and IT. Further
details in regard to these matters is set out
on page 87.
The Board, the Audit Committee and
Group management are fully committed to
continuous improvement of financial and
risk management within the Group.
The responsibilities of the Audit Committee
are summarised in the table below and are
set out in full in its Terms of Reference,
which are available on the DCC website
www.dcc.ie under Investor Relations/
Corporate Governance.
On behalf of the Audit Committee
Jane Lodge
Chairman, Audit Committee
20 May 2014
The Audit Committee
comprises four independent
non-executive Directors, Jane
Lodge (Chairman), Kevin
Melia, John Moloney and
Leslie Van de Walle. The
members of the Committee
have significant financial and
business experience. Further
biographical details regarding
the members of the Audit
Committee are set out on
pages 78 to 79.
Role and Responsibilities
• Monitor the integrity of the Group’s financial statements, including reviewing significant financial reporting judgments
contained in them.
• Provide advice on whether the Annual Report and Accounts, when taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.
• Oversee the relationship with the external auditor, including approval of remuneration and terms of engagement.
• Review the effectiveness of the external audit process.
• Make a recommendation to the Board on the appointment, reappointment and removal of the external auditor.
• Ensure the external audit is put to tender at least every 10 years.
• Develop and implement a policy on the supply of non-audit services by the external auditor to avoid any threat to auditor
objectivity and independence.
• Review the operation and effectiveness of the Group Internal Audit function.
• Review the Company’s internal control and risk management systems and the Company’s statements on internal control and
risk management.
• Review the Company’s arrangements for its employees to raise concerns, in confidence, about possible wrongdoing in
financial reporting or other matters.
86
Governance
Fair, Balanced and Understandable
Financial Reporting and Significant Financial Judgements
The 2012 edition of the Code includes
a new principle which states that the
Board should present a fair, balanced
and understandable assessment of
the company’s position and prospects
and specifically that they consider
that the annual report and accounts,
taken as a whole, is fair, balanced
and understandable and provides the
information necessary for shareholders
to assess the company’s performance,
business model and strategy.
At the request of the Board, the
Committee considered whether the 2014
Annual Report and Accounts met the
requirements.
In fulfilling this responsibility, the
Committee took account of the following:
• The timetable for the Annual Report
and Financial Statements was
extended to ensure that there was
adequate time for existing and new
processes to be completed.
• The Audit Committee was briefed
by PwC and Deloitte in relation to
developing best practice in this area.
• Comprehensive guidance was issued to
contributors of reports for inclusion in
the Annual Report.
• A verification process was
implemented dealing with the factual
contents of the reports.
• Comprehensive reviews were
undertaken at different levels in the
Group to ensure consistency and
overall balance.
• A comprehensive review was also
undertaken by the senior management
team.
• The senior management team reported
to the Audit Committee on these
processes and their outcomes.
After consideration, the Committee
concluded that the Annual Report,
taken as a whole, is fair, balanced
and understandable and that it
provides the necessary information for
shareholders to assess performance,
business model and strategy.
The Committee assesses whether suitable accounting policies have been adopted
and whether management has made appropriate estimates and judgements,
obtaining support from the external auditors in making these assessments.
The Committee pays particular attention to matters it considers to be important by
virtue of their impact on the Group’s results and particularly those which involve a
relatively higher level of complexity, judgement or estimation by management. The
following table sets out the significant issues related to the financial statements for
the year ended 31 March 2014:
Goodwill
As set out in note 20 to the Group financial statements, the Group had goodwill
of £690.0 million as at 31 March 2014. In order to satisfy itself that this balance
was appropriately stated, the Committee considered the impairment reviews
carried out by management. Impairment reviews are carried out annually using
the carrying values of subsidiaries at 31 December and the latest three year plan
information.
In performing their impairment reviews, management determined the recoverable
amount of each cash generating unit (‘CGU’), and compared this to the carrying
amount. The recoverable amount of each CGU is defined as the higher of its fair
value less costs to sell and its value in use. Management uses the present value
of future cash flows to determine the value in use. In calculating the value in
use, management judgement is required in forecasting cash flows of CGU’s, in
determining the long term growth rate and selecting an appropriate discount rate.
Management reported to the Committee that future cash flows of each CGU had
been estimated based on the most up to date business forecasts and discounted
using discount rates that reflected the Group’s estimated before-tax average cost
of capital. Sensitivity analysis was considered on the discount rate and the long
term growth rate.
The Committee constructively challenged management’s key assumptions to
understand their impact on the CGU’s recoverable amounts. The Committee was
satisfied that the significant assumptions used for determining the recoverable
amount had been appropriately scrutinised, challenged and were sufficiently
robust. A £13.9 million impairment charge was made against the carrying value
of goodwill relating to three of the Group’s smaller subsidiaries. The Committee
agreed with management’s results that all of the Group’s other CGU’s displayed an
excess of value in use over their carrying values.
Other Matters
In addition, the Committee has considered a number of other judgements which
have been made by management including:
Revenue recognition, provisioning for impairment of trade receivables, net
exceptional items, post-employment benefits, business combinations, share based
payments, provisions, deferred and contingent consideration, inventories, useful
lives for property, plant and equipment and intangible assets and tax provisioning.
Going Concern
The Audit Committee considered a report on Going Concern, presented by the
Chief Financial Officer. This report took account of the current guidance from the
UK Financial Reporting Council on information relevant to a statement on going
concern, the 2014/2015 budget analysis, the borrowing requirements of the Group,
liability management, contingent liabilities and financial risk management.
Management confirmed to the Committee that they were not aware of any material
misstatements and the auditors confirmed that they had found no material
misstatement in the course of their work.
DCC Annual Report and Accounts 2014
87
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review of fees paid to the external auditor
for audit and non-audit work, seeking
confirmation from the external auditor
that they are in compliance with relevant
ethical and professional guidance and
that, in their professional judgment, they
are independent from the Group.
The Audit Committee has approved
a policy on the engagement of the
external auditor to provide non-audit
services, which provides that the external
auditor is permitted to provide non-
audit services that are not, or are not
perceived to be, in conflict with auditor
independence, providing they have the
skill, competence and integrity to carry
out the work and are considered to be
the most appropriate to undertake such
work in the best interests of the DCC
Group. The policy also provides that any
non-audit work which would result in the
aggregate of non-audit fees paid to the
external auditor exceeding 50% of annual
audit fees must be approved in advance
by the Chief Executive and the Chairman
of the Audit Committee. Details of the
amounts paid to the external auditor
during the year for non-audit services
are set out in note 6 on page 147. A
summary of audit and non-audit fees
over the five year period from 2010 to
2014 inclusive, is set out below.
The Audit Committee has approved a
policy on the employment of employees
or former employees of the external
auditor. This policy provides that the
Chief Executive will consult with the
Chairman of the Audit Committee
prior to the appointment to a senior
financial reporting position, to a senior
management role or to a Company officer
role of any employee or former employee
of the external auditor, where such a
person was a member of the external
audit team in the previous two years.
756
687
630
1,002
1,626
Non-audit fees as
a % of audit fees
47%
47%
50%
85%
123%
Risk Management and Internal Control
The Audit Committee has been
delegated responsibility by the Board
for the ongoing monitoring of the
effectiveness of the Group’s system of
risk management and internal control.
In addition to reports from Group Internal
Audit, the Audit Committee also receives
regular reports from the Risk Committee
and the Enterprise Risk Management,
Group HSE and Group Compliance
functions. Further details on the Group’s
risk management framework are set out
in the Risk Report on page 16.
The Audit Committee conducts, on behalf
of the Board, an annual assessment of
the operation of the Group’s system of
risk management and internal control.
This assessment was based on a
detailed review carried out by Enterprise
Risk Management and Group Internal
Audit. Where areas for improvement
have been identified the necessary
actions in respect of the relevant control
procedures have been or are being taken.
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 the procedures
in place to monitor them.
The Chairman of the Audit Committee
has reported to the Board on the conduct
of and the findings and agreed actions
from this annual assessment of risk
management and internal control.
External Auditor
The Audit Committee oversees the
relationship with the external auditor
including approval of the external
auditor’s fee proposals.
The Audit Committee reviewed the full
external audit plan at the meeting held
in November 2013 and reviewed a brief
update at the meeting in April 2014,
prior to the commencement of the audit.
Following the audit, the Audit Committee
met with the external auditor to review
the findings from the audit of the Group
financial statements.
The Audit Committee reviews the
effectiveness of the external audit
process. As part of this process, audit
effectiveness questionnaires are
completed by Group and subsidiary
finance executives and the responses are
summarised by management in a report
to the Audit Committee. Based on its
consideration of this report and its own
interaction with the external auditors,
in the form of reports and meetings,
the Audit Committee concludes on
the effectiveness of the external audit
process and reports its conclusions to
the Board.
The Audit Committee meets with the
external auditors on a regular basis
without the presence of management.
In accordance with its terms of
reference, the Audit Committee is
required to make a recommendation
to the Board on the appointment,
reappointment and removal of the
external auditor. The Committee noted
that the Company’s auditors, PwC,
will continue in office in accordance
with the provisions of Section 160(2)
of the Companies Act, 1963 and that a
resolution authorising the Directors to
determine their remuneration will be
put to the shareholders at the Annual
General Meeting of the Company.
In accordance with the Code, the Audit
Committee must ensure that the
external audit is put out to tender at least
once every 10 years and must oversee
the tender process. A full audit tender
process was concluded in 2012.
As noted in the Chairman’s Introduction,
the Audit Committee is keeping
developments at EU level in regard to
audit tenure under close review.
The Audit Committee has a process in
place to ensure that the independence
of the audit is not compromised, which
includes monitoring the nature and
extent of services provided by the
external auditor through its annual
Audit v Non-Audit Fees (£’000)
1,600
2014
2013
2012
2011
2010
1,451
1,263
1,174
1,319
Audit
Non-Audit
88
Governance
Audit Committee Report (continued)
Group Internal Audit
The Audit Committee approves the
annual work programme for the Group
Internal Audit function, ensures that it is
adequately resourced and has appropriate
standing within the Group.
External Quality Assessments (‘EQA’) by
independent external consultants are
conducted at least every five years to
confirm compliance of the Group Internal
Audit function with the International
Professional Performance Framework
(‘IPPF’) of the Institute of Internal
Auditors’. The most recent EQA review
was successfully completed by KPMG in
2011.
During the current financial year,
Group Internal Audit have successfully
implemented a new online audit
management system, ‘Teammate’. Audit
work papers, reports and corrective action
plans are now electronically stored within
the Teammate system. Use of this system
has also been extended to Group HSE
and Group Compliance functions and now
provides a central platform for all related
assurance activities.
An IT Standards project using the COBIT
(Control Objectives for Information and
related Technology) framework aimed
at enhancing the IT control environment
across the DCC Group was developed by
Group Internal Audit and Group IT, and
was completed during the current financial
year. As part of this project, the Group IT
policies have been enhanced, a significant
number of identified corrective actions
have been completed and a dedicated IT
Audit Manager has been appointed to the
Group Internal Audit function to enhance
ongoing IT assurance activities.
The Audit Committee receives regular
reports from Group Internal Audit, which
include summaries of the key findings of
each audit in the period.
The Audit Committee ensures co-
ordination between Group Internal Audit
and the external auditor.
The Head of Internal Audit has direct access
to the Chairman of the Audit Committee
and the Audit Committee meets with the
Head of Internal Audit on a regular basis
without the presence of management.
Whistleblowing Arrangements
The Audit Committee is responsible for
ensuring that the Group maintains suitable
whistleblowing arrangements for its
employees. The Committee reviewed those
arrangements during the year to ensure
that they continue to meet the needs of the
Group as it develops into new geographies
and areas of activity. The Committee
has accordingly approved a number of
enhancements to the Group’s existing
whistleblowing arrangements, including
the appointment of an independent party
to whom employees can raise concerns, in
their own language, if they wish to do so.
Governance
Composition
The Audit Committee comprises four
independent non-executive Directors,Jane
Lodge (Chairman), Kevin Melia, John
Moloney and Leslie Van de Walle. Each
member’s length of tenure at 31 March
2014 is set out in the table below.
Biographical details for these Directors
are set out on pages 78 to 79. The Board
is satisfied that Jane Lodge has recent
and relevant financial experience, as
required by the Code, and that the
members of the Audit Committee have
an excellent mix of skills and expertise in
commercial, financial and audit matters
arising from the senior positions they hold
or held in other organisations.
Length of Tenure on Board
Non-executive
Michael Buckley
Róisín Brennan
David Byrne
Pamela Kirby
Meetings
The Committee met four times during
the year ended 31 March 2014 and there
was full attendance by all members of the
Kevin Melia
Committee.
John Moloney
Jane Lodge
0.5 years
1.5 years
Executive
Leslie Van De Walle
David Byrne, the Deputy Chairman and
Senior Independent Director, attends
meetings of the Audit Committee when
risk management matters are being
Tommy Breen
considered.
Donal Murphy
Fergal O’Dwyer
The Chief Executive, Chief Financial
Officer, Head of Enterprise Risk
Management, Head of Internal Audit,
Head of Group Sustainability, Head of
Group Compliance, Chief Information
Officer, other Directors and executives
and representatives of the external
auditor are invited to attend all or part of
any meeting. The Company Secretary is
the secretary to the Audit Committee.
The Committee also meets separately
a number of times each year with the
external auditor and with the Head of
Internal Audit, without other executive
management being present.
Annual Evaluation of Performance
As detailed on page 83, the Board
conducts an annual evaluation of its own
performance and that of its Committees,
Committee Chairmen and individual
Directors. This process concluded that the
performance of the Audit Committee and
of the Chairman of the Audit Committee
were satisfactory.
Reporting
The Chairman of the Audit Committee
reports to the Board at each meeting on
the activities of the Committee.
The Chairman of the Audit Committee
attends the Annual General Meeting
to answer questions on the report on
the Committee’s activities and matters
within the scope of the Committee’s
responsibilities.
5 years
8.5 years
8.5 years
5 years
5 years
3.5 years
5 years
14 years
14 years
Length of Tenure on Audit Committee
Jane Lodge
Kevin Melia
John Moloney
1.5 years
Leslie Van De Walle
1.75 years
Length of Tenure on Remuneration Committee
Leslie Van De Walle
Róisín Brennan
Michael Buckley
David Byrne
Michael Buckley
Róisín Brennan
David Byrne
Leslie Van De Walle
3.5 years
5 years
3 years
3 years
5 years
Length of Tenure on Nomination and Governance Committee
5 years
5 years
8.5 years
8.5 years
8.5 years
Remuneration Report
Introduction
Dear Shareholder,
As Chairman of DCC’s Remuneration
Committee, I am pleased to present the
Remuneration Report for the year ended
31 March 2014 which has been prepared
by the Committee and approved by the
Board.
Our remuneration policy seeks to
incentivise executive Directors and
other senior Group executives to create
shareholder value and consequently
their remuneration is weighted towards
performance related elements with
targets incentivising delivery of strategy
over the short and long term.
DCC achieved another strong result in
the year to 31 March 2014, with operating
profit growth in each of the five divisions
and overall Group operating profit
11.5% ahead of the prior year. Adjusted
earnings per share grew by 11.7%
and it is proposed that the dividend
for the year will be increased by 10%.
Return on capital employed increased
to 16.2% from 15.6% in the prior year,
substantially ahead of the Group’s cost
of capital.
DCC has generated a total shareholder
return of 266.2% in the last five years
and 452.9% over the last ten years as
demonstrated in the charts below.
The Remuneration Committee
comprises three independent
non-executive Directors, Leslie
Van de Walle (Chairman),
Róisín Brennan and David
Byrne, and the Chairman of the
Board, Michael Buckley. The
members of the Committee
have significant financial
and business experience,
including in the area of
executive remuneration.
Further biographical details
regarding the members of the
Remuneration Committee are
set out on pages 78 to 79.
DCC’s TSR Vs. the FTSE 350 since 1 April 2009
DCC’s TSR Vs. the FTSE 350 since 1 April 2009
400
400
350
350
300
300
250
250
200
200
150
150
100
100
50
50
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0
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2010
2009
2009
2011
2011
2012
2012
2013
2013
2014
2014
DCC
DCC
FTSE 350 Index
FTSE 350 Index
DCC’s TSR Vs. the FTSE 350 since 1 April 2004
DCC’s TSR Vs. the FTSE 350 since 1 April 2004
600
600
500
500
400
400
300
300
200
200
100
100
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2004
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
2013
2013
2014
2014
DCC
DCC
FTSE 350 Index
FTSE 350 Index
The charts above show the growth of a hypothetical €100 holding in DCC plc shares since 1 April 2009 and 1 April
2004 respectively, relative to the FTSE 350 index.
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DCC Annual Report and Accounts 2014
89
Bonuses
The bonuses earned by the executive
Directors in respect of the year ended 31
March 2014 are set out at page 103 and
they primarily reflect the growth of 11.7%
in Group adjusted earnings per share in
the year and achievement of a range of
developmental and personal objectives.
Vesting of Long Term Incentives
In December 2013, the Remuneration
Committee determined that 42.4% of the
share options granted in August 2010
under the DCC plc Long Term Incentive
Plan 2009 (‘LTIP’) had vested, based
on performance under the TSR and
EPS conditions (this compares to the
estimated vesting of 50% included in last
year’s Report). Further details on this
vesting are set out on page 104.
The extent of vesting of the share
options granted in November 2011 will
be determined by the Remuneration
Committee in December 2014. It is
currently estimated that 59.3% of the
share options granted will vest.
Further details in relation to the LTIP
are set out on page 93. Awards made
to executive Directors under the LTIP in
November 2013 are set out on page 106.
Remuneration Review
Over the past year, the Committee has
carried out a detailed review of the
remuneration structures in place in DCC,
with particular reference to the existing
LTIP.
The principal objectives of the LTIP are
to support the continued delivery of long
term sustainable value to shareholders
and to attract, retain and motivate
key individual executives by rewarding
them in a fair and balanced way for the
successful implementation of strategy.
Our review involved consideration of two
key matters:
• the effectiveness of the LTIP, as at
present structured, in meeting its
objectives and specifically whether the
growth in shareholder value achieved
was being properly reflected in the
reward to executives; and
• a comparison of our remuneration
structures and outcomes, in particular
our LTIP and short term incentive
plans, with market practice.
9090
Governance
Remuneration Report (continued)
of these draft regulations into our
Remuneration Report, on the basis
that they represented best practice. In
October 2013, the Large and Medium-
sized Companies and Groups (Accounts
and Reports) (Amendment) Regulations
2013 (the ‘UK Regulations’) came into
effect in the UK. While DCC, as an Irish
incorporated company, is not subject
to these regulatory requirements,
we are conscious of the need for our
reporting to reflect best practice, in
particular given our listing on the London
Stock Exchange, and have sought to
substantially apply the UK Regulations to
this report on a voluntary basis.
As DCC is voluntarily adopting the UK
Regulations, the votes at the 2014 Annual
General Meeting on the Remuneration
Policy (pages 91 to 97) and on the Annual
Report on Remuneration (pages 98 to
108) will be on an advisory rather than on
a binding basis. While the votes will not
be binding, they continue our practice of
giving our shareholders a 'say on pay'.
It is our intention to operate in line with
the approved Policy. We welcome and will
consider any shareholder feedback on our
Remuneration Policy and Annual Report
on Remuneration.
Conclusion
I am satisfied that the Committee has
implemented the Group’s existing
remuneration policy in the year ended
31 March 2014 in a manner that properly
reflects the performance of the Group in
the year.
I believe that the changes proposed
to the LTIP will better align our
remuneration policy with the Group’s
strategic objectives and also reflect best
practice. They take appropriate account
of the views of the major shareholders
consulted and I would recommend all
shareholders to vote in favour of their
adoption at the 2014 Annual General
Meeting.
The responsibilities of the Remuneration
Committee are summarised in the table
below and are set out in full in its Terms
of Reference, which are available on the
DCC website www.dcc.ie under Investor
Relations/Corporate Governance.
On behalf of the Remuneration
Committee
Leslie Van de Walle
Chairman, Remuneration Committee
20 May 2014
The principal changes proposed to the
LTIP relate to the quantum of awards,
the performance conditions, the vesting
period and threshold vesting levels.
A letter setting out the background to
and details of the proposed changes
to the LTIP was sent, on behalf of the
Committee, to the Company’s major
shareholders (representing over 33%
of the issued share capital), to the
Association of British Insurers and
to various proxy voting agencies. The
Chairman of the Board, Michael Buckley,
and I subsequently engaged with these
shareholders and with a number of the
organisations to hear their views on the
proposed changes. This engagement
was constructive and helpful to the
Committee. The feedback received from
shareholders and the organisations
was taken into account in formulating
the final proposals, which are set out in
detail on pages 98 to 100 and are subject
to the approval of all shareholders at the
2014 Annual General Meeting.
Format of Report and Shareholder Votes
In last year’s report, I commented on
the introduction by the UK Department
of Business, Innovation and Skills
of draft reporting regulations for
directors’ remuneration and noted
that we had incorporated a number
Role and Responsibilities
• To determine and agree with the Board the policy for the remuneration of the Chief Executive, other executive Directors and
certain Group senior executives (as determined by the Committee).
• To determine the remuneration packages of the Chairman, Chief Executive, other executive Directors and senior executives,
including salary, bonuses, pension rights and compensation payments.
• To oversee remuneration structures for other Group and subsidiary senior management and to oversee any major changes in
employee benefits structures throughout the Group.
• To nominate executives for inclusion in the Company’s long term incentive schemes, to grant options or awards under these
schemes, to determine whether the criteria for the vesting of options or awards have been met and to make any necessary
amendments to the rules of these schemes.
• To ensure that contractual terms on termination or redundancy, and any payments made, are fair to the individual and the
Company.
• To be exclusively responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference
for any remuneration consultants who advise the Committee.
• To obtain reliable, up to date information about remuneration in other companies of comparable scale and complexity.
• To agree the policy for authorising claims for expenses from the Directors.
DCC Annual Report and Accounts 2014
DCC Annual Report and Accounts 2014
91
91
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Remuneration Policy Report
DCC’s Remuneration Policy ('the Policy') is set out below. As an Irish incorporated company, DCC is not required to comply with
the UK legislation which requires UK companies to submit their remuneration policies to a binding shareholder vote. However, we
are conscious of the need for our remuneration policies, practices and reporting to reflect best corporate governance practice and
therefore it is intended to submit this Policy to an advisory, non-binding vote at the 2014 Annual General Meeting.
The Company intends to operate its remuneration arrangements in line with the Remuneration Policy, which will take effect from
the date of the 2014 Annual General Meeting and is subject to the approval by shareholders of the proposed changes to the DCC
plc Long Term Incentive Plan 2009 ('LTIP'), which are incorporated in the Remuneration Policy.
The Policy is designed and managed to support a high performance and entrepreneurial culture, taking into account competitive
market positioning.
The Board seeks to align the interests of executive Directors and other senior Group executives with those of shareholders, within
the framework set out in the UK Corporate Governance Code. Central to this policy is the Group’s belief in long-term, performance
based incentivisation and the encouragement of share ownership.
The basic policy objective is to have overall remuneration reflect performance and contribution, while having basic pay rates and
the short term element of incentive payments at the median of a market capitalisation comparator group.
The Remuneration Committee seeks to ensure:
• that the Group will attract, motivate and retain individuals of the highest calibre;
• that executives are rewarded in a fair and balanced way for their individual and team contribution to the Group’s performance;
• that executives receive a level of remuneration that is appropriate to their scale of responsibility and individual performance;
• that the overall approach to remuneration has regard to the sectors and geographies within which the Group operates and the
markets from which it draws its executives; and
• that risk is properly considered in setting remuneration policy and in determining remuneration packages.
DCC’s strategy of fostering entrepreneurship requires well designed incentive plans that reward the creation of shareholder
value through organic and acquisitive growth while maintaining high returns on capital employed, strong cash generation and
a focus on good risk management. The typical elements of the remuneration package for executive Directors and other senior
Group executives are base pay, pension and other benefits, annual performance related bonuses and participation in long term
performance plans which promote the creation of sustainable shareholder value.
The Remuneration Committee takes external advice from remuneration consultants on market practice to ensure that
remuneration structures continue to support the key remuneration policy objectives.
The primary comparator group for benchmarking is a group of 60 FTSE companies, 30 of whom have market capitalisations just
below DCC’s and 30 of whom have market capitalisations just above DCC’s (‘the market capitalisation comparator group’).
The Remuneration Committee also considers it useful to use a set of other comparators as secondary references to ensure
rigorous and comprehensive benchmarking, being the FTSE 250 and a group of Irish listed industrial companies which can be
taken to be broadly comparable to DCC.
92
Governance
Remuneration Report (continued)
Key elements of pay of executive Directors and other senior Group management under the proposed Policy are set out in the
table below:
Element and
link to strategy
Base Salary
Attract and
retain skilled and
experienced senior
executives.
Benefits
To provide market
competitive benefits.
Annual Bonus
To reward the
achievement of annual
performance targets.
Operation
Maximum Opportunity
No prescribed maximum
base salary or maximum
annual increase.
General intention that any
increases will be in line with
the general increase across
the Group.
Increases may be higher
in certain circumstances
such as changes in role and
responsibility or significant
changes in market practice.
No maximum level has been
set as payments depend
on individual Director
circumstances.
The maximum bonus
potential, as a percentage of
base salary, for the executive
Directors is as follows:
Executive Director
Tommy Breen
Donal Murphy
Fergal O’Dwyer
% of Base Salary
120%
100%
100%
The maximum bonus
potential, as a percentage of
base salary, for other senior
Group executives ranges
between 40% and 60% of base
salary.
Base salaries are reviewed annually on 1 April.
The factors taken into account include:
- Role and experience
- Company performance
- Personal performance
- Competitive market practice
- Benchmarking, principally against the ‘market capitalisation
comparator group’.
When setting pay policy, account is taken of movements in pay
generally across the Group.
Benefits include the use of a company car, life/disability cover, club
subscriptions or cash equivalent.
Bonus payments to executive Directors and other senior Group
executives are based upon meeting pre-determined targets for a
number of key measures, including Group earnings and divisional
operating profit and overall contribution and attainment of personal
objectives. The contribution and personal targets are focussed on
areas such as delivery on strategy, organisational development, risk
management and talent development/succession planning.
The measures, their weighting and the targets are reviewed on an annual
basis.
The current measures for the executive Directors, and their weighting,
are set out on page 101. The targets are considered commercially
confidential and will not be disclosed on a prospective basis, but may
be disclosed retrospectively.
In regard to Mr. Breen, any actual bonus earned in excess of 100%
of salary, once the appropriate tax and social security deductions
have been made, will be invested in DCC shares which will be made
available to him after three years, or on his employment terminating if
earlier, together with accrued dividends.
Bonus levels are determined by the Committee after the year end
based on actual performance achieved. The Committee can apply
appropriate discretion in specific circumstances in respect of
determining the bonuses to be awarded. In particular, the Committee
has the discretion to reduce bonuses in the event that a predetermined
target return on capital employed is not achieved.
A formal clawback policy is in place for the executive Directors and
other senior Group, divisional and subsidiary management, under
which bonuses are subject to clawback for a period of three years in
the event of a material restatement of financial statements or other
specified events. Further details on clawback policy are set out on
page 95.
The Committee has discretion in relation to bonus payments to joiners
and leavers.
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DCC Annual Report and Accounts 2014
93
Element and
link to strategy
Operation
Maximum Opportunity
The LTIP provides for the Remuneration Committee to grant nominal
cost options to acquire shares to Group employees, including executive
Directors.
Long Term Incentive Plan (‘LTIP’) – reflects changes which are subject to approval by shareholders at the 2014 AGM
To align the interests
of executives with
those of the Group’s
shareholders and to
reflect the Group’s
culture of long term
performance based
incentivisation.
The vesting period is normally 5 years from the date of grant, with the
extent of vesting being determined over the first 3 years, based on the
performance conditions set out below.
The market value of the
shares subject to the options
granted in any period of 12
months may not, at the date
of the grant, exceed 200% of
base pay.
In addition to the detailed performance conditions, an award will not vest
unless the Remuneration Committee is satisfied that the Company’s
underlying financial performance has shown a sustained improvement in
the three year period since the award date.
The extent of vesting for awards granted to participants will be
determined by the Remuneration Committee, in its absolute discretion,
based on the performance conditions set out below.
Return on Capital Employed (‘ROCE’):
Up to 40% of an award will vest depending on ROCE achieved in excess
of the Group’s weighted average cost of capital (‘WACC’) over a three
year period with the Remuneration Committee to set a range for
threshold and maximum vesting at the time of each award in the light of
development activity, including any significant corporate transactions,
and three year plans for the Group.
% of total award vesting
Percentage excess over WACC
0%
Below % set as threshold
At % set as threshold
10%
Between % set as threshold and % set as maximum 10%-40% pro rata
40%
Above % set as maximum
The range set will be disclosed in the Annual Report on Remuneration.
The calculation of ROCE will be consistent with the Group financial
statements.
Earnings per Share (‘EPS’):
Up to 40% of an award will vest depending on EPS growth over a three
year period starting on 1 April in the year in which the award is granted
compared with the change in the UK Retail Price Index (RPI) as follows:
Annualised EPS growth in excess of annualised
change in RPI
Less than 3%
At 3%
3% - specified maximum %
Above specified maximum %
% of total award vesting
0%
10%
10%-40% pro rata
40%
The intention is that the specified maximum percentage (level of
excess over RPI) will be set at the time of each award in the light of
development activity, including any significant corporate transactions,
and three year plans for the Group and prevailing business and economic
circumstances. The range set will be disclosed in the Annual Report on
Remuneration.
9494
Governance
Remuneration Report (continued)
Element and
link to strategy Operation
Maximum Opportunity
Long Term Incentive Plan (‘LTIP’) – reflects changes which are subject to approval by shareholders at the 2014 AGM (continued)
Total Shareholder Return (‘TSR’):
Up to 20% of an award will vest depending on TSR performance over
a three year period, starting on 1 April in the year in which the award
is granted, compared with the FTSE 350 Index ('the Index').
TSR
Below the Index
At the Index
Between the Index and 8% p.a. out-performance
Above 8% p.a. out-performance of the Index
% of total award vesting
0%
5%
5%-20% pro rata
20%
No re-testing of the performance conditions is permitted.
The performance conditions and their relative weighting may be
modified by the Remuneration Committee in accordance with the
Rules of the LTIP, provided that they remain no less challenging and
are aligned with the interests of the Company’s shareholders.
In the case of participants other than the executive Directors, the
Remuneration Committee will have discretion to utilise additional
specific divisional ROCE and profit growth performance conditions,
provided that they remain no less challenging and are aligned with the
interests of the Company’s shareholders. These additional conditions
will not account for more than 20% of vesting, with a corresponding
reduction in the percentage of vesting dependent on the ROCE
performance condition.
A formal clawback policy is in place, under which awards are subject
to clawback in the event of a material restatement of financial
statements or other specified events. Further details on this clawback
policy are set out on page 95.
A small number of senior Group executives, including the executive
Directors, are participants in a defined benefit pension scheme.
Other senior Group executives participate in a defined contribution
pension scheme. The pension scheme gives the Company full
discretion to pay appropriate pension levels and the Company
reviews market and benchmarking data for pension contributions
for each employee group.
Pension
To reward
sustained
contribution
Defined benefit pensions are provided
through an Irish Revenue approved
retirement benefit scheme, up to
pension caps, as introduced by the
Irish Finance Act 2006 and amended
by subsequent Acts (see page 101). All
of the executives affected have elected
to cease accruing pension benefits at
the cap and to receive a taxable non-
pensionable cash allowance in lieu of
pension benefits foregone. All cash
allowances have been calculated based
on independent actuarial advice, approved
by the Remuneration Committee, as the
equivalent of the reduction in liability of
the Company arising from the pension
benefits foregone.
The Company contributes to a defined
contribution pension scheme for
other senior Group executives at rates
reflecting their seniority and experience.
The contribution levels also reflect
market benchmarking data.
Pensionable salary is calculated as 105%
of base salary and does not include any
performance related bonuses or benefits.
DCC Annual Report and Accounts 2014
DCC Annual Report and Accounts 2014
95
95
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Payments from Existing Awards
Subject to the achievement of the applicable performance conditions, executive Directors are eligible to receive payment from any
award made prior to the approval and implementation of the Remuneration Policy detailed in this report.
Clawback Policy
Bonus payments made to executives may be subject to clawback for a period of three years from payment in certain
circumstances including:
• a material restatement of the Company’s audited financial statements;
• a material breach of applicable health and safety regulations; or
• business or reputational damage to the Company or a subsidiary arising from a criminal offence, serious misconduct or gross
negligence by the individual executive.
The changes proposed to the LTIP, as summarised in the table on pages 98 to 100 include the giving of discretion to the
Remuneration Committee to reduce or impose further conditions on awards prior to vesting in the circumstances as outlined
above.
Remuneration Policy for Recruitment of New Executive Directors
In determining the remuneration package for a new executive Director, the Remuneration Committee would be guided by
the principle of offering such remuneration as is required to attract, retain and motivate a candidate with the particular skills
and experience required for a role, if it considers this to be in the best interests of the Company and the shareholders. The
Remuneration Committee will generally set a remuneration package which is in accordance with the terms of the approved
Remuneration Policy in force at the time of the appointment, though the Committee may make payments outside of the Policy if
required in the particular circumstances and if in the best interests of the Company and the shareholders. Any such payments
which relate to the buyout of variable pay (bonuses or awards) from a previous employer will be based on matching the estimated
fair value of that variable pay and will take account of the performance conditions and the time until vesting of that variable pay.
Other than in such buyout situations, it is the Company's policy not to offer any additional bonuses or awards on recruitment.
For an internal appointment, any variable pay element awarded in respect of the prior role and any other ongoing remuneration
obligations existing prior to appointment would be honoured.
Remuneration Policy for Other Employees
While the Remuneration Committee’s specific oversight of individual executive remuneration packages extends only to the
executive Directors and a number of senior Group executives, it aims to create a broad policy framework, to be applied by
management to senior executives throughout the Group, through its oversight of remuneration structures for other Group and
subsidiary senior management and of any major changes in employee benefits structures throughout the Group.
DCC employs approximately 10,200 people in 13 countries. Remuneration arrangements across the Group differ depending on the
specific role being undertaken, the industry in which the business operates, the level of seniority and responsibilities, the location
of the role and local market practice.
Consultation with Employees
Although the Remuneration Committee does not consult with employees on the Directors Remuneration Policy, it does consider
remuneration arrangements and trends across the broader employee population when determining the Policy.
Consultation with Shareholders
The Committee engages in dialogue with major shareholders on remuneration matters, particularly in relation to planned
significant changes in policy. The Committee also takes into account the views of shareholder organisations and proxy voting
agencies.
As set out in the Chairman’s Introduction on page 89, during the year the Remuneration Committee undertook a detailed
consultation process in regard to the proposed changes to the LTIP.
The Committee acknowledges that shareholders have a right to have a ‘say on pay’ by putting the Remuneration Policy and the
Annual Report on Remuneration to two separate advisory votes at the 2014 Annual General Meeting, building on our practice each
year (since 2009) of putting the Remuneration Report to a shareholder advisory vote.
The table below shows the voting outcome at the 2013 AGM in relation to the 2013 Directors’ Remuneration Report.
Vote
Advisory vote on 2013
Remuneration Report
Total votes cast
Total votes for
Total votes
against
Total abstentions
61,124,138
60,291,185
(98.64%)
832,953
(1.36%)
42,110
9696
Governance
Remuneration Report (continued)
Exit Payments Policy
The provisions on exit in respect of each of the elements of pay are as follows:
Salary and Benefits
Exit payments are made only in respect of base salary excluding benefits for the relevant notice period. For the Chief Executive the notice
period is 12 months and for the other executive Directors the notice period is 3 months. In all cases, the notice period applies to both the
Company and the executive.
Annual Bonus
The Remuneration Committee can apply appropriate discretion in respect of determining the bonuses to be awarded based on
actual performance achieved and the period of employment during the financial year.
Long Term Incentive Plan
To the extent that a share award or option has vested on the participant’s cessation date, the participant may exercise the share
award or option during a specified period following such date but in no event may the share award or option be exercised later
than the expiry date as specified in the award certificate.
In general, a share award or option that has not vested on the participant’s cessation date immediately lapses.
The Committee would normally exercise its discretion when dealing with a participant who ceases to be an employee by reason of
certain exceptional circumstances e.g. death, injury or disability, redundancy, retirement or any other exceptional circumstances.
In such circumstances, any share award or option that has not already vested on the participant’s cessation date would be eligible
for vesting on a date determined by the Remuneration Committee. The number of shares, if any, in respect of which the share
award or option vests would be determined by the Remuneration Committee.
In the event that a participant ceases to be an employee by reason of a termination of his employment for serious misconduct,
each share award and option held by the participant, whether or not vested, will automatically lapse immediately upon the service
of notice of such termination, unless the Committee in its sole discretion determines otherwise.
Pension
The rules of the Company’s defined benefit pension scheme, of which the executive Directors are members, contain detailed
provisions in respect of termination of employment.
Service Contracts
With the exception of Tommy Breen, Chief Executive, who has a service agreement with a notice period of twelve months, none
of the other Directors has a service contract with the Company or with any member of the Group. Mr. Breen’s service contract
provides that either he or the Company can terminate his employment by giving 12 months’ notice in writing. The Company
may, at its sole discretion, require that Mr. Breen, instead of working out the period of notice, cease employment immediately in
which case he would receive compensation in the form of base salary only in respect of the notice period. The service contract
also provides for summary termination (i.e. without notice) in a number of circumstances, including material breach or grave
misconduct. The service contract does not include any provisions for compensation for loss of office, other than the notice period
provisions set out above.
Mr. O’Dwyer and Mr. Murphy have letters of appointment which provide for 3 months’ notice periods.
Share Ownership Guidelines
DCC’s remuneration policy has at its core recognition that the spirit of ownership and entrepreneurship is essential to the creation
of long term high performance and that share ownership is important in aligning the interests of executive Directors and other
senior Group executives with those of shareholders.
A set of share ownership guidelines is in place, effective from 1 April 2011, under which the Chief Executive, other executive
Directors and other senior Group executives are encouraged to build, over a five year period, a shareholding in the Company with a
valuation relative to base salary as follows:
Executive
Chief Executive
Other executive Directors
Senior Group executives
Share ownership guideline
3 times annual base salary
2 times annual base salary
1 times annual base salary
The position of the executive Directors and senior Group executives under the Share Ownership Guidelines is reviewed annually
by the Remuneration Committee. The position of the executive Directors as at 31 March 2014 is set out in the Annual Report on
Remuneration on page 107.
DCC Annual Report and Accounts 2014
DCC Annual Report and Accounts 2014
97
97
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Scenarios Charts
The current value and composition of the executive Directors’ remuneration packages at minimum, median and maximum
performance are set out in the charts below. As all of the Directors are paid in euro, the Remuneration Committee considers it
appropriate that the figures disclosed in this report continue to be presented in euro.
Tommy Breen, Chief Executive
Donal Murphy, Executive Director
Fergal O’Dwyer, Executive Director
€
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
€3.28m
38%
26%
€2.22m
28%
19%
€1.17m
100%
53%
36%
€1.13m
32%
19%
49%
€0.55m
100%
€1.71m
43%
25%
32%
€1.33m
29%
16%
55%
€0.73m
100%
€1.94m
40%
23%
37%
Minimum
Median
Maximum
Minimum
Median
Maximum
Minimum
Median
Maximum
Fixed
Annual
Long
Notes:
1. Fixed = base salary, benefits and pension
2. Annual = bonus
3. Long = maximum value of options that can be granted under
the DCC plc Long Term Incentive Plan 2009 (175% of base
salary for the year to 31 March 2015).
4. Total pay for minimum performance comprises base salary,
benefits and pension (fixed).
5. Total pay for median performance comprises base salary,
benefits and pension (fixed), 50% of maximum bonus potential
(annual) and 50% of maximum LTIP value (long).
Policy for non-executive Directors
6. Total pay for maximum performance comprises base salary,
benefits and pension (fixed), 100% of maximum bonus
potential (annual) and 100% of maximum LTIP value (long).
7. In calculating any value that may be delivered in shares, no
account has been taken of any potential increase or decrease
in share price.
Element and link to strategy Operation
Maximum Opportunity
Fees
The fees paid to non-
executive Directors reflect
their experience and ability
and the time demands
of their Board and Board
committee duties.
