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8
DCC plc Annual Report
and Accounts 2018
Delivering on our
strategic objectives
while creating new
platforms for growth
Read more: Strategy on page 2
Read more: Chief Executive’s Review on page 8
Strategic Report
Key Performance Indicators
DCC at a Glance
ii
01 Highlights of the Year
Strategy
02
04
Business Model
06 Chairman’s Statement
08 Chief Executive’s Review
12
16 Risk Report
23
32
42 Operating Reviews
– DCC LPG
42
– DCC Retail & Oil
48
– DCC Healthcare
54
62
– DCC Technology
68 Responsible Business Report
Financial Review
Strategy in Action
Governance
73 Chairman’s Introduction
Board of Directors
74
Senior Management
76
78 Corporate Governance
Statement
84 Nomination and Governance
Committee Report
87 Audit Committee Report
92 Remuneration Report
116 Report of the Directors
Financial Statements
121 Statement of Directors’
Responsibilities
Independent Auditors’ Report
122
126 Financial Statements
Supplementary Information
207 Principal Subsidiaries, Joint
Ventures and Associates
211 Shareholder Information
213 Corporate Information
214
Independent Limited Assurance
Report
215 Alternative Performance
Measures
221 5 Year Review
Index
222
DCC at a Glance
Donal Murphy
Chief Executive
i
DCC at a Glance
DCC is a leading international sales, marketing and support services group. The Group is
organised and managed across four divisions and employs over 11,000 people in 15 countries.
LPG
Retail & Oil
Healthcare
Technology
A leading liquefied petroleum gas (‘LPG’) sales and
marketing business, with a developing business in the
retailing of natural gas and electricity.
A leader in the sales, marketing and retailing of transport
and commercial fuels, heating oils and related products
and services.
A leading healthcare business, providing products and
services to healthcare providers and health and beauty
brand owners.
A leading route-to-market and supply chain partner
for global technology brands.
Share of Group adjusted operating profit
44%
Share of Group adjusted operating profit
30%
Share of Group adjusted operating profit
14%
Share of Group adjusted operating profit
12%
Volume (tonnes)
19.8%
Operating profit
4.4%
Volume (litres)
6.4%
Operating profit
20.4%
Revenue
1.6%
Operating profit
11.0%
Revenue
14.7%
Operating profit
16.3%
1.9m
£167.5m
12.3bn
£113.8m
£514.6m
£54.3m
£3.1bn
£47.8m
Customers
Trucks
Employees
Facilities
Customers
Trucks
Employees
Locations
Customers
SKUs
Employees
CMO Facilities
Customers
Brands
Employees
Capacity (m2)
720k
1,500
2,600
170
900k
1,300
3,500
1,400
15k+
40k+
2,200
6
45k
400+
2,700
100k+
Principal operating locations
France, Britain, Ireland, the USA, Germany, Hong Kong & Macau,
the Netherlands, Belgium, Sweden and Norway.
Principal operating locations
Britain, Denmark, Norway, France, Sweden, Ireland, Austria
and Germany.
Principal operating locations
Britain, Ireland, the USA and Sweden.
Principal operating locations
Britain, Ireland, France, Sweden, Germany, the Netherlands, Belgium,
UAE, Spain and Norway with offices in Poland, China and the USA.
Read more: Operating Review on page 42
Read more: Operating Review on page 48
Read more: Operating Review on page 54
Read more: Operating Review on page 62
Our Strategy
Our Locations
Our 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.
Market leading
positions
Operational
excellence
DCC aims to be the
number one or two
operator in each of its
chosen markets.
DCC strives to be the
most efficient business
in each of the sectors in
which it operates.
Extend our
geographic
footprint
We develop our
businesses to enter
new geographic markets
on a selective basis in
the coming years.
Development
of our people
Financial
discipline
Developing and investing
in our employees has
long been recognised
as fundamental to
DCC’s success.
In pursuing our strategic
objectives, we will only
do so in the context of
maintaining relatively low
levels of financial risk in
the Group.
Read more: Strategy on page 2
ii
USA
United Kingdom
Sweden
Norway
Ireland
Denmark
The
Netherlands
Belgium
Germany
France
Austria
Spain
Group operating profit
by geography
45% UK
35% France
15% Continental Europe/Other
5%
Ireland
Hong Kong
Macau
United
Arab Emirates
iii
Highlights of the Year
A year of strong growth
and record development spend
The year ended 31 March 2018 has been another year of strong growth for the Group, with each
division recording good growth in operating profit. It was also a record year of development for the
Group with the highest level of acquisition spend in DCC’s history. The results reflect the continued
successful execution of our strategy, and in particular:
• All divisions recorded good profit growth with Group adjusted operating profit 1,2 11.1% ahead of the prior year
at £383.4 million
• Adjusted earnings per share 1,2 up 10.8% to 317.5 pence
• Good cash flow performance, with conversion of adjusted operating profit 1,2 to free cash flow of 85%
• Return on capital employed 1 of 17.5%
• Acquisitions completed across all four divisions, including DCC’s first entry into the large US markets for LPG
and Health & Beauty Solutions
• A proposed 10% increase in the final dividend, the 24th consecutive year of dividend growth since DCC listed in 1994
Outlook
The Group expects that the year ending 31 March 2019 will be another year of profit growth and development.
Revenue 1
16.3%
Adjusted operating profit 1, 2
11.1%
Adjusted EPS 1, 2
10.8%
£14.3bn
£383.4m
317.45p
2018
2017
2016
£14.3bn
2018
£383.4m
2018
£12.3bn
£10.4bn
2017
2016
£345.0m
£285.3m
2017
2016
317.45p
286.59p
242.78p
Dividend per share
10.0%
Free cash flow
Return on capital employed 1
122.98p
£328.1m
17.5%
2018
2017
2016
122.98p
111.80p
97.22p
2018
2017
2016
£328.1m
£415.5m
£291.1m
2018
2017
2016
17.5%
20.3%
21.9%
1. Continuing operations (i.e. excluding DCC Environmental).
2. All references to ‘adjusted operating profit’ and ‘adjusted earnings per share’ included in the Strategic Report are stated excluding net exceptionals and amortisation of intangible
assets. Other ‘Alternative Performance Measures’ (‘APMs’) are detailed on pages 215 to 220.
Read more: KPIs on page 12
DCC plc Annual Report and Accounts 2018
01
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Strategy
Sustainable Growth
Our 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. We will achieve this by focusing on five strategic priorities as illustrated.
Read more: Responsible Business Report on page 68
Strategic Priorities
Market
leading
positions
DCC aims to be the number one or two operator
in each of its chosen markets. This is achieved
through a consistent focus on increasing market
shares organically and via value enhancing
acquisitions. We have a long and successful track
record of acquisitions which have strengthened our
market positions and generated attractive returns
on capital invested.
Operational
excellence
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 we judge are important
indicators in our drive for superior returns on
capital in the short, medium and longer term.
Extend our
geographic
footprint
In recent years we have been expanding certain
of the Group’s businesses into Continental European
markets we believe provide good opportunity for
future growth. We will look to further develop our
businesses in these markets and to enter new
geographic markets on a selective basis in the
coming years.
Development
of our people
Financial
discipline
Developing and investing in our employees has long
been recognised as fundamental to DCC’s success.