A basic non-executive
Director fee is paid for Board
membership. Additional fees
are paid to the members
and the Chairmen of
Board Committees, to
the Chairman and to the
Deputy Chairman/Senior
Independent Director.
The remuneration of the Chairman is determined
by the Remuneration Committee for approval by
the Board. The Chairman absents himself from
the Committee meeting while this matter is being
considered.
The remuneration of the other non-executive
Directors is determined by the Chairman and the
Chief Executive for approval by the Board.
The fees are reviewed annually, taking account of
any changes in responsibilities and benchmarking
advice from external remuneration consultants on
the level of fees in a range of comparable Irish and
UK companies.
No prescribed maximum annual increase.
In accordance with the Articles
of Association, shareholders set
the maximum aggregate ordinary
remuneration (basic fees, excluding fees
for committee membership and chairman
fees). The current limit of €575,000 was
set at the 2010 Annual General Meeting.
It is proposed to seek the approval of
shareholders, at the 2014 Annual General
Meeting, for an increase in the limit to
€650,000.
Non-executives Directors do not participate
in the Company’s LTIP and do not receive
any pension benefits from the Company.
An office is provided for the use of the
Chairman.
Non-executive Directors Letters of Appointment
The terms and conditions of appointment of non-executive Directors are set out in their letters of appointment, which are available
for inspection at the Company’s registered office during normal office hours and at the Annual General Meeting of the Company.
98
Governance
Remuneration Report (continued)
Annual Report on Remuneration
This section of the Remuneration Report
sets out how the Group’s Remuneration
Policy, as described on pages 91 to 97,
will operate in the year to 31 March
2015, gives details of remuneration
outcomes for the year ended 31 March
2014 and explains how the Remuneration
Committee works.
Operation of Remuneration Policy in the
year to 31 March 2015
Long Term Incentives
As set out in the Chairman’s introduction on
page 89, over the past year the Committee
has carried out a detailed review of the
remuneration structures in place in DCC,
with particular reference to the existing long
term incentive plan, the DCC plc Long Term
Incentive Plan 2009 (‘LTIP’). Arising from the
review, the Committee has concluded that
there is a need to make changes to the LTIP
to ensure that it:
• meets its stated objectives;
• better reflects DCC’s strategic
objectives, in particular return on
capital employed;
• better balances our remuneration
towards the long term and so ensures
the alignment of executives’ interests
with those of our shareholders;
• aligns our reward levels with market
practice, to ensure the attraction and
retention of key individuals; and
• reflects best practice in delivering pay
for performance, with particular regard
to the extension of the vesting period
and the introduction of clawback.
The proposed changes to the LTIP are
set out in the table below:
Rationale for change
Current LTIP
Proposed Changes to LTIP
Quantum:
To align award levels with the market
capitalisation comparator group and
to better balance our remuneration
towards the long term.
Maximum Award Level
Maximum level of award of 120% of
base pay.
Maximum Award Level
Increase in the level of maximum award to 200%
of base pay.
The Remuneration Committee’s current intention
is that the maximum level for awards made during
the year to 31 March 2015 will be 175% of base
pay.
Performance Conditions:
To align LTIP more closely with
strategic objectives.
Performance Conditions Weighted
60% Relative TSR
40% EPS.
Performance Conditions Weighted
40% ROCE
40% EPS
20% Relative TSR.
ROCE:
To align the LTIP more closely with
strategic objectives.
ROCE
Not a performance condition in the
current LTIP.
ROCE
Adoption of ROCE as a performance condition.
It is proposed that threshold and maximum
vesting would be determined on the basis of ROCE
targets achieved well in excess of the Group’s
weighted average cost of capital (‘WACC’), with
the Remuneration Committee to set a range for
threshold and maximum vesting at the time of
each award in the light of development activity,
including any significant corporate transactions,
and three year plans for the Group.
The Remuneration Committee has set a ROCE
range for threshold and maximum vesting of 13%-
17% for awards made during the year to 31 March
2015.
Calculation of ROCE will be consistent with the
Group financial statements.
DCC Annual Report and Accounts 2014
DCC Annual Report and Accounts 2014
99
99
Rationale for change
Current LTIP
Proposed Changes to LTIP
TSR:
To measure relative performance
against a more suitable comparator
group.
Relative TSR
Vesting measured against a subset
of the FTSE 250 (excluding financial
companies).
EPS:
To align with operations of the Group
and therefore reflect UK inflationary
measures – namely RPI.
Median vesting at median of
comparator group and maximum
vesting at upper quartile.
EPS
Median vesting at EPS growth equal
to Irish CPI plus 3% per annum
compound and maximum vesting at
EPS growth equal to Irish CPI plus
7% per annum compound.
Relative TSR
To be measured against the FTSE 350 Index.
Threshold vesting at the Index and maximum
vesting at the Index plus 8% per annum compound
growth.
EPS
Threshold vesting at EPS growth equal to UK RPI
plus 3% per annum compound and maximum
vesting at EPS growth equal to UK RPI plus a
specified percentage per annum compound.
It is proposed that the specified percentage
for maximum vesting will be set at the time of
each award in the light of development activity,
including any significant corporate transactions,
and three year plans for the Group and prevailing
business and economic circumstances.
The Remuneration Committee has set EPS growth
equal to UK RPI plus 7% per annum compound for
maximum vesting of awards made during the year
to 31 March 2015.
Threshold Vesting:
To reflect current best practice.
Vesting Period:
To reflect developments in investor
views on share retention.
40% vesting at median.
Reduce to 25% vesting at threshold.
Performance Period
3 years.
Performance Period
Remains at 3 years.
Vesting Period
Equivalent to the Performance
Period.
Vesting Period
Vesting Period is lengthened to 5 years, 2 years
after the end of the Performance Period.
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Leaving Employment
A similar provision will apply to a cessation of
employment during the full 5 year Vesting Period.
A similar provision will apply to those certain
exceptional circumstances during the full 5 year
Vesting Period.
Leaving Employment
In general, a share award or
option that has not vested on
the participant’s cessation date
immediately lapses.
The Committee would normally
exercise its discretion when dealing
with a participant who ceases
to be an employee by reason of
certain exceptional circumstances
e.g. death, injury or disability,
redundancy, retirement or any other
exceptional circumstances. In such
circumstances, any share award or
option that has not already vested
on the participant’s cessation date
would be eligible for vesting on a date
determined by the Remuneration
Committee. The number of shares,
if any, in respect of which the share
award or option vests would be
determined by the Remuneration
Committee.
100
Governance
Remuneration Report (continued)
Rationale for change
Current LTIP
Proposed Changes to LTIP
Flexibility:
To ensure the LTIP best supports
shareholder value and operates on the
basis of demanding targets.
Flexibility
The performance conditions may
be changed and the requirements
of the performance conditions may
be modified by the Remuneration
Committee after discussions with
the Irish Association of Investment
Managers.
In addition, the LTIP should aid
succession planning in enabling the
Company to operate a certain level of
flexibility and ensure that participants
have appropriate line of sight to their
strategic and business goals.
Flexibility on Performance
Conditions below Board level
Not currently used.
Clawback:
A formal clawback policy is in place in
respect of short term incentives and
it is intended to apply a similar policy
to the LTIP to ensure alignment with
delivering shareholder value.
There are no claw back or malus
type arrangements in the current
LTIP.
Flexibility
The calibration ranges for the ROCE and the EPS
performance conditions will be reviewed each
year by the Remuneration Committee to ensure
appropriate levels of stretch and incentivisation.
The performance conditions and their relative
weighting may be modified by the Remuneration
Committee in accordance with the Rules of
the LTIP, provided that they remain no less
challenging and are aligned with the interests of
the Company’s shareholders.
Flexibility on Performance Conditions below
Board level
It is proposed that, for participants below
Board level, the Remuneration Committee will
have discretion to introduce additional specific
divisional ROCE and profit growth performance
conditions, provided that they remain no less
challenging and are aligned with the interests of
the Company’s shareholders. These additional
conditions will not account for more than 20%
of vesting, with a corresponding reduction in the
percentage of vesting dependent on the ROCE
performance condition.
Clawback arrangements will be introduced into
the LTIP to allow the Remuneration Committee
reduce or impose further conditions on
awards prior to vesting in the event of material
misstatement of financial statements or other
specified events.
Rules:
The LTIP rules should reflect practice
in the country of listing.
Reflect Irish practice.
The LTIP rules will be amended to reflect UK
practice.
Salary
The salaries of the executive Directors for the year to 31 March 2015, together with comparative figures, are as follows:
Executive Director
Tommy Breen
Donal Murphy
Fergal O’Dwyer
Salary
Year to March
2015
Salary
Year ended March
2014
€715,000
€420,000
€440,000
€700,000
€410,000
€430,000
This is the first increase in Mr. Breen’s salary since June 2008, when he became Chief Executive. The increases for the executive
Directors over recent years are shown in the table below.
Executive Director
Tommy Breen
Donal Murphy
Fergal O’Dwyer
2014/2015
2013/2014
% Increase in Year
2012/2013
2011/2012
2010/2011
2.1%
2.4%
2.3%
0.0%
2.5%
7.5%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
7.0%
7.0%
DCC Annual Report and Accounts 2014
101
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The increase in Mr. O’Dwyer’s salary in 2013/2014 followed a benchmarking exercise which showed his salary was positioned
towards the lower quartile of the primary comparator group.
The salaries of other senior Group executives have been increased during 2014/2015 by approximately 3.0% overall, with individual
increases reflecting development in roles and responsibilities.
Bonus
The maximum bonus potential for the executive Directors for the year to 31 March 2015 is set out in the table below:
Executive Director
Tommy Breen
Donal Murphy
Fergal O’Dwyer
Maximum bonus potential
120% of salary
100% of salary
100% of salary
The Committee has set performance targets for the year which will determine the extent of payment of bonuses to the executive
Directors, as follows:
Executive Director
Performance Targets
Tommy Breen
Donal Murphy
Fergal O’Dwyer
70% based on growth in Group adjusted earnings per share and 30% based on overall contribution and
attainment of personal objectives.
20% based on growth in Group adjusted earnings per share, 40% based on growth in DCC Energy operating
profit and 40% based on overall contribution and attainment of personal objectives.
70% based on growth in Group adjusted earnings per share and 30% based on overall contribution and
attainment of personal objectives.
Bonuses for other senior Group executives are based upon meeting pre-determined targets which relate to Group earnings,
divisional operating profit and overall contribution and attainment of personal objectives.
Growth in Group adjusted earnings per share and in divisional operating profit is measured against pre-determined ranges, with
zero payment below threshold up to full payment at the maximum of the range. The Committee considers that information on
the ranges is commercially confidential and therefore it is not being disclosed on a prospective basis but, to the extent no longer
commercially confidential, will be disclosed retrospectively.
Benefits
No changes are proposed to the benefits payable to the executive Directors for the year to 31 March 2015. Benefits include the use
of a company car, life/disability cover, club subscriptions or cash equivalent.
Retirement Benefits
No changes are proposed to retirement benefits payable to the executive Directors for the year to 31 March 2015. As noted on page
94, a small number of senior Group executives, including the executive Directors, are participants in a defined benefit pension
scheme.
The Irish Finance Act 2006 established a cap on pension assets by introducing a penalty tax charge on pension assets in excess of
the higher of €5 million or the value of individual accrued pension entitlements as at 7 December 2005. The Irish Finance Act 2011
reduced these thresholds to the higher of €2.3 million or the value of individual accrued pension entitlements as at 7 December 2010.
As a result of this change the Remuneration Committee decided that the executive Directors and the other senior Group executives,
who are members of the defined benefit scheme, would have the option of continuing to accrue pension benefits as previously or to
cap their benefits in line with the 2011 limits. All of the executive Directors elected to cap their benefits and receive a taxable non-
pensionable cash allowance in lieu of pension benefits foregone.
Other senior Group executives participate in a defined contribution pension scheme.
102
Governance
Remuneration Report (continued)
Remuneration outcomes for the year ended 31 March 2014
Executive and non-executive 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:
Executive Directors
Tommy Breen
Donal Murphy
Fergal O’Dwyer
Total for executive
Directors
Non-executive Directors
Michael Buckley
Róisín Brennan
David Byrne
Pamela Kirby2
Jane Lodge
Kevin Melia
John Moloney
Bernard Somers3
Leslie Van de Walle
Total for non-executive
Directors
Salary and Fees
Bonus
Benefits
Retirement
Benefit Expense
LTIP1
Audited
Total
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
700
410
430
700
400
400
765
362
406
700
400
300
85
32
33
84
32
32
365
102
254
338 1,123
535
96
535
232
575 3,038 2,397
275 1,441 1,203
275 1,658 1,239
1,540 1,500 1,533 1,400
150
148
721
666 2,193 1,125 6,137 4,839
190
68
103
35
80
68
68
-
84
190
68
103
-
39
68
68
53
81
696
670
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
190
68
103
35
80
68
68
-
84
190
68
103
-
39
68
68
53
81
696
670
10
-
10
192
6,843 5,711
Ex gratia pension to dependant of retired Director
Payment to former Director for services in respect of a successful legal claim in favour of the DCC Group4
Total
Notes:
1. The basis of the calculation of these LTIP values is set out under Long Term Incentive Plan on page 104.
2. Pamela Kirby was appointed as a Director on 3 September 2013.
3. Bernard Somers retired on 5 November 2012.
4. In the year to March 2013, a payment was made to a former Director, who retired in 2004, for services provided over a number of
years post retirement, in respect of a successful Taiwanese legal claim in favour of the DCC Group.
Fees
Fees are payable only to non-executive Directors and include Board Committee fees.
Salaries
The salaries of the Executive Directors for the year ended 31 March 2014 represented increases over the prior year as shown in
the table below:
Executive Director
Tommy Breen
Donal Murphy
Fergal O’Dwyer
Salary
% increase
€700,000
€410,000
€430,000
0.0%
2.5%
7.5%
The salaries of other senior Group executives increased by 3.7% overall during the year, with individual increases reflecting
development in roles and responsibilities.
DCC Annual Report and Accounts 2014
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Determination of Bonuses for the year ended 31 March 2014
The growth in Group adjusted earnings per share in the year ended 31 March 2014 of 11.7% was at the 92nd percentile of the
range set by the Remuneration Committee at the beginning of the year for that part of bonuses relating to Group adjusted
earnings per share.
The Remuneration Committee noted that operating profit growth of 4.0% was achieved in DCC Energy against a backdrop of
very mild weather during the winter months of December 2013 to February 2014 and reflected the successful integration of
acquisitions completed in prior years and cost efficiency initiatives. It also noted that significant progress had been made in regard
to the strategic objectives for the division. Consequently the Committee exercised appropriate discretion in determining an award
to Mr. Murphy of 30% (out of a maximum potential of 40%) in respect of this component of his bonus potential.
The Committee concluded that there had been very strong achievement of the targets set in respect of overall contribution and
attainment of personal objectives, in particular with regard to delivery on strategy and organisational development.
The resultant bonus payout levels for the year ended 31 March 2014 were as follows:
Component
Max %
Payout %
Max %
Payout %
Max %
Payout %
Tommy Breen
% of Salary
Donal Murphy
% of Salary
Fergal O’Dwyer
% of Salary
Group EPS
DCC Energy Operating Profit
Contribution / Personal
84.0
-
36.0
120.0
77.3
-
32.0
109.3
20.0
40.0
40.0
100.0
18.4
30.0
40.0
88.4
70.0
-
30.0
100.0
64.4
-
30.0
94.4
In regard to Mr. Breen, the bonus earned in excess of 100% of salary, once the appropriate tax and social security deductions
have been made, will be invested in DCC shares which will be made available to him after three years, or on his employment
terminating if earlier, together with accrued dividends.
Retirement Benefit Expense
As outlined on page 101, the executive Directors have elected to cease accruing pension benefits at the pension cap and to receive
a taxable, non-pensionable cash allowance in lieu of pension benefits foregone. All cash allowances have been calculated based
on independent actuarial advice approved by the Remuneration Committee as the equivalent of the reduction in liability of the
Company arising from the pension benefits foregone. Retirement Benefits Expense comprises an amount of €365,000 for Tommy
Breen, being a cash allowance of €545,000 less the value of a reversal of previously funded benefits of €180,000, a cash allowance
of €102,000 for Donal Murphy and a cash allowance of €254,000 for Fergal O’Dwyer.
Executive Directors’ Defined Benefit Pensions
The table below sets out the change in the accrued pension benefits to which executive Directors have become entitled during the
year ended 31 March 2014 and the transfer value of the change in accrued benefit, under the Company’s defined benefit pension
scheme:
Executive Directors
Tommy Breen
Donal Murphy
Fergal O’Dwyer
Total
Change in accrued
pension benefit (excl inflation)
during the year1
€’000
(10)
0
0
(10)
Transfer value
equivalent to the
change in accrued
pension benefit1
€’000
(180)
0
0
(180)
Total accrued
pension benefit
at year end2
€’000
318
115
162
595
Notes:
1. The pensions of the executive Directors have been capped in line with the provisions of the Irish Finance Acts as detailed on
page 101.
2. Figures represent the total accrued pension payable from normal retirement date, based on pensionable service at 31 March
2014.
104
Governance
Remuneration Report (continued)
Long Term Incentive Plan
The LTIP awards granted in November 2010 vested in December 2013 based on TSR performance and EPS performance over
the three year period ended 31 March 2013 (these being the performance conditions of the LTIP prior to the proposed changes
outlined on pages 98 to 100).
An analysis was conducted by Towers Watson to measure the level of DCC’s TSR performance relative to the FTSE 250 peer group
over a 36 month period to 31 March 2013. The Group’s TSR performance gave rise to a vesting of 27.4% of the total award.
DCC’s adjusted EPS increased by 4.9% annualised over the three year period. CPI increased by an annualised 1.9% over the same
period. Based on the excess of 3% annualised, this gave rise to a vesting of 15% of the total award.
Consequently, the Remuneration Committee determined that 42.4% of the 2010 awards had vested. The value of the LTIP for the
year ended 31 March 2013 is based on the number of options which vested in December 2013 and the share price at the date of
vesting of €34.31 (£28.68). (These final values for 2013 differ from those shown in the 2013 Annual Report which were based upon
estimated vesting of 50% and the share price as at 31 March 2013).
The LTIP awards granted in November 2011 will vest in November 2014 based on TSR performance and EPS performance over
the three year period ended 31 March 2014. The Group’s TSR performance is expected to give rise to a vesting of 43.8% of the total
award. The EPS performance condition is expected to give rise to a vesting of 15.6% of the total award. Consequently, 59.4% of
the 2011 awards are expected to vest. The value of the LTIP for the year ended 31 March 2014 is estimated using the number of
options expected to vest in November 2014 and the share price at 31 March 2014 of €39.36 (£32.60).
Chief Executive’s Remuneration
The charts below show the total remuneration for the Chief Executive for the five years from 1 April 2009 to 31 March 2014 and
map the total remuneration against the five year trend in EPS and TSR, using a base of 100 for 2010 for comparator purposes.
€3.04m
€3.04m
€2.40m
€2.40m
59%
59%
42%
42%
100%
100%
91%
91%
250
250
200
200
150
150
100
100
50
50
€1.67m
€1.67m
95%
95%
€1.55m
€1.55m
100%
100%
57%
57%
€1.64m
€1.64m
26%
26%
30%
30%
€
€
3,500
3,500
3,000
3,000
2,500
2,500
2,000
2,000
1,500
1,500
1,000
1,000
500
500
0
0
2010
2010
2011
2011
2012
2012
2013
2013
2014
2014
2010
2010
2011
2011
2012
2012
2013
2013
2014
2014
long term pay €’000
long term pay €’000
variable pay €’000
variable pay €’000
fixed pay €’000
fixed pay €’000
CEO
CEO
EPS £
EPS £
TSR £
TSR £
Notes:
1. Total remuneration paid to the Chief Executive for the years 2010 to 2014 inclusive. Further details in relation to remuneration
paid in 2014 and 2013 is set out on page 102.
2. Fixed pay comprises salary, benefits and retirement benefits expense.
3. Variable pay comprises the annual bonus; the percentage shown is the value of the bonus paid as a percentage of the maximum
opportunity.
4. Long term pay comprises the value of awards under the DCC plc 1998 Employee Share Option Scheme (for 2010 and 2011) and
the DCC plc Long Term Incentive Plan 2009 (for 2012 to 2014); the percentage shown is the value of the awards vested as a
percentage of the maximum opportunity (actual vesting for 2010 to 2013 and estimated vesting for 2014).
250
200
150
100
50
2010
2011
2012
2013
2014
CEO
EPS £
TSR £
DCC Annual Report and Accounts 2014
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Key Performance Indicator Chart
The chart below shows the change in executive Director pay and key performance indicators for the year ended 31 March 2014
versus the prior year. A base of 100 is used for the prior year, for comparator purposes.
150
120
90
60
30
0
+11.5%
+10.0%
+11.8%
+11.7%
+47.6%
+26.8%
Operating profit
Dividends
Group salaries
Executive Director pay
TSR
EPS
Year ended 31 March 2013
Year ended 31 March 2014
Non-executive Directors’ Remuneration
The basic non-executive Director fee amounts to €60,000 per annum and additional fees are paid to the members and the
Chairmen of Board Committees, to the Chairman and to the Deputy Chairman/Senior Independent Director. There have been no
increases in these fees since 1 April 2009 with the exception of the fee for the Chairman of the Remuneration Committee which
increased from €5,000 to €7,500 with effect from 1 January 2012, in view of the significantly increased responsibilities which this
role now entails.
The Chairman, Michael Buckley, received a total fee of €190,000 for the year ended 31 March 2014, inclusive of the basic fee and
committee fees. This fee is unchanged since 1 April 2010, when it was reduced from the previous level of €225,000.
The Deputy Chairman and Senior Independent Director, David Byrne, received a total fee of €103,000, again inclusive of the basic
fee and committee fees. This fee is unchanged since 1 April 2009.
Executive and Non-executive 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 2014 (together with their interests at 31 March 2013) are set out below:
Directors
Michael Buckley
Tommy Breen
Róisín Brennan
David Byrne
Pamela Kirby**
Jane Lodge
Kevin Melia
John Moloney
Donal Murphy
Fergal O’Dwyer
Leslie Van de Walle
Company Secretary
Gerard Whyte
* or date of appointment if later.
** Pamela Kirby was appointed on 3 September 2013.
No. of Ordinary Shares
At 31 March 2014
No. of Ordinary Shares
At 31 March 2013*
12,000
250,000
-
1,200
2,500
3,000
1,250
2,000
85,413
240,389
670
144,400
12,000
295,000
-
1,200
-
-
1,250
2,000
85,413
264,389
670
144,400
All of the above interests were beneficially owned. 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 2014.
The shareholdings held by the executive Directors are substantially in excess of the share ownership guidelines in place, which are
set out on page 107 of this report.
The Company’s Register of Directors Interests (which is open to inspection) contains full details of Directors’ shareholdings and
share options.
106
Governance
Remuneration Report (continued)
Executive Directors’ and Company Secretary’s Long Term Incentives
DCC plc Long Term Incentive Plan 2009
Details of the executive Directors’ and the Company Secretary’s awards, in the form of nominal cost options, under the DCC plc
Long Term Incentive Plan 2009 are set out in the table below:
Number of options
At 31
March
2013
Granted in
year
Lapsed in
year
At 31
March
2014
Performance period
Earliest exercise
date
Market price on
award
Executive Directors
Tommy Breen
Donal Murphy
Fergal O’Dwyer
Company Secretary
Gerard Whyte
13,887
39,529
48,000
37,070
-
138,486
13,887
-
16,760
-
48,000
-
37,070
-
24,706
24,706
24,706 (22,769) 140,423
-
(22,769)
-
-
-
1 April 2009 – 31 March 2012
1 April 2010 – 31 March 2013
1 April 2011 – 31 March 2014
1 April 2012 – 31 March 2015
1 April 2013 – 31 March 2016
20 August 2012
15 November 2013
15 November 2014
12 November 2015
12 November 2016
5,456
18,894
22,857
17,652
-
64,859
6,034
18,894
22,857
17,652
-
65,437
3,038
8,647
10,500
8,109
-
30,294
-
-
-
(10,883)
-
-
-
-
-
12,059
12,059 (10,883)
-
-
(10,883)
-
-
-
-
-
12,647
-
12,647 (10,883)
-
-
-
-
5,559
5,559
-
(4,981)
-
-
-
(4,981)
5,456
8,011
22,857
17,652
12,059
66,035
6,034
8,011
22,857
17,652
12,647
67,201
3,038
3,666
10,500
8,109
5,559
30,872
1 April 2009 – 31 March 2012
1 April 2010 – 31 March 2013
1 April 2011 – 31 March 2014
1 April 2012 – 31 March 2015
1 April 2013 – 31 March 2016
20 August 2012
15 November 2013
15 November 2014
12 November 2015
12 November 2016
1 April 2009 – 31 March 2012
1 April 2010 – 31 March 2013
1 April 2011 – 31 March 2014
1 April 2012 – 31 March 2015
1 April 2013 – 31 March 2016
20 August 2012
15 November 2013
15 November 2014
12 November 2015
12 November 2016
1 April 2009 – 31 March 2012
1 April 2010 – 31 March 2013
1 April 2011 – 31 March 2014
1 April 2012 – 31 March 2015
1 April 2013 – 31 March 2016
20 August 2012
15 November 2013
15 November 2014
12 November 2015
12 November 2016
€15.63
€21.25
€17.50
€22.66
£28.54
€15.63
€21.25
€17.50
€22.66
£28.54
€15.63
€21.25
€17.50
€22.66
£28.54
€15.63
€21.25
€17.50
€22.66
£28.54
DCC Annual Report and Accounts 2014
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DCC plc 1998 Employee Share Option Scheme
Details as at 31 March 2014 of the executive Directors’ and the Company Secretary’s options to subscribe for shares under the
DCC plc 1998 Employee Share Option Scheme are set out in the table below.
Number of options
At 31
March
2013
Exercised
in year
Lapsed in
year
At 31
March
2014
Weighted average
option price
at 31 March 2014
€
Normal Exercise
Period
Executive Directors
Tommy Breen
Basic Tier
Second Tier
100,000
0
Donal Murphy
Basic Tier
Second Tier
Fergal O’Dwyer
Basic Tier
Second Tier
Company Secretary
Gerard Whyte
Basic Tier
Second Tier
45,000
0
72,500
0
45,000
0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
0
€19.20 Nov 2007 – May 2018
-
-
45,000
0
72,500
0
€18.23 Nov 2007 – May 2018
-
-
€18.52 Nov 2007 – May 2018
-
-
45,000
0
€17.94 Nov 2007 – May 2018
-
-
Options exercised
in year
Exercise
price
Market price at
date of exercise
€
-
-
-
-
-
-
-
-
€
-
-
-
-
-
-
-
-
Notes:
Executive Directors and other senior executives participated in the DCC plc 1998 Employee Share Option Scheme. The ten year
period during which share options could be granted under this Scheme expired in June 2008. Over the life of the Scheme, the
total number of basic and second tier options granted, net of options lapsed, amounted to 7.1% of issued share capital, of which
1.2% is currently outstanding. Basic tier options may not normally be exercised earlier than three years from the date of grant
and second tier options not earlier than five years from the date of grant. Basic tier options may normally be exercised only if
there has been growth in the adjusted earnings per share of the Company equivalent to the increase in the Consumer Price Index
plus 2%, compound, per annum over a period of at least three years following the date of grant. Second tier options may normally
be exercised only if the growth in the adjusted earnings per share over a period of at least five years is such as would place the
Company in the top quartile of companies on the ISEQ index in terms of comparison of growth in adjusted earnings per share and
if there has been growth in the adjusted earnings per share of the Company equivalent to the increase in the Consumer Price
Index plus 10%, compound, per annum in that period.
The market price of DCC shares on 31 March 2014 was £32.60 and the range during the year was £22.45 to £32.89.
Additional information in relation to the DCC plc Long Term Incentive Plan 2009 and the DCC plc 1998 Employee Share Option
Scheme appears in note 10 on pages 149 to 152.
Share Ownership Guidelines
The shareholdings held by the executive Directors as at 31 March 2014, as shown below, are substantially in excess of the
guidelines set out on page 96.
Executive
Tommy Breen
Donal Murphy
Fergal O’Dwyer
Number of shares held as at 31 March
2014
Shareholding as a multiple of base salary
for the year ended 31 March 2014
Share ownership guideline
250,000
85,413
240,389
14.3
8.3
22.3
3.0
2.0
2.0
The shareholdings in the table comprise only the shares held by the executive Directors. Unvested and unexercised share options
are not included. The shareholdings are calculated based on the share price at 31 March 2014 of £32.60 (€39.96).
Length of Tenure on Board
0.5 years
1.5 years
Leslie Van De Walle
3.5 years
Non-executive
Michael Buckley
Róisín Brennan
David Byrne
Pamela Kirby
Jane Lodge
Kevin Melia
John Moloney
Executive
Tommy Breen
Fergal O’Dwyer
Donal Murphy
5 years
5 years
5 years
5 years
108
Governance
Length of Tenure on Audit Committee
Jane Lodge
1.5 years
Remuneration Report (continued)
Kevin Melia
John Moloney
Governance
Composition
The Remuneration Committee
comprises three independent non-
executive Directors, Leslie Van de Walle
(Chairman), Róisín Brennan and David
Byrne, and the Chairman of the Board,
Michael Buckley. Each member’s length
of tenure at 31 March 2014 is set out in
the table opposite. Further biographical
details regarding the members of the
Remuneration Committee are set out on
pages 78 to 79.
Leslie Van De Walle
1.75 years
Length of Tenure on Remuneration Committee
Leslie Van De Walle
Róisín Brennan
Michael Buckley
David Byrne
3.5 years
5 years
8.5 years
8.5 years
Length of Tenure on Nomination and Governance Committee
Michael Buckley
8.5 years
8.5 years
8.5 years
5 years
5 years
14 years
14 years
Meetings
The Committee met six times during the year ended 31 March 2014 and there was full attendance by all members of the
Committee. The main agenda items included remuneration policy and the operation of the DCC plc Long Term Incentive Plan
2009, in particular consideration of the proposed changes outlined earlier in this Report, remuneration trends and market
practice, the remuneration packages of the Chairman, the Chief Executive, the other executive Directors and certain senior Group
executives, pension matters, grants of share options under the Company’s LTIP and approval of this report.
Leslie Van De Walle
David Byrne
3 years
5 years
Róisín Brennan
3 years
The Chief Executive and the Head of Group Human Resources may be invited to attend meetings of the Committee, except when
their own remuneration is being discussed. No Director is involved in consideration of his or her own remuneration. The Company
Secretary acts as secretary to the Remuneration Committee.
Annual Evaluation of Performance
As detailed on page 83, the Board conducts an annual evaluation of its own performance and that of its Committees, Committee
Chairmen and individual Directors. This process concluded that the performance of the Remuneration Committee and of the
Chairman of the Remuneration Committee were satisfactory.
Reporting
The Chairman of the Remuneration Committee reports to the Board at each meeting on the activities of the Committee.
The Chairman of the Remuneration Committee attends the Annual General Meeting to answer questions on the report on the
Committees’ activities and matters within the scope of the Committee’s responsibilities.
External Advice
The Remuneration Committee seeks independent advice when necessary from external consultants. Towers Watson acts as
independent remuneration advisors to the Committee and during the year provided advice in relation to market trends, competitive
positioning and developments in remuneration policy and practice. Towers Watson is a signatory to the Remuneration Consultants
Group Code of Conduct and any advice was provided in accordance with this code. In light of this, and the level and nature of the
service received, the Committee remains satisfied that the advice is indeed objective and independent.
In the year to 31 March 2014, Towers Watson received fees of €69,750 in respect of advice provided to the Committee in regard to
executive Director remuneration. Towers Watson also provided services to the Group on benchmarking, incentive design, Directors
Remuneration Report and in relation to the LTIP.
Mercer acts as pension advisors to the Committee and provides specific advice on pension practice and developments and act as
actuaries and pension advisors to a number of companies in the Group.
Nomination and Governance Committee Report
DCC Annual Report and Accounts 2014
109
Dear Shareholder,
As Chairman of DCC’s Nomination and
Governance Committee, I am pleased to
present the report of the Committee for
the year ended 31 March 2014 which has
been prepared by the Committee and
approved by the Board.
The Nomination and Governance
Committee is responsible for keeping
Board renewal, structure, size and
composition under constant review,
including the skills, knowledge and
experience required, taking account
of the Group’s businesses, strategic
direction and diversity objectives. The
Committee also actively manages a
transparent process for appointment
of new Directors. The Committee uses
the services of executive search firms
to assist with the search for suitable
candidates.
The Nomination and Governance
Committee has overseen the
development of an excellent balance
of background and experience on our
Board as vacancies have arisen in recent
years. Notable in this context is the fact
that, following the appointment of Dr.
Pamela Kirby on 3 September 2013 as
a new non-executive Director, women
now represent 27% of the Board. Gender
balance makes good business sense.
The Committee will work assiduously
with management in the coming years
to increase diversity in our senior
management cadre.
The Committee is also responsible
for reviewing corporate governance
developments and in particular has
reviewed the changes to the UK
Corporate Governance Code issued in
September 2012 (‘the Code’), which
applied to DCC’s financial year ended 31
March 2014.
The responsibilities of the Committee are
summarised in the table below and are
set out in full in its Terms of Reference,
which are available on the DCC website
www.dcc.ie under Investor Relations/
Corporate Governance.
On behalf of the Nomination and
Governance Committee
Michael Buckley
Chairman, Nomination and Governance
Committee
20 May 2014
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The Nomination and
Governance Committee
comprises Michael Buckley
(Chairman) and three
independent non-executive
Directors, Róisín Brennan,
David Byrne and Leslie Van de
Walle. Further biographical
details regarding the members
of the Nomination and
Governance Committee are set
out on pages 78 to 79.
Role and Responsibilities
Board Composition and Renewal
• Regularly review the structure, size and composition (including the skills, knowledge and experience) required of the Board
compared to its current position and make recommendations to the Board with regard to any changes.
• Before making a nomination, to evaluate the balance of skills, knowledge, independence and experience on the Board, and,
in the light of this evaluation, to prepare a description of the role and capabilities required for a particular appointment.
• Keep under review the leadership needs of the organisation, both executive and non-executive, with a view to ensuring the
continued ability of the organisation to compete effectively in the marketplace.
• Succession planning for Directors, in particular the Chairman and the Chief Executive, and senior Group management.
• Keep under review the Board Diversity Policy and the setting of measurable objectives for implementing the Policy.
Corporate Governance
• Monitor the Company’s compliance with corporate governance best practice and with applicable legal, regulatory and listing
requirements (including but not limited to the Companies Acts, the UK Listing Authority’s Listing Rules and the UK Corporate
Governance Code) and to recommend to the Board such changes or additional action as the Committee deems necessary.
• Advise the Board of significant developments in the law and practice of corporate governance.
• Oversee the conduct of the annual evaluation of Board, Committee and individual Director performance.
110
Governance
Nomination and Governance Committee Report (continued)
The length of tenure of the Directors on the Board and on the Committees of the Board is set out below. The length of tenure of
members of Board Committees is dealt with in the individual Committee reports.
Length of Tenure on Board
Non-executive
Michael Buckley
Róisín Brennan
David Byrne
Pamela Kirby
Jane Lodge
Kevin Melia
John Moloney
0.5 years
1.5 years
Leslie Van De Walle
3.5 years
Executive
Tommy Breen
Fergal O’Dwyer
Donal Murphy
5 years
5 years
5 years
5 years
8.5 years
8.5 years
Board Composition and Renewal
At each of its meetings during the
year, the Nomination and Governance
Committee considered the composition
of the Board to ensure the Board has
the appropriate combination of skills,
knowledge and experience.
Length of Tenure on Audit Committee
Kevin Melia
Jane Lodge
1.5 years
John Moloney
Diversity
Board diversity was a regular agenda
item at Committee meetings during the
year. In the previous financial year, the
Committee developed a Board Diversity
Policy which was approved by the Board.
This Policy is available on the Company’s
website www.dcc.ie.
5 years
5 years
Length of Tenure on Nomination and Governance Committee
Length of Tenure on Remuneration Committee
Leslie Van De Walle
The Nomination and Governance
Committee identified a need for a
non-executive director with deep
experience of the healthcare sector
internationally, at senior management
and Board level, as well as a track
record of business development
internationally. Subject to satisfaction
of the professional competencies and
experience requirements, a preference
was expressed for a female candidate.
Leslie Van De Walle
Michael Buckley
Róisín Brennan
David Byrne
1.75 years
3.5 years
3 years
David Byrne
Róisín Brennan
Michael Buckley
Leslie Van De Walle
An international professional search firm,
JCA (who do not have any other connection
with the Company) was employed to carry
out a wide ranging, international search.
The search firm produced a long list of
possible candidates, which was reviewed
by the Chairman, who interviewed
a number of candidates. A short list
was then drawn up, reviewed with and
approved by the Committee. Those on
the short list were interviewed by the
Chairman at least once and in some cases
by the Deputy Chairman. When a preferred
candidate emerged, she was interviewed
individually by the executive Directors
and most of the non-executive Directors,
before a formal proposal was made to the
Board.
3 years
In addition, upon the recommendation
of the Committee, the Board has
approved a Group Diversity and Equal
Opportunities Policy Statement,
developed by Group Human Resources,
which was implemented in Group
subsidiaries in conjunction with local
legislative requirements.
8.5 years
8.5 years
5 years
5 years
8.5 years
Taking account of the Davies Report,
the gender disclosure requirements
of the UK Companies Act 2006
(Strategic Report and Directors Report)
Regulations 2013, the Code and the
Board Diversity Policy, the Nomination
and Governance Committee remained
focussed on increasing the number of
female non-executive Directors and
those with experience in the sectors in
which we operate. Dr. Pamela Kirby’s
appointment to the Board in September
2013 brought the proportion of female
directors to 27%. The target date set
for FTSE 350 companies to reach a
proportion of 25% is 2015, while DCC
is one of only 17 FTSE 250 companies
already to have three or more female
directors on its Board.
14 years
14 years
The composition of the Board as at 31
March 2014 can be analysed as follows:
Gender Diversity
Male
Female
73%
27%
Geographical Spread
(by residency)
Ireland
UK
America
64%
27%
9%
14 years
14 years
Length of Tenure on Board
0.5 years
1.5 years
Leslie Van De Walle
3.5 years
Non-executive
Michael Buckley
Róisín Brennan
David Byrne
Pamela Kirby
Jane Lodge
Kevin Melia
John Moloney
Executive
Tommy Breen
Fergal O’Dwyer
Donal Murphy
5 years
5 years
5 years
5 years
Length of Tenure on Audit Committee
1.5 years
Jane Lodge
Kevin Melia
John Moloney
Leslie Van De Walle
1.75 years
8.5 years
8.5 years
5 years
5 years
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Length of Tenure on Remuneration Committee
DCC Annual Report and Accounts 2014
Leslie Van De Walle
Róisín Brennan
Michael Buckley
David Byrne
3.5 years
5 years
Length of Tenure on Nomination and Governance Committee
Michael Buckley
Róisín Brennan
David Byrne
Leslie Van De Walle
3 years
3 years
5 years
8.5 years
8.5 years
8.5 years
Annual Evaluation of Performance
As detailed on page 83, the Board
conducts an annual evaluation of
its own performance and that of it’s
Committees, Committee Chairman
and individual Directors. This process
concluded that the performance of the
Nomination and Governance Committee
and of the Chairman of the Nomination
and Governance Committee were
satisfactory.
Reporting
The Chairman of the Nomination and
Governance Committee reports to the
Board at each meeting on the activities
of the Committee.
The Chairman of the Nomination and
Governance Committee attends the
Annual General Meeting to answer
questions on the report on the
Committees’ activities and matters
within the scope of the Committee’s
responsibilities.
Governance
Composition
The Nomination and Governance
Committee comprises Michael Buckley
(Chairman) and three independent non-
executive Directors, Róisín Brennan,
David Byrne and Leslie Van De Walle.
Each member’s length of tenure at 31
March 2014 is set out in the table above.
Further biographical details regarding
the members of the Nomination and
Governance Committee are set out on
pages 78 to 79.
Meetings
The Nomination and Governance
Committee met five times during the
year ended 31 March 2014 and there was
full attendance by all members of the
Committee.