The devolved nature of our management structure
requires unique leadership capability and skills and we
believe our people are a key differentiator for us. We
commit significant resources to ensure we attract,
develop and retain our people ensuring a pipeline of
talent to deliver the Group’s strategy over the
longer term.
In pursuing our strategic objectives, 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.
02
DCC plc Annual Report and Accounts 2018
Strategy in action
Examples of Progress in 2018
Priorities for 2019
• The Group maintained or increased market share in the primary markets in which
• The Group will continue to pursue growth organically and through
it operates.
value enhancing acquisitions.
• Each division completed significant acquisitions including Retail West, Shell Hong Kong
& Macau and TEGA in DCC LPG, Esso Retail Norway in DCC Retail & Oil, Elite in DCC
Healthcare and MTR in DCC Technology. These businesses are market leaders with
returns on capital employed above the Group’s cost of capital.
LPG acquisitions on page 32
Tokenisation of the French network
on page 34
Healthcare's first US acquisition
on page 36
People development on page 40
Financial Review on page 23
• DCC LPG launched a number of new product offerings to suit its customers' ever
• DCC LPG is currently reviewing options to improve security of
changing needs. These included a natural gas and electricity B2C offering in the French
supply and logistics capability across all regions in which it operates.
market which required the creation of a new customer online portal and an online ordering
This includes expanding tank capacity at storage sites and
platform. Also in France the division expanded its rollout of the 'Click and Collect' option for
increasing the use of telemetry on customers tanks.
propane cylinders.
• DCC Retail & Oil will focus on its depot optimisation programme
• DCC Retail & Oil completed the integration of Esso Retail Norway into the retail hub based
in Britain along with restructuring and consolidation of its
in Drogheda and also launched tokenisation in France.
• DCC Healthcare delivered strong organic growth in its nutritional contract manufacturing
businesses in Sweden. The division will also focus on ERP
implementation in its Fuelcards business.
business through a continued focus on and investment in its capabilities in the provision
• DCC Healthcare continues to progress a number of investment
of complex and difficult to manufacture product formulations. It continues to streamline its
projects across our manufacturing facilities in Britain and the US,
activities, focusing its portfolio, integrating recently acquired businesses and driving further
adding new capacity, product capability and driving further
operational efficiency across back-office operations.
• DCC Technology’s UK warehouse in Lancashire is now operational and the business has
operational efficiency. The division will also continue to focus on
further streamlining its portfolio and operations.
made excellent progress in consolidating its warehousing and selling its old warehouse
• In DCC Technology the final stage of the new ERP system in the UK
infrastructure. Construction has also been completed on the new warehouses in France
will allow for the implementation of new warehouse automation,
and Sweden.
thereby leading to increased operational efficiency.
• During the year, DCC LPG completed acquisitions in the US, Asia and Germany, consistent
• The acquisitions completed during the year in new geographies
with the Group’s ambition to build a substantial presence in the global LPG market.
will provide further opportunities for both organic and acquisitive
• DCC Retail & Oil completed its first acquisition in Norway, in line with the strategy
of building positions in new geographies with strong local market shares.
• DCC Healthcare also completed its first acquisition in the US.
growth for the Group.
• The Group remains disciplined in its ambition to enter new
geographic markets and the development strategy
remains unchanged.
• During the year we rolled out numerous connected approaches to talent management
• We will continue to support the businesses for the next cycle of
initiatives such as performance management.
• Our senior executive development programme enabled the senior management teams
across the Group to align on a consistent performance management approach for FY2018
which was underpinned by DCC’s leadership competency framework.
• This tailored approach to personal development planning focused on ensuring that we
continue to develop organisation capability that delivers on the Group’s strategic priorities.
growth through the provision of value-added talent management
which will leverage the strength of DCC’s diversity and encourage
and support talent development at all levels of the organisation.
• As a result of the continued strong cash flow performance, DCC’s financial position
• The maintenance of a strong and liquid balance sheet to take
remains very strong. At 31 March 2018, the Group had net debt of £543 million, total equity
advantage of opportunities as they arise will remain an integral part
of £1.7 billion, cash resources, net of overdrafts, of £964 million and a further £400 million
of the Group’s strategy.
of undrawn committed debt facilities.
• The Group’s outstanding term debt at 31 March 2018 had an average maturity of 6.3 years.
• At 31 March 2018, the Group’s net debt: EBITDA was 1.1 times, reflecting the large
acquisition spend in the second half of the financial year.
Strategic Report
Strategic Priorities
Market
leading
positions
DCC aims to be the number one or two operator
in each of its chosen markets. This is achieved
through a consistent focus on increasing market
shares organically and via value enhancing
acquisitions. We have a long and successful track
record of acquisitions which have strengthened our
market positions and generated attractive returns
on capital invested.
Operational
excellence
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 we judge are important
indicators in our drive for superior returns on
capital in the short, medium and longer term.
Extend our
geographic
footprint
In recent years we have been expanding certain
of the Group’s businesses into Continental European
markets we believe provide good opportunity for
future growth. We will look to further develop our
businesses in these markets and to enter new
geographic markets on a selective basis in the
coming years.
Development
of our people
Financial
discipline
Developing and investing in our employees has long
been recognised as fundamental to DCC’s success.
The devolved nature of our management structure
requires unique leadership capability and skills and we
believe our people are a key differentiator for us. We
commit significant resources to ensure we attract,
develop and retain our people ensuring a pipeline of
talent to deliver the Group’s strategy over the
longer term.
In pursuing our strategic objectives, 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.
LPG acquisitions on page 32
Tokenisation of the French network
on page 34
Healthcare's first US acquisition
on page 36
People development on page 40
Financial Review on page 23
Strategy in action
Examples of Progress in 2018
Priorities for 2019
• The Group maintained or increased market share in the primary markets in which
• The Group will continue to pursue growth organically and through
it operates.
value enhancing acquisitions.
• Each division completed significant acquisitions including Retail West, Shell Hong Kong
& Macau and TEGA in DCC LPG, Esso Retail Norway in DCC Retail & Oil, Elite in DCC
Healthcare and MTR in DCC Technology. These businesses are market leaders with
returns on capital employed above the Group’s cost of capital.
• DCC LPG launched a number of new product offerings to suit its customers' ever
• DCC LPG is currently reviewing options to improve security of
changing needs. These included a natural gas and electricity B2C offering in the French
market which required the creation of a new customer online portal and an online ordering
platform. Also in France the division expanded its rollout of the 'Click and Collect' option for
propane cylinders.
• DCC Retail & Oil completed the integration of Esso Retail Norway into the retail hub based
in Drogheda and also launched tokenisation in France.
• DCC Healthcare delivered strong organic growth in its nutritional contract manufacturing
business through a continued focus on and investment in its capabilities in the provision
of complex and difficult to manufacture product formulations. It continues to streamline its
activities, focusing its portfolio, integrating recently acquired businesses and driving further
operational efficiency across back-office operations.
• DCC Technology’s UK warehouse in Lancashire is now operational and the business has
made excellent progress in consolidating its warehousing and selling its old warehouse
infrastructure. Construction has also been completed on the new warehouses in France
and Sweden.
supply and logistics capability across all regions in which it operates.
This includes expanding tank capacity at storage sites and
increasing the use of telemetry on customers tanks.