The Chief Executive, other executives and
external advisers are invited to attend
all or part of any meeting. The Company
Secretary is the secretary to the
Nomination and Governance Committee.
The Chairman of the Board does not
chair the Committee when it is dealing
with the matter of succession to the
chairmanship.
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Succession Planning
The Committee has particular regard to
the leadership needs of the organisation
and gives full consideration to
succession planning for Directors and
senior management, in particular the
Chairman and Chief Executive, taking
into account Group strategy, as well
as the challenges and opportunities
facing the Group and the skills and
expertise required. A detailed succession
management plan, prepared by the Chief
Executive, was considered at a meeting
during the year and was presented to the
Board for approval.
Corporate Governance
The Committee advises the Board on
significant developments in the law and
practice of corporate governance and
monitors the Company’s compliance
with corporate governance best practice,
with particular reference to the Code.
The Committee has recommended any
necessary action required to be adopted
and implemented by the Board in respect
of the Code.
The Nomination and Governance
Committee reviewed and approved the
Governance Statement in the Annual
Report and other material being made
public in respect of the Company’s
corporate governance.
The terms and conditions of appointment
of non-executive Directors are set out in
their letters of appointment, and include
expected time commitment in respect
of Board and Committee meetings,
boardroom development training and
visits to Group subsidiaries. The letters of
appointment are available for inspection
at the Company’s registered office during
normal office hours and at the Annual
General Meeting of the Company.
112
Governance
Report of the Directors
The Directors of DCC plc present
their report and the audited financial
statements for the year ended 31 March
2014.
Results and Review of Activities
Revenue for the year amounted to
£11,231.7 million (2013: £10,572.7
million). The profit for the year
attributable to owners of the Parent
amounted to £121.2 million (2013: £106.3
million). Adjusted earnings per share
amounted to 191.20 pence (2013: 171.20
pence). Further details of the results for
the year are set out in the Group Income
Statement on page 120.
The Chairman’s Message on page 6 to
7, the Chief Executive’s Review on pages
12 to 15, the Operating Reviews on pages
22 to 57 and the Financial Review on
pages 58 to 64 contain a review of the
development and performance of the
Group’s business during the year, of
the state of affairs of the business at
31 March 2014, of recent events and of
likely future developments. Information
in respect of events since the year end as
required by the Companies (Amendment)
Act, 1986 is included in these sections
and in note 48 on page 200.
Dividends
An interim dividend of 26.12 pence per
share, amounting to £22.167 million,
was paid on 29 November 2013. The
Directors recommend the payment of a
final dividend of 50.73 pence per share,
amounting to £42.5 million. Subject to
shareholders’ approval at the Annual
General Meeting on 18 July 2014, this
dividend will be paid on 24 July 2014 to
shareholders on the register on 30 May
2014. The total dividend for the year
ended 31 March 2014 amounts to 76.85
pence per share, a total of £64.7 million.
This represents an increase of 10% on
the prior year’s total dividend per share.
The profit attributable to owners of the
Parent, which has been transferred to
reserves, and the dividends paid during
the year ended 31 March 2014 are shown
in note 39 on page 183.
Share Capital and Treasury Shares
DCC’s authorised share capital is
152,368,568 ordinary shares of €0.25
each, of which 83,861,964 shares
(excluding treasury shares) and
4,367,440 treasury shares were in issue
at 31 March 2014. All of these shares are
of the same class. With the exception
of treasury shares which have no voting
rights and no entitlement to dividends,
they all carry equal voting rights and
rank for dividends.
The number of shares held as treasury
shares at the beginning of the year (and
the maximum number held during the
year) was 4,535,981 (5.14 % of the issued
share capital) with a nominal value of
€1.134 million.
A total of 168,541 shares (0.19% of the
issued share capital) with a nominal
value of €0.042 million were re-issued
during the year at prices ranging from
€0.25 to €23.35 consequent to the
exercise of share options under the DCC
plc 1998 Employee Share Option Scheme
and the DCC plc Long Term Incentive
Plan 2009, leaving a balance held as
treasury shares at 31 March 2014 of
4,367,440 shares (4.95% of the issued
share capital) with a nominal value of
€1.092 million.
At the Annual General Meeting held on
19 July 2013, the Company was granted
authority to purchase up to 8,822,940
of its own shares (10% of the issued
share capital) with a nominal value of
€ 2.206 million. This authority has not
been exercised and will expire on 18 July
2014, the date of the next Annual General
Meeting of the Company. A special
resolution will be proposed at the Annual
General Meeting to renew this authority.
At each Annual General Meeting, in
addition to the authority to buy back
shares referred to above, the Directors
seek authority to exercise all the powers
of the Company to allot shares up to
an aggregate amount of €7,352,400,
representing approximately one third of
the issued share capital of the Company.
The Directors also seek authority to
allot shares for cash, other than strictly
pro-rata to existing shareholdings.
This proposed authority is limited to
the allotment of shares in specific
circumstances relating to rights issues
and other issues up to approximately
5% of the issued share capital of the
Company.
Details of the share capital of the
Company are set out in note 36 on page
181 and are deemed to form part of this
Report.
Principal Risks and Uncertainties
Under Irish company law (Regulation
37 of the European Communities
(Companies: Group Accounts)
Regulations 1992, as amended), DCC
is required to give a description of the
principal risks and uncertainties facing
the Group. These are addressed in the
Risk Report on pages 16 to 19.
Directors
The names of the Directors and a short
biographical note on each Director
appear on pages 78 to 79.
In accordance with the UK Corporate
Governance Code, all Directors submit
to re-election at each Annual General
Meeting.
With the exception of Tommy Breen, who
has a service agreement with a notice
period of twelve months, none of the
other Directors has a service contract
with the Company or with any member of
the Group.
Details of the Directors’ interests in the
share capital of the Company are set out
in the Remuneration Report on pages 89
to 108.
Corporate Governance
The Corporate Governance Statement on
pages 80 to 84 sets out the Company’s
appliance of the principles and
compliance with the provisions of the UK
Corporate Governance Code, the Group’s
system of risk management and internal
control and the adoption of the going
concern basis in preparing the financial
statements. The Corporate Governance
Statement shall be treated as forming
part of the Report of the Directors.
DCC Annual Report and Accounts 2014
113
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The 2014 AGM will be held at 11.00 a.m.
on 18 July 2014 at The Four Seasons
Hotel, Simmonscourt Road, Ballsbridge,
Dublin 4, Ireland.
Memorandum and Articles of
Association
The Company’s Memorandum and
Articles of Association sets out the
objects and powers of the Company. The
Articles of Association detail the rights
attaching to shares, the method by which
the Company’s shares can be purchased
or re-issued, the provisions which apply
to the holding of and voting at general
meetings and the rules relating to the
Directors, including their appointment,
retirement, re-election, duties and
powers.
The Company’s Articles of Association
may be amended by a special resolution
passed by the shareholders at an AGM or
EGM of the Company.
A copy of the Memorandum and Articles
of Association can be obtained from the
Company’s website www.dcc.ie.
Transparency Rules
As required by the Transparency Rules
published by the Central Bank of Ireland
under Section 22 of the Investment
Funds, Companies and Miscellaneous
Provisions Act 2006, the following
sections of the Annual Report shall be
treated as forming part of this report: the
Chairman’s Message on page 6 to 7, the
Chief Executive’s Review on pages 12 to
15, the Operating Reviews on pages 22 to
57, the Financial Review on pages 58 to
64, the Principal Risks and Uncertainties
on pages 18 to 19, the earnings per
ordinary share in note 18 on page 158,
the Key Performance Indicators on
page 20 and the derivative financial
instruments in note 1 on page 135.
DCC plc is fully compliant with the 2012
edition of the UK Corporate Governance
Code, which applied to the Company for
the year ended 31 March 2014.
For the purposes of the European
Communities (Takeover Bids (Directive
2004/25/EC)) Regulations 2006, details
concerning the appointment and the re-
election of Directors and the amendment
of the Company’s Articles of Association
are set out in the Corporate Governance
Statement.
All other general meetings are called
Extraordinary General Meetings (‘EGM’).
An EGM called for the passing of a
special resolution must be called by
at least twenty one clear days’ notice.
Provided shareholders have passed
a special resolution to that effect
at the immediately preceding AGM
and the Company continues to allow
shareholders to vote by electronic
means, an EGM to consider an ordinary
resolution may be called at fourteen
clear days’ notice.
General Meetings
The Company’s Annual General Meeting
(‘AGM’) affords shareholders the
opportunity to question the Chairman
and the Board. The chairmen of the
Audit, Nomination and Governance and
Remuneration Committees are also
available to answer questions at the
AGM. The Chief Executive presents at
the AGM on the Group’s business and its
performance during the prior year and
answers questions from shareholders.
Notice of the AGM, the Form of Proxy
and the Annual Report are sent to
shareholders at least 20 working days
before the AGM. At the AGM, resolutions
are voted on by a show of hands of those
shareholders attending, in person or by
proxy. After each resolution has been
dealt with, details are given of the level of
proxy votes cast on each resolution and
the numbers for, against and withheld.
If validly requested, resolutions can be
voted by way of a poll. In a poll, the votes
of shareholders present and voting at
the AGM are added to the proxy votes
received in advance of the AGM and
the total number of votes for, against
and withheld for each resolution are
announced.
A quorum for an AGM or an EGM of
the Company is constituted by three
shareholders, present in person, by proxy
or by a duly authorised representative
in the case of a corporate member.
The passing of resolutions at a general
meeting, other than special resolutions,
requires a simple majority. To be passed,
a special resolution requires a majority
of at least 75% of the votes cast.
Shareholders have the right to attend,
speak, ask questions and vote at general
meetings. In accordance with Irish
company law, the Company specifies
record dates for general meetings,
by which date shareholders must be
registered in the Register of Members
of the Company to be entitled to attend.
Record dates are specified in the notes to
the Notice convening the meeting.
Shareholders may exercise their right
to vote by appointing a proxy/proxies,
by electronic means or in writing, to
vote some or all of their shares. The
requirements for the receipt of valid
proxy forms are set out in the notes to
the Notice convening the meeting.
A shareholder or a group of
shareholders, holding at least 5% of the
issued share capital of the Company,
has the right to requisition a general
meeting. A shareholder or a group of
shareholders, holding at least 3% of the
issued share capital, has the right to put
an item on the agenda of an AGM or to
table a draft resolution for an item on the
agenda of a general meeting.
114
Governance
Report of the Directors (continued)
Substantial Shareholdings
The Company has been notified of the following shareholdings of 3% or more in the issued share capital (excluding treasury
shares) of the Company as at 31 March 2014 and 20 May 2014:
As at 31 March 2014
As at 20 May 2014
No. of €0.25 Ordinary
Shares
% of Issued Share Capital
(excluding treasury shares)
No. of €0.25 Ordinary
Shares
% of Issued Share Capital
(excluding treasury shares)
11,017,646
5,598,545
3,075,475
3,371,897
2,633,000
13.14%
6.67%
3.67%
4.02%
3.14%
10,765,602
5,584,021
3,391,967
3,102,851
2,633,000
12.84%
6.65%
4.04%
3.70%
3.14%
Takeover Regulations
The Company has certain banking
facilities which may require repayment in
the event that a change in control occurs
with respect to the Company. In addition,
the Company’s long term incentive plans
contain change of control provisions
which can allow for the acceleration of
the exercise of share options or awards
in the event that a change of control
occurs with respect to the Company.
Auditors
The auditors, PricewaterhouseCoopers,
will continue in office in accordance
with the provisions of Section 160(2) of
the Companies Act, 1963. A resolution
authorising the Directors to determine
their remuneration will be proposed at
the Annual General Meeting.
Michael Buckley, Tommy Breen
Directors
20 May 2014
FMR LLC and FIL Limited on behalf of its
direct and indirect subsidiaries*
Invesco*
Blackrock*
Setanta Asset Management *
Jim Flavin
* notified as non-beneficial interests
Principal Subsidiaries and Joint
Ventures
Details of the Company’s principal
operating subsidiaries and joint ventures
are set out on pages 202 to 206.
Research and Development
Certain Group companies are involved
in ongoing development work aimed at
improving the quality, competitiveness,
technology and range of their products.
Political Contributions
There were no political contributions
which require to be disclosed under the
Electoral Act, 1997.
Accounting Records
The Directors are responsible for
ensuring that proper books and
accounting records, as outlined in
Section 202 of the Companies Act, 1990,
are kept by the Company. The Directors
believe that they have complied with
this requirement by providing adequate
resources to maintain proper books and
accounting records throughout the Group
including the appointment of personnel
with appropriate qualifications,
experience and expertise. The books and
accounting records of the Company are
maintained at the Company’s registered
office, DCC House, Brewery Road,
Stillorgan, Blackrock, Co. Dublin, Ireland.
DCC Annual Report and Accounts 2014
115
Financial
Statements
& Notes
Income Statement
Group revenue, operating
profit, earnings per share and
other financial information.
Contents
116 Statement of Directors’
Responsibilities
117 Report of the Independent Auditors
120 Financial Statements
Page 120
Balance Sheet
The Group’s Balance Sheet as
at 31 March 2014.
Page 122
Notes
Accounting policies,
segmental analysis and other
helpful information.
Page 128
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116
Statement of Directors’ Responsibilities
The Directors are responsible for
preparing the Annual Report and the
financial statements in accordance with
applicable laws and regulations.
Irish company law requires the Directors
to prepare financial statements for
each financial year. Under that law the
Directors have prepared the Group
and Company financial statements in
accordance with International Financial
Reporting Standards (‘IFRS’) as adopted
by the European Union. The financial
statements are required by law to give a
true and fair view of the state of affairs of
the Company and the Group and of the
profit or loss of the Group.
In preparing these financial statements
the Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and estimates that
are reasonable and prudent;
• comply with applicable International
Financial Reporting Standards as
adopted by the European Union,
subject to any material departures
disclosed and explained in the financial
statements; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Group and the Company will continue
in business.
The Directors are also required by
applicable law and the Listing Rules
issued by the Financial Services
Authority, to prepare a Report of the
Directors and reports relating to
Directors’ remuneration and corporate
governance. In accordance with the
Transparency (Directive 2004/109/EC)
Regulations 2007 (‘the Transparency
Regulations’), the Directors are required
to include a management report
containing a fair review of the business
and a description of the principal risks
and uncertainties facing the Group.
Directors’ Statement Pursuant to the
Transparency Regulations
Each of the Directors, whose names
and functions are listed on pages 78 and
79, confirms that, to the best of each
person’s knowledge and belief:
The Directors confirm that they have
complied with the above requirements in
preparing the financial statements.
The Directors are responsible for keeping
proper books of account which disclose
with reasonable accuracy at any time the
financial position of the Company and
the Group and to enable them to ensure
that the financial statements comply with
the Companies Acts 1963 to 2013 and, as
regards the Group financial statements,
Article 4 of the International Accounting
Standards (‘IAS’) Regulation. They are
also responsible for safeguarding the
assets of the Company and the Group
and for taking reasonable steps for the
prevention and detection of fraud and
other irregularities.
The Directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the Company’s website.
Legislation in the Republic of Ireland
governing the preparation and
dissemination of financial statements
may differ from legislation in other
jurisdictions.
As required by the Transparency
Regulations:
• the financial statements, prepared
in accordance with IFRS as adopted
by the European Union, give a true
and fair view of the assets, liabilities
and financial position of the Company
and the Group and of the profit of the
Group; and
• the Report of the Directors contained
in the Annual Report includes a
fair review of the development and
performance of the Group’s business
and the position of the Company and
Group, together with a description of
the principal risks and uncertainties
that they face.
As required by the UK Corporate
Governance Code:
• the Annual Report and consolidated
financial statements, taken as a whole,
provides the information necessary
to assess the Group’s performance,
business model and strategy and is
fair, balanced and understandable.
On behalf of the Board
Michael Buckley
Non-executive Chairman
Tommy Breen
Chief Executive
Financial Statements & Notes
Report of the Independent Auditors
For the year ended 31 March 2014
117
Report on the financial statements
Our opinion
In our opinion:
• the Group financial statements give
a true and fair view, in accordance
with International Financial Reporting
Standards (IFRSs) as adopted by the
European Union, of the state of the
Group’s affairs as at 31 March 2014 and
of its profit and cash flows for the year
then ended;
• the Company financial statements give
a true and fair view, in accordance with
IFRSs as adopted by the European
Union as applied in accordance with
the provisions of the Companies
Acts 1963 to 2013, of the state of the
Company’s affairs as at 31 March 2014
and of its cash flows for the year then
ended; and
• the Group and Company financial
statements have been properly
prepared in accordance with the
requirements of the Companies Acts
1963 to 2013 and, as regards the Group
financial statements, Article 4 of the
IAS Regulation.
This opinion is to be read in the context
of what we say in the remainder of this
report.
What we have audited
The Group financial statements and
Company financial statements (the
‘financial statements’), which are
prepared by DCC plc, comprise:
• the Group and Company Balance
Sheets as at 31 March 2014;
• the Group Income Statement and the
Group and Company Statements of
Comprehensive Income for the year
then ended;
• the Group and Company Statements
of Changes in Equity and Cash Flow
Statements for the year then ended;
and
• the notes to the financial statements,
which include a summary of significant
accounting policies and other
explanatory information.
The financial reporting framework that
has been applied in their preparation
comprises Irish law and IFRSs as
adopted by the European Union and,
as regards the Company, as applied in
accordance with the provisions of the
Companies Acts 1963 to 2013.
Certain disclosures required by the
financial reporting framework have
been presented elsewhere in the Annual
Report rather than in the notes to the
financial statements. These are cross-
referenced from the financial statements
and are identified as audited.
What an audit of financial statements
involves
We conducted our audit in accordance
with International Standards on Auditing
(UK and Ireland) (ISAs (UK & Ireland)).
An audit involves obtaining evidence
about the amounts and disclosures in
the financial statements sufficient to give
reasonable assurance that the financial
statements are free from material
misstatement, whether caused by fraud
or error. This includes an assessment of:
• whether the accounting policies
are appropriate to the Group’s and
Company’s circumstances and
have been consistently applied and
adequately disclosed;
• the reasonableness of significant
accounting estimates made by the
directors; and
• the overall presentation of the financial
statements.
In addition, we read all the financial
and non-financial information in the
Annual Report to identify material
inconsistencies with the audited
financial statements and to identify
any information that is apparently
materially incorrect based on, or
materially inconsistent with, the
knowledge acquired by us in the
course of performing the audit. If we
become aware of any apparent material
misstatements or inconsistencies we
consider the implications for our report.
Overview of our audit approach
Materiality
We set certain thresholds for materiality.
These helped us to determine the
nature, timing and extent of our audit
procedures and to evaluate the effect of
misstatements, both individually and on
the financial statements as a whole.
Based on our professional judgement,
we determined materiality for the
Group financial statements as a whole
to be £8.5 million. This represents
approximately 5% of profit before tax and
exceptional items. This benchmark in
our professional judgement is the best
measure of recurring performance.
We agreed with the Audit Committee that
we would report to them misstatements
identified during our audit above £0.45
million as well as misstatements below
that amount that, in our view, warranted
reporting for qualitative reasons.
Overview of the scope of our audit
The Group is structured across
five divisions; Energy, Technology,
Healthcare, Environmental and Food
& Beverage. The five divisions and
ultimately the Group financial statements
are a consolidation of 55 reporting
units, comprising the Group’s operating
businesses and centralised functions.
In establishing the overall approach to
the Group audit, we determined the type
of work that needed to be performed
at the reporting units by us, as the
Group engagement team, or component
auditors within PwC ROI, from other PwC
network firms and other firms operating
under our instruction. Where the work
was performed by component auditors,
we determined the level of involvement
we needed to have in the audit work
at those reporting units to be able to
conclude whether sufficient appropriate
audit evidence had been obtained as
a basis for our opinion on the Group
financial statements as a whole. Audits
of the full financial information were
undertaken for Group reporting purposes
at 53 components of the Group and were
performed to materiality levels set by
the Group audit team. These reporting
components represent in excess of 99%
of turnover and profit before tax. Agreed
upon procedures were performed based
on risk assessment in respect of the
remaining two reporting components.
The structure of the Group’s finance
function is such that certain transactions
and balances are accounted for by the
central Group finance team. The work
performed at Group level included our
procedures in respect of the Group’s
treasury activities, aggregation of the
Group’s operating or reporting units,
assessment of goodwill and intangible
assets for impairment and evaluation
of key assumptions in respect of the
Group’s retirement benefit obligations.
Areas of particular audit focus
In preparing the financial statements, the
Directors made a number of subjective
judgements, for example in respect
of significant accounting estimates
that involved making assumptions
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
118
Report of the Independent Auditors (continued)
For the year ended 31 March 2014
and considering future events that
are inherently uncertain. We primarily
focussed our work in these areas by
assessing the Directors’ judgements
against available evidence, forming our
own judgements, and evaluating the
disclosures in the financial statements.
auditing techniques, to the extent
we considered necessary to provide
a reasonable basis for us to draw
conclusions. We obtained audit evidence
through testing the effectiveness of
controls, substantive procedures or a
combination of both.
In our audit, we tested and examined
information, using sampling and other
We considered the following areas to be
those that required particular focus in
the current year. This is not a complete
list of all risks or areas of focus identified
by our audit. We discussed these areas
of focus with the Audit Committee.
Their report on those matters that they
considered to be significant issues in
relation to the financial statements is set
out on page 86.
Area of focus
How the scope of our audit addressed the area of focus
Goodwill impairment assessment
The Group has goodwill of £0.69 billion
at 31 March 2014 (see note 20). There
are 30 individual Cash Generating Units
(‘CGUs’), the most significant of which is
the Group’s Certas Energy UK business
(£252 million) and the Group’s DCC Vital
business (£107 million). We focussed on
this area given the scale of the assets and
the judgement involved in determining key
assumptions which form the basis for the
assessment for impairment.
We evaluated the Directors’ determination of recoverable amount in respect of
each CGU. We evaluated the adequacy and appropriateness of the impairment
charges of £13.9 million recorded in the year. Our evaluation included
understanding and challenging cash flow forecasts, and the process by which
they were prepared, including testing the extraction of the forecast cash flows
from the Board approved three year plans. Our assessment of management’s
forecast future cash flows for the CGUs included our independent consideration
of (i) past performance against plan and (ii) challenge of management’s
expectations of industry developments.
Our work also included challenge of:
• the discount rate by assessing the cost of capital for the individual businesses
and comparable organisations in those sectors; and
• the Directors’ key assumptions included in the forecast future cash flows by
comparing them to historical results, economic and industry forecasts.
We also performed sensitivity analysis of the key assumptions and of the key
drivers of the cash flow forecasts for the individual CGUs. Having ascertained
the extent of change in those assumptions that either individually or collectively
would be required for the goodwill to be impaired, we considered the likelihood
of such a movement in those key assumptions arising.
Fraud in revenue recognition
ISAs (UK & Ireland) presume there is
a risk of fraud in revenue recognition
because of the pressure management
may feel to achieve the planned results.
We focussed on the terms of sale
arrangements with customers including
the nature of discount and rebate
arrangements.
We evaluated the relevant IT systems and tested the internal controls over
the completeness, accuracy and timing of revenue recognised in the financial
statements.
We read the relevant customer terms of sale and agreements and tested the
accounting for consistency with those terms of sale for the Group’s businesses.
Our work included consideration of the accounting for, and presentation of,
rebate and discount arrangements.
We also tested journal entries posted to revenue accounts focussing on unusual
or irregular items.
Risk of management override of internal
controls
ISAs (UK & Ireland) require that we
consider this.
We assessed the overall control environment of the Group, including the
arrangements for staff to ‘whistle-blow’ inappropriate actions, and interviewed
senior management and the Group’s internal audit function. We considered
the incentive for management bias. We examined the significant accounting
estimates and judgements relevant to the financial statements for evidence of
bias by the Directors that may represent a risk of material misstatement due to
fraud.
In particular, we challenged and evaluated key assumptions which formed the
basis for the critical estimates and judgements in the financial statements. We
also tested journal entries at each reporting component and at Group.
Financial Statements & Notes
119
Going concern
As noted in the Statement of Directors’
Responsibilities, the Directors have
concluded that it is appropriate to
prepare the Group’s and Company’s
financial statements using the going
concern basis of accounting. The going
concern basis presumes that the Group
and Company have adequate resources
to remain in operation, and that the
Directors intend them to do so, for at
least one year from the date the financial
statements were signed. As part of
our audit we have concluded that the
Directors’ use of the going concern basis
is appropriate.
However, because not all future events
or conditions can be predicted, these
statements are not a guarantee as to
the Group’s and the Company’s ability to
continue as a going concern.
Matters on which we are required to
report by the Companies Acts 1963 to
2013
• We have obtained all the information
and explanations which we consider
necessary for the purposes of our
audit.
• In our opinion proper books of account
have been kept by the Company.
• The Company Balance Sheet is in
agreement with the books of account.
• In our opinion the information
given in the Report of the Directors
is consistent with the financial
statements and the description in
the Corporate Governance Statement
of the main features of the internal
control and risk management systems
in relation to the process for preparing
the Group financial statements is
consistent with the Group financial
statements.
• The net assets of the Company, as
stated in the Company Balance Sheet,
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 2014 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
Parent Company.
Matters on which we are required to
report by exception
Directors’ remuneration and
transactions
Under the Companies Acts 1963 to 2013
we are required to report to you if, in
our opinion, the disclosure of Directors’
remuneration and transactions specified
by law have not been made. We have
nothing to report arising from these
responsibilities.
Corporate Governance Statement
Under the United Kingdom Listing
Authority Listing Rules we are required
to review the part of the Corporate
Governance Statement relating to the
Parent Company’s compliance with
nine provisions of the UK Corporate
Governance Code (‘the Code’). We have
nothing to report having performed our
review.
On page 116 of the Annual Report, as
required by the Code Provision C.1.1,
the Directors state that they consider
the Annual Report taken as a whole to
be fair, balanced and understandable
and provides the information necessary
for members to assess the Group’s
performance, business model and
strategy. On page 86, as required by
C.3.8 of the Code, the Audit Committee
has set out the significant issues
that it considered in relation to the
financial statements, and how they were
addressed. Under ISAs (UK & Ireland)
we are required to report to you if, in our
opinion:
• the statement given by the directors
is materially inconsistent with our
knowledge of the Group acquired in the
course of performing our audit; or
• the section of the Annual Report
describing the work of the Audit
Committee does not appropriately
address matters communicated by us
to the Audit Committee.
We have no exceptions to report arising
from this responsibility.
Other information in the Annual Report
Under ISAs (UK & Ireland), we are
required to report to you if, in our opinion,
information in the Annual Report is:
• materially inconsistent with the
information in the audited financial
statements; or
• apparently materially incorrect based
on, or materially inconsistent with, our
knowledge of the Group and Company
acquired in the course of performing
our audit; or
• otherwise misleading.
We have no exceptions to report arising
from this responsibility.
Responsibilities for the financial
statements and the audit
Our responsibilities and those of the
Directors
As explained more fully in the Statement
of Directors’ Responsibilities set out on
page 116 the Directors are responsible
for the preparation of the Group and
Company financial statements giving a
true and fair view.
Our responsibility is to audit and express
an opinion on the Group and Company
financial statements in accordance with
Irish law and ISAs (UK & Ireland). Those
standards require us to comply with
the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions,
has been prepared for and only for
the Company’s members as a body
in accordance with Section 193 of the
Companies Act, 1990 and for no other
purpose. We do not, in giving these
opinions, accept or assume responsibility
for any other purpose or to any other
person to whom this report is shown
or into whose hands it may come save
where expressly agreed by our prior
consent in writing.
Paul Hennessy
for and on behalf of
PricewaterhouseCoopers
Chartered Accountants and Statutory
Audit Firm
Dublin
20 May 2014
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 120
Group Income Statement
For the year ended 31 March 2014
2014
Restated
2013
Pre
Exceptionals
Pre
Exceptionals
exceptionals
Note
£’000
(note 11)
£’000
Total
£’000
exceptionals
£’000
(note 11)
£’000
Total
£’000
Revenue
Cost of sales
4
11,231,666
(10,425,140)
-
-
11,231,666
(10,425,140)
10,572,686
(9,831,692)
-
-
10,572,686
(9,831,692)
Gross profit
Administration expenses
Selling and distribution expenses
Other operating income
Other operating expenses
Operating profit before amortisation of
intangible assets
Amortisation of intangible assets
Operating profit
Finance costs
Finance income
Share of associates’ profit/(loss) after tax
Profit before tax
Income tax expense
5
5
4
4
12
12
14
15
806,526
(261,910)
(353,244)
19,875
(2,844)
208,403
(20,416)
187,987
(50,824)
29,413
33
166,609
(22,000)
-
-
-
31,101
(44,384)
(13,283)
-
(13,283)
(2,128)
-
-
(15,411)
(5,255)
806,526
(261,910)
(353,244)
50,976
(47,228)
740,994
(247,368)
(321,988)
19,129
(3,905)
195,120
(20,416)
174,704
(52,952)
29,413
33
151,198
(27,255)
186,862
(14,420)
172,442
(39,363)
25,291
26
158,396
(26,288)
-
-
-
5,601
(29,418)
(23,817)
-
(23,817)
(1,372)
-
(285)
(25,474)
-
740,994
(247,368)
(321,988)
24,730
(33,323)
163,045
(14,420)
148,625
(40,735)
25,291
(259)
132,922
(26,288)
Profit after tax for the financial year
144,609
(20,666)
123,943
132,108
(25,474)
106,634
Profit attributable to:
Owners of the Parent
Non-controlling interests
Earnings per ordinary share
Basic
Diluted
18
18
Michael Buckley, Tommy Breen, Directors
121,234
2,709
123,943
144.70p
143.90p
106,295
339
106,634
127.17p
126.77p
Financial Statements & Notes
Group Statement of Comprehensive Income
For the year ended 31 March 2014
Group profit for the financial year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Currency translation:
- arising in the year
- recycled to the Income Statement on disposal of subsidiary
Losses relating to cash flow hedges
Movement in deferred tax liability on cash flow hedges
Items that will not be reclassified to profit or loss
Group defined benefit pension obligations:
- remeasurements
- movement in deferred tax asset
Other comprehensive income for the financial year, net of tax
Total comprehensive income for the financial year
Attributable to:
Owners of the Parent
Non-controlling interests
Michael Buckley, Tommy Breen, Directors
121
Note
2014
£’000
Restated
2013
£’000
123,943
106,634
31
32
31
(7,575)
324
(3,455)
288
1,853
-
(1,931)
202
(10,418)
124
(835)
152
(683)
(9,579)
1,506
(8,073)
(11,101)
(7,949)
112,842
98,685
110,189
2,653
112,842
98,309
376
98,685
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
122
Group Balance Sheet
As at 31 March 2014
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates
Deferred income tax assets
Derivative financial instruments
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Assets classified as held for sale
Total assets
EQUITY
Capital and reserves attributable to owners of the Parent
Share capital
Share premium
Share based payment reserve
Cash flow hedge reserve
Foreign currency translation reserve
Other reserves
Retained earnings
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred income tax liabilities
Post employment benefit obligations
Provisions for liabilities and charges
Deferred and contingent acquisition consideration
Government grants
Current liabilities
Trade and other payables
Current income tax liabilities
Borrowings
Derivative financial instruments
Provisions for liabilities and charges
Deferred and contingent acquisition consideration
Liabilities associated with assets classified as held for sale
Total liabilities
Total equity and liabilities
Michael Buckley, Tommy Breen, Directors
Note
2014
£’000
Restated
2013
£’000
Restated as at
1 April
2012
£’000
19
20
21
31
28
23
24
28
27
36
37
38
38
38
38
39
40
29
28
31
32
34
33
35
25
29
28
34
33
469,417
744,073
824
11,260
56,240
1,281,814
501,765
959,655
1,221
963,144
2,425,785
-
2,425,785
3,707,599
441,500
749,317
808
9,478
125,912
1,327,015
389,526
1,139,266
11,794
518,925
2,059,511
-
2,059,511
3,386,526
14,688
83,032
10,630
(3,844)
49,822
932
786,158
941,418
4,837
946,255
14,688
83,032
9,445
(677)
57,017
932
725,514
889,951
2,391
892,342
725,831
45,636
27,526
16,033
24,157
36,949
1,323
877,455
1,492,968
32,276
316,726
18,699
6,846
16,374
1,883,889
-
1,883,889
2,761,344
3,707,599
672,715
13,436
32,897
19,352
17,141
56,558
1,574
813,673
1,463,330
29,304
154,060
2,372
12,044
19,401
1,680,511
-
1,680,511
2,494,184
3,386,526
376,170
654,782
978
5,334
112,185
1,149,449
282,000
1,077,147
3,581
525,376
1,888,104
118,926
2,007,030
3,156,479
14,688
83,032
8,367
1,052
55,201
932
680,070
843,342
2,215
845,557
707,452
14,587
26,694
12,296
12,874
71,107
2,050
847,060
1,279,102
32,366
59,206
851
8,311
11,198
1,391,034
72,828
1,463,862
2,310,922
3,156,479
Financial Statements & Notes 123
Group Statement of Changes in Equity
For the year ended 31 March 2014
Attributable to owners of the Parent
Share
capital
£’000
Share
premium
£’000
Retained
earnings
£’000
Other
reserves
(note 38)
£’000
Non-
controlling
interests
£’000
Total
£’000
Total
equity
£’000
At 1 April 2013 (restated)
14,688
83,032
725,514
66,717
889,951
2,391
892,342
Profit for the financial year
Other comprehensive income:
Currency translation:
- arising in the year
- recycled to the Income Statement
on disposal of subsidiary
Group defined benefit pension obligations:
- remeasurements
- movement in deferred tax asset
Losses relating to cash flow hedges
Movement in deferred tax liability
on cash flow hedges
Total comprehensive income
Re-issue of treasury shares
Share based payment
Dividends
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
121,234
-
121,234
2,709
123,943
(7,519)
(7,519)
(56)
(7,575)
-
-
(835)
152
-
324
324
-
-
(3,455)
(835)
152
(3,455)
-
288
288
-
-
-
-
-
324
(835)
152
(3,455)
288
120,551
1,981
-
(61,888)
(10,362)
-
1,185
-
110,189
1,981
1,185
(61,888)
2,653
-
-
(207)
112,842
1,981
1,185
(62,095)
At 31 March 2014
14,688
83,032
786,158
57,540
941,418
4,837
946,255
For the year ended 31 March 2013 (restated)
Attributable to owners of the Parent
Share
capital
£’000
Share
premium
£’000
Retained
earnings
£’000
Other
reserves
(note 38)
£’000
Non-
controlling
interests
£’000
Total
£’000
Total
equity
£’000
At 1 April 2012 (restated)
14,688
83,032
680,070
65,552
843,342
2,215
845,557
Profit for the financial year
Other comprehensive income:
Currency translation arising in the year
Group defined benefit pension obligations:
- remeasurements
- movement in deferred tax asset
Losses relating to cash flow hedges
Movement in deferred tax liability on
cash flow hedges
Total comprehensive income
Re-issue of treasury shares
Share based payment
Dividends
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
106,295
-
106,295
339
106,634
-
1,816
1,816
37
1,853
(9,579)
1,506
-
-
98,222
1,702
-
(54,480)
-
-
(1,931)
202
87
-
1,078
-
(9,579)
1,506
(1,931)
202
98,309
1,702
1,078
(54,480)
-
-
-
-
376
-
-
(200)
(9,579)
1,506
(1,931)
202
98,685
1,702
1,078
(54,680)
At 31 March 2013 (restated)
14,688
83,032
725,514
66,717
889,951
2,391
892,342
Michael Buckley, Tommy Breen, Directors
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
124
Group Cash Flow Statement
For the year ended 31 March 2014
Operating activities
Cash generated from operations before exceptionals
Exceptionals
Cash generated from operations
Interest paid
Income tax paid
Net cash flows from operating activities
Investing activities
Inflows
Proceeds from disposal of property, plant and equipment
Government grants received
Disposal of subsidiaries
Interest received
Outflows
Purchase of property, plant and equipment
Acquisition of subsidiaries
Deferred and contingent acquisition consideration paid
Net cash flows from investing activities
Financing activities
Inflows
Re-issue of treasury shares
Increase in interest-bearing loans and borrowings
Net cash movement in derivative financial instruments
Increase in finance lease liabilities
Outflows
Repayment of interest-bearing loans and borrowings
Repayment of finance lease liabilities
Dividends paid to owners of the Parent
Dividends paid to non-controlling interests
Net cash flows from financing activities
Change in cash and cash equivalents
Translation adjustment
Cash and cash equivalents at beginning of year
Note
41
35
45
17
40
2014
£’000
Restated
2013
£’000
348,664
(21,097)
327,567
(50,011)
(33,193)
244,363
264,614
(25,179)
239,435
(39,970)
(31,273)
168,192
8,584
100
11,073
30,210
49,967
(79,241)
(39,876)
(10,196)
(129,313)
(79,346)
1,981
342,950
4,554
324
349,809
(60,364)
(499)
(61,888)
(207)
(122,958)
226,851
391,868
(8,376)
431,074
5,042
-
11,722
25,593
42,357
(62,508)
(156,177)
(11,970)
(230,655)
(188,298)
1,702
-
-
1,425
3,127
-
(564)
(54,480)
(200)
(55,244)
(52,117)
(72,223)
2,891
500,406
Cash and cash equivalents at end of year
30
814,566
431,074
Cash and cash equivalents consists of:
Cash and short term bank deposits
Overdrafts
Michael Buckley, Tommy Breen, Directors
27
30
963,144
(148,578)
518,925
(87,851)
814,566
431,074
Financial Statements & Notes Company Statement of Comprehensive Income
For the year ended 31 March 2014
Profit for the financial year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Currency translation effects
Other comprehensive income for the financial year, net of tax
Total comprehensive income for the financial year
Attributable to:
Owners of the Parent
Company Balance Sheet
As at 31 March 2014
ASSETS
Non-current assets
Investments in associates
Investments in subsidiary undertakings
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY
Capital and reserves attributable to owners of the Parent
Share capital
Share premium
Other reserves
Retained earnings
Total equity
LIABILITIES
Non-current liabilities
Amounts due to subsidiary undertakings
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
Michael Buckley, Tommy Breen, Directors
125
Note
2014
£’000
Restated
2013
£’000
16
40,894
40,173
(3,489)
(3,489)
2,302
2,302
37,405
42,475
37,405
42,475
Restated
2013
£’000
-
143,807
143,807
315,632
3,381
319,013
462,820
14,688
83,032
63,290
26,044
187,054
36,948
36,948
238,818
238,818
275,766
462,820
Restated as at
1 April
2012
£’000
208
140,149
140,357
341,612
723
342,335
482,692
14,688
83,032
60,988
38,649
197,357
36,436
36,436
248,899
248,899
285,335
482,692
Note
22
24
27
36
37
38
39
25
2014
£’000
-
142,692
142,692
335,662
2,999
338,661
481,353
14,688
83,032
59,801
7,031
164,552
36,976
36,976
279,825
279,825
316,801
481,353
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 126
Company Statement of Changes in Equity
For the year ended 31 March 2014
Share
capital
£’000
Share
premium
£’000
Retained
earnings
£’000
Other
reserves
(note 38)
£’000
Total
equity
£’000
At 1 April 2013 (restated)
14,688
83,032
26,044
63,290
187,054
Profit for the financial year
Other comprehensive income:
Currency translation
Total comprehensive income
Re-issue of treasury shares
Dividends
At 31 March 2014
For the year ended 31 March 2013 (restated)
-
-
-
-
-
-
-
-
-
-
40,894
-
40,894
-
40,894
1,981
(61,888)
(3,489)
(3,489)
(3,489)
37,405
-
-
1,981
(61,888)
14,688
83,032
7,031
59,801
164,552
Share
capital
£’000
Share
premium
£’000
Retained
earnings
£’000
Other
reserves
(note 38)
£’000
Total
equity
£’000
At 1 April 2012
14,688
83,032
38,649
60,988
197,357
Profit for the financial year
Other comprehensive income:
Currency translation
Total comprehensive income
Re-issue of treasury shares
Dividends
At 31 March 2013
Michael Buckley, Tommy Breen, Directors
-
-
-
-
-
-
-
-
-
-
40,173
-
40,173
-
40,173
1,702
(54,480)
2,302
2,302
2,302
42,475
-
-
1,702
(54,480)
14,688
83,032
26,044
63,290
187,054
Financial Statements & Notes
Company Cash Flow Statement
For the year ended 31 March 2014
Operating activities
Cash generated from operations
Interest paid
Net cash flows from operating activities
Investing activities
Inflows
Interest received
Dividend received from subsidiary
Outflows
Acquisition of subsidiary
Net cash flows from investing activities
Financing activities
Inflows
Re-issue of treasury shares
Outflows
Dividends paid to owners of the Parent
Net cash flows from financing activities
Change in cash and cash equivalents
Translation adjustment
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Michael Buckley, Tommy Breen, Directors
127
Restated
2013
£’000
17,544
(1,619)
15,925
11,632
29,405
41,037
(1,631)
(1,631)
39,406
1,702
1,702
(54,480)
(54,480)
(52,778)
2,553
105
723
3,381
Note
41
17
2014
£’000
51,362
(2,085)
49,277
12,178
14
12,192
(1,880)
(1,880)
10,312
1,981
1,981
(61,888)
(61,888)
(59,907)
(318)
(64)
3,381
2,999
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
128
Notes to the Financial Statements
1. Summary of Significant Accounting Policies
Statement of Compliance
The consolidated financial statements of DCC plc have been prepared in accordance with International Financial Reporting
Standards (‘IFRS’) and their interpretations approved by the International Accounting Standards Board (IASB) as adopted by the
European Union (EU) and those parts of the Companies Acts, 1963 to 2013 applicable to companies reporting under IFRS. IFRS as
adopted by the EU differ in certain respects from IFRS as issued by the IASB. Both the Parent Company and the Group financial
statements have been prepared in accordance with IFRS as adopted by the EU and references to IFRS hereafter should be
construed as references to IFRS as adopted by the EU. In presenting the Parent Company financial statements together with the
Group financial statements, the Company has availed of the exemption in Section 148(8) of the Companies Act 1963 not to present
its individual Income Statement and related notes that form part of the approved Company financial statements. The Company has
also availed of the exemption from filing its individual Income Statement with the Registrar of Companies as permitted by Section
7(1A) of the Companies (Amendment) Act 1986.
The Going Concern Statement on page 84 forms part of the Group financial statements.
DCC plc, the ultimate parent company, is a publicly traded limited company incorporated and domiciled in the Republic of Ireland.
Change in Presentation Currency
On 26 February 2013 the Group announced that from the beginning of the current financial year it would be changing the currency
in which it presents its financial results from euro to UK pounds sterling (‘sterling’). For some time, the majority of the Group’s
revenue and operating profit has been generated in the UK in sterling. In the past, fluctuations in the sterling/euro exchange rate
have given rise to differences between reported results and constant currency results. Accordingly, the Board determined that,
with effect from 1 April 2013, DCC will present its results in sterling. The Board believes that this change will help to provide a
clearer understanding of DCC’s financial performance by more closely reflecting the profile of its operations. Given the current
composition of the Group’s activities, this change is expected to reduce the impact of currency movements on reported results.
In order to satisfy the requirements of IAS 21 with respect to a change in presentation currency, the statutory financial information as
previously reported in the Group’s Annual Reports has been restated from euro into sterling using the procedures outlined below:
• assets and liabilities of foreign operations where the functional currency is other than sterling were translated into sterling at
the relevant closing rates of exchange. Non-sterling trading results were translated into sterling at the relevant average rates
of exchange. Differences arising from the retranslation of the opening net assets and the results for the year have been taken to
the foreign currency translation reserve;
• the cumulative foreign currency translation reserve was set to nil at 1 April 2004, the date of transition to IFRS. All subsequent
movements comprising differences on the retranslation of the opening net assets of non-sterling subsidiaries have been taken
to the foreign currency translation reserve. Share capital, share premium and other reserves were translated at the historic
rates prevailing at the dates of transactions; and
• all exchange rates used were extracted from the Group’s underlying financial records.
Further information on the procedures used to restate comparative information can be found on page 181 of the 2013 Annual Report.
A change in presentation currency represents a change in accounting policy which is accounted for retrospectively.
Basis of Preparation
The consolidated financial statements, which are presented in sterling, rounded to the nearest thousand, have been prepared
under the historical cost convention, as modified by the measurement at fair value of share-based payments, post employment
benefit obligations and certain financial assets and liabilities including derivative financial instruments. The carrying values of
recognised assets and liabilities that are hedged are adjusted to record changes in the fair values attributable to the risks that are
being hedged.
The accounting policies applied in the preparation of the financial statements for the year ended 31 March 2014 are set out below.
These policies have been applied consistently by the Group’s subsidiaries, joint ventures and associates for all periods presented
in these consolidated financial statements.
Financial Statements & Notes 129
1. Summary of Significant Accounting Policies (continued)
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. In
addition, it requires management to exercise judgement in the process of applying the Company’s accounting policies. The areas
involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated
financial statements are documented in note 3.
Adoption of IFRS and International Financial Reporting Interpretations Committee (‘IFRIC’) Interpretations
The Group has adopted the following standards, interpretations and amendments to existing standards during the financial year:
• Amendment to IAS 1 Presentation of Items of Other Comprehensive Income (OCI). This amendment introduced a requirement
for entities to group items of OCI on the basis of whether they are potentially re-classifiable to profit or loss subsequently. This
amendment has resulted in some presentation changes and comparative information has been presented accordingly. The
adoption of this amendment had no impact on the recognised assets, liabilities and comprehensive income of the Group;
• Amendment to IAS 19 Employee Benefits. The IASB has issued a number of amendments to IAS 19. This amendment (which was
EU endorsed on 6 June 2012) made significant changes to the recognition and measurement of defined benefit pension expense
and termination benefits. The main impact on the Group, apart from additional required disclosures, is that the expected return
on defined benefit pension assets included in the Income Statement is no longer based on an estimate of asset returns but is
now calculated based on the discount rate. The change in accounting policy had no impact on net assets and had no material
impact on earnings per share for the current or comparative periods. Accordingly, for the comparative year ended 31 March
2013, the expected return on defined benefit pension scheme assets (previously reported under finance income) has been netted
off against the interest on defined benefit pension scheme liabilities (previously reported under finance costs);
• IFRS 13 Fair Value Measurement. This standard sets out a single framework for measuring fair value and requires disclosures
about fair value measurements. It applies when other IFRSs require or permit fair value measurements. It does not introduce
new requirements to measure an asset or liability at fair value, change what is measured at fair value in IFRS or address how
to present changes in fair value. The disclosure requirements have been adopted in the consolidated financial statements. This
standard did not have a significant impact on the Group’s financial statements;
• Amendments to IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities. These amendments require an entity
to disclose information about rights of set-off and related arrangements (e.g. collateral agreements). The disclosures will
provide users with information that is useful in evaluating the effect of netting arrangements on an entity’s financial position. The
adoption of the amendments did not have a material impact on the Group’s consolidated financial statements; and
• Amendment to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets. This amendment sets out the changes to the
disclosures when recoverable amount is determined based on fair value less costs of disposal. The key amendment is to remove
the requirement to disclose recoverable amount when a cash-generating unit (‘CGU’) contains goodwill or indefinite lived
intangible assets but there has been no impairment. The amendment is not mandatory for the Group until 1 April 2014, however
the Group has decided to early adopt the amendment as of 1 April 2013.
There are a number of other changes to IFRS which became effective for the Group during the financial year but did not result in
material changes to the Group’s consolidated financial statements.
Standards, interpretations and amendments to published standards that are not yet effective
The Group has not applied certain new standards, amendments and interpretations to existing standards that have been issued
but are not yet effective, the most significant of which are as follows:
• IFRS 10 Consolidated Financial Statements (effective date: DCC financial year beginning 1 April 2014). This standard (which
was EU endorsed on 29 December 2012) replaces all of the guidance on control and consolidation in IAS 27 and SIC 12. IFRS
10 changes the definition of control so that the same criteria are applied to all entities to determine control. The core principle
that a consolidated entity presents a parent and its subsidiaries as if they are a single entity remains unchanged, as do the
mechanics of consolidation. IAS 27 is renamed ‘Separate Financial Statements’ and is now a standard dealing solely with
separate financial statements. This standard and the amendment to IAS 27 are not expected to have a significant impact on the
Group’s financial statements;
• IFRS 11 Joint Arrangements (effective date: DCC financial year beginning 1 April 2014). This standard (which was EU endorsed
on 29 December 2012) eliminates the existing accounting policy choice of proportionate consolidation for jointly controlled
entities. IFRS 11 makes equity accounting mandatory for participants in joint ventures. Changes in definitions also mean that
the types of joint arrangements have been reduced from three to two; joint operations and joint ventures. IFRS 11 also made
a number of consequential amendments to IAS 28 Investments in Associates and Joint Ventures. On adoption of IFRS 11
the Group will be required to equity account for its interests in jointly controlled entities. This standard will impact the Group
financial statements as the Group currently has adopted an accounting policy of proportionate consolidation for jointly controlled
entities. The change to equity accounting will have no impact on the Group’s profit after tax but will impact each line item in the
Consolidated Income Statement. The impact of IFRS 11 on the current period, which will be the comparative period as of 31
March 2015, will be to increase the Group’s share of equity-accounted investments (which currently only include the results of
our associate investments) by £0.9 million, decrease revenue by £20.8 million and operating profit by £1.1 million, and reduce
income tax expense by £0.2 million. The Group’s Consolidated Balance Sheet will also be impacted on a line by line basis. The
Group’s investments accounted for using the equity method will increase by £5.2 million. The Group’s other non-current assets
will decrease by £6.0 million. The impact on current assets and current liabilities will be a reduction of £3.2 million and £4.0
million respectively;
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 130
Notes to the Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
• IFRS 12 Disclosure of Interests in Other Entities (effective date: DCC financial year beginning 1 April 2014). This standard (which
was EU endorsed on 29 December 2012) sets out the required disclosures for entities reporting under IFRS 10 and IFRS 11. IFRS
12 requires entities to disclose information about the nature, risks and financial effects associated with the entity’s interests in
subsidiaries, associates, joint arrangements and unconsolidated structured entities. This standard will not have a significant
impact on the Group’s financial statements; and
• IFRS 9 Financial Instruments (effective date not yet confirmed). This standard is designed to replace IAS 39 Financial
Instruments: Recognition and Measurement and is being completed in a number of phases. The majority of these phases have
been completed however the impairment phase of the project has yet to be concluded. In November 2013 the IASB decided that
the mandatory date for accounting periods beginning on or after 1 January 2015 would not allow sufficient time for entities to
prepare to apply the new standard and accordingly, that a new effective date should be decided upon when the entire IFRS 9
project is closer to completion. EU endorsement of this standard has therefore been postponed. The new standard is likely to
affect the Group’s accounting for some financial instruments. Subject to EU endorsement, the Group will apply IFRS 9 from its
effective date. The Group will quantify the effect of IFRS 9 when the complete standard is issued.
Basis of Consolidation
Subsidiaries
Subsidiaries are entities that are controlled by the Group. Control exists where the Group has the power, directly or indirectly, to
govern the financial and operating policies of the entity so as to obtain benefits from its activities. In assessing control, potential
voting rights that are currently exercisable or convertible are taken into account.
The results of subsidiary undertakings acquired or disposed of during the year are included in the Group Income Statement
from the date of their acquisition or up to the date of their disposal. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into line with those used by the Group.
Joint ventures
In accordance with IAS 31 Interests in Joint Ventures, the Group’s share of results and net assets of joint ventures, which are
entities in which the Group holds an interest on a long-term basis and which are jointly controlled by the Group and one or more
other venturers under a contractual arrangement, are accounted for on the basis of proportionate consolidation from the date
on which the contractual agreements stipulating joint control are finalised and are derecognised when joint control ceases. All
of the Group’s joint ventures are jointly controlled entities within the meaning of IAS 31. The Group combines its share of the joint
ventures’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the
Group’s financial statements.
Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding
of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting
and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any
accumulated impairment loss. Goodwill attributable to investments in associates is treated in accordance with the accounting
policy for goodwill.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the Group Income Statement, and its share
of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted
against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest
in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
The results of associates are included from the effective date on which the Group obtains significant influence and are excluded
from the effective date on which the Group ceases to have significant influence.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains arising from such transactions, are eliminated in preparing the
consolidated financial statements. Unrealised gains arising from transactions with joint ventures and associates are eliminated to
the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same manner as unrealised gains, but only
to the extent that there is no evidence of impairment.
Investments in Subsidiary Undertakings
Investments in subsidiaries are stated at cost less any accumulated impairments and are reviewed for impairment if there are
indications that the carrying value may not be recoverable.
Financial Statements & Notes 131
1. Summary of Significant Accounting Policies (continued)
Revenue Recognition
Revenue comprises the fair value of the sale of goods and services to external customers net of value added tax, rebates and
discounts. Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are
transferred to the buyer, which generally arises on delivery, or in accordance with specific terms and conditions agreed with
customers. Revenue from the rendering of services is recognised in the period in which the services are rendered.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income from investments is recognised when shareholders’ rights to receive payment have been established.
Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker who is responsible for allocating resources and assessing performance of the operating segments. The Group has
determined that it has five reportable operating segments: DCC Energy, DCC Technology, DCC Healthcare, DCC Environmental
and DCC Food & Beverage.
Foreign Currency Translation
Functional and presentation currency
The functional currency of the Company is euro. The consolidated financial statements are presented in sterling which is the
Company’s and the Group’s presentation currency. Items included in the financial statements of each of the Group’s entities are
measured using the currency of the primary economic environment in which the entity operates.
Transactions and balances
Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. Currency
translation differences on monetary assets and liabilities are taken to the Group Income Statement except when cash flow or net
investment hedge accounting is applied.
Group companies
Results and cash flows of subsidiaries, joint ventures and associates which do not have sterling as their functional currency are
translated into sterling at average exchange rates for the year. Average exchange rates are a reasonable approximation of the
cumulative effect of the rates on the transaction dates. The related balance sheets are translated at the rates of exchange ruling
at the balance sheet date. Adjustments arising on translation of the results of such subsidiaries, joint ventures and associates at
average rates, and on the restatement of the opening net assets at closing rates, are dealt with in a separate translation reserve
within equity, net of differences on related currency instruments designated as hedges of such investments.
On disposal of a foreign operation, such cumulative currency translation differences are recognised in the Income Statement as
part of the overall gain or loss on disposal. In accordance with IFRS 1, cumulative currency translation differences arising prior
to the transition date to IFRS (1 April 2004) have been set to zero for the purposes of ascertaining the gain or loss on disposal of a
foreign operation.
Goodwill and fair value adjustments arising on acquisition of a foreign operation are regarded as assets and liabilities of the
foreign operation, are expressed in the functional currency of the foreign operation and are recorded at the exchange rate at the
date of the transaction and subsequently retranslated at the applicable closing rates.
Exceptional Items
The Group has adopted an Income Statement format which seeks to highlight significant items within the Group results for
the year. Such items may include restructuring, profit or loss on disposal or termination of operations, litigation costs and
settlements, profit or loss on disposal of investments, profit or loss on disposal of property, plant and equipment, IAS 39 ineffective
mark to market movements together with gains or losses arising from currency swaps offset by gains or losses on related
fixed rate debt, acquisition costs, profit or loss on defined benefit pension scheme restructuring, adjustments to deferred and
contingent consideration (arising on business combinations from 1 April 2010) and impairment of assets. Judgement is used
by the Group in assessing the particular items, which by virtue of their scale and nature, should be presented in the Income
Statement and disclosed in the related notes as exceptional items.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 132
Notes to the Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Depreciation is provided on a straight-line basis at the rates stated below, which are estimated to reduce each item of property,
plant and equipment to its residual value level by the end of its useful life:
Freehold and long term leasehold buildings
Plant and machinery
Cylinders
Motor vehicles
Fixtures, fittings & office equipment
Annual Rate
2%
5 - 331/3%
62/3%
10 - 331/3%
10 - 331/3%
Land is not depreciated. The residual values and useful lives of property, plant and equipment are reviewed, and adjusted if
appropriate, at each balance sheet date.
In accordance with IAS 36 Impairment of Assets, the carrying amounts of items of property, plant and equipment are reviewed at
each balance sheet date to determine whether there is any indication of impairment. An impairment loss is recognised whenever
the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in the Income Statement. Following the recognition of an impairment loss, the depreciation
charge applicable to the asset or cash-generating unit is adjusted prospectively in order to systematically allocate the revised
carrying amount, net of any residual value, over the remaining useful life.
Subsequent costs are included in an asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the replaced item can be
measured reliably. All other repair and maintenance costs are charged to the Income Statement during the financial period in
which they are incurred.
Borrowing costs directly attributable to the construction of property, plant and equipment are capitalised as part of the cost of
those assets.
Business Combinations
Business combinations from 1 April 2010
Business combinations are accounted for using the acquisition method. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The cost of
an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value. For
each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the
proportionate share of the acquiree’s identifiable net assets. Acquisition costs are expensed as incurred.
When the Group acquires a business it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition
date.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in
the acquiree is re-measured to fair value at the acquisition date through the Income Statement.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in
accordance with IAS 39 in the Income Statement.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount
recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is
lower than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised
in the Income Statement.
A financial liability is recognised in relation to the other shareholder’s option to put its shareholding, being the fair value of the
estimate of amounts payable to acquire the subsidiary shareholding. The financial liability is included in deferred and contingent
consideration. The discount component is unwound as an interest charge in the Income Statement over the life of the obligation.
Financial Statements & Notes 133
1. Summary of Significant Accounting Policies (continued)
Subsequent changes to the financial liability are recognised in the Income Statement.
Business combinations prior to 1 April 2010
Business combinations were accounted for using the purchase method. Transaction costs directly attributable to the acquisition
formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the
proportionate share of the acquiree’s identifiable net assets.
Business combinations achieved in stages were accounted for as separate steps. Any additional acquired share of interest did not
affect previously recognised goodwill.
Contingent consideration was recognised if the Group had a present obligation, the economic outflow was more likely than not
and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognised as part of
goodwill.
A financial liability was recognised in relation to the other shareholder’s option to put its shareholding, being the fair value of the
estimate of amounts payable to acquire the subsidiary shareholding. The financial liability was included in deferred and contingent
consideration. The discount component was unwound as an interest charge in the Income Statement over the life of the obligation.
Subsequent changes to the financial liability were recognised as an adjustment to goodwill.
Non-Current Assets Held for Sale
Non-current assets and disposal groups are classified as assets held for sale if their carrying amounts will be recovered
principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale
is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be
committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of
classification. The assets held for sale are stated at the lower of their carrying amount and fair value less costs to sell.
Goodwill
Goodwill arising in respect of acquisitions completed prior to 1 April 2004 (being the transition date to IFRS) is included at its
carrying amount, which equates to its net book value recorded under previous GAAP. In accordance with IFRS 1, the accounting
treatment of business combinations undertaken prior to the transition date was not reconsidered and goodwill amortisation
ceased with effect from the transition date.
Goodwill on acquisitions is initially measured at cost being the excess of the cost of the business combination over the acquirer’s
interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Goodwill acquired in a business
combination is allocated, from the acquisition date, to the cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the goodwill arose.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for
impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
The carrying amount of goodwill in respect of associates, net of any impairment, is included in investments in associates under
the equity method in the Group Balance Sheet.
Goodwill is subject to impairment testing on an annual basis and at any time during the year if an indicator of impairment is
considered to exist; the goodwill impairment tests are undertaken at a consistent time in each annual period. Impairment is
determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable
amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. Impairment losses arising
in respect of goodwill are not reversed following recognition.
Where a subsidiary is sold, any goodwill arising on acquisition, net of any impairments, is included in determining the profit or loss
arising on disposal.
Where goodwill forms part of a cash-generating unit and part of the operations within that unit are disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss
on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the
operation disposed of and the proportion of the cash-generating unit retained.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 134
Notes to the Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Intangible Assets (other than Goodwill)
Intangible assets acquired separately are capitalised at cost. Intangible assets acquired in the course of a business combination
are capitalised at fair value being their deemed cost as at the date of acquisition.
Following initial recognition, intangible assets which have a finite life are carried at cost less any applicable accumulated
amortisation and any accumulated impairment losses. Where amortisation is charged on assets with finite lives this expense is
taken to the Income Statement.
The amortisation of intangible assets is calculated to write off the book value of intangible assets over their useful lives on a
straight-line basis on the assumption of zero residual value. In general, finite-lived intangible assets are amortised over periods
ranging from two to six years, depending on the nature of the intangible asset.
The carrying amount of finite-lived intangible assets are reviewed for indicators of impairment at each reporting date and are
subject to impairment testing when events or changes in circumstances indicate that the carrying values may not be recoverable.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows (cash-generating units).
The Group does not have any indefinite-lived intangible assets other than goodwill.
Inventories
Inventories 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 inventories,
comprises purchase price plus transport and handling costs less trade discounts and subsidies. Cost, in the case of products
manufactured by the Group, consists of direct material and labour costs together with the relevant production overheads based
on normal levels of activity. Net realisable value represents the estimated selling price less costs to completion and appropriate
selling and distribution costs.
Provision is made, where necessary, for slow moving, obsolete and defective inventories.
Financial instruments
A financial instrument is recognised when the Group becomes a party to its contractual provisions. Financial assets are
derecognised when the Group’s contractual rights to the cash flows from the financial assets expire, are extinguished or
transferred to a third party. Financial liabilities are derecognised when the Group’s obligations specified in the contracts expire,
are discharged or cancelled.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership of the asset to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are capitalised as assets of the Group at the inception of the lease at the lower of the fair value of
the leased asset and the present value of the minimum lease payments. The corresponding liability to the lessor is included in the
Balance Sheet as a short, medium or long term lease obligation as appropriate. Lease payments are apportioned between finance
charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance charges are recognised in the Income Statement.
Rentals payable under operating leases (net of any incentives received from the lessor) are charged to the Income Statement on a
straight line basis over the term of the relevant lease.
Trade and Other Receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method less provision for impairment.
A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the trade
receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of
estimated future cash flows. The amount of the provision is recognised in the Income Statement.
Financial Statements & Notes
135
1. Summary of Significant Accounting Policies (continued)
Trade and Other Payables
Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost, which approximates
to fair value given the short-dated nature of these liabilities.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and in hand and short term deposits with an original maturity of three months
or less.
For the purpose of the Group Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined
above, net of bank overdrafts.
Interest-Bearing Loans and Borrowings
All loans and borrowings are initially recorded at fair value, net of transaction costs incurred. Loans and borrowings are
subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is
recognised in the Income Statement over the period of the borrowings using the effective interest method.
Derivative Financial Instruments
The Group uses derivative financial instruments (principally interest rate, currency and cross currency interest rate swaps and
forward foreign exchange and commodity contracts) to hedge its exposure to interest rate and foreign exchange risks and to
changes in the prices of certain commodity products arising from operational, financing and investment activities.
Derivative financial instruments are recognised at inception at fair value, being the present value of estimated future cash flows.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument,
and if so, the nature of the item being hedged.
Changes in the fair value of currency swaps that are hedging borrowings and for which the Group has not elected to apply hedge
accounting, along with changes in the fair value of derivatives hedging borrowings, that are part of designated fair value hedge
relationships, are reflected in the Income Statement in ‘Finance Costs’ and presented in note 12.
Changes in the fair value of other derivative financial instruments for which the Group has not elected to apply hedge accounting
are reflected in the Income Statement, in ‘Other Operating Income’ or ‘Other Operating Expenses’ and presented in note 5.
Hedging
For the purposes of hedge accounting, hedges are designated either as fair value hedges (which hedge the exposure to
movements in the fair value of recognised assets or liabilities or firm commitments that are attributable to hedged risks) or cash
flow hedges (which hedge exposures to fluctuations in future cash flows derived from a particular risk associated with recognised
assets or liabilities or highly probable forecast transactions).
The Group documents, at the inception of the transactions, the relationship between hedging instruments and hedged items, as
well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or cash flows of hedged items.
The fair values of various derivative instruments are disclosed in note 28 and the movements on the cash flow hedge reserve
in equity are shown in note 38. The full fair value of a derivative is classified as a non-current asset or non-current liability if
the remaining maturity of the derivative is more than twelve months and as a current asset or current liability if the remaining
maturity of the derivative is less than twelve months.
Fair value hedge
In the case of fair value hedges which satisfy the conditions for hedge accounting, any gain or loss arising from the re-
measurement of the fair value of the hedging instrument is reported in the Income Statement, together with any changes in
the fair value of the hedged asset or liability that are attributable to the hedged risk. As a result, the gain or loss on interest
rate swaps and cross currency interest rate swaps that are in hedge relationships with borrowings are included within ‘Finance
Income’ or ‘Finance Costs’. In the case of the related hedged borrowings, any gain or loss on the hedged item which is attributable
to the hedged risk is adjusted against the carrying amount of the hedged item and reflected in the Income Statement within
‘Finance Costs’ or ‘Finance Income’. The gain or loss on commodity derivatives that are designated as fair value hedges of firm
commitments are recognised in the Income Statement. Any change in the fair value of the firm commitment attributable to the
hedged risk is recognised as an asset or liability on the Balance Sheet with a corresponding gain or loss in the Income Statement.
If a hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of the hedged item is
amortised to the Income Statement over the period to maturity.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 136
Notes to the Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Hedging (continued)
Cash flow hedge
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability or
a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognised
as a separate component of equity. The ineffective portion is reported in the Income Statement in ‘Finance Income’ and ‘Finance
Costs’ where the hedged item is private placement debt, and in ‘Other Operating Income’ or ‘Other Operating Expenses’ for
all other cases. When a forecast transaction results in the recognition of an asset or a liability, the cumulative gain or loss is
removed from equity and included in the initial measurement of the asset or liability. Otherwise, the associated gains or losses
that had previously been recognised in equity are transferred to the Income Statement in the same reporting period as the hedged
transaction in Revenue or Costs of Sales (depending on whether the hedge related to a forecasted sale or purchase).
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in the Income Statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that
was reported in equity is immediately transferred to the Income Statement.
Provisions
A provision is recognised in the Balance Sheet when the Group has a present obligation (either legal or constructive) as a result
of a past event, and it is probable that a transfer of economic benefits will be required to settle the obligation. Provisions are
measured at the Directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date and are
discounted to present value where the effect is material.
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan and announced
its main provisions.
Provisions arising on business combinations are only recognised to the extent that they would have qualified for recognition in the
financial statements of the acquiree prior to the acquisition.
A contingent liability is not recognised but is disclosed where the existence of the obligation will only be confirmed by future
events or where it is not probable that an outflow of resources will be required to settle the obligation or where the amount of the
obligation cannot be measured with reasonable reliability. Contingent assets are not recognised but are disclosed where an inflow
of economic benefits is probable.
Environmental Provisions
The Group’s waste management and recycling activities are subject to various laws and regulations governing the protection of the
environment. Full provision is made for the net present value of the Group’s estimated costs in relation to restoration liabilities at
its landfill sites. The net present value of the estimated costs is capitalised as property, plant and equipment and the unwinding of
the discount element on the restoration provision is reflected in the Income Statement.
Finance Costs
Finance costs comprise interest payable on borrowings calculated using the effective interest rate method, net losses on hedging
instruments that are recognised in the Income Statement, facility fees and the unwinding of discounts on provisions. The interest
expense component of finance lease payments is recognised in the Income Statement using the effective interest rate method. The
net finance cost on defined benefit pension scheme liabilities is recognised in the Income Statement in accordance with IAS 19.
The ‘mark to market of designated swaps and related debt’ and the ‘mark to market of undesignated currency swaps and
related debt’ are included in ‘Finance Costs’ in the case of a net loss. The mark to market of designated swaps and related debt
comprises the gain or loss on interest rate swaps and cross currency interest rate swaps that are in hedge relationships with
borrowings, together with the gain or loss on the hedged borrowings which is attributable to the hedged risk. The mark to market
of undesignated swaps and related debt comprises the gain or loss on currency swaps which are not designated as hedging
instruments, but which are used to offset movements in foreign exchange rates on certain borrowings, along with the currency
movement on those borrowings.
Finance Income
Interest income is recognised in the Income Statement as it accrues, using the effective interest method, and includes net gains
on hedging instruments that are recognised in the Income Statement.
The mark to market of designated swaps and related debt and the mark to market of undesignated currency swaps and related
debt, both as defined above, are included in ‘Finance Income’ in the case of a net gain.
Financial Statements & Notes
137
1. Summary of Significant Accounting Policies (continued)
Income Tax
Current tax
Current tax represents the expected tax payable or recoverable on the taxable profit for the year using tax rates enacted or
substantively enacted at the balance sheet date and taking into account any adjustments stemming from prior years.
Deferred tax
Deferred tax is provided using the liability method on all temporary differences at the balance sheet date which is defined as the
difference between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax
assets and liabilities are not subject to discounting and are measured using the tax rates that are expected to apply in the period
when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantially enacted by the end
of the reporting period.
Deferred tax liabilities are recognised for all taxable temporary differences with the exception of the following:
(i) where the deferred tax liability arises from the initial recognition of goodwill or the initial recognition of an asset or a liability in a
transaction that is not a business combination and affects neither the accounting profit nor the taxable profit or loss at the time
of the transaction; and
(ii) where, in respect of taxable temporary differences associated with investments in subsidiaries, joint ventures and associates,
the timing of the reversal of the temporary difference is subject to control by the Group and it is probable that reversal will not
occur in the foreseeable future.
Deferred tax assets are recognised in respect of all deductible temporary differences, carry-forward of unused tax credits and
unused tax losses to the extent that it is probable that taxable profits will be available against which to offset these items except:
(i) where the deferred tax asset arises from the initial recognition of an asset or a liability in a transaction that is not a business
combination and affects neither the accounting profit nor the taxable profit or loss at the time of the transaction; and
(ii) where, in respect of deductible temporary differences associated with investment in subsidiaries, joint ventures and associates,
a deferred tax asset is recognised only if it is probable that the deductible temporary difference will reverse in the foreseeable
future and that sufficient taxable profits will be available against which the temporary difference can be utilised.
The carrying amounts of deferred tax assets are reviewed at each balance sheet date and are reduced to the extent that it is no
longer probable that sufficient taxable profits would be available to allow all or part of the deferred tax asset to be utilised.
Pension and other Post Employment Obligations
The Group operates defined contribution and defined benefit pension schemes.
The costs arising in respect of the Group’s defined contribution schemes are charged to the Income Statement in the period in
which they are incurred. The Group has no legal or constructive obligation to pay further contributions after payment of fixed
contributions.
The Group operates a number of defined benefit pension schemes which require contributions to be made to separately
administered funds. The liabilities and costs associated with the Group’s defined benefit pension schemes are assessed on the
basis of the projected unit credit method by professionally qualified actuaries and are arrived at using actuarial assumptions
based on market expectations at the balance sheet date. The Group’s net obligation in respect of defined benefit pension schemes
is calculated separately for each plan by estimating the amount of future benefits that employees have earned in return for their
service in the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any plan
asset is deducted. Plan assets are measured at bid values.
The discount rate employed in determining the present value of the schemes’ liabilities is determined by reference to market
yields at the balance sheet date on high quality corporate bonds of a currency and term consistent with the currency and term of
the associated post-employment benefit obligations.
The net surplus or deficit arising in the Group’s defined benefit pension schemes are shown within either non-current assets or
liabilities in the Group Balance Sheet. The deferred tax impact of pension scheme surpluses and deficits is disclosed separately
within deferred tax liabilities or assets as appropriate. Remeasurements, comprising actuarial gains and losses and the return on
plan assets (excluding net interest) are recognised immediately in the Group Balance Sheet with a corresponding entry to retained
earnings through Other Comprehensive Income in the period in which they occur. Remeasurements are not reclassified to profit
or loss in subsequent periods.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 138
Notes to the Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
The defined benefit pension asset or liability in the Group Balance Sheet comprises the total for each plan of the present value of
the defined benefit obligation less the fair value of plan assets out of which the obligations are to be settled directly. Plan assets
are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Fair value is based on market
price information and, in the case of published securities, it is the published bid price. The value of any defined benefit asset is
limited to the present value of any economic benefits available in the form of refunds from the plan and reductions in the future
contributions to the plan.
A curtailment arises when the Group is demonstrably committed to make a significant reduction in the number of employees
covered by a plan. A past service cost, negative or positive, arises following a change in the present value of the defined benefit
obligation for employee service in prior periods, resulting in the current period from the introduction of, or changes to, post
employment benefits. A settlement arises where the Group is relieved of responsibility for a pension obligation and eliminates
significant risk relating to the obligation and the assets used to effect the settlement. Past-service costs, negative or positive, are
recognised immediately in the Income Statement. Losses arising on settlement or curtailment not allowed for in the actuarial
assumptions are measured at the date on which the Group becomes demonstrably committed to the transaction. Gains arising on
a settlement or curtailment are measured at the date on which all parties whose consent is required are irrevocably committed to
the transaction. Curtailment and settlement gains and losses are dealt with in the Income Statement.
Share-Based Payment Transactions
Employees (including Directors) of the Group receive remuneration in the form of share-based payment transactions, whereby
employees render service in exchange for shares or rights over shares.
The fair value of share entitlements granted is recognised as an employee expense in the Income Statement with a corresponding
increase in equity. The fair value at the grant date is determined using a Monte Carlo simulation technique for the DCC plc Long
Term Incentive Plan 2009 and a binomial model for the DCC plc 1998 Employee Share Option Scheme.
The DCC plc Long Term Incentive Plan 2009 contains both market and non-market based vesting conditions. Accordingly, the
fair value assigned to the related equity instrument on initial application of IFRS 2 Share-based Payment is adjusted to reflect
the anticipated likelihood at the grant date of achieving the market based vesting conditions. The cumulative non-market based
charge to the Income Statement is only reversed where entitlements do not vest because non-market performance conditions
have not been met or where an employee in receipt of share entitlements relinquishes service before the end of the vesting period.
The DCC plc 1998 Employee Share Option Scheme contains non-market based vesting conditions which are not taken into account
when estimating the fair value of entitlements as at the grant date. The expense in the Income Statement represents the product
of the total number of options anticipated to vest and the fair value of those options. This amount is allocated on a straight-
line basis over the vesting period to the Income Statement with a corresponding credit to Share Based Payment Reserve. The
cumulative charge to the Income Statement is only reversed where entitlements do not vest because non-market performance
conditions have not been met or where an employee in receipt of share entitlements relinquishes service before the end of the
vesting period.
Where the share-based payments give rise to the issue of new equity share capital, the proceeds received by the Company are
credited to Share Capital (nominal value) and Share Premium when the share entitlements are exercised. Where the share-based
payments give rise to the re-issue of shares from treasury shares, the proceeds of issue are credited to shareholders equity.
The measurement requirements of IFRS 2 have been implemented in respect of share options entitlements granted after 7
November 2002. In accordance with the standard, the disclosure requirements of IFRS 2 have been applied to all outstanding
share-based payments regardless of their grant date. The Group does not operate any cash-settled share-based payment
schemes or share-based payment transactions with cash alternatives as defined in IFRS 2.
Government Grants
Grants are recognised at their fair value when there is a reasonable assurance that the grant will be received and all attaching
conditions have been complied with.
Capital grants received and receivable by the Group are credited to government grants and are amortised to the Income Statement
on a straight-line basis over the expected useful lives of the assets to which they relate.
Revenue grants are recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it
is intended to compensate.
Financial Statements & Notes 139
1. Summary of Significant Accounting Policies (continued)
Equity
Treasury shares
Where the Company purchases the Company’s equity share capital, the consideration paid is deducted from total equity and
classified as treasury shares until they are cancelled. Where such shares are subsequently sold or re-issued, any consideration
received is included in total equity.
Dividends
Dividends on Ordinary Shares are recognised as a liability in the Group’s financial statements in the period in which they are
approved by the shareholders of the Company. Proposed dividends that are approved after the balance sheet date are not
recognised as a liability at that balance sheet date, but are disclosed in the dividends note.
Non-Controlling Interests
Non-controlling interests represent the portion of the equity of a subsidiary not attributable either directly or indirectly to the
Parent Company and are presented separately in the Group Income Statement and within equity in the Group Balance Sheet,
distinguished from shareholders’ equity attributable to owners of the Parent. Acquisitions of non-controlling interests are
accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as
a result of such transactions. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
2. Financial Risk Management
Financial Risk Factors
The Group uses derivative financial instruments (principally interest rate, currency and cross currency interest rate swaps and
forward foreign exchange and commodity contracts) to hedge certain risk exposures, as detailed below, arising from operational,
financing and investment activities. The Group does not trade in financial instruments nor does it enter into any leveraged
derivative transactions.
Financial risk management within the Group is governed by policies and guidelines reviewed and approved annually by the Board
of Directors. These policies and guidelines primarily cover foreign exchange risk, commodity price risk, credit risk, liquidity risk
and interest rate risk. Monitoring of compliance with the policies and guidelines is managed by the Group Risk Management
function.
The Group’s financial risks are detailed in note 46.
Fair Value Estimation
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The
quoted market price used for financial assets held by the Group is the current bid price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined by using valuation techniques. The Group uses a variety of techniques and makes assumptions that are based on
market conditions existing at each balance sheet date.
The fair value of interest rate, currency and cross currency interest rate swaps is calculated as the present value of the estimated
future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the
balance sheet date. The fair value of forward commodity contracts is determined using quoted forward commodity prices at the
balance sheet date. The fair values of borrowings (none of which are listed) are measured by discounting cash flows at prevailing
interest and exchange rates.
The nominal value less impairment provision of trade receivables and payables approximate to their fair values, largely due to their
short-term maturities.
Fair values of the Group’s financial assets and financial liabilities are summarised in note 46.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 140
Notes to the Financial Statements (continued)
3. Critical Accounting Estimates and Judgements
The Group’s main accounting policies affecting its results of operations and financial condition are set out on pages 128 to 139. In
determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy,
accounting estimate or assumption to be followed could materially affect the reported results or net asset position of the Group
should it later be determined that a different choice would be more appropriate. Management considers the accounting estimates
and assumptions discussed below to be its critical accounting estimates and judgements:
Goodwill
The Group has capitalised goodwill of £690.0 million at 31 March 2014. Goodwill is required to be tested for impairment at least
annually or more frequently if changes in circumstances or the occurrence of events indicating potential impairment exist. The
Group uses the present value of future cash flows to determine recoverable amount. In calculating the value in use, management
judgement is required in forecasting cash flows of cash-generating units, in determining terminal growth values and in selecting
an appropriate discount rate. Sensitivities to changes in assumptions are detailed in note 20.
Post Employment Benefits
The Group operates a number of defined benefit retirement plans. The Group’s total obligation in respect of defined benefit plans
is calculated by independent, qualified actuaries, updated at least annually and totals £119.9 million at 31 March 2014. At 31 March
2014 the Group also has plan assets totalling £103.9 million, giving a net pension liability of £16.0 million. The size of the obligation
is sensitive to actuarial assumptions. These include demographic assumptions covering mortality and longevity, and economic
assumptions covering price inflation, benefit and salary increases together with the discount rate used. The size of the plan assets
is also sensitive to asset return levels and the level of contributions from the Group. Sensitivities to changes in assumptions are
detailed in note 32.
Taxation
The Group is subject to income taxes in a number of jurisdictions. Provisions for tax liabilities require management to make
judgements and estimates in relation to tax issues and exposures. Amounts provided are based on management’s interpretation
of country specific tax laws and the likelihood of settlement. Where the final tax outcome is different from the amounts that
were initially recorded, such differences will impact the current tax and deferred tax provisions in the period in which such
determination is made.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the
unused tax losses and unused tax credits can be utilised. The Group estimates the most probable amount of future taxable profits,
using assumptions consistent with those employed in impairment calculations, and taking into account applicable tax legislation
in the relevant jurisdiction. These calculations require the use of estimates.
Business Combinations
Business combinations are accounted for using the acquisition method which requires that the assets and liabilities assumed are
recorded at their respective fair values at the date of acquisition. The application of this method requires certain estimates and
assumptions particularly concerning the determination of the fair values of the acquired assets and liabilities assumed at the date
of acquisition.
For intangible assets acquired, the Group bases valuations on expected future cash flows. This method employs a discounted
cash flow analysis using the present value of the estimated after-tax cash flows expected to be generated from the purchased
intangible asset using risk adjusted discount rates and revenue forecasts as appropriate. The period of expected cash flows is
based on the expected useful life of the intangible asset acquired.