• DCC Retail & Oil will focus on its depot optimisation programme
in Britain along with restructuring and consolidation of its
businesses in Sweden. The division will also focus on ERP
implementation in its Fuelcards business.
• DCC Healthcare continues to progress a number of investment
projects across our manufacturing facilities in Britain and the US,
adding new capacity, product capability and driving further
operational efficiency. The division will also continue to focus on
further streamlining its portfolio and operations.
• In DCC Technology the final stage of the new ERP system in the UK
will allow for the implementation of new warehouse automation,
thereby leading to increased operational efficiency.
• During the year, DCC LPG completed acquisitions in the US, Asia and Germany, consistent
with the Group’s ambition to build a substantial presence in the global LPG market.
• DCC Retail & Oil completed its first acquisition in Norway, in line with the strategy
• The acquisitions completed during the year in new geographies
will provide further opportunities for both organic and acquisitive
growth for the Group.
of building positions in new geographies with strong local market shares.
• The Group remains disciplined in its ambition to enter new
• DCC Healthcare also completed its first acquisition in the US.
geographic markets and the development strategy
remains unchanged.
• During the year we rolled out numerous connected approaches to talent management
• We will continue to support the businesses for the next cycle of
initiatives such as performance management.
• Our senior executive development programme enabled the senior management teams
across the Group to align on a consistent performance management approach for FY2018
which was underpinned by DCC’s leadership competency framework.
• This tailored approach to personal development planning focused on ensuring that we
continue to develop organisation capability that delivers on the Group’s strategic priorities.
growth through the provision of value-added talent management
which will leverage the strength of DCC’s diversity and encourage
and support talent development at all levels of the organisation.
• As a result of the continued strong cash flow performance, DCC’s financial position
• The maintenance of a strong and liquid balance sheet to take
remains very strong. At 31 March 2018, the Group had net debt of £543 million, total equity
of £1.7 billion, cash resources, net of overdrafts, of £964 million and a further £400 million
of undrawn committed debt facilities.
• The Group’s outstanding term debt at 31 March 2018 had an average maturity of 6.3 years.
• At 31 March 2018, the Group’s net debt: EBITDA was 1.1 times, reflecting the large
acquisition spend in the second half of the financial year.
advantage of opportunities as they arise will remain an integral part
of the Group’s strategy.
DCC plc Annual Report and Accounts 2018
03
Supplementary InfoFinancial StatementsGovernanceStrategic Report Business Model
How we create, sustain and share value
Our Business Model is guided by our
strategic framework and underpinned
by our core values.
Strategic framework
Market leading positions
Operational excellence
Extend our geographic
footprint
Development of our people
Financial discipline
Read more: Strategy on page 2
Our core values
Safety
For us, safety comes first
Integrity
Our business is built on trust
Partnership
We are stronger together
Excellence
We are driven to excel in everything we do
Read more: Chairman’s Statement on page 6
04
DCC plc Annual Report and Accounts 2018
Inputs
People
We employ over 11,000 highly
talented and committed people across
15 countries.
Capital
Our strong and liquid balance sheet
enables us to react quickly to
commercial opportunities.
Partnerships
We value strong stakeholder relationships
including long-term strategic partnerships
with suppliers and customers.
Facilities
Our physical infrastructure provides a
strong platform for the products we sell.
Intellectual
The quality of our own brands, third party
brands, licences and processes provides
significant competitive advantage.
Strategic Report
Our business model is highly cash generative and offers
significant growth potential and shareholder returns on
capital employed significantly ahead of our cost of capital.
Creating value
Outputs
S t r ategic
F
i
n
a
n
c
i
al
O
l
a
n
p eratio
We leverage our key
differentiators to create value
Strategic
• Consistent strategic direction
• Disciplined capital allocation
• Devolved management structure
• Talent development and retention
Financial
• Focus on cash generation and ROCE
• Ability to identify, execute and integrate acquisitions
Operational
• Cash generative businesses
• Strong, empowered management teams
• Best practice in governance and compliance
• Robust risk management
• Strong supplier and customer relationships
Returns for stakeholders and
capital for reinvestment
Shareholders
Our business model adds long-term value for shareholders through
our progressive dividend policy.
Dividend to shareholders
£110m (2017: £99m)
Employees
We invest in our people throughout their careers to ensure they
are engaged and fully equipped to perform their roles. We provide
competitive rewards and benefits that are clearly linked to performance
and offer opportunities for further career development.
Employee costs
£461m (2017: £466m)
Business partners
We adopt a collaborative approach with our suppliers and customers,
thus facilitating the provision of a best-in-class service and the
achievement of mutually beneficial goals.
Goods, services and interest
£13.6bn (2017: £11.7bn)
Governments
The taxes and levies paid by the Group in the jurisdictions in which we
operate enable local governments to develop and maintain public works,
services and institutions.
Corporate taxes
£49m (2017: £47m)
Local communities
We partner with a number of charities and encourage our people
to engage in volunteer work, thereby benefiting local communities.
Our operations also create business opportunities for local suppliers.
Capital for reinvestment
Disciplined and selective capital redeployment allows us to sustain our
growth model. The highly cash generative nature of our business model
enables ongoing investment in our people and existing businesses
together with further acquisitions, driving efficiencies and further
sustainable growth.
Retained for reinvestment
£190m (2017: £186m)
DCC plc Annual Report and Accounts 2018
05
Supplementary InfoFinancial StatementsGovernanceStrategic Report Chairman’s Statement
Good earnings growth
across our four divisions
and global geographical
footprint extended
John Moloney
Chairman
Dear Shareholder,
Performance
2018 was a strong year of growth and
development for the Group, with adjusted
operating profits up 11.1% and adjusted
earnings per share up by 10.8%, both on a
continuing basis.
Return on capital employed, a key metric for
the Group, was 17.5%. The strong conversion
of adjusted operating profits to free cash flow
continued, at 85%, with net debt at the year end
of £543 million and total equity of £1.7 billion.
Strategy
Our core strategy continues to be to build
an international business of scale that is
sustainable and cash generative and which
provides our shareholders with returns on
capital employed substantially ahead of our
cost of capital. The Strategy in Action section
on pages 32 to 41 illustrates how this strategy
was executed during the year.
It has been a record year of development in
DCC, with over £670 million of acquisition
capital spent across our four divisions.
The acquisition activity during the year saw the
Group enter new geographies and included the
acquisition of the Retail West LPG business,
DCC’s first acquisition in the large US LPG
market, the acquisition of Elite One Source,
DCC’s first acquisition in the US Health &
Beauty sector, and the acquisition of the TEGA
LPG and refrigerant gas distribution business
in Germany. In addition, the acquisition of Shell’s
LPG business in Hong Kong and Macau, DCC’s
first material step to Asia, and the acquisition
of Esso’s retail network in Norway, completed
during the year.
On 30 May 2017, DCC disposed of its
Environmental division, at an enterprise value
of £219 million, on a debt-free, cash-free basis.
This disposal brought a sharpened strategic
focus to the Group which has been further
shaped by splitting DCC Energy into two separate
divisions, DCC LPG and DCC Retail & Oil.
DCC is now actively deploying capital across
each of our four divisions.
06
DCC plc Annual Report and Accounts 2018
Strategic Report Dividend and TSR
The Board is recommending a final dividend
of 82.09 pence per share. This brings the total
dividend per share for the year ended 31 March
2018 to 122.98 pence per share, up 10% on the
previous year. We have now completed 24 years
of uninterrupted dividend growth since DCC
became a publicly listed company in 1994.