Environmental Provisions
The Group has provisions for environmental remediation costs at 31 March 2014 of £9.6 million as disclosed in note 34. The main
component of this provision relates to restoration liabilities at the Group’s landfill sites. Future remediation costs are affected
by a number of uncertainties, the most significant of which is the estimation of the ongoing costs of treating the by-products of
bio-degrading waste. Management believes that the total provision is adequate based on currently available information. However,
given the inherent difficulties in estimating liabilities in this area, it cannot be guaranteed that additional costs will not be incurred
in excess of the amounts accrued. The effect of the resolution of environmental matters on the results of the Group cannot be
predicted due to the uncertainty concerning both the amount and the timing of future costs. Such changes that arise could impact
the provisions recognised in the Balance Sheet in future periods.
Financial Statements & Notes 141
3. Critical Accounting Estimates and Judgements (continued)
Provision for Impairment of Trade Receivables
The Group trades with a large and varied number of customers on credit terms. Some debts due will not be paid through the
default of a small number of customers. The Group uses estimates based on historical experience and current information in
determining the level of debts for which a provision for impairment is required. The level of provision required is reviewed on an
ongoing basis.
Useful Lives for Property, Plant and Equipment and Intangible Assets
Long-lived assets comprising primarily of property, plant and equipment and intangible assets represent a significant portion of
the Group’s total assets. The annual depreciation and amortisation charge depends primarily on the estimated lives of each type
of asset and, in certain circumstances, estimates of residual values. Management regularly review these useful lives and change
them if necessary to reflect current conditions. In determining these useful lives management consider technological change,
patterns of consumption, physical condition and expected economic utilisation of the assets. Changes in the useful lives can have
a significant impact on the depreciation and amortisation charge for the period.
4. Segment Information
Analysis by operating segment and by geography
DCC is a sales, marketing, distribution and business support services group headquartered in Dublin, Ireland. Operating
segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker has been identified as Mr. Tommy Breen, Chief Executive and his executive management team. The
Group is organised into five operating segments: DCC Energy, DCC Technology, DCC Healthcare, DCC Environmental and DCC
Food & Beverage.
DCC Energy markets and sells oil products and services for transport, commercial/industrial, marine, aviation and home heating
use in Britain, Ireland and Continental Europe. DCC Energy markets and sells liquefied petroleum gas for similar uses in Britain,
Ireland and Continental Europe.
DCC Technology sells, markets and distributes a broad range of consumer and SME focussed technology products in Europe.
DCC Healthcare sells, markets and distributes pharmaceutical and medical devices in British and Irish markets. DCC Healthcare
also provides outsourced product development, manufacturing, packaging and other services to health and beauty brand owners
in Europe.
DCC Environmental provides a broad range of waste management and recycling services to the industrial, commercial,
construction and public sectors in Britain and Ireland.
DCC Food & Beverage markets and sells food and beverages in Ireland and wine in Britain. DCC Food & Beverage is also a
provider of frozen food supply chain services in Ireland.
The chief operating decision maker monitors the operating results of segments separately in order to allocate resources
between segments and to assess performance. Segment performance is predominantly evaluated based on operating profit
before amortisation of intangible assets and net operating exceptional items. Net finance costs and income tax are managed
on a centralised basis and therefore these items are not allocated between operating segments for the purpose of presenting
information to the chief operating decision maker and accordingly are not included in the detailed segmental analysis below.
Intersegment revenue is not material and thus not subject to separate disclosure.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
142
Notes to the Financial Statements (continued)
4. Segment Information (continued)
The segment results for the year ended 31 March 2014 are as follows:
Income Statement items
Year ended 31 March 2014
DCC
Energy
£’000
DCC
Technology
£’000
DCC
Healthcare
£’000
DCC
Environmental
£’000
DCC Food &
Beverage
£’000
Total
£’000
Segment revenue
8,243,645
2,263,973
406,510
130,635
186,903
11,231,666
Operating profit*
Amortisation of intangible assets
Net operating exceptionals (note 11)
110,467
(13,686)
(4,219)
48,092
(1,974)
(11,371)
30,392
(2,711)
3,285
11,746
(1,285)
3,743
7,706
(760)
(4,721)
Operating profit
92,562
34,747
30,966
14,204
2,225
Finance costs
Finance income
Share of associates’ profit after tax
Profit before income tax
Income tax expense
Profit for the year
208,403
(20,416)
(13,283)
174,704
(52,952)
29,413
33
151,198
(27,255)
123,943
* Operating profit before amortisation of intangible assets and net operating exceptionals
Year ended 31 March 2013 (restated)
DCC
Energy
£’000
DCC
Technology
£’000
DCC
Healthcare
£’000
DCC
Environmental
£’000
DCC Food &
Beverage
£’000
Total
£’000
Segment revenue
8,112,143
1,850,246
320,593
116,107
173,597
10,572,686
Operating profit*
Amortisation of intangible assets
Net operating exceptionals (note 11)
106,170
(10,140)
(26,325)
41,481
(1,354)
2,467
22,194
(850)
(2,040)
10,895
(1,342)
360
6,122
(734)
1,721
69,705
42,594
19,304
9,913
7,109
Operating profit
Finance costs
Finance income
Share of associates’ loss after tax
Profit before income tax
Income tax expense
Profit for the year
186,862
(14,420)
(23,817)
148,625
(40,735)
25,291
(259)
132,922
(26,288)
106,634
* Operating profit before amortisation of intangible assets and net operating exceptionals
Financial Statements & Notes
143
4. Segment Information (continued)
Balance Sheet items
As at 31 March 2014
DCC
Energy
£’000
DCC
Technology
£’000
DCC
Healthcare
£’000
DCC
Environmental
£’000
DCC Food &
Beverage
£’000
Total
£’000
Segment assets
1,400,781
711,053
301,976
172,558
88,542
2,674,910
Reconciliation to total assets as reported in the Group Balance Sheet
Investments in associates
Derivative financial instruments (current and non-current)
Deferred income tax assets
Cash and cash equivalents
Total assets as reported in the Group Balance Sheet
824
57,461
11,260
963,144
3,707,599
Segment liabilities
852,116
516,131
92,376
36,807
42,554
1,539,984
Reconciliation to total liabilities as reported in the Group Balance Sheet
Interest-bearing loans and borrowings (current and non-current)
Derivative financial instruments (current and non-current)
Income tax liabilities (current and deferred)
Deferred and contingent acquisition consideration (current and non-current)
Government grants (current and non-current)
Total liabilities as reported in the Group Balance Sheet
1,042,557
64,335
59,802
53,323
1,343
2,761,344
Year ended 31 March 2013 (restated)
DCC
Energy
£’000
DCC
Technology
£’000
DCC
Healthcare
£’000
DCC
Environmental
£’000
DCC Food &
Beverage
£’000
Total
£’000
Segment assets
1,500,063
673,452
281,682
165,749
98,663
2,719,609
Reconciliation to total assets as reported in the Group Balance Sheet
Investments in associates
Derivative financial instruments (current and non-current)
Deferred income tax assets
Cash and cash equivalents
Total assets as reported in the Group Balance Sheet
808
137,706
9,478
518,925
3,386,526
Segment liabilities
913,137
445,041
78,817
28,987
45,828
1,511,810
Reconciliation to total liabilities as reported in the Group Balance Sheet
Interest-bearing loans and borrowings (current and non-current)
Derivative financial instruments (current and non-current)
Income tax liabilities (current and deferred)
Deferred and contingent acquisition consideration (current and non-current)
Government grants (current and non-current)
Total liabilities as reported in the Group Balance Sheet
826,775
15,808
62,201
75,959
1,631
2,494,184
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
144
Notes to the Financial Statements (continued)
4. Segment Information (continued)
Other segment information
Year ended 31 March 2014
DCC
Energy
£’000
DCC
Technology
£’000
DCC
Healthcare
£’000
DCC
Environmental
£’000
DCC Food &
Beverage
£’000
Total
£’000
Capital expenditure - additions
62,447
7,976
6,223
8,062
1,746
86,454
Capital expenditure - business combinations
3,990
28
4,629
524
-
9,171
Depreciation
35,498
4,551
6,006
7,497
2,578
56,130
Total consideration - business combinations
10,466
4,799
25,433
1,536
1,899
44,133
Intangible assets acquired - business combinations
10,493
5,574
17,503
1,228
2,136
36,934
Impairment of goodwill (note 11)
-
7,286
1,606
-
5,031
13,923
Year ended 31 March 2013 (restated)
DCC
Energy
£’000
DCC
Technology
£’000
DCC
Healthcare
£’000
DCC
Environmental
£’000
DCC Food &
Beverage
£’000
Total
£’000
Capital expenditure - additions
36,578
3,346
7,176
8,744
2,338
58,182
Capital expenditure - business combinations
51,968
470
11,000
-
-
63,438
Depreciation
35,880
4,132
4,384
7,358
2,480
54,234
Total consideration - business combinations
104,492
5,747
58,289
Intangible assets acquired - business combinations
61,316
4,391
39,566
Impairment of goodwill (note 11)
-
-
-
-
-
-
478
169,006
225
105,498
-
-
Financial Statements & Notes
145
4. Segment Information (continued)
Geographical analysis
The Group has a presence in 13 countries worldwide. The following represents a geographical analysis of the segment information
presented above in accordance with IFRS 8, which requires disclosure of information about the country of domicile (Republic of
Ireland) and countries with material revenue and non-current assets.
Year ended 31 March
UK
Republic of Ireland
Rest of the World
Total
2014
£’000
Restated
2013
£’000
2014
£’000
Restated
2013
£’000
2014
£’000
Restated
2013
£’000
2014
£’000
Restated
2013
£’000
Income Statement items
Revenue
8,386,889 8,083,476
910,314
835,324 1,934,463 1,653,886 11,231,666 10,572,686
Operating profit*
Amortisation of intangible assets
Net operating exceptionals
Segment result
158,735
(11,721)
2,812
149,826
137,696
(8,394)
(19,405)
109,897
23,199
(2,075)
(13,963)
7,161
20,052
(1,372)
(1,317)
17,363
26,469
(6,620)
(2,132)
17,717
29,114
(4,654)
(3,095)
21,365
208,403
(20,416)
(13,283)
174,704
186,862
(14,420)
(23,817)
148,625
Balance Sheet items
Segment assets
1,984,007 1,980,470
333,502
353,893
357,401
385,246 2,674,910 2,719,609
Segment liabilities
1,151,614 1,114,137
140,533
150,660
247,837
247,013 1,539,984 1,511,810
Other segment information
Non-current assets**
905,113
871,952
187,269
196,971
121,932
122,702 1,214,314 1,191,625
Capital expenditure - additions
69,403
45,220
11,479
7,867
5,572
5,095
86,454
58,182
Capital expenditure
- business combinations
8,709
46,227
84
228
378
16,983
9,171
63,438
Depreciation
40,785
41,235
10,777
9,993
4,568
3,006
56,130
54,234
Total consideration
- business combinations
37,058
106,792
2,030
5,327
5,045
56,887
44,133
169,006
Intangible assets acquired
24,890
67,635
2,105
4,897
9,939
32,966
36,934
105,498
Impairment of goodwill
5,031
-
8,892
-
-
-
13,923
-
* Operating profit before amortisation of intangible assets and net operating exceptionals
** Non-current assets comprise intangible assets, property, plant and equipment and investments in associates
Revenue and operating profit are derived almost entirely from the sale of goods and are disclosed based on the location of the
entity producing the goods. There are no material dependencies or concentrations on individual customers which would warrant
disclosure under IFRS 8. The Balance Sheet and other segment information presented above are disclosed based on the location
of the assets.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 146
Notes to the Financial Statements (continued)
5. Other Operating Income/Expense
Other operating income and expense comprise the following credits/(charges):
Other operating income
Fair value gains on non-hedge accounted derivative financial instruments - commodities
Fair value gains on non-hedge accounted derivative financial instruments - forward exchange contracts
Throughput
Haulage
Rental income
Other operating income
Other operating income included in net exceptional items (note 11)
Total other operating income
Other operating expenses
Expensing of employee share options (note 10)
Fair value losses on non-hedge accounted derivative financial instruments - commodities
Fair value losses on non-hedge accounted derivative financial instruments - forward exchange contracts
Other operating expenses
Other operating expenses included in net exceptional items (note 11)
2014
£’000
44
982
6,226
766
4,385
7,472
19,875
31,101
50,976
(1,185)
(57)
(1,026)
(576)
(2,844)
(44,384)
Restated
2013
£’000
121
2,100
5,521
503
3,771
7,113
19,129
5,601
24,730
(1,078)
(160)
(1,603)
(1,064)
(3,905)
(29,418)
Total other operating expenses
(47,228)
(33,323)
Financial Statements & Notes 147
6. Group Operating Profit
Group operating profit has been arrived at after charging/(crediting) the following amounts (including the Group’s share of joint
ventures accounted for on the basis of proportionate consolidation):
Depreciation (note 19)
Amortisation of intangible assets (note 20)
Provision for impairment of trade receivables (note 46)
Profit on sale of property, plant and equipment
Foreign exchange loss
Amortisation of government grants (note 35)
Operating lease rentals
- land and buildings
- plant and machinery
- motor vehicles
2014
£’000
56,130
20,416
4,904
(1,783)
416
(383)
15,811
714
11,147
27,672
During the year the Group obtained the following services from the Group’s auditors (PricewaterhouseCoopers):
Statutory auditor:
Audit fees
Tax compliance and advisory services
Other non-audit services
683
154
4
Other PricewaterhouseCoopers network firms:
Audit fees
Tax compliance and advisory services
Other non-audit services
841
917
572
26
Restated
2013
£’000
54,234
14,420
3,390
(1,036)
180
(476)
14,954
712
10,333
25,999
615
134
49
798
836
504
-
Auditor statutory disclosure
The audit fee for the Parent Company is £13,759 (2013: £13,291). This amount is paid to PricewaterhouseCoopers, Ireland, the
statutory auditor.
7. Directors’ Emoluments and Interests
Directors’ emoluments (which are included in operating costs) and interests are presented in the Remuneration Report on pages
89 to 108.
1,515
1,340
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 148
Notes to the Financial Statements (continued)
8. Proportionate Consolidation of Joint Ventures
Impact on Group Income Statement
Year ended 31 March
Group share of:
Revenue
Cost of sales
Gross profit
Operating costs
Exceptional items
Operating profit
Finance income (net)
Profit before income tax
Income tax expense
Profit for the financial year
Impact on Group Balance Sheet
As at 31 March
Group share of:
Non-current assets
Current assets
Total assets
Total equity
Non-current liabilities
Current liabilities
Total liabilities
Total equity and liabilities
Impact on Group Cash Flow Statement
Year ended 31 March
Group share of:
Net cash flow from operating activities
Net cash flow from investing activities
Net increase/(decrease) in cash and cash equivalents
Translation
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Reconciliation of cash and cash equivalents to net cash
Cash and cash equivalents as above
Net cash at 31 March
2014
£’000
20,834
(16,029)
4,805
(3,669)
-
1,136
-
1,136
(173)
963
2014
£’000
6,018
3,198
9,216
5,200
8
4,008
4,016
9,216
2014
£’000
1,008
(679)
329
(21)
697
1,005
1,005
1,005
Restated
2013
£’000
20,293
(13,155)
7,138
(5,877)
(392)
869
7
876
(104)
772
Restated
2013
£’000
6,185
3,038
9,223
4,979
-
4,244
4,244
9,223
Restated
2013
£’000
100
(845)
(745)
(6)
1,448
697
697
697
The Group’s share of its joint ventures’ capital commitments for property, plant and equipment at 31 March 2014, which has been
authorised by the Directors but not yet contracted for, is £0.538 million (2013: £0.494 million).
Details of the Group’s principal joint ventures are shown in the Group directory on pages 202 to 206.
Financial Statements & Notes
149
9. Employment
The average weekly number of persons (including executive Directors and the Group’s share of employees of joint ventures,
applying proportionate consolidation) employed by the Group during the year analysed by class of business was:
DCC Energy
DCC Technology
DCC Healthcare
DCC Environmental
DCC Food & Beverage
The employee benefit expense (excluding termination payments - note 11) for the above were:
Wages and salaries
Social welfare costs
Share based payment expense (note 10)
Pension costs - defined contribution plans
Pension costs - defined benefit plans (note 32)
2014
2013
Number
Number
4,635
1,753
1,602
952
862
9,804
2014
£’000
315,851
33,037
1,185
9,394
614
4,507
1,573
1,280
903
890
9,153
Restated
2013
£’000
281,613
28,594
1,078
9,763
975
360,081
322,023
10. Employee Share Options and Awards
The Group’s employee share options and awards are equity-settled share-based payments as defined in IFRS 2 Share-based
Payment. The IFRS requires that a recognised valuation methodology be employed to determine the fair value of share options
granted. The expense reported in the Income Statement of £1.185 million (2013: £1.078 million) has been arrived at by applying
a Monte Carlo simulation technique for share awards issued under the DCC plc Long Term Incentive Plan 2009 and a binomial
model, which is a lattice option-pricing model, for options issued under the DCC plc 1998 Employee Share Option Scheme.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
150
Notes to the Financial Statements (continued)
10. Employee Share Options and Awards (continued)
Impact on Income Statement
In compliance with IFRS 2 Share-based Payment, the Group has implemented the measurement requirements of the IFRS in
respect of share options that were granted after 7 November 2002 and had not vested by 1 April 2004.
The total share option expense is analysed as follows:
Grant
price
Minimum
duration of
vesting period
Number of
share awards/
options granted
Weighted
average
fair value
Expense in Income Statement
Restated
2013
£’000
2014
£’000
Date of grant
DCC plc Long Term Incentive Plan 2009
20 August 2009
15 November 2010
15 November 2011
12 November 2012
12 November 2013
€15.63
€21.25
€17.50
€22.66
£28.54
3 years
3 years
3 years
3 years
3 years
255,406
212,525
252,697
215,489
153,430
€8.97
€12.00
€9.17
€12.09
£14.42
DCC plc 1998 Employee Share Option Scheme
23 June 2006
€18.05
3 years
223,500
€4.54
Total expense
Share options and awards
-
(62)
270
731
246
(465)
693
629
236
-
1,185
1,093
-
-
(15)
(15)
1,185
1,078
DCC plc Long Term Incentive Plan 2009
At 31 March 2014, under the DCC plc Long Term Incentive Plan 2009, Group employees hold awards to subscribe for 742,574
ordinary shares.
The general terms of the DCC plc Long Term Incentive Plan 2009 are set out in the Remuneration Report on pages 89 to 108.
The DCC plc Long Term Incentive Plan 2009 contains both market and non-market based vesting conditions. Accordingly, the
fair value assigned to the related equity instrument on initial application of IFRS 2 Share-based Payment is adjusted to reflect
the anticipated likelihood at the grant date of achieving the market based vesting conditions. The cumulative non-market based
charge to the Income Statement is only reversed where entitlements do not vest because non-market performance conditions
have not been met or where an employee in receipt of share entitlements relinquishes service before the end of the vesting period.
A summary of activity under the DCC plc Long Term Incentive Plan 2009 over the year is as follows:
At 1 April
Granted
Exercised
Expired
At 31 March
2014
2013
Number of
Number of
share awards
share awards
733,414
153,430
(15,941)
(128,329)
714,755
215,489
(11,776)
(185,054)
742,574
733,414
The weighted average share price at the dates of exercise for share awards exercised during the year under the DCC plc Long
Term Incentive Plan 2009 was £29.39 (2013: €22.16). The share awards outstanding at the year end have a weighted average
remaining contractual life of 5.1 years (2013: 5.5 years).
Financial Statements & Notes 151
10. Employee Share Options and Awards (continued)
The weighted average fair values assigned to share awards granted under the DCC plc Long Term Incentive Plan 2009, which were
computed in accordance with the Monte Carlo valuation methodology, were as follows:
Granted during the year ended 31 March 2014
Granted during the year ended 31 March 2013
Granted during the year ended 31 March 2012
Granted during the year ended 31 March 2011
Granted during the year ended 31 March 2010
£14.42
€12.09
€9.17
€12.00
€8.97
The fair values of share awards granted under the DCC plc Long Term Incentive Plan 2009 were determined taking account of peer
group total share return volatilities and correlations together with the following assumptions:
Risk-free interest rate (%)
Dividend yield (%)
Expected volatility (%)
Expected life in years
Share price at date of grant
2014
1.65
3.1
23.3
5.0
£28.54
2013
0.67
2.5
30.0
5.0
€22.65
The expected volatility is based on historic volatility over the past 5 years. The expected life is the average expected period to exercise.
The risk free rate of return is the yield on zero coupon government bonds of a term consistent with the assumed option life.
Analysis of closing balance - outstanding at end of year
Date of grant
Date of expiry
20 August 2009
15 November 2010
15 November 2011
12 November 2012
12 November 2013
Total outstanding at 31 March
20 August 2016
15 November 2017
15 November 2018
12 November 2019
12 November 2020
2014
2013
Number of
Number of
share awards
share awards
47,148
79,066
249,211
214,143
153,006
52,703
212,525
252,697
215,489
-
742,574
733,414
Analysis of closing balance - exercisable at end of year
As at 31 March 2014, 126,214 of the outstanding share awards under the DCC plc Long Term Incentive Plan 2009 were exercisable.
DCC plc 1998 Employee Share Option Scheme
At 31 March 2014, under the DCC plc 1998 Employee Share Option Scheme, Group employees hold basic tier options to subscribe
for 714,750 ordinary shares and second tier options to subscribe for 89,500 ordinary shares.
The general terms of the DCC plc 1998 Employee Share Option Scheme are set out in the Remuneration Report on pages 89
to 108.
The DCC plc 1998 Employee Share Option Scheme contains non-market based vesting conditions which are not taken into account
when estimating the fair value of entitlements as at the grant date. The expense in the Income Statement represents the product
of the total number of options anticipated to vest and the fair value of those options. This amount is allocated on a straight-line
basis over the vesting period to the Income Statement. The cumulative charge to the Income Statement is only reversed where
entitlements do not vest because non-market performance conditions have not been met or where an employee in receipt of share
entitlements relinquishes service before the end of the vesting period.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
152
Notes to the Financial Statements (continued)
10. Employee Share Options and Awards (continued)
A summary of activity under the DCC plc 1998 Employee Share Option Scheme over the year is as follows:
At 1 April
Exercised
Expired
At 31 March
2014
2013
Average
exercise
price in €
per share
17.09
15.35
10.70
17.96
Options
1,024,350
(152,600)
(67,500)
804,250
Average
exercise
price in €
per share
15.51
13.61
10.50
17.09
Options
1,443,000
(153,150)
(265,500)
1,024,350
Total exercisable at 31 March
18.49
714,750
17.94
867,350
The weighted average share price at the dates of exercise for share options exercised during the year under the DCC plc 1998
Employee Share Option Scheme was £27.87 (2013: €23.40). The share options outstanding at the year end have a weighted
average remaining contractual life of 2.6 years (2013: 3.3 years).
Analysis of closing balance - outstanding at end of year
Date of grant
Date of expiry
per share
Options
per share
Options
2014
2013
Exercise
price
Exercise
price
22 December 2003
18 May 2004
9 November 2004
15 December 2005
23 June 2006
23 July 2007
20 December 2007
20 May 2008
22 December 2013
18 May 2014
9 November 2014
15 December 2015
23 June 2016
23 July 2017
20 December 2017
20 May 2018
Total outstanding at 31 March
Analysis of closing balance - exercisable at end of year
Date of grant
Date of expiry
22 December 2003
18 May 2004
9 November 2004
15 December 2005
23 June 2006
23 July 2007
20 December 2007
20 May 2008
Total exercisable at 31 March
22 December 2013
18 May 2014
9 November 2014
15 December 2015
23 June 2016
23 July 2017
20 December 2017
20 May 2018
€10.70
€12.75
€15.65
€16.70
€18.05
€23.35
€19.50
€15.68
Exercise
price
per share
€10.70
€12.75
€15.65
€16.70
€18.05
€23.35
€19.50
€15.68
-
67,000
93,000
81,250
117,000
212,000
12,500
221,500
804,250
€10.70
€12.75
€15.65
€16.70
€18.05
€23.35
€19.50
€15.68
75,000
118,000
120,500
107,350
131,500
222,000
12,500
237,500
1,024,350
2014
2013
Exercise
price
per share
€10.70
€12.75
€15.65
€16.70
€18.05
€23.35
€19.50
€15.68
Options
7,500
58,500
90,500
107,350
131,500
222,000
12,500
237,500
867,350
Options
-
7,500
63,000
81,250
117,000
212,000
12,500
221,500
714,750
Financial Statements & Notes 11. Exceptionals
Restructuring costs
Impairment of goodwill
Acquisition and related costs
Impairment of property, plant and equipment
Adjustments to deferred and contingent acquisition consideration
Gain arising from Taiwanese legal claim
Net profit on disposal of subsidiaries
Restructuring of Group defined benefit pension schemes
Legal and other operating exceptional items
Net operating exceptional items
Mark to market of swaps and related debt
Impairment of associate company investment and loan receivable from associate
Net exceptional items before taxation
Tax on Taiwanese legal claim
Net exceptional items after taxation
Non-controlling interest share of profit on disposal of subsidiary
Net exceptional items attributable to owners of the Parent
153
Restated
2013
£’000
(16,882)
-
(12,146)
-
5,601
-
-
-
(390)
(23,817)
(1,372)
(285)
(25,474)
-
(25,474)
-
(25,474)
2014
£’000
(19,720)
(13,923)
(5,638)
(550)
16,165
6,962
5,294
1,435
(3,308)
(13,283)
(2,128)
-
(15,411)
(5,255)
(20,666)
(2,055)
(22,721)
The analysis of the net operating exceptional items of £13.283 million (2013: £23.817 million) is as follows:
Exceptional operating income
Exceptional operating expense
31,101
(44,384)
5,601
(29,418)
(13,283)
(23,817)
The Group incurred an exceptional charge of £19.720 million in relation to restructuring of acquired and existing businesses.
Most of this related to the costs of integration of previously acquired oil and LPG businesses, the relocation of DCC Healthcare’s
Swedish health and beauty manufacturing activities to Britain, which was planned for at the time of the acquisition of those assets,
and the closure of DCC Technology’s Irish DVD business.
There was a non-cash exceptional charge of £13.923 million relating to the impairment of subsidiary goodwill. Included in this
charge is an impairment charge of £7.286 million in relation to the carrying value of MSE Limited, a subsidiary of DCC Technology,
primarily arising on the closure of the company’s Irish DVD business. In addition, an impairment charge of £5.031 million was
recognised in relation to Bottle Green Limited, a subsidiary of DCC Food & Beverage which was primarily due to weak demand in
the current year whilst the recovery in profits is forecasted at a slower rate than previously anticipated. There was also a non-cash
impairment of a property asset of £0.550 million.
Acquisition and related costs include the professional and tax costs (such as stamp duty) relating to the evaluation and completion
of acquisition opportunities. During the year, acquisition and related costs amounted to £5.638 million.
Most of the Group’s debt has been raised in the US Private Placement market and swapped, using long term interest, currency
and cross currency derivatives, to both fixed and floating rate sterling and euro. The level of ineffectiveness calculated under
IAS 39 on the fair value and cash flow hedge relationships relating to fixed rate debt, together with gains or losses arising from
marking to market swaps not designated as hedges, offset by foreign exchange translation gains or losses on the related fixed
rate debt, is charged or credited as an exceptional item. In the year to 31 March 2014 this amounted to a total exceptional loss of
£2.128 million.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 154
Notes to the Financial Statements (continued)
11. Exceptionals (continued)
There was a non-cash credit of £16.165 million for deferred and contingent acquisition consideration overprovided in previous
years. In accordance with IFRS 3 (revised), deferred and contingent consideration is measured at fair value at the time of the
business combination. If the amount of deferred and contingent consideration changes as a result of a post-acquisition event then
the changed amount is recognised in the Income Statement.
In January 2004, the High Court in London awarded £12.2 million in damages and associated interim costs, together with interest,
to DCC’s former British based mobility and rehabilitation subsidiary for breach of an exclusive supply agreement by a Taiwanese
supplier. A further amount in respect of costs of £2.9 million was subsequently determined by the High Court to be payable. In
order to enforce the High Court judgements, it has been necessary to pursue the collection of all outstanding amounts through
the Taiwanese courts. In March 2012, DCC received the initial £12.2 million referred to above which was accounted for in DCC’s
financial year ended 31 March 2012. In December 2013 and January 2014 a further aggregate amount of £6.962 million was
recovered in respect of the accumulated interest on the £12.2 million from which there was a deduction of £5.255 million for
Taiwanese withholding tax which is being challenged by DCC. The recovery of the £2.9 million, plus interest, continues to be
pursued through the Taiwanese courts. DCC has not accrued the amount of this outstanding claim.
In March 2014, DCC Healthcare disposed of Virtus Inc., a small US based subsidiary which contract manufactures a range of
mattress covers for hospital beds and stretchers and in February 2014 DCC Food & Beverage disposed of part of its chilled and
frozen food distribution activities. The business activities disposed of accounted for less than 1% of DCC’s operating profit for
the year ended 31 March 2014. The assets disposed of comprised non-current assets of £1.050 million and net current assets
(including cash and cash equivalents of £2.828 million) of £7.233 million. In addition, net foreign currency translation losses
previously recognised in the foreign currency translation reserve of £0.324 million were recycled to the Income Statement. The
net cash inflow from these transactions was £11.073 million and resulted in a gain on disposal (before a non-controlling interest
charge) on their book carrying values of £5.294 million.
There was a tax charge of £5.255 million, as referred to above, for Taiwanese withholding tax, which is being challenged by DCC
and a non-controlling interest charge of £2.055 million relating to the net exceptional items. The cash impact in the year of net
exceptional charges relating to the year to 31 March 2014 and the prior year was £21.097 million.
Financial Statements & Notes 12. Finance Costs and Finance Income
Finance costs
On bank loans, overdrafts and Unsecured Notes
- repayable within 5 years, not by instalments
- repayable within 5 years, by instalments
- repayable wholly or partly in more than 5 years
On finance leases
Facility fees
Other interest
Other finance costs:
Net interest on defined benefit pension scheme liabilities (note 32)
Mark to market of swaps and related debt* (note 11)
Finance income
Interest on cash and term deposits
Net income on interest rate and currency swaps
Other income
155
Restated
2013
£’000
(21,372)
(121)
(13,980)
(241)
(1,472)
(1,120)
(38,306)
(1,057)
(1,372)
(40,735)
2,351
22,925
15
25,291
2014
£’000
(19,817)
(92)
(26,276)
(204)
(1,632)
(2,130)
(50,151)
(673)
(2,128)
(52,952)
2,546
26,830
37
29,413
Net finance cost
(23,539)
(15,444)
*Mark to market of swaps and related debt
Interest rate swaps designated as fair value hedges
Cross currency interest rate swaps designated as fair value hedges
Adjusted hedged fixed rate debt
Mark to market of swaps designated as fair value hedges and related debt
Currency movements on fixed rate debt not designated as hedged
Currency swaps not designated as hedges
Mark to market of undesignated swaps and related debt
Movement on cross currency interest rate swaps designated as cash flow hedges
Transferred to cash flow hedge reserve
(8,430)
(95,148)
101,589
(1,989)
9,399
(8,903)
496
(8,935)
8,300
(635)
(4,130)
22,029
(19,362)
(1,463)
(5,255)
5,346
91
(811)
811
-
Total mark to market of swaps and related debt
(2,128)
(1,372)
13. Foreign Currency
The exchange rates used in translating non-sterling Income Statement and Balance Sheet amounts into sterling were as follows:
Euro
Danish Krone
Swedish Krona
Norwegian Krone
Average rate
Closing rate
2014
Stg£1=
2013
Stg£1=
2014
Stg£1=
1.1847
8.8386
10.3362
9.5103
1.2264
9.1366
10.5862
9.1035
1.2074
9.0146
10.8045
9.9674
2013
Stg£1=
1.1826
8.8162
9.8806
8.8836
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 156
Notes to the Financial Statements (continued)
14. Share of Associates’ Profit/(Loss) after Tax
The Group’s share of associates’ profit/(loss) after tax is equity-accounted and is presented as a single line item in the Group
Income Statement. The profit/(loss) after tax generated by the Group’s associates is analysed as follows:
Group share of:
Revenue
Operating profit
Impairment of associate company investment and loan receivable from associate
Profit/(loss) before finance costs
Finance costs (net)
Profit/(loss)
15. Income Tax Expense
(i) Income tax expense recognised in the Income Statement
Current taxation
Irish corporation tax at 12.5%
Exceptional taxation charge (note 11)
United Kingdom corporation tax at 23% (2013: 24%)
Other overseas tax
Over provision in respect of prior years
Total current taxation
Deferred tax
Irish at 12.5%
United Kingdom at 20% (2013: 23%)
Other overseas deferred tax
Over provision in respect of prior years
Total deferred tax credit
Total income tax expense
2014
£’000
Restated
2013
£’000
5,106
5,032
40
-
40
(7)
33
2014
£’000
4,130
5,255
20,669
6,036
-
36,090
(3,797)
(284)
(2,345)
(2,409)
(8,835)
34
(285)
(251)
(8)
(259)
Restated
2013
£’000
3,700
-
17,428
8,017
(682)
28,463
(2,299)
(517)
862
(221)
(2,175)
27,255
26,288
The deferred tax over provision in respect of prior years principally arose following substantially enacted legislation in the UK to
reduce the UK tax rate to 20% with effect from 1 April 2015.
Financial Statements & Notes 15. Income Tax Expense (continued)
(ii) Deferred tax recognised directly in Equity
Defined benefit pension obligations
Cash flow hedges
(iii) Reconciliation of effective tax rate
Profit on ordinary activities before taxation
Add back: share of associates’ (profit)/loss after tax
Add back: amortisation of intangible assets
At the standard rate of corporation tax in Ireland of 12.5%
Adjustments in respect of prior years
Effect of earnings taxed at higher rates
Permanent and other differences
Income tax expense
Tax on exceptional gain
Deferred tax attaching to amortisation of intangible assets
Total income tax expense
Income tax expense as a percentage of profit before share of associates’ profit/(loss) after tax,
amortisation of intangible assets and net exceptionals
Impact of associates’ profit/(loss) after tax, amortisation of intangible assets and net exceptionals
Total income tax expense as a percentage of profit before tax
157
Restated
2013
£’000
(1,506)
(202)
(1,708)
132,922
259
14,420
147,601
18,450
(903)
12,101
(273)
29,375
-
(3,087)
2014
£’000
(152)
(288)
(440)
151,198
(33)
20,416
171,581
21,448
(2,409)
9,328
(2,188)
26,179
5,255
(4,179)
27,255
26,288
2014
%
14.0%
4.0%
18.0%
2013
%
17.0%
2.8%
19.8%
(iv) Factors that may affect future tax rates and other disclosures
No significant change is expected to the standard rate of corporation tax in the Republic of Ireland which is currently 12.5%. The
standard rate of corporation tax in the UK reduced from 24% to 23% with effect from 1 April 2013. A tax rate of 21% applies with
effect from 1 April 2014 and the UK March 2013 budget announcement included a further proposal to reduce the UK corporation
tax rate to 20% with effect from 1 April 2015. As the legislation to give statutory effect to the reduction in the rate to 20% from 1
April 2015 had been substantially enacted as at the balance sheet date, account has been taken of this change in these financial
statements.
The Group has not provided deferred tax in relation to temporary differences applicable to investments in subsidiaries on the
basis that the Group can control the timing and realisation of these temporary differences and it is probable that the temporary
difference will not reverse in the foreseeable future. No provision has been recognised in respect of deferred tax relating to
unremitted earnings of subsidiaries as there is no commitment to remit earnings.
16. Profit Attributable to DCC plc
Profit after taxation for the year attributable to owners of the Parent amounting to £40.894 million (2013: £40.173 million) has
been accounted for in the financial statements of the Company. In accordance with Section 148(8) of the Companies Act 1963,
the Company is availing of the exemption from presenting its individual Income Statement to the Annual General Meeting. The
Company has also availed of the exemption from filing its individual Income Statement with the Registrar of Companies as
permitted by Section 7(1A) of the Companies (Amendment) Act 1986.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 158
Notes to the Financial Statements (continued)
17. Dividends
Dividends paid per Ordinary Share are as follows:
Final - paid 56.20 cent per share on 25 July 2013
(2013: paid 50.47 cent per share on 26 July 2012)
Interim - paid 26.12 pence per share on 29 November 2013
(2013: paid 29.48 cent per share on 30 November 2012)
2014
£’000
Restated
2013
£’000
39,721
34,375
22,167
20,105
61,888
54,480
The Directors are proposing a final dividend in respect of the year ended 31 March 2014 of 50.73 pence per ordinary share (£42.543
million). This proposed dividend is subject to approval by the shareholders at the Annual General Meeting.
Interim and final dividends declared previously in euro have been translated to sterling using the relevant average sterling/euro
exchange rate for the period.
18. Earnings per Ordinary Share
Profit attributable to owners of the Parent
Amortisation of intangible assets after tax
Exceptionals after tax (note 11)
2014
£’000
121,234
16,237
22,721
Restated
2013
£’000
106,295
11,333
25,474
Adjusted profit after taxation and non-controlling interests
160,192
143,102
Basic earnings per ordinary share
Basic earnings per ordinary share
Amortisation of intangible assets after tax
Exceptionals
Adjusted basic earnings per ordinary share
Weighted average number of ordinary shares in issue (thousands)
2014
pence
144.70p
19.38p
27.12p
Restated
2013
pence
127.17p
13.56p
30.47p
191.20p
171.20p
83,781
83,586
Basic earnings per share is calculated by dividing the profit attributable to owners of the Parent by the weighted average number
of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares. The
adjusted figures for basic earnings per ordinary share are intended to demonstrate the results of the Group after eliminating the
impact of amortisation of intangible assets and net exceptionals.
Financial Statements & Notes 18. Earnings per Ordinary Share (continued)
Diluted earnings per ordinary share
Diluted earnings per ordinary share
Amortisation of intangible assets after tax
Exceptionals
Adjusted diluted earnings per ordinary share
Weighted average number of ordinary shares in issue (thousands)
159
2014
pence
143.90p
19.27p
26.97p
Restated
2013
pence
126.77p
13.51p
30.38p
190.14p
170.66p
84,250
83,850
The earnings used for the purposes of the diluted earnings per share calculations were £121.234 million (2013: £106.295 million)
and £160.192 million (2013: £143.102 million) for the purposes of the adjusted diluted earnings per share calculations.
The weighted average number of ordinary shares used in calculating the diluted earnings per share for the year ended 31 March
2014 was 84.250 million (2013: 83.850 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 ordinary shares in issue
Dilutive effect of options and awards
Weighted average number of ordinary shares for diluted earnings per share
2014
‘000
83,781
469
84,250
2013
‘000
83,586
264
83,850
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. Share options and awards are the Company’s only category of dilutive potential
ordinary shares.
Employee share options and awards, which are performance-based, are treated as contingently issuable shares because their
issue is contingent upon satisfaction of specified performance conditions in addition to the passage of time. These contingently
issuable shares are excluded from the computation of diluted earnings per ordinary share where the conditions governing
exercisability have not been satisfied as at the end of the reporting period.
The adjusted figures for diluted earnings per ordinary share are intended to demonstrate the results of the Group after eliminating
the impact of amortisation of intangible assets and net exceptionals.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 160
Notes to the Financial Statements (continued)
19. Property, Plant and Equipment
Group
Year ended 31 March 2014
Opening net book amount (restated)
Exchange differences
Arising on acquisition (note 45)
Disposal of subsidiaries
Additions
Disposals
Depreciation charge
Impairment charge (note 11)
Reclassifications
Closing net book amount
Plant &
Land &
machinery
Fixtures &
fittings &
office
buildings
& cylinders
equipment
£’000
£’000
£’000
149,839
(1,111)
5,701
(875)
7,606
(712)
(3,785)
(550)
(1,238)
154,875
202,500
(1,667)
2,595
(129)
39,756
(1,026)
(29,563)
-
(1,414)
211,052
27,665
(192)
426
(46)
13,347
(760)
(10,255)
-
2,475
32,660
Motor
vehicles
£’000
61,496
(207)
449
-
25,745
(4,303)
(12,527)
-
177
70,830
Total
£’000
441,500
(3,177)
9,171
(1,050)
86,454
(6,801)
(56,130)
(550)
-
469,417
At 31 March 2014
Cost
Accumulated depreciation and impairment losses
Net book amount
195,750
(40,875)
154,875
552,380
(341,328)
211,052
108,814
(76,154)
32,660
156,648
(85,818)
70,830
1,013,592
(544,175)
469,417
Year ended 31 March 2013 (restated)
Opening net book amount
Exchange differences
Arising on acquisition (note 45)
Additions
Disposals
Depreciation charge
Reclassifications
Closing net book amount
136,298
1,060
12,339
5,347
(1,119)
(3,034)
(1,052)
149,839
144,591
610
49,068
32,343
(1,093)
(26,362)
3,343
202,500
29,071
219
902
8,446
(101)
(8,585)
(2,287)
27,665
66,210
62
1,129
12,046
(1,694)
(16,253)
(4)
61,496
376,170
1,951
63,438
58,182
(4,007)
(54,234)
-
441,500
At 31 March 2013 (restated)
Cost
Accumulated depreciation and impairment losses
Net book amount
186,948
(37,109)
149,839
518,214
(315,714)
202,500
100,158
(72,493)
27,665
144,005
(82,509)
61,496
949,325
(507,825)
441,500
Assets held under finance leases
The net carrying amount and the depreciation charge during the year in respect of assets held under finance leases and
accordingly capitalised in property, plant and equipment are as follows:
Cost
Accumulated depreciation
Net book amount
Depreciation charge for the year
2014
£’000
45,047
(43,605)
1,442
Restated
2013
£’000
48,484
(47,016)
1,468
276
771
Financial Statements & Notes 20. Intangible Assets
Group
Year ended 31 March 2014
Opening net book amount (restated)
Exchange differences
Arising on acquisition (note 45)
Impairment charge (note 11)
Other movements (note 33)
Amortisation charge
Closing net book amount
At 31 March 2014
Cost
Accumulated amortisation and impairment losses
Net book amount
Year ended 31 March 2013 (restated)
Opening net book amount
Exchange differences
Arising on acquisition (note 45)
Other movements (note 33)
Amortisation charge
Closing net book amount
At 31 March 2013 (restated)
Cost
Accumulated amortisation and impairment losses
Net book amount
161
Goodwill
£’000
685,918
(6,392)
24,601
(13,923)
(208)
-
689,996
Customer
related
£’000
63,399
(1,239)
12,333
-
-
(20,416)
54,077
Total
£’000
749,317
(7,631)
36,934
(13,923)
(208)
(20,416)
744,073
723,876
(33,880)
689,996
133,721
(79,644)
54,077
857,597
(113,524)
744,073
603,234
4,336
79,907
(1,559)
-
685,918
51,548
680
25,591
-
(14,420)
63,399
654,782
5,016
105,498
(1,559)
(14,420)
749,317
705,667
(19,749)
685,918
122,627
(59,228)
63,399
828,294
(78,977)
749,317
Customer related intangible assets principally comprise contractual and non-contractual customer relationships arising from
business combinations and are amortised over their estimated useful lives. The weighted average remaining amortisation period
is 2.7 years (2013: 3.2 years).
Cash-generating units
Goodwill acquired in business combinations is allocated, at acquisition, to the cash-generating units (CGUs) that are expected
to benefit from that business combination. A CGU is the smallest identifiable group of assets that generates cash inflows that
are largely independent of the cash inflows from other assets or group of assets. The CGUs represent the lowest level within the
Group at which the associated goodwill is assessed for internal management purposes and are not larger than the operating
segments determined in accordance with IFRS 8 Operating Segments. A total of 30 CGUs (2013: 29 CGUs) have been identified and
these are analysed between the five operating segments below together with a summary of the allocation of the carrying value of
goodwill by segment.
Cash-generating units
Goodwill (£’000)
DCC Energy
DCC Technology
DCC Healthcare
DCC Environmental
DCC Food & Beverage
12
5
4
4
5
30
11
5
4
4
5
29
406,511
63,643
125,197
78,909
15,736
689,996
685,918
2014
number
2013
number
2014
£’000
Restated
2013
£’000
401,885
69,141
117,331
76,694
20,867
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 162
Notes to the Financial Statements (continued)
20. Intangible Assets (continued)
In accordance with IAS 36 Impairment of Assets, the CGUs to which significant amounts of goodwill have been allocated are as
follows:
Certas Energy UK Group
DCC Vital Group
2014
£’000
Restated
2013
£’000
252,408
106,700
251,742
101,328
For the purpose of impairment testing, the discount rates applied to these CGUs to which significant amounts of goodwill have
been allocated were 8.5% (2013: 9%) for the Certas Energy UK Group and 8.5% (2013: 10%) for the DCC Vital Group. The long term
growth rate assumed in both cases was 2.3% (2013: 2.5%). The remaining goodwill balance of £330.888 million is allocated across
28 CGUs (2013: £332.848 million over 27 CGUs), none of which are individually significant.
Impairment testing of goodwill
Goodwill acquired through business combinations has been allocated to CGUs for the purpose of impairment testing. Impairment
of goodwill occurs when the carrying value of a CGU is greater than the present value of the cash that it is expected to generate
(i.e. the recoverable amount). The Group reviews the carrying value of each CGU at least annually or more frequently if there is an
indication that the CGU may be impaired.
The recoverable amount of each CGU is based on a value in use computation. The cash flow forecasts employed for this
computation are extracted from a three year plan that has been formally approved by the Board of Directors and specifically
excludes future acquisition activity. Cash flows for a further two years are based on the assumptions underlying the three year
plan. A long term growth rate reflecting the lower of the extrapolated cash flow projections and the long term GDP rate for the
country of operation is applied to the year five cash flows. The weighted average long term growth rate used in the impairment
testing was 2.3% (2013: 2.5%).
A present value of the future cash flows is calculated using a before-tax discount rate representing the Group’s estimated before-
tax weighted average cost of capital, adjusted to reflect risks associated with each CGU. The range of discount rates applied
ranged from 7.5% to 8.5% (2013: 7% to 10%).
Key assumptions include management’s estimates of future profitability, working capital investment and capital expenditure
requirements. Cash flow forecasts and key assumptions are generally determined based on historical performance together with
management’s expectation of future trends affecting the industry and other developments and initiatives in the business. The prior
year assumptions were prepared on the same basis.
Applying these techniques, an impairment charge of £13.923 million arose in 2014 (2013: nil). The impairment charge, which
is included in the Income Statement in other operating expenses, primarily arose in MSE Limited (a subsidiary of the Group’s
Technology division) following the closure of the Irish DVD business and in Bottle Green Limited (a subsidiary of the Group’s Food
& Beverage division) as this CGU experienced weak demand in the current year whilst the recovery in profits is forecasted at a
slower rate than previously anticipated. The recoverable amounts for both CGUs were determined on a value in use basis. For the
purpose of impairment testing, the discount rates applied to these CGUs were 8.4% (2013: 8.0%) for MSE Limited and 8.0% (2013:
8.0%) for Bottle Green Limited.
Sensitivity analysis was performed by increasing the discount rate by 1.5%, reducing the long term growth rate by 0.3% and
decreasing cash flows by 10% which resulted in an excess in the recoverable amount of all CGUs over their carrying amount under
each approach. Management believes that any reasonable change in any of the key assumptions would not cause the carrying
value of goodwill to exceed the recoverable amount.
Financial Statements & Notes
163
2014
£’000
808
33
-
(17)
824
Restated
2013
£’000
978
26
(204)
8
808
21. Investments in Associates
At 1 April
Share of profit after tax (before impairment of associate company investment)
Impairment of associate company investment
Exchange
At 31 March
Investments in associates at 31 March 2014 include goodwill of £0.350 million (2013: £0.357 million).
The Group’s geographical share of the assets (including goodwill) and liabilities of its associates is as follows:
As at 31 March 2014
Ireland
France
As at 31 March 2013 (restated)
Ireland
France
Non-current
Current
Non-current
assets
£’000
assets
£’000
liabilities
£’000
Current
liabilities
£’000
404
3
407
386
4
390
460
427
887
676
403
1,079
-
(118)
(118)
-
(112)
(112)
(132)
(220)
(352)
(349)
(200)
(549)
Net
assets
£’000
732
92
824
713
95
808
Details of the Group’s associates are as follows:
Name and Registered Office
Nature of Business
Financial Year End
% Shareholding
Relevant Share Capital
Lee Oil (Cork) Limited,
Clonminam Industrial
Estate, Portlaoise,
Co Laois.
SAS Blue Stork Industry
300, rue du Président
Salvador Allende, 92700
Colombes, France.
Sale and distribution of oil products.
31 March
50.0%
100 ordinary shares of
€1.26 each.
Sale and distribution of computer
hardware, software and peripherals.
31 March
20.0%
740 ordinary shares of
€10 each.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 164
Notes to the Financial Statements (continued)
22. Investments in Subsidiary Undertakings
Company
At 1 April
Additions
Exchange
At 31 March
2014
£’000
143,807
1,880
(2,995)
Restated
2013
£’000
140,149
1,631
2,027
142,692
143,807
Details of the Group’s principal operating subsidiaries are shown on pages 202 to 206. Non-wholly owned subsidiaries comprises
DCC Environmental Britain Limited (70%) (which owns 100% of Wastecycle Limited and William Tracey Limited) where put and call
options exist to acquire the remaining 30%, and Virtus Limited (51%).
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 Hill House, 1 Little New Street, London EC4A 3TR, England. The registered office of DCC
International Holdings B.V. is Teleport Boulevard 140, 1043 EJ Amsterdam, The Netherlands.
23. Inventories
Group
Raw materials
Work in progress
Finished goods
24. Trade and Other Receivables
Group
Trade receivables
Provision for impairment of trade receivables (note 46)
Prepayments and accrued income
Value added tax recoverable
Other debtors
Company
Amounts owed by subsidiary undertakings
2014
£’000
14,229
2,476
485,060
Restated
2013
£’000
14,195
2,769
372,562
501,765
389,526
2014
£’000
878,698
(17,284)
52,796
13,634
31,811
Restated
2013
£’000
1,043,977
(20,782)
60,572
17,294
38,205
959,655
1,139,266
2014
£’000
Restated
2013
£’000
335,662
315,632
Financial Statements & Notes 165
2014
£’000
1,245,238
173,199
11,944
50,539
20
4,740
7,288
Restated
2013
£’000
1,197,764
199,640
14,576
47,337
57
3,864
92
1,492,968
1,463,330
2014
£’000
Restated
2013
£’000
279,319
506
238,301
517
279,825
238,818
Trade
and other
Inventories
receivables
£’000
£’000
Trade
and other
payables
£’000
389,526
(1,693)
6,748
(2,209)
-
109,393
1,139,266
(11,376)
22,209
(1,525)
969
(189,888)
(1,463,330)
12,259
(25,811)
(671)
(9,006)
(6,409)
Total
£’000
65,462
(810)
3,146
(4,405)
(8,037)
(86,904)
25. Trade and Other Payables
Group
Trade payables
Other creditors and accruals
PAYE and National Insurance
Value added tax
Government grants (note 35)
Interest payable
Amounts due in respect of property, plant and equipment
Company
Amounts due to subsidiary undertakings
Other creditors and accruals
26. Movement in Working Capital
Group
Year ended 31 March 2014
At 1 April 2013 (restated)
Translation adjustment
Arising on acquisition (note 45)
Disposal of subsidiaries
Exceptional items, interest accruals and other
Increase/(decrease) in working capital (note 41)
At 31 March 2014
501,765
959,655
(1,492,968)
(31,548)
Year ended 31 March 2013 (restated)
At 1 April 2012
Translation adjustment
Arising on acquisition (note 45)
Exceptional items, interest accruals and other
Increase/(decrease) in working capital (note 41)
At 31 March 2013
282,000
2,215
17,191
-
88,120
1,077,147
5,007
35,755
(383)
21,740
(1,279,102)
(6,097)
(44,225)
4,155
(138,061)
80,045
1,125
8,721
3,772
(28,201)
389,526
1,139,266
(1,463,330)
65,462
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
166
Notes to the Financial Statements (continued)
26. Movement in Working Capital (continued)
Company
Year ended 31 March 2014
At 1 April 2013 (restated)
Translation adjustment
Dividends receivable
Decrease in working capital (note 41)
At 31 March 2014
Year ended 31 March 2013 (restated)
At 1 April 2012
Translation adjustment
Exceptional item
(Decrease)/increase in working capital (note 41)
At 31 March 2013
27. Cash and Cash Equivalents
Group
Cash at bank and in hand
Short-term bank deposits
Trade
Trade
and other
and other
receivables
payables
£’000
£’000
Total
£’000
315,632
(7,003)
29,476
(2,443)
(275,766)
6,573
-
(47,608)
39,866
(430)
29,476
(50,051)
335,662
(316,801)
18,861
341,612
3,694
(82)
(29,592)
(285,336)
(3,519)
-
13,089
56,276
175
(82)
(16,503)
315,632
(275,766)
39,866
2014
£’000
Restated
2013
£’000
313,792
649,352
282,289
236,636
963,144
518,925
Cash at bank earns interest at floating rates based on daily bank deposit rates. The short-term deposits are for periods up to three
months and earn interest at the respective short-term deposit rates.
Cash and cash equivalents include the following for the purposes of the Group Cash Flow Statement:
Cash and short-term bank deposits
Bank overdrafts
Bank overdrafts are included within current borrowings (note 29) in the Group Balance Sheet.
Company
Cash at bank and in hand
2014
£’000
Restated
2013
£’000
963,144
(148,578)
518,925
(87,851)
814,566
431,074
2014
£’000
Restated
2013
£’000
2,999
3,381
Financial Statements & Notes 28. Derivative Financial Instruments
Group
Non-current assets
Interest rate swaps - fair value hedges
Cross currency interest rate swaps - fair value hedges
Current assets
Interest rate swaps - fair value hedges
Cross currency interest rate swaps - fair value hedges
Foreign exchange forward contracts - cash flow hedges
Commodity forward contracts - cash flow hedges
Foreign exchange forward contracts - fair value hedges
Commodity forward contracts - fair value hedges
Foreign exchange forward contracts - not designated as hedges
Commodity forward contracts - not designated as hedges
Total assets
Non-current liabilities
Currency swaps - not designated as hedges
Cross currency interest rate swaps - fair value hedges
Cross currency interest rate swaps - cash flow hedges
Current liabilities
Currency swaps - not designated as hedges
Cross currency interest rate swaps - fair value hedges
Foreign exchange forward contracts - cash flow hedges
Commodity forward contracts - cash flow hedges
Foreign exchange forward contracts - fair value hedges
Commodity forward contracts - fair value hedges
Foreign exchange forward contracts - not designated as hedges
Commodity forward contracts - not designated as hedges
Total liabilities
Net (liability)/asset arising on derivative financial instruments
167
Restated
2013
£’000
16,071
109,841
125,912
-
9,754
554
847
36
227
325
51
11,794
137,706
(9,249)
(3,346)
(841)
(13,436)
-
-
(951)
(1,083)
-
-
(209)
(129)
(2,372)
(15,808)
121,898
2014
£’000
7,323
48,917
56,240
318
253
373
20
2
193
28
34
1,221
57,461
(4,308)
(31,671)
(9,657)
(45,636)
(13,843)
(950)
(129)
(3,348)
(240)
(8)
(109)
(72)
(18,699)
(64,335)
(6,874)
The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged
item is more than twelve months and as a current asset or liability if the maturity of the hedged item is less than twelve months.
Interest rate swaps
The notional principal amounts of the outstanding interest rate swap contracts designated as fair value hedges under IAS 39 at 31
March 2014 total US$200.0 million, Stg£55.0 million and €20.0 million. At 31 March 2014, the fixed interest rates vary from 4.58%
to 6.18% and the floating rates are based on US$ LIBOR, sterling LIBOR and EURIBOR.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 168
Notes to the Financial Statements (continued)
28. Derivative Financial Instruments (continued)
In addition to the above and as referred to in note 29 to the financial statements, on 20 March 2014 the Group committed itself to
issuing US$, euro and sterling denominated debt of US$516.0 million, €85.0 million and £70.0 million. This debt will be drawn
down on 21 May 2014 (US$436.0 million, €85.0 million and £70.0 million) and on 23 September 2014 (US$80.0 million). The Group
has entered a number of cross currency interest rate swaps and interest rate swaps to hedge the interest rate and currency risk
arising from this debt issuance. The interest rate swaps swapped the fixed rate €85.0 million issuance to floating rate euro debt,
and swapped the fixed rate £70.0 million to floating rate sterling debt. The swaps to floating rate euro and sterling are designated
as fair value hedges under IAS 39.
Currency swaps
The Group utilises currency swaps in conjunction with interest rate swaps designated as fair value hedges (as noted above) to
swap fixed rate US$ denominated debt into floating rate euro debt. The currency swaps (which swap floating US$ denominated
debt based on US$ LIBOR into floating euro denominated debt based on EURIBOR) have notional principal amounts of US$200.0
million/€167.113 million and are not designated as hedges under IAS 39.
Cross currency interest rate swaps
The Group utilises cross currency interest rate swaps to swap fixed rate US$ denominated debt of US$980.5 million into floating
rate sterling debt of Stg£343.445 million and floating rate euro debt of €304.961 million. At 31 March 2014 the fixed interest rates
vary from 3.41% to 6.19%. These swaps are designated as fair value hedges under IAS 39.
The Group utilises cross currency interest rate swaps to swap fixed rate US$ denominated debt of US$130.0 million into fixed rate
sterling debt of Stg£29.664 million and floating rate euro debt of €64.970 million. At 31 March 2014 the fixed US$ interest rates
vary from 4.04% to 4.19%. These swaps are designated as cash flow hedges under IAS 39.
In addition to the above, the cross currency interest rate swaps entered into in connection with the 20 March 2014 fundraising
commitment referred to above and in note 29, swapped the fixed rate US$516.0 million issuance to floating rate euro debt of
€195.4 million, floating rate sterling debt of £36.4 million, fixed rate euro debt of €98.1 million and fixed rate sterling debt of £31.5
million. The swaps to floating rate euro and sterling are designated as fair value hedges under IAS 39 and the swaps to fixed rate
euro and sterling are designated as cash flow hedges under IAS 39.
Forward foreign exchange contracts
The notional principal amounts of outstanding forward foreign exchange contracts at 31 March 2014 total £62.204 million (2013:
£80.596 million). Gains and losses recognised in the cash flow hedge reserve in equity (note 38) at 31 March 2014 on forward
foreign exchange contracts designated as cash flow hedges under IAS 39 will be released to the Income Statement at various
dates up to twelve months after the balance sheet date.
Commodity price forward contracts
The notional principal amounts of outstanding forward commodity contracts at 31 March 2014 total £41.056 million (2013: £16.225
million). Gains and losses recognised in the cash flow hedge reserve in equity (note 38) at 31 March 2014 on forward commodity
contracts designated as cash flow hedges under IAS 39 will be released to the Income Statement at various dates up to twelve
months after the balance sheet date.
Financial Statements & Notes 29. Borrowings
Group
Non-current
Finance leases*
Unsecured Notes
Current
Bank borrowings
Finance leases*
Unsecured Notes
Total borrowings
*Secured on specific plant and equipment
The maturity of non-current borrowings is as follows:
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
169
2014
£’000
Restated
2013
£’000
619
725,212
725,831
619
672,096
672,715
148,578
501
167,647
316,726
87,851
722
65,487
154,060
1,042,557
826,775
2014
£’000
14,697
152,708
558,426
Restated
2013
£’000
188,498
186,358
297,859
725,831
672,715
Bank borrowings and finance leases
Interest on bank borrowings is at floating rates set in advance for periods ranging from overnight to six months by reference to
inter-bank interest rates (EURIBOR, sterling LIBOR and US$ LIBOR) and consequently fair value approximates carrying amounts.
The majority of finance leases are at fixed rates.
In January 2012, the Group put in place a five year committed revolving credit facility with four relationship banks: Barclays, HSBC,
JP Morgan and RBS. The Group had various other uncommitted bank facilities available at 31 March 2014.
Unsecured Notes
The Group’s Unsecured Notes which fall due between 2014 and 2029 are comprised of fixed rate debt of US$200.0 million and
Stg£30.0 million issued in 2004 and maturing in 2014 and 2016 (the ‘2014/16 Notes’), fixed rate debt of US$200.0 million and
Stg£25.0 million issued in 2007 and maturing in 2017 and 2019 (the ‘2017/19 Notes’), fixed rate debt of US$22.5 million issued in
2008 and maturing in 2015 (the ‘2015 Notes’), fixed rate debt of US$363.0 million and €20.0 million issued in 2010 and maturing in
2015, 2017, 2020 and 2022 (the ‘2015/17/20/22 Notes’), fixed rate debt of US$525 million issued in 2013 and maturing in 2020, 2023
and 2025 (the ‘2020/23/25 Notes’) and fixed rate debt of US$516.0 million, €85.0 million and £70.0 million committed to be issued
in 2014 and maturing in 2021, 2024, 2026 and 2029 (the ‘2021/24/26/29 Notes’).
The 2015 Notes denominated in US$ have been swapped (using cross currency interest rate swaps designated as fair value
hedges under IAS 39) from fixed US$ to floating sterling rates, repricing quarterly based on sterling LIBOR.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 170
Notes to the Financial Statements (continued)
29. Borrowings (continued)
The 2014/16 Notes denominated in US$ have been swapped from fixed to floating US$ rates (using interest rate swaps designated
as fair value hedges under IAS 39) and further swapped (using currency swaps not designated as hedges under IAS 39) from
floating US$ to floating euro rates, repricing semi-annually based on EURIBOR. The 2014/16 Notes denominated in sterling have
been swapped from fixed to floating sterling rates (using an interest rate swap designated as a fair value hedge under IAS 39),
repricing semi-annually based on sterling LIBOR.
The 2017/19 Notes denominated in US$ have been swapped (using cross currency interest rate swaps designated as fair value
hedges under IAS 39) from fixed US$ to floating sterling rates, repricing quarterly based on sterling LIBOR. The 2017/19 Notes
denominated in sterling have been swapped from fixed to floating sterling rates (using an interest rate swap designated as a fair
value hedge under IAS 39), repricing quarterly based on sterling LIBOR.
Of the 2015/17/20/22 Notes denominated in US$, $213.0 million has been swapped (using cross currency interest rate swaps
designated as fair value hedges under IAS 39) from fixed US$ to floating sterling rates, repricing quarterly based on sterling
LIBOR and $150.0 million has been swapped (using cross currency interest rate swaps designated as fair value hedges under IAS
39) from fixed US$ to floating euro rates, repricing quarterly based on EURIBOR. The 2015/17/20/22 Notes denominated in euro
have been swapped from fixed to floating euro rates (using an interest rate swap designated as a fair value hedge under IAS 39),
repricing quarterly based on EURIBOR.
Of the 2020/23/25 Notes denominated in US$, $255.0 million has been swapped (using cross currency interest rate swaps
designated as fair value hedges under IAS 39) from fixed US$ to floating euro rates, repricing quarterly based on EURIBOR,
$140.0 million has been swapped (using cross currency interest rate swaps designated as fair value hedges under IAS 39) from
fixed US$ to floating sterling rates, repricing quarterly based on sterling LIBOR, $85.0 million has been swapped (using cross
currency interest rate swaps designated as cash flow hedges under IAS 39) from fixed US$ to fixed euro rates and $45.0 million
has been swapped (using cross currency interest rate swaps designated as cash flow hedges under IAS 39) from fixed US$ to
fixed sterling rates.
On 20 March 2014 the Group committed to issue fixed rate US$, sterling and euro denominated debt of US$516.0 million, €85.0
million and £70.0 million maturing in 2021, 2024, 2026 and 2029. Of the 2021/24/26/29 Notes, $269.0 million has been swapped
(using cross currency interest rate swaps designated as fair value hedges under IAS 39) from fixed US$ to floating euro rates,
repricing quarterly based on EURIBOR, $60.0 million has been swapped (using cross currency interest rate swaps designated
as fair value hedges under IAS 39) from fixed US$ to floating sterling rates, repricing quarterly based on sterling LIBOR, $135.0
million has been swapped (using cross currency interest rate swaps designated as cash flow hedges under IAS 39) from
fixed US$ to fixed euro rates, $52.0 million has been swapped (using cross currency interest rate swaps designated as cash
flow hedges under IAS 39) from fixed US$ to fixed sterling rates, €85.0 million has been swapped (using interest rate swaps
designated as fair value hedges under IAS 39) from fixed euro to floating euro rates, repricing quarterly based on EURIBOR and
£70.0 million has been swapped (using rate swaps designated as fair value hedges under IAS 39) from fixed sterling to floating
sterling rates, repricing quarterly based on LIBOR. The 2021/24/26/29 Notes will be drawn down on 21 May 2014 (US$436.0
million, €85.0 million and £70.0 million) and on 23 September 2014 (US$80.0 million). In accordance with IAS 39, the adjusted
value corresponding to the portion of the 2021/24/26/29 Notes which has been swapped using cross currency interest rate
swaps designated as fair value hedges and using interest rate swaps designated as fair value hedges has been included in the
Group’s borrowings at 31 March 2014.
Financial Statements & Notes 29. Borrowings (continued)
The maturity and interest profile of the Unsecured Notes is as follows:
Average maturity*
Average fixed interest rates**
- US$ denominated*
- sterling denominated*
- euro denominated*
Average floating rate including swaps
- sterling denominated
- euro denominated
171
2014
2013
7.8 years
6.1 years
4.76%
4.91%
3.49%
4.96%
5.95%
4.58%
1.94%
1.84%
1.84%
1.49%
* Including the 2021/24/26/29 Notes and excluding the portion of the 2004 Notes repaid on 22 April 2014 (US$157.0 million and £30.0 million).
**Issued and repayable at par.
30. Analysis of Net Debt
Reconciliation of opening to closing net debt
The reconciliation of opening to closing net debt for the year ended 31 March 2014 is as follows:
Restated
At 1
Fair value adjustment
Income
Cash Flow
Translation
At 31
April 2013
Cash flow
Statement
Hedge Reserve
adjustment
March 2014
£’000
£’000
£’000
£’000
£’000
£’000
Cash and short term bank deposits
Overdrafts
Finance leases
Unsecured Notes
Derivative financial instruments (net)
Group net debt (including share of net
cash in joint ventures)
Group net debt (excluding share of net
cash in joint ventures)
518,925
(87,851)
431,074
(1,341)
(737,583)
121,898
452,873
(61,005)
391,868
175
(282,586)
(7,500)
-
-
-
-
110,988
(113,116)
-
-
-
-
-
(8,300)
(8,654)
278
(8,376)
46
16,322
144
963,144
(148,578)
814,566
(1,120)
(892,859)
(6,874)
(185,952)
101,957
(2,128)
(8,300)
8,136
(86,287)
(186,649)
101,628
(2,128)
(8,300)
8,157
(87,292)
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 172
Notes to the Financial Statements (continued)
30. Analysis of Net Debt (continued)
The reconciliation of opening to closing net debt for the year ended 31 March 2013 (restated) is as follows:
Cash and short term bank deposits
Overdrafts
Finance leases
Unsecured Notes
Derivative financial instruments (net)
Group net debt (including share of
net cash in joint ventures)
Group net debt (excluding share of
net cash in joint ventures)
Restated
At 1
Fair value adjustment
Income
Cash Flow
Translation
Restated
At 31
April 2012
Cash flow
Statement
Hedge Reserve
adjustment
March 2013
£’000
£’000
£’000
£’000
£’000
£’000
559,411
(59,005)
500,406
(440)
(707,212)
100,328
(43,947)
(28,276)
(72,223)
(861)
-
(3,060)
-
-
-
-
(24,617)
23,245
(106,918)
(76,144)
(1,372)
(108,366)
(75,399)
(1,372)
-
-
-
-
-
(811)
(811)
(811)
3,461
(570)
2,891
(40)
(5,754)
2,196
518,925
(87,851)
431,074
(1,341)
(737,583)
121,898
(707)
(185,952)
(701)
(186,649)
Currency profile
The currency profile of net debt at 31 March 2014 is as follows:
Euro
£’000
Sterling
US Dollar
Swedish Krona
£’000
£’000
£’000
Other
£’000
Total
£’000
Cash and cash equivalents
Borrowings
Derivatives
242,777
(392,873)
(33,200)
674,728
(571,121)
26,455
13,777
(78,162)
(129)
16,972
(401)
-
14,890
-
-
963,144
(1,042,557)
(6,874)
(183,296)
130,062
(64,514)
16,571
14,890
(86,287)
The currency profile of net debt at 31 March 2013 (restated) is as follows:
Euro
£’000
Sterling
US Dollar
Swedish Krona
£’000
£’000
£’000
Cash and cash equivalents
Borrowings
Derivatives
92,987
(291,817)
15,871
386,109
(533,567)
106,404
11,168
(798)
(377)
22,172
(593)
-
Other
£’000
6,489
-
-
Total
£’000
518,925
(826,775)
121,898
(182,959)
(41,054)
9,993
21,579
6,489
(185,952)
Interest rate profile
Cash and cash equivalents at 31 March 2014 and 31 March 2013 have maturity periods up to three months (note 27).
Bank borrowings are at floating interest rates for periods less than six months while the Group’s Unsecured Notes due 2014 to
2029 have been swapped to a combination of fixed rates and floating rates which reset on a quarterly or semi-annual basis (note
29). The majority of finance leases are at fixed rates.
Financial Statements & Notes
173
31. Deferred Income Tax
The following is an analysis of the movement in the major categories of deferred tax liabilities/(assets) recognised by the Group for
the year ended 31 March 2014:
Short term
temporary
Retirement
differences
Intangible
Tax losses
benefit
and other
assets
£’000
18,294
(5,841)
-
2,402
(417)
and credits
obligations
differences
£’000
£’000
£’000
(1,319)
(1,815)
-
-
125
(3,209)
879
(152)
-
62
(1,758)
(321)
(288)
106
(71)
Total
£’000
23,419
(8,835)
(440)
2,508
(386)
Property
plant and
equipment
£’000
11,411
(1,737)
-
-
(85)
At 1 April 2013 (restated)
Consolidated Income Statement movement
Recognised in Other Comprehensive Income
Arising on acquisition
Exchange differences and other
At 31 March 2014
9,589
14,438
(3,009)
(2,420)
(2,332)
16,266
Analysed as:
Deferred tax asset
Deferred tax liability
(998)
10,587
-
14,438
(3,009)
-
(2,638)
218
(4,615)
2,283
(11,260)
27,526
9,589
14,438
(3,009)
(2,420)
(2,332)
16,266
The following is an analysis of the movement in the major categories of deferred tax liabilities/(assets) recognised by the Group for
the year ended 31 March 2013 (restated):
Short term
temporary
Retirement
differences
Intangible
Tax losses
benefit
and other
assets
£’000
14,731
(2,751)
-
6,380
(66)
and credits
obligations
differences
£’000
£’000
£’000
(997)
276
-
(564)
(34)
(2,142)
482
(1,506)
-
(43)
(574)
(887)
(202)
(122)
27
Total
£’000
21,360
(2,175)
(1,708)
5,929
13
Property
plant and
equipment
£’000
10,342
705
-
235
129
At 1 April 2012 (restated)
Consolidated Income Statement movement
Recognised in Other Comprehensive Income
Arising on acquisition
Exchange differences
At 31 March 2013 (restated)
11,411
18,294
(1,319)
(3,209)
(1,758)
23,419
Analysed as:
Deferred tax asset
Deferred tax liability
(863)
12,274
-
18,294
(1,319)
-
(3,376)
167
(3,920)
2,162
(9,478)
32,897
11,411
18,294
(1,319)
(3,209)
(1,758)
23,419
Deferred tax assets and liabilities require management judgement in determining the amounts to be recognised. In particular,
significant judgement is used when assessing the extent to which deferred tax assets should be recognised, with consideration
given to the timing and level of future taxable income in the relevant jurisdiction. The majority of the net deferred tax asset at 31
March 2014 of £11.260 million is expected to be settled/recovered more than twelve months after the balance sheet date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes relate to the same fiscal authority. Deferred income tax has not been
recognised for withholding and other taxes that may be payable on the unremitted earnings of certain subsidiaries as the timing of
the reversal of these temporary differences is controlled by the Group and it is probable that these temporary differences will not
reverse in the foreseeable future.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 174
Notes to the Financial Statements (continued)
32. Post Employment Benefit Obligations
Group
The Group operates defined benefit and defined contribution schemes. The pension scheme assets are held in separate trustee
administered funds.
The Group operates eight defined benefit pension schemes in the Republic of Ireland and four in the UK. The projected unit credit
method has been employed in determining the present value of the defined benefit obligation arising, the related current service
cost and, where applicable, past service cost.
Full actuarial valuations were carried out between 1 January 2010 and 1 May 2013. 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.
Actuarial valuations have been updated to 31 March 2014 for IAS 19 by a qualified actuary.
The schemes expose the Group to a number of risks, the most significant of which are as follows:
Discount rates
The calculation of the present value of the defined benefit obligation is sensitive to changes in the discount rate. The discount rate
is based on the interest yield at the balance sheet date on high quality corporate bonds of a currency and term consistent with
the currency and term of the post employment benefit obligation. Changes in the discount rate can lead to volatility in the Group’s
Balance Sheet, Income Statement and Statement of Comprehensive Income.
Asset volatility
The scheme assets are reported at fair value using bid prices where relevant. The majority of the Group’s scheme assets comprise
of bonds. A decrease in corporate bond yields will increase the value of the Group’s bond holdings although this will be partially
offset by an increase in the value of the scheme’s liabilities. The Group also holds a significant proportion of equities which are
expected to outperform corporate bonds in the long term while providing some volatility and risk in the short term. External
consultants periodically conduct investment reviews to determine the most appropriate asset allocation, taking account of asset
valuations, funding requirements, liability duration and the achievement of appropriate returns.
Inflation risk
The majority of the Group’s defined benefit obligations are linked to inflation and higher inflation will lead to higher scheme
liabilities although caps are in place to protect the schemes against extreme inflation.
Mortality risk
The present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of plan
participants. An increase in the life expectancy of the plan participants will increase the defined benefit obligation.
The principal actuarial assumptions used were as follows:
Republic of Ireland schemes
Rate of increase in salaries
Rate of increase in pensions in payment
Discount rate
Inflation assumption
UK schemes
Rate of increase in salaries
Rate of increase in pensions in payment
Discount rate
Inflation assumption
2014
2013
2.00% - 3.00% 2.00% - 3.25%
2.50%
3.70%
2.25%
2.50%
3.40%
2.00%
3.50%
4.20%
1.75% - 3.50% 2.20% - 3.50%
4.40%
3.50%
4.50%
3.50%
Financial Statements & Notes 175
32. Post Employment Benefit Obligations (continued)
The mortality assumptions employed in determining the present value of scheme liabilities under IAS 19 are set based on advice
from published statistics and experience in both geographic regions and are in accordance with the underlying funding valuations.
The average future life expectancy factored into the relevant valuations, based on retirement at 65 years of age, for current and
future retirees is as follows:
Current retirees
Male
Female
Future retirees
Male
Female
The Group does not operate any post-employment medical benefit schemes.
The net pension liability recognised in the Balance Sheet is analysed as follows:
Equities
Bonds
Property
Cash
Total fair value at 31 March 2014
Present value of scheme liabilities
2014
2013
23.7
25.3
26.6
27.8
23.6
25.1
26.5
27.7
ROI
£’000
30,011
50,670
725
1,002
82,408
(94,940)
2014
UK
£’000
8,398
11,144
1,027
945
21,514
(25,015)
Total
£’000
38,409
61,814
1,752
1,947
103,922
(119,955)
Net pension liability at 31 March 2014
(12,532)
(3,501)
(16,033)
Equities
Bonds
Property
Cash
Total fair value at 31 March 2013
Present value of scheme liabilities
Net pension liability at 31 March 2013
2013 (restated)
ROI
£’000
UK
£’000
Total
£’000
26,510
50,940
668
700
78,818
(92,920)
7,693
10,523
918
894
20,028
(25,278)
34,203
61,463
1,586
1,594
98,846
(118,198)
(14,102)
(5,250)
(19,352)
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 176
Notes to the Financial Statements (continued)
32. Post Employment Benefit Obligations (continued)
The amounts recognised in the Group Income Statement in respect of defined benefit pension schemes are as follows:
Current service cost
Past service costs
Administration expenses
Total, included in employee benefit expenses (note 9)
Exceptional curtailment and settlement gains
Total, included in exceptional items (note 11)
Interest cost on scheme liabilities
Interest income on scheme assets
2014
£’000
(870)
316
(60)
(614)
1,435
1,435
(4,517)
3,844
Restated
2013
£’000
(975)
-
-
(975)
-
-
(4,366)
3,309
Net interest expense, included in finance costs (note 12)
(673)
(1,057)
Based on the assumptions employed for the valuation of assets and liabilities at 31 March 2014, the net charge in the Group
Income Statement in the year ending 31 March 2015 (excluding the exceptional item above) is expected to be broadly in line with
the current year figures.
Remeasurements recognised in Other Comprehensive Income are as follows:
Return on scheme assets excluding interest income
Experience variations
Actuarial loss from changes in financial assumptions
Total, included in Other Comprehensive Income
2014
£’000
1,110
818
(2,763)
Restated
2013
£’000
6,388
1,368
(17,335)
(835)
(9,579)
There were no changes to the demographic assumptions underlying the Group’s defined benefit pension liabilities and,
consequently, there were no actuarial gains or losses arising from changes in demographic assumptions in the current year
(2013: nil).
Cumulatively since transition to IFRS on 1 April 2004, £38.904 million has been recognised as a charge in the Group Statement of
Comprehensive Income.
Financial Statements & Notes 32. Post Employment Benefit Obligations (continued)
The movement in the fair value of plan assets is as follows:
At 1 April
Interest income on scheme assets
Remeasurements:
- return on scheme assets excluding interest income
Contributions by employers
Contributions by members
Administration expenses
Benefits paid
Exchange
177
Restated
2013
£’000
84,681
3,309
6,388
4,888
378
-
(2,112)
1,314
2014
£’000
98,846
3,844
1,110
3,741
268
(60)
(2,105)
(1,722)
At 31 March
103,922
98,846
The actual return on plan assets was a gain of £4.954 million (2013: gain of £9.697 million).
The movement in the present value of defined benefit obligations is as follows:
At 1 April
Current service cost
Past service costs
Interest cost
Remeasurements:
- experience variations
- actuarial loss from changes in financial assumptions
Contributions by members
Benefits paid
Curtailment and settlement gains
Exchange and other
2014
£’000
118,198
870
(316)
4,517
(818)
2,763
268
(2,105)
(1,435)
(1,987)
Restated
2013
£’000
96,977
975
-
4,366
(1,368)
17,335
378
(2,112)
-
1,647
At 31 March
119,955
118,198
The weighted average duration of the defined benefit obligation at 31 March 2014 was 21.6 years (2013: 22.9 years).
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 178
Notes to the Financial Statements (continued)
32. Post Employment Benefit Obligations (continued)
Employer contributions for the forthcoming financial year are estimated at £5.0 million. The difference between the actual
employer contributions paid in the current year of £3.7 million and the expectation of £4.9 million included in the 2013 Annual
Report was primarily due to the timing of contributions in certain of the Group’s pension schemes which could not have been
anticipated at the time of preparation of the 2013 financial statements.
Sensitivity analysis for principal assumptions used to measure scheme liabilities
There are inherent uncertainties surrounding the financial assumptions adopted in calculating the actuarial valuation of the Group’s
defined benefit pension schemes. The following table analyses, for the Group’s Irish and UK pension schemes, the estimated impact
on plan liabilities resulting from changes to key actuarial assumptions, whilst holding all other assumptions constant.