It is also worth noting that, taking account of
growth in our share price and dividends paid,
the total return to shareholders in the last ten
years has been 594%.
p
5
.
1
5
p
8
.
9
3
Dividend (pence)
Years ended 31 March
Total Shareholder Return ('TSR')
TSR over 10 years: 594%
p
0
.
3
2
1
p
8
.
1
1
1
p
2
.
7
9
p
5
.
4
8
p
9
.
6
7
900
800
700
600
500
400
300
200
100
p
6
.
7
6
p
9
.
9
6
p
2
.
3
6
p
8
.
9
5
594%
Board Composition and Renewal
Board composition and renewal continues
to be an important area of focus and is key
to the Group’s success.
I am delighted to welcome Mark Ryan, who was
co-opted to the Board on 13 November 2017.
Mark is a highly experienced board director and
business leader who has successfully operated
at senior management level both in Ireland and
internationally. Mark has also joined the
Audit Committee.
Values
DCC’s values of safety, integrity, partnership
and excellence define how DCC’s businesses
operate. These values, which are summarised
in the table opposite, have been communicated
Group wide and are promoted by the Group’s
management teams to guide our employees
in the way we do business.
Our People
We recognise the dedication and hard work of
the people throughout the Group and I would
like to thank them all for their achievements this
year, which contributed greatly to the Group’s
continued success.
I am pleased to note that Donal Murphy has
made a seamless transition into the role of Chief
Executive and, on behalf of the Board, I would
like to thank him and his executive leadership
team for their ongoing commitment and
achievements in the year ended March 2018.
Looking ahead
DCC is well positioned, in terms of strategy,
management, resources and ambition, to
continue to deliver real value to its shareholders.
On behalf of the Board, I would like to thank you,
our shareholders, for your continued support.
John Moloney
Chairman
14 May 2018
2008 2009
2010
2011
2012
2013
2014 2015
2016
2017
2018
The chart above shows the growth of a hypothetical
£100 holding in DCC plc shares since 1 April 2008.
0
2008
2010
2012
2014
2016
2018
Our values
SAFETY
For us, safety comes first
Our first priority is the safety of our employees, contractors, customers and other
persons who may be affected by our business activities. Safety is a key focus for
Board and management across our supply chains and in particular with regard to
our 11,000 employees across over 400 sites. Trends in the last financial year showed
further improvement.
INTEGRITY
Our business is built on trust
Being honest, open, accountable and fair is in our nature. These traits are the
pillars on which our business has been built. Integrity is at the heart of our interaction
with stakeholders.
PARTNERSHIP
We are stronger together
Our business is all about creating sustainable partnerships with customers and suppliers.
EXCELLENCE
We are driven to excel in everything we do
We believe great performance comes from preparation, focus on the detail, relentless
determination, a sense of urgency and a genuine hunger for success. Excellence is what
drives focus on continuous improvement in all that we do.
DCC plc Annual Report and Accounts 2018
07
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Chief Executive’s Review
Excellent year
of growth and
development
Donal Murphy
Chief Executive
08
DCC plc Annual Report and Accounts 2018
Strategic Report It is pleasing to report, in my
first year as Chief Executive,
that the year ended 31 March
2018 has been a year of
strong growth and of record
development for DCC.
Performance Highlights
• Strong performance for the year with
all four divisions recording good profit
growth. Group adjusted operating profit on
continuing activities increased by 11.1%
(8.6% on a constant currency basis) to
£383.4 million.
• Adjusted earnings per share on a
continuing basis was up 10.8% (8.3%
ahead on a constant currency basis)
to 317.5 pence.
• Good cash flow performance, with free
cash flow conversion of approximately 85%.
• Return on capital employed was 17.5%.
• A proposed 10% increase in the final
dividend, which will see the total dividend for
the year increase by 10% to 122.98 pence.
The results reflect the continued successful
execution of our strategy in significantly
growing our operating profits, converting those
profits into cash and redeploying capital into
our LPG, Retail & Oil, Healthcare and
Technology businesses.
We had another successful year from a trading
perspective, delivering good organic growth
within the existing business. It was a record
year of development for the Group, with
approximately £670 million of capital spent
on acquisitions, the highest level of spend
in DCC’s history.
FY18 Acquisition Spend
Record year of development in DCC –
Approximately £670 million spent
on new acquisitions
3%
6%
38%
53%
DCC LPG
DCC Retail & Oil
DCC Healthcare
DCC Technology
The acquisition activity during the year
demonstrates DCC’s ability to acquire and
integrate businesses in our existing markets
to strengthen our market positions, build scale
and to increase our relevance and service
offerings to both our customers and suppliers.
It also reflects our strategy to extend our
geographic footprint as evidenced by DCC
LPG’s first acquisitions in the US and Asia and
DCC Healthcare’s entry into the US market.
These acquisitions provide additional platforms
for organic and acquisitive growth for the Group
into the future.
Our underlying trading performance reflected
themes consistent with recent years. In our
LPG business, we delivered strong volume
growth in the industrial and commercial sectors,
where we continue to lead the industry in the
conversion of existing oil users to LPG. We also
launched a natural gas and electricity offering
to consumers in France, an important
development for our Butagaz business there.
Although a nascent activity, we are encouraged
by the early progress in what is a very large
energy sector.
DCC Retail & Oil had an excellent year and
delivered strong organic profit growth. The
business benefited modestly from a marginally
colder than average winter in Britain. We
continue to broaden the base of the business
in Britain and made good progress in developing
additional value-added services, such as
telemetry, and also selling increased volumes
of premium products. In addition, the continued
expansion of the business into lubricants,
aviation and the unmanned retail market is
encouraging for the future. The other notable
performance during the year was that of our
Danish business, where the team delivered
an excellent performance and where the
business has benefited from the investments
undertaken in previous years to broaden its
base into the aviation, marine, agricultural and
retail markets.
DCC Healthcare and DCC Technology also
generated strong growth during the year. DCC
Healthcare delivered strong organic growth in
medical devices and nutritional products and
the business also benefited from the prior year
acquisition of Medisource. DCC Technology,
while also benefiting from acquisitions, drove
strong growth in the UK, Ireland and the
Nordics, driven by market share gains in key
product categories such as audio visual, home
automation, enterprise software, components
and gaming.
DCC plc Annual Report and Accounts 2018
09
Supplementary InfoFinancial StatementsGovernanceStrategic Report Chief Executive’s Review (continued)
between LPG and refrigerants. The business
supplies approximately 35,000 tonnes of LPG
annually to 15,000 domestic and commercial
customers. It also supplies refrigerant gases
to wholesalers and end-users for use in
air-conditioning, commercial cooling systems
and refrigerators. The business will continue
to be led by its existing, highly experienced
management team.
The acquisition of the trade and assets
of the LPG distribution business of
Countrywide Farmers plc in Britain, for
a total cash consideration of £28.75 million.
The business supplies bulk and cylinder LPG
to domestic, agricultural and commercial
customers in Britain and sells approximately
20,000 tonnes of LPG annually.
The completion in January 2018 of the
acquisition of Shell’s LPG business in Hong
Kong and Macau.
The business provides LPG in bulk, cylinder
and autogas formats to domestic, commercial
and industrial customers. The acquisition is
consistent with DCC LPG’s ambition to build
a substantial presence in the global LPG
market. The acquisition represents a further
strengthening of DCC’s relationship with Shell
and gives DCC LPG a strong market position
in Hong Kong and Macau and a platform for
development in the growing LPG market
in Asia.
Development Highlights
We have split our Energy division into two
divisions, DCC LPG and DCC Retail & Oil, and
now operate through four divisions; DCC LPG,
DCC Retail & Oil, DCC Healthcare and DCC
Technology. We have very clear development
strategies for each of our four divisions and
during the year spent approximately £670
million on corporate development across all
of our divisions. The highlights of this activity
have been:
DCC LPG
The acquisition of Retail West in the US,
based on an enterprise value of US$200
million (£152 million).
The acquisition represents DCC LPG’s entry
into the US market and is a further significant
step in DCC’s strategy to build a global LPG
business over time. The US is one of the world’s
largest LPG markets and is an attractive and
growing market. It is also highly fragmented,
with over 4,000 LPG distribution businesses
operating in the market. The acquisition of
Retail West will provide DCC with a substantial,
high-quality presence in the US with leading
market positions in a number of states. The
business has an excellent customer base,
a strong and well-invested operational
infrastructure and an experienced
management team.
The acquisition of TEGA, an LPG
and refrigerant gas distribution business
in Germany.
TEGA, which is headquartered in Würzburg,
employs approximately 100 people across five
operating sites, largely in southern Germany.
TEGA has revenue of c.€75 million evenly split
Adjusted operating profit* (£'m) – years ended 31 March
2018: £383.4m
+11.1%
383.4
345.0
285.3
176.0
155.4
139.1
130.6
208.4
189.0
169.8
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
*continuing operations.
10
DCC plc Annual Report and Accounts 2018
Strategic Report DCC Retail & Oil
The completion in October 2017 of the
acquisition of Esso Retail in Norway.
The acquisition is another significant step
for DCC in building its retail petrol station
business in Europe. The business in Norway
comprises 142 company-operated sites
(127 retail service stations and 15 unmanned
stations) and has contracts to supply 108
Esso-branded dealer stations. The business
has now been fully integrated into DCC’s
retail operating infrastructure.
The acquisition of SNAP, an end-to-end
transaction processing and payment system
for HGV fleets.
The business facilitates cashless payments
through licence plate recognition for services
to HGV fleets at truck stops. The business,
although modest, is growing strongly and will
be complementary to the existing retail and
oil businesses.
DCC Healthcare
The acquisition of Elite One Source for an
enterprise value of $50 million (£35 million).
The acquisition is the first step by DCC Health
& Beauty Solutions into the growing US market,
the world’s leading healthcare and dietary
supplements market. Elite is a provider of
contract manufacturing and related services
to leading specialist brands in the US consumer
healthcare market. The business, led by an
experienced management team, employs
180 people and operates from well-invested
facilities which comply with FDA cGMP and
Health Canada standards and are certified
by leading third party regulatory bodies.
DCC Technology
The acquisition of MTR, a fast-growing
UK-based provider of second lifecycle
solutions for mobile and tablet devices.
In addition, DCC Technology continues to
invest in a new and innovative ERP system
which will enable it to significantly enhance its
service offering for its customers and suppliers.
MTR provides a broad range of services
to retailers, mobile handset manufacturers
and insurance companies to source and
refurbish mobile phones and tablets for resale
to customers in the UK and abroad. The
acquisition advances the DCC Technology
strategy of expanding its service proposition
to vendors and customers and provides
access to the high growth second lifecycle
solutions market.
DCC remains ambitious to continue the growth
and development of its business in existing
and new geographies and retains a strong,
well-funded and liquid balance sheet.
DCC continues to invest in its infrastructure
to optimise our cost base and drive excellence
in our service propositions.
Last year, DCC Technology successfully
completed the construction and commenced
the commissioning of its new, purpose built
450,000 sq.ft. UK national distribution centre
in the north of England. The facility is now
fully operational.
DCC Technology has also invested in a new
distribution centre for our Nordic business and
will shortly move to a new distribution centre
in France.
People and Values
DCC’s core values, developed over the past
forty years, of safety, integrity, partnership
and excellence, have helped to create a growth
focused and entrepreneurial culture which
encourages and enables our people to develop
their businesses. This represents a key
competitive advantage for DCC.
As we expand into new geographies and
business sectors, these core values, which
are part of the Group’s DNA, will remain
constant and will bind us together.
I want to thank each of the Group’s 11,146
employees for their dedication to performing
better every day and driving long-term growth
in stakeholder value.
Outlook
The Group continues to have the opportunity,
ambition and capacity for further development
across each of our divisions, supported by
a strong and liquid balance sheet.
We expect that the year ending 31 March
2019 will be another year of profit growth
and development for the Group.
Donal Murphy
Chief Executive
14 May 2018
Adjusted earnings per share* (pence) – years ended 31 March
2018: 317.5p
+10.8%
317.5
286.6
242.8
202.4
183.3
150.6
129.2
163.8
165.1
132.9
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
*continuing operations.
DCC plc Annual Report and Accounts 2018
11
Supplementary InfoFinancial StatementsGovernanceStrategic Report Key Performance Indicators
Measuring our
financial progress
The Group employs 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 42 to 67.
Strategic Linkages
Market leading
positions
Operational
excellence
Extend our
geographic
footprint
Development
of our people
Financial
discipline
Linked to Directors’
Remuneration
Financial KPIs
Description
Strategic Linkage
FY18 Performance
FY18 Comment
FY19 Outlook and Aims
Return on capital
employed
(‘ROCE’)
ROCE is defined as adjusted
operating profit expressed as
a percentage of the average capital
employed. ROCE is presented on
a continuing basis.
ROCE is the key financial benchmark we use when evaluating both
the performance of existing businesses and potential investments
and is a key component of DCC’s executive bonus plans and Long
Term Incentive Plan.
2018
2017
17.5%
ROCE on continuing operations of 17.5% is significantly in excess
The achievement of returns on capital employed in
20.3%
of our cost of capital. The decrease in the Group ROCE versus
excess of the Group’s cost of capital will continue
the prior year principally reflects the impact of the substantial
to be a key focus in order to ensure the efficient
acquisition spend during the year as the Group entered
generation of cash to fund organic growth,
new geographies.
acquisitions and dividend growth.
Growth in
adjusted
operating profit
The change in adjusted operating
profit achieved in the current year
compared to the prior year. Growth
in adjusted operating profit is
presented on a continuing basis.
Adjusted operating profit measures the underlying operating
performance of the Group’s businesses and is an indicator
of our revenue generation, margin management, cost control
and performance efficiency.
Growth in
adjusted
earnings per
share (‘EPS’)
The change in adjusted EPS
achieved in the current year
compared to the prior year.
Growth in EPS is presented
on a continuing basis.
Adjusted EPS is a widely accepted metric used in determining corporate
profitability. It also represents an important metric in determining the
generation of superior shareholder returns and is a key component
of DCC’s executive bonus plans and Long Term Incentive Plan.
The Group anticipates that the year ending
31 March 2019 will be another year of profit
growth and development.
All four divisions recorded profit growth versus the prior year.