Assumption
Discount rate
Price inflation
Mortality
Change in assumption
Impact on Irish plan liabilities
Impact on UK plan liabilities
Increase/decrease by 0.25%
Increase/decrease by 0.25%
Increase/decrease by one year
Decrease/increase by 5.4%
Increase/decrease by 2.4%
Increase/decrease by 3.0%
Decrease/increase by 5.4%
Increase/decrease by 4.8%
Increase/decrease by 2.6%
Split of scheme assets
Investments quoted in active markets:
Equity instruments:
- developed markets
- emerging markets
Debt instruments:
- non government debt instruments
- government debt instruments
Cash and cash equivalents
Unquoted investments:
Property
UK
Year ended 31 March
Republic of Ireland
Total
2014
£’000
2013
£’000
2014
£’000
2013
£’000
2014
£’000
2013
£’000
7,524
874
7,142
4,019
928
6,915
778
6,978
3,545
894
28,874
1,137
15,447
35,206
1,019
26,293
217
17,796
33,144
700
36,398
2,011
22,589
39,225
1,947
33,208
995
24,774
36,689
1,594
1,027
918
725
668
1,752
1,586
21,514
20,028
82,408
78,818
103,922
98,846
Financial Statements & Notes 179
33. Deferred and Contingent Acquisition Consideration
Group
The Group’s deferred and contingent acquisition consideration of £53.323 million (2013: £75.959 million) as stated on the Balance
Sheet consists of £46.997 million of sterling floating rate financial liabilities (2013: £60.284 million), £5.374 million of euro floating
rate financial liabilities (2013: £8.493 million) and £0.952 million of swedish krona floating rate financial liabilities (2013: £7.182
million) payable as follows:
Within one year
Between one and two years
Between two and five years
Analysed as:
Non-current liabilities
Current liabilities
The movement in the Group’s deferred and contingent acquisition consideration is as follows:
At 1 April
Arising on acquisition
Amounts no longer required (adjustment to goodwill, note 20)
Amounts no longer required (recognised in the Income Statement, note 11)
Paid during the year
Exchange and other
At 31 March
2014
£’000
16,374
2,972
33,977
53,323
36,949
16,374
53,323
2014
£’000
75,959
4,257
(208)
(16,165)
(10,196)
(324)
53,323
Restated
2013
£’000
19,401
7,620
48,938
75,959
56,558
19,401
75,959
Restated
2013
£’000
82,305
12,829
(1,559)
(5,601)
(11,970)
(45)
75,959
34. Provisions for Liabilities and Charges
The reconciliation of the movement in provisions for liabilities and charges for the year ended 31 March 2014 is as follows:
Group
At 1 April 2013 (restated)
Provided during the year
Utilised during the year
Arising on acquisition
Exchange and other
At 31 March 2014
Analysed as:
Non-current liabilities
Current liabilities
Rationalisation,
restructuring
Environmental
and
and
redundancy
remediation
£’000
£’000
13,589
16,675
(16,606)
-
(393)
13,265
7,177
6,088
13,265
8,801
(750)
(288)
1,930
(84)
9,609
9,352
257
9,609
Insurance
and other
£’000
6,795
3,000
(1,405)
-
(261)
8,129
Total
£’000
29,185
18,925
(18,299)
1,930
(738)
31,003
7,628
501
8,129
24,157
6,846
31,003
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 180
Notes to the Financial Statements (continued)
34. Provisions for Liabilities and Charges (continued)
The reconciliation of the movement in provisions for liabilities and charges for the year ended 31 March 2013 (restated) is as follows:
Group
At 1 April 2012 (restated)
Provided during the year
Utilised during the year
Arising on acquisition (note 45)
Exchange and other
At 31 March 2013 (restated)
Analysed as:
Non-current liabilities
Current liabilities
Rationalisation,
restructuring
Environmental
and
and
redundancy
remediation
£’000
£’000
8,694
9,665
(6,253)
1,460
23
13,589
3,102
10,487
13,589
8,242
899
(289)
-
(51)
8,801
8,691
110
8,801
Insurance
and other
£’000
4,249
1,419
(626)
1,599
154
6,795
5,348
1,447
6,795
Total
£’000
21,185
11,983
(7,168)
3,059
126
29,185
17,141
12,044
29,185
Rationalisation, restructuring and redundancy
This provision relates to various rationalisation and restructuring programs across the Group. The Group expects that the majority
of this provision will be utilised within one year.
Environmental and remediation
This provision relates to obligations governing site remediation and improvement costs to be incurred in compliance with
environmental regulations. The net present value of the estimated costs is capitalised as property, plant and equipment. The
unwinding of the discount element on the provision is reflected in the Income Statement. Provision is made for the net present
value of post closure costs based on the quantity of waste input into the landfill during the year. Ongoing costs incurred during the
operating life of the sites are written off directly to the Income Statement and are not charged to the provision. The majority of the
obligations will unwind over a 30-year timeframe but the exact timing of settlement of these provisions is not certain.
Insurance and other
The insurance provision relates to employers liability, motor liability and public and products liability and reflects an estimation
of the excess not recoverable from insurers arising from claims against Group companies. A significant element of the provision
is subject to external assessments. The claims triangles applied in valuation indicate that these provisions have an average life of
four years (2013: four years).
35. Government Grants
Group
At 1 April
Amortisation in year
Received in year
Exchange and other adjustments
At 31 March
Disclosed as due within one year (note 25)
2014
£’000
1,631
(383)
100
(5)
1,343
(20)
1,323
Restated
2013
£’000
2,106
(476)
-
1
1,631
(57)
1,574
Government grants relate to capital grants received and are amortised to the Income Statement over the estimated useful lives of
the related capital assets.
Financial Statements & Notes 36. Share Capital
Group and Company
Authorised
152,368,568 ordinary shares of €0.25 each
Issued
181
2014
£’000
Restated
2013
£’000
25,365
25,365
88,229,404 ordinary shares (including 4,367,440 ordinary shares held as Treasury Shares) of €0.25
each, fully paid (2013: 88,229,404 ordinary shares (including 4,535,981 ordinary shares held as
Treasury Shares) of €0.25 each, fully paid)
14,688
14,688
As at 31 March 2014, the total authorised number of ordinary shares is 152,368,568 shares (2013: 152,368,568 shares) with a par
value of €0.25 per share (2013: €0.25 per share).
During the year the Company re-issued 168,541 Treasury Shares for a consideration (net of expenses) of £1.981 million.
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.
Details of share options and awards granted under the Company’s share option and award schemes and the terms attaching
thereto are provided in note 10 to the financial statements and in the Remuneration Report on pages 89 to 108.
Restriction on transfer of shares
The Directors may, in their absolute discretion and without giving any reason, refuse to register the transfer of a share, or any
renunciation of any allotment made in respect of a share, which is not fully paid, or any transfer of a share to a minor or a person
of unsound mind.
The Directors may also refuse to register any transfer (whether or not it is in respect of a fully paid share) unless (i) it is lodged at
the Company’s Registered Office or at such other place as the Directors may appoint and is accompanied by the certificate for the
shares to which it relates and such other evidence as the Directors may reasonably require to show the right of the transferor to
make the transfer save where the transferor is a Stock Exchange Nominee (ii) it is in respect of only one class of shares and (iii) it
is in favour of not more than four transferees.
Restriction of voting rights
If at any time the Directors determine that a ‘Specified Event’ as defined in the Articles of Association of DCC plc has occurred in
relation to any share or shares, the Directors may serve a notice to such effect on the holder or holders thereof. Upon the expiry
of 14 days from the service of any such notice, for so long as such notice shall remain in force, no holder or holders of the share
or shares specified in such notice shall be entitled to attend, speak or vote either personally, by representative or by proxy at
any general meeting of the Company or at any separate general meeting of the holders of the class of shares concerned or to
exercise any other right conferred by membership in relation to any such meeting. The Directors shall, where the specified shares
represent not less than 0.25 per cent of the class of shares concerned, be entitled: to withhold payment of any dividend or other
amount payable (including shares issuable in lieu of dividends) in respect of the specified shares; and/or to refuse to register any
transfer of the specified shares or any renunciation of any allotment of new shares or debentures made in respect thereof unless
such transfer or renunciation is shown to the satisfaction of the Directors to be an arm’s length transfer or a renunciation to
another beneficial owner unconnected with the holder or any person appearing to have an interest in the specified shares.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 182
Notes to the Financial Statements (continued)
37. Share Premium
Group and Company
At 31 March
2014
£’000
Restated
2013
£’000
83,032
83,032
Share premium of £83.032 million relates to the share premium arising on the issue of shares.
38. Other Reserves
Group
At 31 March 2012 (restated)
Currency translation arising in the year
Cash flow hedges
- fair value loss in year - private placement debt
- fair value loss in year - other
- tax on fair value losses
- transfers to sales
- transfers to cost of sales
- tax on transfers
Share based payment
At 31 March 2013 (restated)
Currency translation:
- arising in the year
- recycled to the Income Statement on disposal of
subsidiary
Cash flow hedges
- fair value loss in year - private placement debt
- fair value loss in year - other
- tax on fair value losses
- transfers to sales
- transfers to cost of sales
- transfers to operating expenses
- tax on transfers
Share based payment
Share
based
payment
reserve1
£’000
8,367
-
-
-
-
-
-
-
1,078
9,445
-
-
-
-
-
-
-
-
-
1,185
Cash flow
Foreign
currency
hedge
translation
Other
reserve2
£’000
1,052
-
(811)
(2,536)
443
603
813
(241)
-
reserve3
reserves4
£’000
£’000
55,201
1,816
932
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£’000
65,552
1,816
(811)
(2,536)
443
603
813
(241)
1,078
(677)
57,017
932
66,717
-
-
(7,519)
324
(8,300)
(3,828)
536
(676)
2,546
6,803
(248)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,519)
324
(8,300)
(3,828)
536
(676)
2,546
6,803
(248)
1,185
At 31 March 2014
10,630
(3,844)
49,822
932
57,540
Financial Statements & Notes 38. Other Reserves (continued)
Company
At 31 March 2012 (restated)
Currency translation
At 31 March 2013 (restated)
Currency translation
At 31 March 2014
183
Total
£’000
60,988
2,302
63,290
(3,489)
59,801
Foreign
currency
translation
Other
reserve5
reserves6
£’000
£’000
60,759
2,302
63,061
(3,489)
59,572
229
-
229
-
229
1 The share based payment reserve comprises the amounts expensed in the Income Statement in connection with share-based payments.
2 The cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet occurred.
3 The Group’s foreign currency translation reserve represents all foreign exchange differences from 1 April 2004 arising from the
translation of the net assets of the Group’s non-sterling denominated operations, including the translation of the profits and
losses of such operations from the average rate for the year to the closing rate at the balance sheet date.
4 The Group’s other reserves comprise a capital conversion reserve fund and an unrealised gain on the disposal of an associate.
5 The Company’s foreign currency translation reserve represents all foreign exchange differences from 1 April 2004 arising
from the translation of the net assets of the Company’s euro denominated operations into sterling (the presentation currency),
including the translation of the profits and losses of the Company from the average rate for the year to the closing rate at the
balance sheet date.
6 The Company’s other reserves is a capital conversion reserve fund.
39. Retained Earnings
Group
At 1 April
Net income recognised in Income Statement
Net income recognised directly in equity
- remeasurements of defined benefit pension obligations
- deferred tax on remeasurements
Re-issue of treasury shares (net of expenses)
Dividends
At 31 March
Company
At 1 April
Total comprehensive income for the financial year
Re-issue of treasury shares (net of expenses)
Dividends
At 31 March
2014
£’000
Restated
2013
£’000
725,514
121,234
680,070
106,295
(835)
152
1,981
(61,888)
786,158
2014
£’000
26,044
40,894
1,981
(61,888)
7,031
(9,579)
1,506
1,702
(54,480)
725,514
Restated
2013
£’000
38,649
40,173
1,702
(54,480)
26,044
The cost to the Group and the Company of €58.670 million to acquire the 4,367,440 shares held in Treasury has been deducted
from the Group and Company Retained Earnings. These shares were acquired at prices ranging from €10.80 to €17.90 each
(average: €13.43) between 27 November 2003 and 19 June 2006 and are primarily held to satisfy exercises under the Group’s
share options and awards schemes.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
184
Notes to the Financial Statements (continued)
40. Non-Controlling Interests
Group
At 1 April
Share of profit for the financial year
Dividends to non-controlling interests
Exchange
At 31 March
41. Cash Generated from Operations
Group
2014
£’000
2,391
2,709
(207)
(56)
4,837
2014
£’000
Profit for the financial year
Add back non-operating expenses
- tax (note 15)
- share of (profit)/loss from associates (note 14)
- net operating exceptionals (note 11)
- net finance costs (note 12)
Operating profit before exceptionals
- share-based payments expense (note 10)
- depreciation (note 19)
- amortisation (note 20)
- profit on sale of property, plant and equipment
- amortisation of government grants (note 35)
- other
Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation):
- inventories (note 26)
- trade and other receivables (note 26)
- trade and other payables (note 26)
123,943
27,255
(33)
13,283
23,539
187,987
1,185
56,130
20,416
(1,783)
(383)
(1,792)
(109,393)
189,888
6,409
Restated
2013
£’000
2,215
339
(200)
37
2,391
Restated
2013
£’000
106,634
26,288
259
23,817
15,444
172,442
1,078
54,234
14,420
(1,036)
(476)
(4,249)
(88,120)
(21,740)
138,061
Cash generated from operations before exceptionals
348,664
264,614
Financial Statements & Notes 41. Cash Generated from Operations (continued)
Company
Profit for the financial year
Add back non-operating (income)/expense
- net operating exceptionals
- net finance income
- dividend income
Operating profit
Changes in working capital:
- trade and other receivables (note 26)
- trade and other payables (note 26)
Cash generated from operations
185
2014
£’000
Restated
2013
£’000
40,894
40,173
-
(10,093)
(29,490)
1,311
2,443
47,608
285
(10,012)
(29,405)
1,041
29,592
(13,089)
51,362
17,544
42. Contingencies
Guarantees
The Company and certain subsidiaries have given guarantees of £1,603.209 million (2013: £1,335.026 million) in respect of
borrowings and other obligations arising in the ordinary course of business of the Company and other Group undertakings.
Other
Pursuant to the provisions of Section 17, Companies (Amendment) Act, 1986, the Company has guaranteed the liabilities of the
following subsidiaries; Alvabay Limited, DCC Business Expansion Fund Limited, DCC Energy Limited, DCC Finance Limited, DCC
Funding 2007 Limited, DCC Healthcare Limited, DCC Management Services Limited, DCC Nominees Limited, DCC Technology
Limited, DCC Treasury Ireland 2013 Limited, Emo Oil Limited, Energy Procurement Limited, Exertis Ireland Limited (formerly
Sharptext Limited), Fannin Limited, Fannin Compounding Limited, Flogas Ireland Limited, Great Gas Petroleum (Ireland) Limited,
Lotus Green Limited, Technology Distribution Limited, Technology (Holdings) Limited, Technology Property Limited and Shannon
Environmental Holdings Limited. As a result, these companies will be exempted from the filing provisions of Section 7, Companies
(Amendment) Act, 1986.
43. Capital Expenditure Commitments
Group
Capital expenditure on property, plant and equipment that has been contracted for but has not been
provided for in the financial statements
Capital expenditure on property, plant and equipment that has been authorised by the Directors but
has not yet been contracted for
2014
£’000
Restated
2013
£’000
4,704
3,541
73,835
78,539
61,614
65,155
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 186
Notes to the Financial Statements (continued)
44. Commitments under Operating and Finance Leases
Group
Operating leases
Future minimum rentals payable under non-cancellable operating leases at 31 March are as follows:
Within one year
After one year but not more than five years
More than five years
2014
£’000
23,147
43,111
62,247
Restated
2013
£’000
20,065
47,901
68,731
128,505
136,697
The Group leases a number of properties under operating leases. The leases typically run for a period of 10 to 25 years. Rents are
generally reviewed every five years.
During the year ended 31 March 2014, £27.672 million (2013: £25.999 million) was recognised as an expense in the Income
Statement in respect of operating leases.
Finance leases
Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as
follows:
Within one year
After one year but not more than five years
Less: amounts allocated to future finance costs
Present value of minimum lease payments
2014
2013 (restated)
Minimum
payments
£’000
503
630
1,133
(13)
1,120
Present
value of
payments
£’000
501
619
1,120
-
1,120
Minimum
payments
£’000
725
632
1,357
(16)
1,341
Present
value of
payments
£’000
722
619
1,341
-
1,341
Financial Statements & Notes
187
45. Business Combinations
A key strategy of the Group is to create and sustain market leadership positions through bolt-on acquisitions in markets it
currently operates in together with extending the Group’s footprint into new geographic markets. In line with this strategy, the
principal acquisitions completed by the Group during the year, together with percentages acquired were as follows:
• the acquisition of 100% of Bronberger & Kessler, an oil distribution business in southern Germany, completed in May 2013;
• the acquisition of 100% of Leonhard Lang UK Limited, a UK based business which is focussed on the sales, marketing and
distribution of medical consumables to hospitals and ambulance services in Britain, completed in June 2013;
• the acquisition of 100% of Cohort Technology, a UK based distributor of security and networking products, completed in October
2013; and
• the acquisition of 100% of Universal Products Manufacturing (Lytham) Limited, a British contract manufacturer of creams and
liquids, completed in January 2014.
The carrying amounts of the assets and liabilities acquired (excluding net cash/debt acquired), determined in accordance with
IFRS before completion of the business combinations, together with the fair value adjustments made to those carrying values
were as follows:
Assets
Non-current assets
Property, plant and equipment (note 19)
Intangible assets - other intangible assets (note 20)
Deferred income tax assets
Total non-current assets
Current assets
Inventories (note 26)
Trade and other receivables (note 26)
Total current assets
Liabilities
Non-current liabilities
Deferred income tax liabilities
Provisions for liabilities and charges
Total non-current liabilities
Current liabilities
Trade and other payables (note 26)
Current income tax (liabilities)/assets
Provisions for liabilities and charges
Total current liabilities
Identifiable net assets acquired
Intangible assets - goodwill (note 20)
Total consideration (enterprise value)
Satisfied by:
Cash
Net cash acquired
Net cash outflow
Deferred and contingent acquisition consideration
Total consideration
2014
£’000
9,171
12,333
4
21,508
6,748
22,209
28,957
Restated
2013
£’000
63,438
25,591
666
89,695
17,191
35,755
52,946
(2,512)
(1,930)
(4,442)
(6,595)
(2,800)
(9,395)
(25,811)
(680)
-
(26,491)
19,532
24,601
(44,225)
337
(259)
(44,147)
89,099
79,907
44,133
169,006
51,009
(11,133)
39,876
4,257
166,325
(10,148)
156,177
12,829
44,133
169,006
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 188
Notes to the Financial Statements (continued)
45. Business Combinations (continued)
None of the business combinations completed during the year were considered sufficiently material to warrant separate
disclosure of the fair values attributable to those combinations. The carrying amounts of the assets and liabilities acquired,
determined in accordance with IFRS, before completion of the combination together with the adjustments made to those carrying
values disclosed above were as follows:
Total
Non-current assets (excluding goodwill)
Current assets
Non-current liabilities
Current liabilities
Identifiable net assets acquired
Goodwill arising on acquisition
Total consideration (enterprise value)
Book
value
£’000
Fair value
adjustments
£’000
12,333
-
(2,402)
-
9,931
(9,931)
9,175
28,957
(2,040)
(26,491)
9,601
34,532
44,133
Fair
value
£’000
21,508
28,957
(4,442)
(26,491)
19,532
24,601
-
44,133
The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of
a number of the business combinations above given the timing of closure of these transactions. Any amendments to these fair
values within the twelve month timeframe from the date of acquisition will be disclosable in the 2015 Annual Report as stipulated
by IFRS 3.
The principal factors contributing to the recognition of goodwill on business combinations entered into by the Group are the
expected profitability of the acquired business and the realisation of cost savings and synergies with existing Group entities.
£2.525 million of the goodwill recognised in respect of acquisitions completed during the financial year is expected to be
deductible for tax purposes.
Acquisition related costs included in other operating expenses in the Group Income Statement amounted to £5.638 million (2013:
£12.146 million).
No contingent liabilities were recognised on the acquisitions completed during the financial year or the prior financial years.
The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to £22.507 million.
The fair value of these receivables is £22.209 million (all of which is expected to be recoverable) and is inclusive of an aggregate
allowance for impairment of £0.298 million.
The fair value of contingent consideration recognised at the date of acquisition is calculated by discounting the expected future
payment to present value at the acquisition date. In general, for contingent consideration to become payable, pre-defined profit
thresholds must be exceeded. On an undiscounted basis, the future payments for which the Group may be liable for acquisitions in
the current year range from nil to £7.2 million.
There were no adjustments processed during the year to the fair value of business combinations completed during the year ended
31 March 2013 where those fair values were not readily determinable as at 31 March 2013.
Financial Statements & Notes 189
45. Business Combinations (continued)
The post-acquisition impact of business combinations completed during the year on Group profit for the financial year was as
follows:
Revenue
Cost of sales
Gross profit
Operating costs
Operating profit
Finance costs (net)
Profit before tax
Income tax expense
2014
£’000
353,004
(334,844)
18,160
(12,212)
5,948
(205)
5,743
(848)
Restated
2013
£’000
212,643
(173,762)
38,881
(28,625)
10,256
(624)
9,632
(2,184)
Profit for the financial year
4,895
7,448
The revenue and profit of the Group for the financial year determined in accordance with IFRS as though the acquisition date for
all business combinations effected during the year had been the beginning of that year would be as follows:
Revenue
Profit for the financial year
2014
£’000
Restated
2013
£’000
11,352,020
10,823,585
127,485
113,081
46. Financial Risk and Capital Management
Capital risk management
The Group’s objectives when managing its capital structure are to safeguard the Group’s ability to continue as a going concern in
order to provide returns to shareholders and benefits for other stakeholders, while maintaining a strong balance sheet to support
the continued organic and acquisitive growth of its businesses and to maintain investor, creditor and market confidence.
Return on capital employed (‘ROCE’) is a key performance indicator for the Group. Further analysis of ROCE is included in the
Financial Review on pages 58 to 64.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new
shares or buy back existing shares, increase or reduce debt or sell assets.
The Group includes borrowings in its measure of capital. The Group’s borrowings are subject to covenants. Further details on this
are outlined in the Liquidity Risk Management section of this note.
The policy for net debt is to ensure a structure of longer term debt funding and cash balances with deposit maturities up to three
months.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 190
Notes to the Financial Statements (continued)
46. Financial Risk and Capital Management (continued)
The capital structure of the Group, which comprises capital and reserves attributable to the owners of the Parent, net debt and
deferred and contingent acquisition consideration, may be summarised as follows:
Group
Capital and reserves attributable to the owners of the Parent
Net debt (note 30)
Deferred and contingent acquisition consideration (note 33)
At 31 March
2014
£’000
Restated
2013
£’000
941,418
86,287
53,323
1,081,028
889,951
185,952
75,959
1,151,862
Financial risk management
Group financial risk management is governed by policies and guidelines which are reviewed and approved annually by the
Board of Directors, most recently in December 2013. These policies and guidelines primarily cover credit risk, liquidity risk,
foreign exchange risk, interest rate risk and commodity price risk. The principal objective of these policies and guidelines is
the minimisation of financial risk at reasonable cost. The Group does not trade in financial instruments nor does it enter into
any leveraged derivative transactions. DCC’s Group Treasury function centrally manages the Group’s funding and liquidity
requirements. Divisional and subsidiary management, in conjunction with Group Treasury, manage foreign exchange and
commodity price exposures within approved policies and guidelines.
There are no significant concentrations of risk and there has been no significant change during the financial year, or since the end
of the year, to the types of financial risks faced by the Group or the Group’s approach to the management of those risks.
(i) Credit risk management
Credit risk arises from credit exposure to trade receivables, cash and cash equivalents including deposits with banks and financial
institutions and derivative financial instruments.
Trade receivables arise from a wide and varied customer base spread throughout the Group’s operations and as such there is
no significant concentration of credit risk. The Group’s credit risk management policy in relation to trade receivables involves
periodically assessing the financial reliability of customers, taking into account their financial position, past experience and other
factors. The utilisation of credit limits is regularly monitored and a significant element of credit risk is covered by credit insurance.
Risk of counterparty default arising on cash and cash equivalents and derivative financial instruments is controlled within a
framework of dealing with high quality institutions and, by policy, limiting the amount of credit exposure to any one bank or
institution. DCC transacts with a variety of high credit quality financial institutions for the purpose of placing deposits and entering
into derivative contracts. The Group actively monitors its credit exposure to each counterparty to ensure compliance with the
counterparty risk limits of the Board approved treasury policy. Of the total cash and cash equivalents at 31 March 2014 of £963.144
million, 49.7% (£478.801 million) was with financial institutions with a minimum rating in the P-1 (short-term) category of Moody’s
and 93.5% (£900.691 million) was with financial institutions with a minimum rating in the P-2 (short-term) category of Moody’s. In
the normal course of business, the Group operates notional cash pooling systems, where a legal right of set-off applies. As at 31
March 2014 derivative transactions were with counterparties with ratings ranging from AA- to BB (long-term) with Standard and
Poors or Aa2 to Ba3 (long-term) with Moody’s.
Management does not expect any significant counterparty to fail to meet its obligations. The maximum exposure to credit risk is
represented by the carrying amount of each asset.
Financial Statements & Notes
191
46. Financial Risk and Capital Management (continued)
Included in the Group’s trade and other receivables as at 31 March 2014 are balances of £87.420 million (2013: £112.191 million)
which are past due at the reporting date but not impaired. The aged analysis of these balances is as follows:
Group
Less than 1 month overdue
1 - 3 months overdue
3 - 6 months overdue
Over 6 months overdue
2014
£’000
61,188
18,301
6,272
1,659
87,420
Restated
2013
£’000
83,885
21,142
5,179
1,985
112,191
Trade and other receivables which are not past due nor impaired at the reporting date are expected to be fully recoverable.
The movement in the provision for impairment of trade receivables during the year is as follows:
Group
At 1 April
Provision for impairment recognised in the year
Subsequent recovery of amounts previously provided for
Amounts written off during the year
Arising on acquisition
Exchange
At 31 March
2014
£’000
20,782
4,904
(388)
(8,118)
298
(194)
17,284
Restated
2013
£’000
21,862
3,390
(430)
(5,363)
1,218
105
20,782
The vast majority of the provision for impairment relates to trade and other receivables balances which are over 6 months overdue.
Company
There were no past due or impaired trade receivables in the Company at 31 March 2014 (31 March 2013: none).
(ii) Liquidity risk management
The Group maintains a strong balance sheet with long term debt funding and cash balances with deposit maturities up to
three months. Wherever possible, surplus funds in the Group are transferred to the centralised treasury department through
the repayment of borrowings, deposits and dividends. These are then lent to Group companies or contributed as equity to fund
Group operations, used to retire external debt or invested externally. The Group does not use off-balance sheet special purpose
entities as a source of liquidity or for other financing purposes. In addition, the Group maintains significant committed and
uncommitted credit lines with its relationship banks. Compliance with the Group’s debt covenants is monitored continually based
on the management accounts. Sensitivity analyses using various scenarios are applied to forecasts to assess their impact on
covenants and net debt. During the year to 31 March 2014 all covenants have been complied with and based on current forecasts
it is expected that all covenants will continue to be complied with for the foreseeable future. Further analysis of the Group’s debt
covenants is included in the Financial Review on pages 58 to 64.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 192
Notes to the Financial Statements (continued)
46. Financial Risk and Capital Management (continued)
The tables below show the projected contractual undiscounted total cash outflows (principal and interest) arising from the Group’s
trade and other payables, gross debt and derivative financial instruments. The tables also include the gross cash inflows projected
to arise from derivative financial instruments. These projections are based on the interest and foreign exchange rates applying at
the end of the relevant financial year.
Group
As at 31 March 2014
Financial liabilities - cash outflows
Trade and other payables
Interest bearing loans and borrowings
Interest payments on interest bearing loans and borrowings
Deferred and contingent acquisition consideration
Cross currency swaps - gross cash outflows
Other derivative financial instruments
Derivative financial instruments - cash inflows
Interest rate swaps - net cash inflows
Cross currency swaps - gross cash inflows
Less than
Between
Between
1 year
£’000
1 and 2 years
2 and 5 years
£’000
£’000
Over
5 years
£’000
Total
£’000
(1,492,968)
(315,617)
(55,568)
(16,374)
(177,859)
(3,256)
(2,061,642)
-
(14,058)
(53,504)
(2,972)
(39,289)
-
(109,823)
-
(139,619)
(143,567)
(33,977)
(173,238)
-
(490,401)
-
(995,485)
(168,192)
-
(976,035)
-
(2,139,712)
(1,492,968)
(1,464,779)
(420,831)
(53,323)
(1,366,421)
(3,256)
(4,801,578)
6,189
182,672
188,861
5,909
59,390
65,299
13,550
222,545
13,224
999,103
38,872
1,463,710
236,095
1,012,327
1,502,582
Group
As at 31 March 2013 (restated)
Financial liabilities - cash outflows
Trade and other payables
Interest bearing loans and borrowings
Interest payments on interest bearing loans and borrowings
Deferred and contingent acquisition consideration
Cross currency swaps - gross cash outflows
Other derivative financial instruments
Derivative financial instruments - cash inflows
Interest rate swaps - net cash inflows
Cross currency swaps - gross cash inflows
Less than
Between
Between
1 year
£’000
1 and 2 years
2 and 5 years
£’000
£’000
Over
5 years
£’000
Total
£’000
(1,463,330)
(152,959)
(50,042)
(19,401)
(74,113)
(2,372)
(1,762,217)
3,109
108,665
111,774
-
(180,524)
(39,784)
(7,620)
(171,151)
-
(399,079)
1,829
187,270
189,099
-
(163,750)
(101,368)
(48,938)
(157,501)
-
(471,557)
3,868
218,157
222,025
-
(593,670)
(99,782)
-
(619,769)
-
(1,313,221)
(1,463,330)
(1,090,903)
(290,976)
(75,959)
(1,022,534)
(2,372)
(3,946,074)
-
693,452
693,452
8,806
1,207,544
1,216,350
The Group has sufficient cash resources and liquid assets to enable it to meet its current borrowing obligations and trade and
other payables. The Group has a well balanced profile of debt maturities over the coming years which will be serviced through a
combination of cash and cash equivalents, cash flows, committed bank facilities and the raising of additional long term debt.
Financial Statements & Notes
193
46. Financial Risk and Capital Management (continued)
Company
As at 31 March 2014
Financial liabilities - cash outflows
Trade and other payables
Company
As at 31 March 2013 (restated)
Financial liabilities - cash outflows
Trade and other payables
Less than
Between
Between
1 year
1 and 2 years
2 and 5 years
£’000
£’000
£’000
Over
5 years
£’000
Total
£’000
279,825
-
36,976
-
316,801
Less than
Between
Between
1 year
1 and 2 years
2 and 5 years
£’000
£’000
£’000
Over
5 years
£’000
Total
£’000
238,818
-
36,948
-
275,766
The Company has sufficient cash resources and liquid assets to enable it to meet its trade and other payables.
(iii) Market risk management
Foreign exchange risk management
DCC’s reporting currency is sterling. Foreign exchange risk arises from future commercial transactions, recognised assets and
liabilities and net investments in foreign operations giving rise to exposure to other currencies, primarily the euro and the US
dollar.
Divisional and subsidiary management, in conjunction with Group Treasury, manage foreign currency exposures within approved
policies and guidelines using forward currency contracts.
The Group does not hedge translation exposure on the translation of the profits of foreign currency subsidiaries on the basis that
they are not intended to be repatriated.
The Group has investments in non-sterling, primarily euro denominated, operations which are cash generative and cash
generated from these operations is reinvested in development activities rather than being repatriated into sterling. The Group
seeks to manage the resultant foreign currency translation risk through borrowings denominated in or swapped (utilising
currency swaps or cross currency interest rate swaps) into the relevant currency, although this hedge is offset by the strong
ongoing cash flow generated from the Group’s non-sterling operations, leaving DCC with a net investment in non-sterling assets.
The 2.1% strengthening in the value of sterling against the euro during the year ended 31 March 2014, referred to above, was
the main element of the translation loss of £7.6 million arising on the translation of DCC’s non-sterling denominated net asset
position at 31 March 2014 as set out in the Group Statement of Comprehensive Income in the financial statements.
The Group has a moderate level of transactional currency exposure arising from sales or purchases by operating units in
currencies other than their functional currencies. Where sales or purchases are invoiced in other then the local currency
and there is not a natural hedge with other activities within the Group, DCC generally hedges between 50% and 90% of those
transactions for the subsequent two months. The Group also hedges a proportion of anticipated transactions in certain
subsidiaries for periods ranging up to fifteen months with such transactions qualifying as ‘highly probable’ forecast transactions
for IAS 39 hedge accounting purposes.
Sensitivity to currency movements
Group
A change in the value of other currencies by 10% against sterling would have a £0.7 million (2013: £2.2 million) impact on the
Group’s profit before tax, would change the Group’s equity by £5.2 million and change the Group’s net debt by £21.9 million (2013:
£15.1 million and £14.6 million respectively). These amounts include an insignificant amount of transactional currency exposure.
Company
The Company does not have any material assets or liabilities denominated in any currency other than euro at 31 March 2014 or
at 31 March 2013 which would give rise to a significant transactional currency exposure. However, as the presentation currency
for the Company is sterling, it is exposed to fluctuations in the sterling/euro exchange rate. A change in the value of euro by
10% against sterling would have a £1.1 million (2013: £3.8 million) impact on the Company’s profit before tax, would change
the Company’s equity by £13.6 million and change the Company’s net cash by £0.3 million (2013: £18.3 million and £0.3 million
respectively).
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 194
Notes to the Financial Statements (continued)
46. Financial Risk and Capital Management (continued)
Interest rate risk management
On a net debt basis, the Group is exposed to changes in interest rates, primarily changes in EURIBOR and sterling LIBOR. Having
borrowed at both fixed and floating rates of interest, DCC has swapped its fixed rate borrowings to a combination of fixed and
floating interest rates, using interest rate and cross currency interest rate swaps. Overall interest rate risk on gross borrowings is
mitigated by matching, to the extent possible, the maturity of its cash balances with the interest rate reset periods on the swaps
related to its borrowings.
Sensitivity of interest charges to interest rate movements
Group
Based on the composition of net debt at 31 March 2014 a one percentage point (100 basis points) change in average floating
interest rates would have a £4.1 million (2013: £5.8 million) impact on the Group’s profit before tax.
Further information on Group borrowings and the management of related interest rate risk is set out in notes 28 and 29.
Company
The Company holds negligible levels of cash and consequently the interest earned on cash at bank does not give rise to any
significant market risk. Finance income principally comprises guarantee fees charged at fixed rates on intergroup loans. Finance
costs comprise interest on intergroup loans payable at variable market rates.
Commodity price risk management
The Group is exposed to commodity cost price risk in its oil distribution and LPG businesses. Market dynamics are such that
these commodity cost price movements are immediately reflected in oil commodity sales prices and, within a short period, in
LPG commodity sales prices and in the resale prices of recycled oil products. Fixed price oil supply contracts are occasionally
provided to certain customers for periods of less than one year. To manage this exposure, the Group enters into matching forward
commodity contracts which are designated as hedges under IAS 39. The Group hedges a proportion of its anticipated LPG
commodity exposure, with such transactions qualifying as ‘highly probable’ forecast transactions for IAS 39 hedge accounting
purposes. In addition, to cover certain customer segments for which it is commercially beneficial to avoid price increases, a
proportion of LPG commodity price and related foreign exchange exposure is hedged. All commodity hedging counterparties are
approved by the Chief Executive and the Chief Financial Officer and are reviewed by the Board.
Sensitivity to commodity price movements
Group
Due to pricing dynamics in the oil distribution market and the recycled oil product market, an increase or decrease of 10% in the
commodity cost price of oil would have a nil impact on the Group’s profit before tax (2013: nil) and a nil impact on the Group’s
equity (2013: nil).
The impact on the Group’s profit before tax and on the Group’s equity of an increase or decrease of 10% in the commodity cost
price of LPG would be dependent on seasonal variations, competitive pressures and the underlying absolute cost of the commodity
at the time and, as such, is difficult to quantify but would not be material.
Company
The Company has no exposure to commodity price risk.
Financial Statements & Notes
195
46. Financial Risk and Capital Management (continued)
Fair values of financial assets and financial liabilities
The fair values of borrowings (none of which are listed) and derivative financial instruments are measured by discounting cash
flows at prevailing interest and exchange rates. The fair values of expected future payments under deferred and contingent
consideration arrangements are determined by applying a risk-adjusted discount rate to the future payments which are based on
forecasted operating profits of the acquired entity over the relevant period. The carrying value of non-interest bearing financial
assets and financial liabilities and cash and cash equivalents approximates their fair values, largely due to their short-term
maturities. The following is a comparison by category of book values and fair values of the Group’s and Company’s financial assets
and financial liabilities:
Group
Financial assets
Derivative financial instruments
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Borrowings
Derivative financial instruments
Deferred and contingent acquisition consideration
Trade and other payables
Company
Financial assets
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Trade and other payables
2014
2013 (restated)
Book value
Fair value
Book value
Fair value
£’000
£’000
£’000
£’000
57,461
959,655
963,144
1,980,260
1,042,557
64,335
53,323
1,492,968
2,653,183
57,461
959,655
963,144
1,980,260
1,068,642
64,335
53,323
1,492,968
2,679,268
137,706
1,139,266
518,925
1,795,897
826,775
15,808
75,959
1,463,330
2,381,872
137,706
1,139,266
518,925
1,795,897
825,613
15,808
75,959
1,463,330
2,380,710
2014
2013 (restated)
Book value
Fair value
Book value
Fair value
£’000
£’000
£’000
£’000
335,662
2,999
338,661
335,662
2,999
338,661
316,801
316,801
316,801
316,801
315,632
3,381
319,013
275,766
275,766
315,632
3,381
319,013
275,766
275,766
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 196
Notes to the Financial Statements (continued)
46. Financial Risk and Capital Management (continued)
Group
The Group has adopted the following fair value measurement hierarchy in relation to its financial assets and financial liabilities
that are carried in the Balance Sheet at fair value as at the year end:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2: inputs, other than quoted prices included within level 1, that are observable for the asset or liability either directly (as
prices) or indirectly (derived from prices); and
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Group
Fair value measurement as at 31 March 2014
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Financial assets
Derivative financial instruments
Financial liabilities
Deferred and contingent acquisition consideration
Derivative financial instruments
Group
Fair value measurement as at 31 March 2013 (restated)
Financial assets
Derivative financial instruments
Financial liabilities
Deferred and contingent acquisition consideration
Derivative financial instruments
-
-
-
-
-
Level 1
£’000
-
-
-
-
-
57,461
57,461
-
64,335
64,335
Level 2
£’000
137,706
137,706
-
15,808
15,808
-
-
57,461
57,461
53,323
-
53,323
Level 3
£’000
53,323
64,335
117,658
Total
£’000
-
-
137,706
137,706
75,959
-
75,959
75,959
15,808
91,767
Company
As at 31 March 2014 and 31 March 2013 the Company had no financial assets or financial liabilities which were carried at fair value.
Financial Statements & Notes 197
46. Financial Risk and Capital Management (continued)
Offsetting financial assets and financial liabilities
(i) Financial assets
The following financial assets are subject to offsetting, enforceable master netting arrangements or similar agreements:
Group
As at 31 March 2014
Derivative financial instruments
Cash and cash equivalents
Group
As at 31 March 2013 (restated)
Gross amounts
of recognised
financial
liabilities set off
in the Balance
Sheet
Net amounts of
financial assets
presented in the
Balance Sheet
Gross amounts
of recognised
financial assets
Related amounts not set off in the
Balance Sheet
Financial
liabilities
Cash collateral
received
Net amount
£’000
£’000
£’000
£’000
£’000
£’000
56,811
226,255
283,066
-
-
-
56,811
226,255
(16,885)
(133,575)
283,066
(150,460)
-
-
-
39,926
92,680
132,606
Gross amounts
of recognised
financial
liabilities set off
in the Balance
Sheet
Net amounts of
financial assets
presented in the
Balance Sheet
Gross amounts
of recognised
financial assets
Related amounts not set off in the
Balance Sheet
Financial
liabilities
Cash collateral
received
Net amount
£’000
£’000
£’000
£’000
£’000
£’000
Derivative financial instruments
Cash and cash equivalents
135,666
186,859
322,525
-
-
-
135,666
186,859
(9,663)
(74,933)
322,525
(84,596)
-
-
-
126,003
111,926
237,929
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report
198
Financial Statements & Notes
Notes to the Financial Statements (continued)
46. Financial Risk and Capital Management (continued)
(ii) Financial liabilities
The following financial liabilities are subject to offsetting, enforceable master netting arrangements or similar agreements:
Group
As at 31 March 2014
Derivative financial instruments
Bank borrowings
Group
As at 31 March 2013 (restated)
Derivative financial instruments
Bank borrowings
Gross amounts
of recognised
financial
liabilities
Gross amounts
of recognised
financial assets
set off in the
Balance Sheet
Net amounts
of financial
liabilities
presented in the
Balance Sheet
Related amounts not set off in the
Balance Sheet
Financial
assets
Cash collateral
provided
Net amount
£’000
£’000
£’000
£’000
£’000
£’000
60,429
133,575
194,004
-
-
-
60,429
133,575
(16,885)
(133,575)
194,004
(150,460)
-
-
-
43,544
-
43,544
Gross amounts
of recognised
financial
liabilities
Gross amounts
of recognised
financial assets
set off in the
Balance Sheet
Net amounts
of financial
liabilities
presented in the
Balance Sheet
Related amounts not set off in the
Balance Sheet
Financial
assets
Cash collateral
provided
Net amount
£’000
13,436
74,933
88,369
£’000
-
-
-
£’000
13,436
74,933
£’000
(9,663)
(74,933)
88,369
(84,596)
£’000
-
-
-
£’000
3,773
-
3,773
For the financial assets and liabilities subject to enforceable master netting arrangements or similar arrangements above, each
agreement between the Group and the counterparty allows for net settlement of the relevant financial assets and liabilities when
both elect to settle on a net basis. In the absence of such an election, financial assets and liabilities will be settled on a gross basis
however each party to the master netting agreement or similar agreement will have the option to settle all such amounts on a net
basis in the event of default of the other party. Per the terms of each agreement, an event of default includes failure by a party to
make payment when due, failure by a party to perform any obligation required by the agreement (other than payment) if such a
failure is not remedied within periods of 15 to 30 days after notice of such failure is given to the party or bankruptcy.