DCC LPG recorded profit growth of 4.4%, despite the anticipated
headwind of a rising cost of product and continued organic
investment in its B2C natural gas and electricity offering in France.
DCC Retail & Oil was 20.4% ahead of the prior year; organic growth
accounted for approximately half of the overall growth and was
complemented by acquisitions.
DCC Healthcare’s operating profit was 11.0% ahead of the prior
year, reflecting good growth in both pillars.
Operating profit in DCC Technology was 16.3% ahead of the
prior year, mainly reflecting a very strong organic performance
in the UK and Ireland.
317.5p
286.6p
The increase in adjusted EPS was primarily driven by the factors
The Group expects that the year ending 31 March
mentioned under the adjusted operating profit KPI.
2019 will be another year of growth in adjusted
earnings per share.
Free cash flow
Cash generated from operations
before exceptional items and after
net capital expenditure.
Free cash flow represents the funds available for reinvestment,
acquisitions and dividends, so maintaining a high level of free cash
flow is key to maintaining a strong, liquid balance sheet.
£328.1m
The Group generated strong free cash flow of £328.1m during
Cash generation and working capital management
the year, following an excellent performance in the prior year,
will remain a key focus of the Group.
£415.5m
and was driven by adjusted operating profit of £384.4m. Working
capital management remained strong and net capital expenditure
amounted to £146.7 million for the year (2017: £131.4 million),
reflecting the increased scale of the Group and a number of
investments being undertaken to support continued growth
and development.
Committed
acquisition
expenditure
Cash spent and acquisition related
consideration for acquisitions
committed to during the year.
The Group constantly seeks to add value-enhancing acquisitions
in order to provide shareholders with returns on capital in excess
of our cost of capital.
£355.3m
The Group committed to acquisition expenditure of £355.3m
The Group will continue to pursue attractive
during the year which principally comprised Retail West (£152m),
opportunities in our traditional markets as well as
£553.9m
TEGA (£75m), Elite (£35m), Countrywide (£29m), and MTR
looking to extend our business into selected new
(£27m). The cash spend on acquisitions in the year of £670m
geographic markets. We continue to pursue a strong
includes £368m on acquisitions which were committed
pipeline of opportunities but acquisition targets must
to in prior years.
meet our demanding criteria and we will remain
disciplined in our approach to acquisition spend.
12
DCC plc Annual Report and Accounts 2018
2018
2017
2018
2017
2018
2017
Strategic Report
Financial KPIs
Description
Strategic Linkage
FY18 Performance
FY18 Comment
FY19 Outlook and Aims
Read more: Financial Review on page 23
Return on capital
employed
(‘ROCE’)
ROCE is defined as adjusted
operating profit expressed as
a percentage of the average capital
employed. ROCE is presented on
a continuing basis.
ROCE is the key financial benchmark we use when evaluating both
the performance of existing businesses and potential investments
and is a key component of DCC’s executive bonus plans and Long
Term Incentive Plan.
Growth in
adjusted
operating profit
The change in adjusted operating
profit achieved in the current year
Adjusted operating profit measures the underlying operating
performance of the Group’s businesses and is an indicator
compared to the prior year. Growth
of our revenue generation, margin management, cost control
in adjusted operating profit is
presented on a continuing basis.
and performance efficiency.
2018
2017
2018
2017
2018 v 2017: +11.1%
17.5%
20.3%
ROCE on continuing operations of 17.5% is significantly in excess
of our cost of capital. The decrease in the Group ROCE versus
the prior year principally reflects the impact of the substantial
acquisition spend during the year as the Group entered
new geographies.
The achievement of returns on capital employed in
excess of the Group’s cost of capital will continue
to be a key focus in order to ensure the efficient
generation of cash to fund organic growth,
acquisitions and dividend growth.
The Group anticipates that the year ending
31 March 2019 will be another year of profit
growth and development.
£383.4m
£345.0m
All four divisions recorded profit growth versus the prior year.
DCC LPG recorded profit growth of 4.4%, despite the anticipated
headwind of a rising cost of product and continued organic
investment in its B2C natural gas and electricity offering in France.
DCC Retail & Oil was 20.4% ahead of the prior year; organic growth
accounted for approximately half of the overall growth and was
complemented by acquisitions.
DCC Healthcare’s operating profit was 11.0% ahead of the prior
year, reflecting good growth in both pillars.
Operating profit in DCC Technology was 16.3% ahead of the
prior year, mainly reflecting a very strong organic performance
in the UK and Ireland.
Growth in
adjusted
earnings per
share (‘EPS’)
Committed
acquisition
expenditure
The change in adjusted EPS
achieved in the current year
compared to the prior year.
Growth in EPS is presented
on a continuing basis.
Adjusted EPS is a widely accepted metric used in determining corporate
profitability. It also represents an important metric in determining the
generation of superior shareholder returns and is a key component
of DCC’s executive bonus plans and Long Term Incentive Plan.
2018
2017
317.5p
286.6p
2018 v 2017: +10.8%
The increase in adjusted EPS was primarily driven by the factors
mentioned under the adjusted operating profit KPI.
The Group expects that the year ending 31 March
2019 will be another year of growth in adjusted
earnings per share.
Free cash flow
Cash generated from operations
before exceptional items and after
net capital expenditure.
Free cash flow represents the funds available for reinvestment,
acquisitions and dividends, so maintaining a high level of free cash
flow is key to maintaining a strong, liquid balance sheet.
2018
2017
£328.1m
£415.5m
Cash spent and acquisition related
The Group constantly seeks to add value-enhancing acquisitions
consideration for acquisitions
committed to during the year.
in order to provide shareholders with returns on capital in excess
of our cost of capital.
2018
2017
£355.3m
£553.9m
The Group generated strong free cash flow of £328.1m during
the year, following an excellent performance in the prior year,
and was driven by adjusted operating profit of £384.4m. Working
capital management remained strong and net capital expenditure
amounted to £146.7 million for the year (2017: £131.4 million),
reflecting the increased scale of the Group and a number of
investments being undertaken to support continued growth
and development.
Cash generation and working capital management
will remain a key focus of the Group.
The Group committed to acquisition expenditure of £355.3m
during the year which principally comprised Retail West (£152m),
TEGA (£75m), Elite (£35m), Countrywide (£29m), and MTR
(£27m). The cash spend on acquisitions in the year of £670m
includes £368m on acquisitions which were committed
to in prior years.
The Group will continue to pursue attractive
opportunities in our traditional markets as well as
looking to extend our business into selected new
geographic markets. We continue to pursue a strong
pipeline of opportunities but acquisition targets must
meet our demanding criteria and we will remain
disciplined in our approach to acquisition spend.
DCC plc Annual Report and Accounts 2018
13
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Key Performance Indicators (continued)
Measuring our
non-financial progress
The Group employs non-financial key performance indicators (‘KPIs’) to assess the activities
that we see as important in conducting our operations responsibly and achieving our strategic
objective of building a sustainable business which delivers long-term value to shareholders.
Strategic Linkages
Market leading
positions
Operational
excellence
Extend our
geographic
footprint
Development
of our people
Financial
discipline
Financial KPIs
Description
Strategic Linkage
FY18 Performance
FY18 Comment
FY19 Outlook and Aims
Health and
Safety
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 safety of our employees and the wider community is central to
everything we do. A continually improving occupational and process
safety culture is a key element in delivering on our strategic objectives.