199
47. Related Party Transactions
The principal related party relationships requiring disclosure in the consolidated financial statements of the Group under IAS 24
Related Party Disclosures relate to the existence of subsidiaries, joint ventures and associates and transactions with these entities
entered into by the Group and the identification and compensation of key management personnel as addressed in more detail below:
Group
Subsidiaries, joint ventures and associates
The consolidated financial statements include the financial statements of the Company and its subsidiaries, joint ventures and
associates as documented in the accounting policies on pages 128 to 139. A listing of the principal subsidiaries, joint ventures and
associates is provided in the Group Directory on pages 202 to 206 of this Annual Report.
Transactions are entered into in the normal course of business on an arm’s length basis.
Sales to and purchases from, together with outstanding payables and receivables to and from subsidiaries and joint ventures are
eliminated in the preparation of the consolidated financial statements.
Compensation of key management personnel
For the purposes of the disclosure requirements under IAS 24, the term ‘key management personnel’ (i.e. those persons having
authority and responsibility for planning, directing and controlling the activities of the Company) comprises the Board of Directors
which manages the business and affairs of the Company. Key management remuneration amounted to:
Short-term benefits
Post-employment benefits
Share-based payment (calculated in accordance with the principles disclosed in note 10)
At 31 March
2014
£’000
2,721
609
404
3,734
Restated
2013
£’000
2,573
562
390
3,525
Company
Subsidiaries, joint ventures and associates
The Company’s Income Statement includes dividends of £29.476 million from its subsidiary DCC Corporate Funding and £14,000
from its subsidiary Minsley Limited. Details of loan balances to/from subsidiaries are provided in the Company Balance Sheet on
page 125, in note 24 ‘Trade and Other Receivables’ and in note 25 ‘Trade and Other Payables’.
DCC Annual Report and Accounts 2014Supplementary Information Financial Statements & Notes Governance Strategic Report 200
Financial Statements & Notes
Notes to the Financial Statements (continued)
48. Events after the Balance Sheet Date
On 9 May 2014 the Group acquired 100% of Qstar Försäljning AB, a Swedish unmanned retail petrol station company, along with
its related fuel distribution and fuel card businesses (‘Qstar’). The consideration, inclusive of deferred consideration, was £40
million. The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis given
the timing of closure of the transaction. The carrying amounts of the assets and liabilities acquired, determined in accordance
with IFRS, before completion of the combination together with the adjustments made to those carrying values disclosed above
were as follows:
Qstar
Non-current assets (excluding goodwill)
Current assets
Non-current liabilities
Current liabilities
Identifiable net assets acquired
Goodwill arising on acquisition
Total consideration (enterprise value)
49. Approval of Financial Statements
The financial statements were approved by the Board of Directors on 20 May 2014.
Book
value
£’000
Fair value
adjustments
£’000
6,983
-
(12,144)
-
(5,161)
5,161
27,703
34,975
(5,732)
(37,549)
19,397
20,966
40,363
Fair
value
£’000
34,686
34,975
(17,876)
(37,549)
14,236
26,127
-
40,363
DCC Annual Report and Accounts 2014
201
Supplementary
Information
Group Directory
Contact details for our
principal subsidiaries and joint
ventures.
Page 202
Contents
202 Group Directory
207 Shareholder Information
210 Corporate Information
211 Non-GAAP Information
212 Five Year Review
213 Index
Shareholder and
Corporate
Information
Useful dates and information
for investors.
Page 207, 210
Five Year Review
The Group’s financial
performance since 2010.
Page 212
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202
Supplementary Information
Group Directory - Principal Subsidiaries1 and Joint Ventures
Great Gas Petroleum (Ireland) Limited
Market House,
Churchtown, Mallow,
Co. Cork, Ireland
Procurement, sales, marketing and
distribution of petroleum products
Procurement, sales, marketing and
distribution of petroleum products
DCC Energy
Company name & address
DCC Energy Limited
DCC House, Brewery Road,
Stillorgan, Blackrock,
Co. Dublin, Ireland
Oil
Certas Energy UK Limited
302 Bridgewater Place,
Birchwood Park,
Warrington WA3 6XG, England
Emo Oil Limited
Clonminam Industrial Estate,
Portlaoise,
Co. Laois, Ireland
DCC Energy Limited
Airport Road West,
Sydenham, Belfast BT3 9ED,
Northern Ireland
DCC Energi Danmark A/S
Naerum Hovedgade 8,
2850 Naerum, Danmark
Energie Direct
MineralölhandelsgesmbH
Alte Poststraße 400,
A-8055 Graz,
Austria
Swea Energi AB
Storgatan 35,
434 32 Kungsbacka,
Sweden
Bronberger & Kessler
Raiffeisenstraße 16,
82041 Oberhaching,
Germany
Qstar Försäljning AB
Spårgatan 5,
601 14 Norrköping,
Sweden
Fuel Card Services Limited
Alexandra House,
Lawnswood Business Park,
Redvers Close,
Leeds LS16 6QY, England
Principal activity
Contact details
Holding and divisional management
company
Tel: +353 1 2799 400
Fax: +353 1 2831 017
Email: energy@dcc.ie
www.dcc.ie
Procurement, sales, marketing and
distribution of petroleum and lubricant
products
Tel: +44 1925 858 500
Fax: +44 1925 858 501
Email: info@certasenergy.co.uk
www.certasenergy.co.uk
Procurement, sales, marketing and
distribution of petroleum products
Tel: +353 578 674 700
Fax: +353 578 674 775
Email: info@emo.ie
www.emo.ie
Tel: +353 22 23 989
Fax: +353 22 23 980
Email: info@greatgas.com
www.greatgas.com
Tel: +44 28 9045 6789
Fax: +44 28 9045 7371
Email: enquiries@emooil.com
www.emooil.com
Procurement, sales, marketing and
distribution of petroleum products and
natural gas
Tel: +45 7010 2010
Fax: +45 4558 0190
Email: info@kundeservice.dccenergi.dk
www.dccenergi.dk
Procurement, sales, marketing and
distribution of petroleum products
Procurement, sales, marketing and
distribution of petroleum products
Tel: +43 316 210
Fax: +43 316 210 2110
Email: info@energiedirect.at
www.energiedirect.at
Tel: +46 300 687000
Fax: +46 300 687050
Email: info@sweaenergi.se
www.sweaenergi.se
Procurement, sales, marketing and
distribution of petroleum products
Tel: +49 72 90 4001525
Fax: +49 72 90 250
www.die-starke-haendlergemeinschaft.de
Procurement, sales and marketing of
petroleum products
Sale and administration of petroleum
products through the use of fuel cards
Tel: +46 11 400 1500
Fax: +46 11 280 000
Email: info@qstar.se
www.qstar.se
Tel: +44 113 384 6264
Fax: +44 844 870 9827
Email: info@fuelcardservices.com
www.fuelcardservices.com
1. A full list of subsidiaries and associates will be annexed to the Annual Return of the Company to be filed with the Irish Registrar of Companies
203
DCC Energy
Company name & address
LPG
Flogas Britain Limited
81 Rayns Way,
Syston, Leicester LE7 1PF,
England
Flogas Ireland Limited
Knockbrack House,
Matthews Lane,
Donore Road,
Drogheda, Co. Louth, Ireland
Principal activity
Contact details
Procurement, sales, marketing and
distribution of liquefied petroleum gas
Tel: +44 116 2649 000
Fax: +44 116 2649 001
Email: enquiries@flogas.co.uk
www.flogas.co.uk
Procurement, sales, marketing and
distribution of liquefied petroleum gas
and natural gas
Tel: +353 41 9831 041
Fax: +353 41 9834 652
Email: info@flogas.ie
www.flogas.ie
Benegas BV
Zuiderzeestraatweg 1, 3882NC,
Putten, Nederland
Procurement, sales, marketing and
distribution of liquefied petroleum gas
Procurement, sales, marketing and
distribution of liquefied petroleum gas
Tel: +31 3417 23300
Fax: +31 3413 60216
Email: info@benegas.com
www.benegas.nl
Tel: +46 08 6750080
Email: info@flogas.se
www.flogas.se
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Flogas Sverige AB
Brännkyrkagatan 63,
11822 Stockholm,
Sweden
Flogas Norge AS
Nydalsveien 153, 3 etg,
0484 Oslo,
Norway
DCC Technology
Company name & address
DCC SerCom Limited
(in the process of changing its name to
DCC Technology Limited)
DCC House, Brewery Road,
Stillorgan, Blackrock,
Co. Dublin, Ireland
Micro P Limited
trading as Exertis Micro-P
Shorten Brook Way,
Altham Business Park, Altham,
Accrington, Lancashire BB5 5YJ,
England
Gem Distribution Limited
trading as Exertis Gem
St. George House, Parkway,
Harlow Business Park, Harlow,
Essex CM19 5QF, England
Exertis Banque Magnetique SAS
Paris Nord 2, Parc des Reflets,
99 Avenue de la Pyramide,
95700, Roissy en France, France
Procurement, sales, marketing and
distribution of liquefied petroleum gas
Tel: +47 90248000
Email: info@flogas.no
www.flogas.no
Principal activity
Contact details
Holding and divisional management
company
Tel: +353 1 2799 400
Fax: +353 1 2831 017
Email: technology@dcc.ie
www.dcc.ie
Procurement, sales, marketing and
distribution of technology products
Tel: +44 1282 776 776
Fax: +44 1282 770 001
Email: enquiries@exertismicro-p.co.uk
www.exertismicro-p.co.uk
Procurement, sales, marketing and
distribution of technology products
Tel: +44 1279 822 800
Fax: +44 1279 416 228
Email: info@exertisgem.co.uk
www.exertisgem.co.uk
Procurement, sales, marketing and
distribution of technology peripherals
and accessories
Tel: +33 1 49 90 93 93
Fax: +33 1 49 90 94 94
Email: c.dupont@exertisbm.fr
www.exertisbanquemagnetique.fr
DCC Annual Report and Accounts 2014
204
Supplementary Information
Group Directory - Principal Subsidiaries and Joint Ventures (continued)
DCC Technology
Company name & address
Exertis Comtrade SAS
300 rue du Président Salvador Allende,
92700 Colombes, France
Principal activity
Contact details
Procurement, sales, marketing and
distribution of technology peripherals
and accessories
Tel: +33 1 56 47 04 70
www.exertiscomtrade.fr
Exertis Ireland Limited
M50 Business Park,
Ballymount Road Upper,
Dublin 12, Ireland
Advent Data Limited
trading as Exertis Advent
Unit H4 Premier Way,
Lowfields Business Park,
Elland HX5 9HF, England
Procurement, sales, marketing and
distribution of technology products
Procurement, sales, marketing and
distribution of electronic office supplies
Exertis Supply Chain Services Limited
M50 Business Park,
Ballymount Road Upper,
Dublin 12, Ireland
Provision of supply chain management
and procurement services
Tel: +353 1 4087 171
Fax: +353 1 4193 111
Email: ireland.webteam@exertis.com
www.exertis.ie
Tel: +44 871 222 3844
Fax: +44 871 222 3855
Email: sales@exertisadvent.co.uk
www.exertisadvent.co.uk
Tel: +353 1 4056 500
Fax: +353 1 4056 555
Email:info@exertissupplychain.com
www.exertissupplychain.com
DCC Healthcare
Company name & address
DCC Healthcare Limited
DCC House, Brewery Road,
Stillorgan, Blackrock,
Co. Dublin, Ireland
DCC Vital
DCC Vital Limited
Fannin House,
South County Business Park,
Leopardstown, Dublin 18, Ireland
Fannin Limited
Fannin House,
South County Business Park,
Leopardstown, Dublin 18, Ireland
Fannin (UK) Limited
42-46 Booth Drive, Park Farm South,
Wellingborough, Northamptonshire,
NN8 6GT, England
Kent Pharmaceuticals Limited
Joshna House,
Crowbridge Road,
Orbital Park, Ashford,
Kent TN24 0GR, England
Athlone Laboratories Limited
Ballymurray,
Co. Roscommon, Ireland
Squadron Medical Limited
Greaves Close,
Markham Vale, Chesterfield,
Derbyshire, S44 5FB, England
Principal activity
Contact details
Holding and divisional management
company
Holding company for the operations of
the DCC Vital group of companies
Tel: +353 1 2799 400
Fax: +353 1 2831 017
Email: healthcare@dcc.ie
www.dcc.ie
Tel: +353 1 2907 000
Fax: +353 1 2954 777
Email: info@dccvital.com
www.dccvital.com
Sales, marketing, distribution and other
services to healthcare providers and
medical and pharma brand owners/
manufacturers
Tel: +353 1 2907 000
Fax: +353 1 2954 777
Email: information@fannin.ie
www.fannin.eu
Sales, marketing, distribution and other
services to healthcare providers and
medical and pharma brand owners/
manufacturers
Tel: +44 1189 305 333
Fax: +44 1189 305 111
Email: enquiries@fanninuk.com
www.fanninuk.com
Sales marketing and distribution of a
broad range of pharmaceuticals to hospital
and community pharmacies in Britain
Tel: +44 845 437 5565
Fax: +44 845 437 5567
Email: info@kentpharm.co.uk
www.kentpharm.co.uk
Manufacture and supply of oral beta –
lactam antibiotics for the British, Irish
and international markets
Tel: +353 9066 61109
Fax: +353 9066 61921
www.athlone-laboratories.com
Provision of value-added distribution
services to healthcare providers and
brand owners/manufacturers
Tel: +44 1246 822 822
Fax: +44 1246 820 410
Email: enquiries@squadronmedical.co.uk
www.squadronmedical.co.uk
205
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DCC Healthcare
Company name & address
The TPS Healthcare Group Limited
27-35 Napier Place,
Wardpark, North Cumbernauld,
Glasgow G68 0LL, Scotland
Leonhard Lang (UK) Ltd
Units A-C Stonedale Road,
Oldends Lane Industrial Estate,
Stonehouse, Gloucestershire,
GL10 3SA, England
Health & Beauty Solutions
DCC Health & Beauty Solutions
9-12 Hardwick Road,
Astmoor Industrial Estate, Runcorn,
Cheshire WA7 1PH, England
Thompson & Capper Limited
9-12 Hardwick Road,
Astmoor Industrial Estate, Runcorn,
Cheshire WA7 1PH, England
EuroCaps Limited
Crown Business Park,
Dukestown, Tredegar,
Gwent NP22 4EF, Wales
Laleham Healthcare Limited
Sycamore Park,
Mill Lane, Alton,
Hampshire GU34 2PR, England
Vitamex Manufacturing AB
Box 715,
SE-601 16 Norrköping,
Sweden
DCC Environmental
Company name & address
DCC Environmental Limited
DCC House, Brewery Road,
Stillorgan, Blackrock,
Co. Dublin, Ireland
William Tracey Limited
49 Burnbrae Road,
Linwood Industrial Estate, Linwood,
Renfrewshire, PA3 3BD, Scotland
Principal activity
Contact details
Provision of value-added distribution
services to healthcare providers and
brand owners/manufacturers
Tel: +44 1236 739 668
Fax: +44 1236 738 376
Email: corporate@tpshealthcare.com
www.tpshealthcare.com
Sales, marketing and distribution of
a range of disposable electrode and
diathermy systems and accessories
Tel: +44 1453 874 130
Fax: +44 1453 874 131
Email: sales@leonhardlang.co.uk
Outsourced solutions for the health
and beauty industry
Tel: +44 1928 573 734
Fax: +44 1420 566 566
Email: enquiries@dcchealthandbeauty.com
www.dcchealthandbeauty.com
Development, contract manufacture
and packing of tablet and hard gel
capsule nutraceuticals
Tel: +44 1928 573 734
Fax: +44 1928 580 694
Email: enquiries@tablets2buy.com
www.tablets2buy.com
Development and contract manufacture
of soft gel capsule nutraceuticals
Tel: +44 1495 308 900
Fax: +44 1495 308 990
Email: info@softgels.co.uk
www.softgels.co.uk
Development, contract manufacture
and packing of liquids and creams for
the beauty and consumer healthcare
sectors
Tel: +44 1420 566 500
Fax: +44 1420 566 566
Email: reception@laleham-healthcare.com
www.laleham-healthcare.com
Development, contract manufacture
and packing of tablet and hard gel
capsule nutraceuticals
Tel: +46 11 23 00 00
Fax: +46 11 18 79 45
Email: info@vitamex.se
www.vitamex.se
Principal activity
Contact details
Holding and divisional management
company
Recycling and waste management
Tel: +353 1 2799 400
Fax: +353 1 2831 017
Email: environmental@dcc.ie
www.dcc.ie
Tel: +44 1505 321 000
Fax: +44 1505 335 555
Email: info@wmtracey.co.uk
www.wmtracey.co.uk
DCC Annual Report and Accounts 2014
206
Supplementary Information
Group Directory - Principal Subsidiaries and Joint Ventures (continued)
DCC Environmental
Company name & address
Wastecycle Limited
Enviro Building, Private Road No. 4,
Colwick Industrial Estate,
Nottingham NG4 2JT, England
Oakwood Fuels Limited
Brailwood Road,
Bilsthorpe, Newark
Nottinghamshire, NG22 8UA, England
Enva Ireland Limited
Clonminam Industrial Estate,
Portlaoise,
Co. Laois, Ireland
DCC Food & Beverage
Company name & address
DCC Food & Beverage Limited
DCC House, Brewery Road,
Stillorgan, Blackrock,
Co. Dublin, Ireland
Kelkin Limited
Unit 1, Crosslands Industrial Park,
Ballymount Cross,
Dublin 12, Ireland
Robert Roberts Limited
79 Broomhill Road,
Tallaght,
Dublin 24, Ireland
KP (Ireland) Limited *
79 Broomhill Road,
Tallaght,
Dublin 24, Ireland
Allied Foods Limited
Second Avenue,
Cookstown Industrial Estate,
Dublin 24, Ireland
Bottle Green Limited
19 New Street,
Horsforth,
Leeds LS18 4BH, England
KSG*
McKee Avenue,
Finglas,
Dublin 11, Ireland
*50% owned joint venture
Principal activity
Contact details
Recycling and waste management
Specialist waste
treatment/management services
Specialist waste
treatment/management services
Tel: +44 115 9403 111
Fax: +44 115 940 4141
Email: enquiries@wastecycle.co.uk
www.wastecycle.co.uk
Tel: +44 1623 871 964
Fax: +44 1623 871 905
Email: mail@oakwoodgroup.uk.com
www.oakwoodfuels.co.uk
Tel: +353 578 678 600
Fax: +353 578 678 699
Email: info@enva.ie
www.enva.ie
Principal activity
Contact details
Holding and divisional management
company
Procurement, sales, marketing and
distribution of branded healthy foods,
beverages and vms products
Procurement, sales, marketing and
distribution of food and beverages
Manufacture of snack foods
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 4047 311
Email: info@robert-roberts.ie
www.robert-roberts.ie
Tel: +353 1 4047 300
Fax: +353 1 4047 311
Chilled and frozen food supply chain
management
Tel: +353 1 466 2600
Fax: +353 1 466 2688
Email: info@alliedfoods.ie
Procurement, sales, marketing
and distribution of wine
Restaurant and hospitality service
provider
Tel: +44 113 2054 500
Fax: +44 113 2054 501
Email: info@bottlegreen.com
www.bottlegreen.com
Tel: +353 1 814 0600
Fax: +353 1 814 0601
Email: info@ksg.ie
www.ksg.ie
Shareholder Information
Share Price Data
Share price at 20 May
Market capitalisation at 20 May
Share price at 31 March
Market capitalisation at 31 March
Share price movement during the year
- High
- Low
Shareholdings as at 31 March 2014
By location
By location
North America
UK
North America
Europe/Asia
UK
Ireland
Europe/Asia
Retail3
Ireland
Retail3
32.2%
30.9%
32.2%
5.2%
30.9%
5.8%
5.2%
25.9%
5.8%
25.9%
By size of holding
By size of holding
Over 250,000
100,001 - 250,000
Over 250,000
10,000 - 100,000
100,001 - 250,000
Less than 10,000
10,000 - 100,000
Less than 10,000
77.9%
9.0%
77.9%
9.5%
9.0%
3.6%
9.5%
3.6%
207
2014
£
2013
£
31.05
2,604m
25.30
2,117m
32.60
2,734m
22.70
1,899m
32.89
22.45
23.21
14.81
Number of
Shares¹
% of
shares
27,036,567
25,929,910
4,299,564
4,861,460
21,734,463
83,861,964
32.2
30.9
5.2
5.8
25.9
100.0
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Geographic division²
North America
UK
Europe/Asia
Ireland
Retail³
Total
Range of shares held
Number of
accounts
% of
accounts
Number of
shares¹
% of
shares
Over 250,000
100,001 – 250,000
10,000 – 100,000
Less than 10,000
Total
66
48
218
2,884
3,216
2.0 65,380,721
7,494,605
1.5
7,940,755
6.8
3,045,883
89.7
100.0 83,861,964
77.9
9.0
9.5
3.6
100.0
1 Excludes 4,367,440 shares held as Treasury Shares
2 This represents the best estimate of the number of shares controlled by fund managers resident in the relevant geographic regions
3 Retail includes private shareholders, management and broker holdings
Share Listing
As reported last year, following a review of the Company’s listing arrangements, which included consultations with a wide range of
large shareholders, the Board determined, as announced on 26 February 2013, that it was appropriate for DCC to seek admission
to the FTSE UK Index Series. This entailed cancelling the listing of the Company’s shares on the Irish Stock Exchange (‘ISE’) while
maintaining the Premium Listing of DCC’s shares on the Official List of the United Kingdom Listing Authority (‘UKLA Official List’).
Consequently, with effect from the close of business on 3 May 2013, DCC’s listing on the Official List of the ISE was cancelled and
the trading of DCC’s shares on the Main Securities Market of the ISE ceased. Since 6 May 2013, DCC’s shares are traded solely on
the London Stock Exchange in sterling.
CREST
DCC is a member of the CREST share settlement system. Shareholders have the choice of holding their shares in electronic form or
in the form of paper share certificates. Shareholders should consult their stockbroker if they wish to hold shares in electronic form.
DCC Annual Report and Accounts 2014
208
Supplementary Information
Shareholder Information (continued)
Dividends
DCC normally pays dividends twice yearly, in July and in December. The final dividend in respect of the year ended 31 March 2014,
which will be paid in July, will be paid in sterling, although shareholders have the option to elect to receive their dividends in euro.
Shareholders may also elect to receive dividend payments by electronic funds transfer directly into their bank accounts, rather
than by cheque. Shareholders should contact the Company’s Registrar for details of these options.
The Company is obliged to deduct Dividend Withholding Tax (‘DWT’) 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 to non-individual shareholders resident in Ireland (for example companies, pension
funds and charities).
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. This leaflet can also be downloaded from the
Irish Revenue Commissioners’ website at www.revenue.ie. Declaration forms for claiming an exemption are available from the
Company’s Registrar.
Website
Through DCC’s website, www.dcc.ie, stakeholders and other interested parties can access information on DCC in an easy-to-
follow and user-friendly format. As well as information on the Group’s activities, users can keep up to date on DCC’s financial
results and share price performance through downloadable reports and interactive share price tools. The site also provides access
to archived financial data, annual reports, stock exchange announcements and investor presentations.
Electronic Communications
Following the introduction of the Transparency Regulations 2007, and in order to adopt a more environmentally friendly and
cost-effective approach, the Company provides information concerning the Company (such as the Annual Report and Notice of
Annual General Meeting) to shareholders electronically via DCC’s website, www.dcc.ie, and only sends a printed copy to those
shareholders who specifically request a copy. Shareholders who receive information electronically will continue to receive
certain communications by post (such as share certificates, dividend cheques, dividend payment vouchers and tax vouchers).
Shareholders who wish to alter the method by which they receive communications should contact the Company’s Registrar.
Financial Calendar
Preliminary results announced
Ex-dividend date for the final dividend
Record date for the final dividend
Interim Management Statement
Annual General Meeting
Proposed payment date for final dividend
Interim results to be announced
Proposed payment date for the interim dividend
Interim Management Statement
21 May 2014
28 May 2014
30 May 2014
18 July 2014
18 July 2014
24 July 2014
4 November 2014
December 2014
February 2015
209
Annual General Meeting, Electronic Proxy Voting and CREST Voting
The 2014 Annual General Meeting will be held at The Four Seasons Hotel, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland on
Friday 18 July 2014 at 11.00 a.m. The Notice of Meeting together with an explanatory letter from the Chairman and a Form of Proxy
accompany this Report.
Shareholders may lodge a Form of Proxy for the 2014 Annual General Meeting via the internet. Shareholders who wish to submit
their proxy in this manner may do so by accessing the Company’s Registrar’s website at www.eproxyappointment.com and
following the instructions which are set out on the Form of Proxy or in the email broadcast that you would have received if you have
elected to receive communications via electronic means.
CREST members who wish to appoint a proxy or proxies via the CREST electronic proxy appointment service should refer to the
notes in the Notice of Annual General Meeting or on the Form of Proxy.
Registrar
All administrative queries about the holding of DCC shares should be addressed to the Company’s Registrar, Computershare
Investor Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland.
Tel: + 353 1 247 5698
Fax: + 353 1 447 5571
www.investorcentre.com/ie/contactus
Investor Relations
For investor enquiries please contact Stephen Casey, Investor Relations Manager, DCC plc, DCC House, Brewery Road, Stillorgan,
Blackrock, Co Dublin, Ireland.
Tel: + 353 1 2799 400
Fax: + 353 1 2831 017
email: investorrelations@dcc.ie
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DCC Annual Report and Accounts 2014
210
Supplementary Information
Corporate Information
Registered and Head Office
DCC House
Brewery Road
Stillorgan
Blackrock
Co. Dublin
Ireland
Auditors
PricewaterhouseCoopers
Chartered Accountants
& Registered Auditors
One Spencer Dock
North Wall Quay
Dublin 1
Ireland
Registrar
Computershare Investor Services
(Ireland) Limited
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18
Ireland
Bankers
Allied Irish Banks
Bank of Ireland
Bank of America Merrill Lynch
Barclays
BNP Paribas
Danske Bank A/S
Deutsche Bank
HSBC
ING Bank N.V.
J.P. Morgan
KBC Bank
Lloyds Banking Group
Rabobank
Royal Bank of Scotland Group
Solicitors
William Fry
Fitzwilton House
Wilton Place
Dublin 2
Ireland
Stockbrokers
Davy
49 Dawson Street
Dublin 2
Ireland
Jefferies Hoare Govett
Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
England
J.P. Morgan Cazenove Limited
10 Aldermanbury
London
EC2V 7RF
England
211
Non-GAAP Information
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The Group reports certain financial measures that are not required under International Financial Reporting Standards (IFRS)
which represent the generally accepted accounting principles (GAAP) under which the Group reports. The Group believes that the
presentation of these non-GAAP measures provides useful supplemental information which, when viewed in conjunction with our
IFRS financial information, provides investors with a more meaningful understanding of the underlying financial and operating
performance of the Group and its divisions.
These non-GAAP financial measures are primarily used for the following purposes:
• to evaluate the historical and planned underlying results of our operations;
• to set director and management remuneration; and
• to discuss and explain the Group’s performance with the investment analyst community.
None of the non-GAAP measures should be considered as an alternative to financial measures derived in accordance with GAAP.
The non-GAAP measures can have limitations as analytical tools and should not be considered in isolation or as a substitute for an
analysis of our results as reported under GAAP.
The principal non-GAAP measures used by the Group are as follows:
Operating profit before net exceptionals and amortisation of intangible assets (EBIT)
This comprises operating profit as reported in the Group Income Statement before net operating exceptional items and
amortisation of intangible assets.
EBITDA
EBITDA represents earnings before net interest, tax, depreciation, amortisation of intangible assets, share of associates’ profit
after tax and net exceptional items.
Net interest
The Group defines net interest as the net total of finance costs and finance income before interest related exceptional items as
presented in the Group Income Statement.
Adjusted earnings per share
The Group defines adjusted earnings per share as basic earnings per share adjusted for the impact of net exceptional items and
amortisation of intangible assets.
Net capital expenditure
Net capital expenditure comprises purchases of property, plant and equipment, proceeds from the disposal of property, plant and
equipment and government grants received in relation to property, plant and equipment.
Free cash flow
Free cash flow is defined by the Group as cash generated from operations before exceptional items as reported in the Group Cash
Flow Statement after net capital expenditure, interest paid, income tax paid and interest received.
Cash conversion ratio
The cash conversion ratio expresses free cash flow before interest paid, income tax paid and interest received as a percentage of
EBIT.
Net debt
Net debt represents the net total of current and non-current borrowings, current and non-current derivative financial instruments
and cash and cash equivalents as presented in the Group Balance Sheet.
Return on capital employed (‘ROCE’)
ROCE represents operating profit before net operating exceptional items and amortisation of intangible assets expressed as
a percentage of the average capital employed. Capital employed represents total equity adjusted for net debt, goodwill and
intangibles previously written off, deferred and contingent consideration and investments in associates.
Committed acquisition expenditure
The Group defines committed acquisition expenditure as the total of the acquisition of subsidiaries as presented in the Group Cash
Flow Statement and future deferred and contingent consideration amounts for acquisitions committed to during the year.
Net working capital
Net working capital represents the net total of inventories, trade and other receivables (excluding interest receivable), and trade
and other payables (excluding interest payable, amounts due in respect of property, plant and equipment and current government
grants).
Net working capital days
Working capital days is defined by the Group as the number of day’s sales represented by the closing net working capital.
DCC Annual Report and Accounts 2014
212
Supplementary Information
5 Year Review
Group Income Statement
Year ended 31 March
Revenue
Operating profit before exceptional items and amortisation of
intangible assets
Exceptional items
Amortisation of intangible assets
Operating profit
Finance costs (net)
Share of associates’ profit/(loss) after tax
Profit before tax
Income tax expense
Non-controlling interests
Profit attributable to owners of the Parent
Earnings per share
- basic (pence)
- basic adjusted (pence)
2010
£’m
2011
£’m
2012
£’m
2013
£’m
2014
£’m
5,967.1
7,397.6
9,283.5
10,572.7
11,231.7
171.1
(8.7)
(5.4)
157.0
(10.8)
0.1
146.3
(29.5)
(0.7)
116.1
195.7
(10.8)
(9.3)
175.6
(13.8)
(0.2)
161.6
(37.3)
(0.6)
123.7
160.7
(19.4)
(9.9)
131.4
(14.9)
(1.0)
115.5
(26.0)
(0.6)
88.9
186.8
(23.8)
(14.4)
148.6
(15.4)
(0.3)
132.9
(26.3)
(0.3)
106.3
208.4
(13.3)
(20.4)
174.7
(23.5)
0.0
151.2
(27.3)
(2.7)
121.2
140.87p
157.93p
148.69p
173.12p
106.62p
141.99p
127.17p
171.20p
144.70p
191.20p
Dividend per share (pence)
59.84p
63.22p
67.64p
69.86p
76.85p
Dividend cover (times)
Interest cover (times)*
* excludes exceptional items
Group Balance Sheet
As at 31 March
Non-current and current assets
Property, plant and equipment
Intangible assets
Investments in associates
Cash/derivatives
Other assets
Total assets
Equity
Non-current and current liabilities
Borrowings/derivatives
Retirement benefit obligations
Other liabilities
Total liabilities
Total equity and liabilities
2.6
17.7
2010
£’m
2.7
15.8
2011
£’m
2.1
10.4
2012
£’m
2.5
13.3
2013
£’m
2.5
9.7
2014
£’m
318.5
529.3
2.1
727.7
1,039.8
2,617.4
349.5
562.1
2.0
696.6
1,141.5
2,751.7
376.2
654.8
1.0
641.2
1,483.3
3,156.5
441.5
749.3
0.8
656.6
1,538.3
3,386.5
469.4
744.1
0.8
1,020.5
1,472.8
3,707.6
744.4
823.5
845.6
892.3
946.3
775.3
21.1
1,076.6
1,873.0
2,617.4
736.5
17.1
1,174.6
1,928.2
2,751.7
782.0
12.3
1,516.6
2,310.9
3,156.5
842.6
19.4
1,632.2
2,494.2
3,386.5
1,106.8
16.0
1,638.5
2,761.3
3,707.6
Net debt included above
(47.6)
(39.9)
(106.9)
(186.0)
(86.3)
Group Cash Flow
Year ended 31 March
Operating cash flow
Capital expenditure
Acquisitions
Other Information
Return on capital employed (%)
Working capital (days)
Average number of employees
2010
£’m
264.2
41.9
118.5
2011
£’m
229.7
71.1
66.7
2012
£’m
240.8
61.0
146.0
2013
£’m
264.6
62.5
168.1
2014
£’m
348.7
79.2
50.1
2010
2011
2012
2013
2014
18.4%
4.6
7,396
19.9%
4.9
7,925
14.2%
2.5
8,355
15.6%
2.2
9,153
16.3%
(0.6)
9,804
Index
Accounting Policies
Accounting Records
Adjusted Earnings per Share
Analysis of Net Debt
Annual General Meeting
Appointment of Directors
Approval of Financial Statements
Attendance at Meetings
Audit Committee Report
Auditors
Balance Sheet and Group Financing
Basis of Consolidation
Basis of Preparation
Board Committees
Board Meetings
Board Membership and Composition
Board of Directors
Board Performance Evaluation
Borrowings
Business Combinations
Business Conduct Guidelines
Business Model
Capital Expenditure Commitments
Carbon Disclosure Project
Carbon Emissions
Cash and Cash Equivalents
Cash Flow
Cash Generated from Operations
Chairman
Chairman’s Message
Change in Presentation Currency
Chief Executive
Chief Executive’s Remuneration
Chief Executive’s Review
Clawback Policy
Commitments Under Operating and
Finance Leases
Commodity Price Risk Management
Community Support
Company Balance Sheet
213
127
81
126
125
67
84
185
80
210
64
140
172
179
173
81
167
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128
114
61
171
209
81, 110
200
Company Cash Flow Statement
Company Secretary
Company Statement of Changes in Equity
Company Statement of Comprehensive
Income
Compliance and Business Ethics
Compliance Statement
82, 88, 108, 111
Contingencies
Corporate Governance Statement
Corporate Information
Credit Risk Management
Critical Accounting Estimates and
Judgments
Currency Profile
Deferred and Contingent Acquisition
Consideration
Deferred Income Tax
Deputy Chairman and Senior Independent
Director
Derivative Financial Instruments
Directors
78, 112
Directors’ and Company Secretary’s
Interests
Directors’ Emoluments and Interests
Directors’ Remuneration
Directors’ Statement pursuant to the
Transparency Regulations
Diversity
Dividends
Earnings per Ordinary Share
Electronic Communications
Employee Share Options and Awards
Employment
Environmental Provisions
Equity
Events After the Balance Sheet Date
Exceptional Items
Executive Directors’ Remuneration
Executive Risk Committee
Exit Payments Policy
105
147
102
116
110
61, 112, 158
158
208
149
149
140
139
200
131, 153
102
17, 82
96
85
87, 114
63
130
128
85, 89, 109
82
110
78
83
169
187
67, 84
10
185
70
68
166
62
184
80
06
128
82
104
12
95
186
64
71
125
DCC Annual Report and Accounts 2014
64
164
163
164
64
20
29
51
57
45
37
214
Supplementary Information
Index (continued)
Fair Value Estimation
Finance Costs and Finance Income
139
136, 155
Interest Rate Risk and Debt/Liquidity
Management
Financial Calendar
Financial Highlights
Financial Review
Financial Risk and Capital Management
Financial Risk Factors
208
03
58
189
139
Inventories
Investments In Associates
Investments In Subsidiary Undertakings
Investor Relations
Financial Risk Management
63, 139
Key Performance Indicators
Five Year Review
Foreign Currency
Foreign Currency Translation
Foreign Exchange Risk Management
Free Cash Flow
General Meetings
Going Concern
Goodwill
Governance
Government Grants
Group Balance Sheet
Group Cash Flow Statement
Group Directory
Group Income Statement
Group Operating Profit
Group Statement of Changes in Equity
Group Statement of Comprehensive
Income
Health & Safety
Hedging
Highlights
Income Tax
Income Tax Expense
Independence of Non-Executive Directors
Induction and Development of Directors
Intangible Assets
Intangible Assets (other than Goodwill)
Interest-Bearing Loans and Borrowings
212
155
131
64
62
Group
DCC Energy
DCC Environmental
DCC Food & Beverage
DCC Healthcare
DCC Technology
113, 209
84, 119
86, 133, 140
77
138, 180
122
124
202
120
147
123
121
68
135
02
137
156
81
81
161
134
135
Leases
Long Term Incentive Plan
134
93, 98, 104
Memorandum and Articles of Association
Movement in Working Capital
Nomination and Governance Committee
Report
Non-Controlling Interests
Non-Current Assets Held for Sale
113
165
109
184
133
Non-Executive Directors’ Remuneration
97, 102
Non-GAAP Information
Notes to the Financial Statements
Operating Reviews
DCC Energy
DCC Environmental
DCC Food & Beverage
DCC Healthcare
DCC Technology
Other Operating Income/Expense
Other Reserves
Outlook
Overview of Results
211
128
22
46
52
38
30
146
182
07, 15
59
215
83
182
64
128
116
08
114
128
65
114
67
135, 165
134, 164
113
141
208
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Post Employment Benefits
Post Employment Benefit Obligations
140
174
Share Ownership and Dealing
Share Premium
Principal Risks and Uncertainties
18, 112
Share Price and Market Capitalisation
Profit Attributable to DCC plc
157
Statement of Compliance
Statement of Directors’ Responsibilities
Strategy
Substantial Shareholdings
Summary of Significant Accounting
Policies
Sustainability Report
Takeover Regulations
Talent Development
Trade and Other Payables
Trade and Other Receivables
Transparency Rules
Useful Lives for Property, Plant and
Equipment and Intangible Assets
Website
Who we are
Profit before Net Exceptional Items,
Amortisation of Intangible Assets and Tax
Property, Plant and Equipment
Proportionate Consolidation of Joint
Ventures
Provision for Impairment of Trade
Receivables
Provisions
Provisions for Liabilities and Charges
Registrar
Related Party Transactions
Relations with Shareholders
Remuneration Committee
Remuneration Policy Report
Remuneration Report
Remuneration Review
Report of the Directors
Report of the Independent Auditors
Results Highlights
Retained Earnings
Return on Capital Employed
Revenue Recognition
Risk Management and Internal Control
Risk Report
Segment Information
Segment Reporting
Senior Management
Share-Based Payment Transactions
Share Capital
Share Capital and Treasury Shares
Share of Associates’ Profit/(Loss) after
Tax
Shareholder Information
Share Listing
61
160
148
141
136
179
209
199
84
108
91
89
89
112
117
13
183
62
131
87
16
141
131
74
138
181
112
156
207
207
DCC Annual Report and Accounts 2014
216
Notes
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DCC plc
DCC House, Brewery Road,
Stillorgan, Blackrock,
Co. Dublin, Ireland.
Tel: + 353 1 279 9400
Fax: + 353 1 283 1017
Email: info@dcc.ie
www.dcc.ie