1.1
1.6
The LTIFR decreased versus the prior year
The Group will continue to focus on promoting
reflecting ongoing actions to raise risk awareness,
a strong safety culture across our businesses
act on unsafe condition reports and deliver regular
and ensure appropriate risk control measures
training and Safety F1rst initiatives.
are in place and operating effectively. LTI rates
are targeted to improve as a result.
The LTISR increased compared to the prior
year primarily due to a relatively small number of
accidents that required extended recovery periods.
27 days
23 days
Gender
diversity
The percentage split of the overall
workforce between female and
male employees.
The Group benefits from attracting and developing a workforce
with diverse skills, qualities and experiences.
At 31 March 2018, female employees accounted
The Group will continue to focus on actions which
M: 66%
F: 34%
for 34% of the overall workforce, 17% of senior
M: 68%
F: 32%
management and 30% of Board members.
will improve the gender diversity of our workforce.
We are committed to better gender balance at all
levels of the organisation and actively support the
development of our high potential female talent.
Greenhouse gas
emissions
Total Scope 1 and 2 greenhouse gas
emissions expressed in kilotonnes
(kts) of CO2e.
The Group relies on the availability of raw materials and natural resources
and is committed to running our businesses in an environmentally
responsible manner.
89kts
The disposal of the Environmental division in
May 2017 has reduced DCC’s Scope 1 and 2
The Group will continue to identify energy saving
opportunities and monitor greenhouse gas
118kts
greenhouse gas emissions by approximately
emissions from its operations.
20% compared to the prior year. Investments
in energy efficiency, consolidation of warehousing,
optimisation of vehicle routing and ongoing
decarbonisation of national electricity grids have
also contributed to a reduction in emissions.
LTIFR
2018
2017
LTISR
2018
2017
2018
2017
2018
2017
14
DCC plc Annual Report and Accounts 2018
Strategic Report
Financial KPIs
Description
Strategic Linkage
FY18 Performance
FY18 Comment
FY19 Outlook and Aims
Read more:
Responsible Business Report on page 68
Health and
Safety
The safety of our employees and the wider community is central to
everything we do. A continually improving occupational and process
safety culture is a key element in delivering on our strategic objectives.
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.
Gender
diversity
The percentage split of the overall
workforce between female and
male employees.
The Group benefits from attracting and developing a workforce
with diverse skills, qualities and experiences.
LTIFR
2018
2017
LTISR
2018
2017
2018
2017
1.1
1.6
The LTIFR decreased versus the prior year
reflecting ongoing actions to raise risk awareness,
act on unsafe condition reports and deliver regular
training and Safety F1rst initiatives.
The Group will continue to focus on promoting
a strong safety culture across our businesses
and ensure appropriate risk control measures
are in place and operating effectively. LTI rates
are targeted to improve as a result.
The LTISR increased compared to the prior
year primarily due to a relatively small number of
accidents that required extended recovery periods.
27 days
23 days
M: 66%
M: 68%
F: 34%
F: 32%
At 31 March 2018, female employees accounted
for 34% of the overall workforce, 17% of senior
management and 30% of Board members.
The Group will continue to focus on actions which
will improve the gender diversity of our workforce.
We are committed to better gender balance at all
levels of the organisation and actively support the
development of our high potential female talent.
Greenhouse gas
emissions
Total Scope 1 and 2 greenhouse gas
The Group relies on the availability of raw materials and natural resources
emissions expressed in kilotonnes
and is committed to running our businesses in an environmentally
(kts) of CO2e.
responsible manner.
2018
2017
89kts
118kts
The disposal of the Environmental division in
May 2017 has reduced DCC’s Scope 1 and 2
greenhouse gas emissions by approximately
20% compared to the prior year. Investments
in energy efficiency, consolidation of warehousing,
optimisation of vehicle routing and ongoing
decarbonisation of national electricity grids have
also contributed to a reduction in emissions.
The Group will continue to identify energy saving
opportunities and monitor greenhouse gas
emissions from its operations.
DCC plc Annual Report and Accounts 2018
15
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Risk Report
Identify, assess
and manage risk
The Board of DCC is responsible for setting the
Group’s risk appetite and ensuring that appropriate risk
management and internal control systems, designed
to identify, manage and mitigate potential material risks
to the achievement of the Group’s strategic and business
objectives, are in place.
Risk Management Framework
DCC plc Board
Audit Committee
HSE Report
Legal and
Compliance Report
Group Risk
Register
Group Internal
Audit Report
Executive Risk
Committee
First line of defence
Second line of defence
Third line of defence
Subsidiary and
Divisional Management
Group HSE, Group
Legal & Compliance,
Group IT, Group Finance
Group Internal Audit and
Other Independent
Assurance Providers
16
DCC plc Annual Report and Accounts 2018
Risk Management
The Board has approved a Risk Appetite
Statement specifying the levels of risk that
the Group is prepared to accept in key areas
of activity in achieving its strategic objectives.
This Statement informs the risk management
and internal control systems that are
maintained in those areas.
The Board has also approved a Risk
Management Policy which sets out delegated
responsibilities and procedures for the
management of risk across the Group.
The Risk Appetite Statement and the Risk
Management Policy are reviewed by the Board 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.
Risk Management 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
individual subsidiaries and divisions. The second
line comprises Group oversight functions which
provide expertise in regard to the management
of specific risks, in particular health, safety and
environmental (‘HSE’), IT, legal & compliance
and finance. The third line of defence principally
comprises Group Internal Audit and also
includes the external auditors and specialist
third party auditors/regulators.
The detailed roles and responsibilities assigned
under the risk management framework are
summarised below.
Board
As noted earlier, the Board is responsible for
approving the Group’s Risk Appetite Statement
and the Risk Management Policy.
The Board monitors the Group’s risk
management and internal control activities
through the receipt, at each Board meeting,
of a risk report which focuses on the principal
risks, as set out in the Group Risk Register,
on emerging risks, on current risk mitigation
activities and on developments in risk
management practice. The Board also receives
a briefing from the Chairman of the Audit
Committee on its current risk and internal
control activities.
In addition, recognising that health and safety
is a very significant risk area for the Group,
particularly in the LPG and Retail & Oil divisions,
the Board takes particular responsibility for this
Strategic Report area through direct quarterly reporting to it
by the Head of Group Sustainability, who is
responsible for the Group HSE function.
The Board also considers the annual review
of the effectiveness of the Group’s risk
management and internal control systems,
which is undertaken jointly by Enterprise Risk
Management and Group Internal Audit and
reviewed in detail by the Audit Committee.
Subsidiary and Divisional Management
Subsidiary and divisional management are
responsible for day-to-day risk management
activity. Each subsidiary is required to maintain
a risk register, which is reviewed and updated at
each monthly management meeting, attended
by both subsidiary and divisional management.
Divisional management consider the subsidiary
risk registers in preparing and updating
divisional risk registers.
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 oversight of the
Group Risk Register, including principal risks,
emerging risks and risk mitigation activities
and by reviewing regular reports from Group
Internal Audit and from second line providers,
including the Executive Risk Committee and
Group Legal & 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.
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 risk management
and internal control systems.
Further detail on the activities of the Audit
Committee is set out in its Report on page 87
Executive Risk Committee
The Executive Risk Committee is chaired by
the Chief Executive and comprises senior
Group and divisional 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 emerging risks which impact on the Group’s
risk environment and controls.
The Executive Risk Committee maintains
the Group Risk Register and the Integrated
Assurance Report (as detailed under the Risk
Register Process) and reports on changes
to these to the Audit Committee.
The Executive Risk Committee also evaluates
all audit reports prepared by Group Internal
Audit, Group HSE and Group Legal &
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 or the Board as appropriate.
Subsidiary and divisional management are also
responsible for designing, implementing and
maintaining effective internal controls to
address the risks on their risk registers.
Group Oversight Functions
Group HSE
The Group HSE function operates a risk
based HSE audit programme which provides
independent assurance on the key HSE
management processes and controls that
are in place in the Group’s businesses.
The Group HSE function also facilitates the
exchange of best practice and supports the
HSE working groups (organised around key
areas, including transport safety and process
safety) in setting objectives and developing
appropriate HSE standards. As mentioned
earlier, the Board receives direct reports on
the management of HSE risks.
Further detail on HSE risk management is set out
in the Responsible Business Report on page 68
Group Legal & Compliance
The Group maintains a structured
compliance programme which is designed
to provide reasonable assurance that all of
its operations comply with applicable legal
and ethical standards.
The directors of each Group subsidiary are
primarily responsible for ensuring that their
business complies with applicable legal and
ethical standards. The Group Legal &
Compliance function assists them in this
through the identification of relevant
compliance risks and the development and
implementation of suitable controls, such as
policies, training and audits to mitigate those
risks. More detail on the compliance programme
is contained in the Corporate Governance
Statement on page 82.
The Group Legal & Compliance function carries
out compliance audits in Group subsidiaries
and reports on these to the Audit Committee.
Further detail on compliance risk is set out in the
Corporate Governance Statement on page 82
Group IT
The Group IT function is responsible for setting
the Group’s IT strategy for major IT projects
and for managing IT security risks.
The Group’s IT Security Advisor provides
ongoing technical support, including managing
cybersecurity and Payment Card Industry Data
Security Standards (‘PCI DSS’) requirements,
and is also responsible for user security training
and network penetration testing.
The Group’s Project Management Office
provides support to key projects and change
management programmes.
Group Finance
Group Finance incorporates the Group
accounting, corporate finance, treasury,
taxation and commodity risk management
functions, who are responsible for
implementing appropriate risk management
practices and having oversight of subsidiary
activities in their areas of operation.
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 develops an annual, risk based
internal audit programme, which is approved
by the Audit Committee.
Group Internal Audit incorporates a dedicated
IT Assurance function which is focused on
ensuring the Group Information Security Policy
and related IT Standards are consistently
applied and key risks with respect to IT,
cybersecurity and business continuity are
regularly reviewed. It also plays a role in IT
project assessment and provides data analytics
support to risk and control reviews performed
by Group Internal Audit.
Further detail on the Group Internal Audit
function is set out on page 89
Risk Register Process
The Group’s risk register process is based on a
Group-wide approach to the identification and
assessment of risks and the manner in which
they are managed and monitored.
Risk registers, covering strategic, operational,
financial and compliance risks, are completed
with the impact and likelihood of occurrence for
each risk determined. New or emerging risks
are added to the risk registers as they
are identified.
The risk register process is embedded into the
Group’s businesses and forms part of ongoing
management processes. This facilitates
frequent review and updating of the divisional
and Group risk registers and the related
assurance reports. This process is overseen by
a dedicated risk management executive within
the Group Internal Audit function.
DCC plc Annual Report and Accounts 2018
17
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Going Concern and the Viability Statement
Viability Statement
The Directors confirm that they have
a reasonable expectation that the Group
will continue to operate and meet its
liabilities, as they fall due, for the next three
years to 31 March 2021. The Directors’
assessment has been made with
reference to the resilience of the Group
and its strong financial position, the
Group’s current strategy, the Board’s risk
appetite and the Group’s principal risks
and how these are managed, as described
in the Strategic Report.
The Group has a broad spread of
customers and suppliers across different
geographic areas and independent market
sectors. The Group is supported by a
well-funded and liquid balance sheet and
strong operational cash flows. The
assessment period of three years has
been chosen as it is consistent with the
Board’s annual review of the Group’s
strategy at which the development plans
for each business are discussed.
A robust financial model of the Group is
built on a business by business basis. This
model is subjected to sensitivity analysis.
This review and analysis also considers
the principal risks facing the Group, as
described on pages 19 to 22 and the
potential impacts these risks would have
on the Group’s business model, future
performance, solvency or liquidity over
the assessment period.
The Board considers that the diverse
nature of the sectors and geographies
in which the Group operates acts
significantly to mitigate the impact any
of these risks might have on the Group.
Going Concern and the
Viability Statement
In accordance with the relevant provisions
set out in the UK Corporate Governance
Code, the Board has taken account of the
principal risks and uncertainties, as set
out in the table on pages 19 to 22, in
considering the statements to be made
in regard to the going concern basis of
accounting and the viability statement.
These statements are set out below:
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
Strategic Report.
The financial position of the Company,
its cash flows, liquidity position and
borrowing facilities are described in the
Financial Review on page 23. In addition,
note 5.7 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.
Risk Report (continued)
Subsidiary
As noted earlier, each subsidiary is required
to maintain a risk register, which is reviewed
and updated at each monthly management
meeting, attended by both subsidiary and
divisional management. Control improvements
identified by management as part of the risk
register process are formally monitored
through an online Group audit management
system. Each subsidiary also completes
a half-yearly online risk survey as an additional
review of current and emerging risk trends.
Division
Divisional management are responsible for
regularly reviewing the subsidiary risk registers
and updating the divisional risk registers, which
are submitted to the Executive Risk Committee
at each meeting.
Group
The Group Risk Register is maintained by the
Executive Risk Committee and is regularly
updated to reflect any significant changes
noted in the reviews of divisional risk registers
or in Group level risks.
The principal risks to the attainment of
the Group’s strategic priorities, which were
confirmed by the risk register process, are
set out on pages 19 to 22.
An Integrated Assurance Report (‘IAR’) is
maintained to identify the assurance activities,
both current and planned, across the three
lines of defence, which are intended to address
the key and emerging risks identified by the risk
register process. The IAR is updated and
discussed by the Executive Risk Committee
at each meeting.
The Group Risk Register and the IAR are then
reviewed by the Audit Committee and the
Board, as noted earlier.
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 and Board, by way of the Legal and
Compliance report and the quarterly HSE
report respectively, and from Group Internal
Audit to the Audit Committee.
18
DCC plc Annual Report and Accounts 2018
Strategic Report Principal Risks and Uncertainties
The principal risks and uncertainties which have the potential, in the short to medium term,
to have a significant impact upon the Group’s strategic objectives are set out below, together
with an indication of the particular strategic priorities to which they relate, the principal mitigation
measures and any movement or development in the risk or the mitigation in the past year.
These represent the Board’s view of the
principal risks at this point in time. There may
be other matters that are not currently known
to the Board or are currently considered of low
likelihood which 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.
The Board has reviewed the principal risks
and considers that while there has not been
a significant change in these risks in the past
year, they do continue to evolve, taking account,
in particular, of the growth in the scale of the
Group, geographic expansion, regulatory
change and significant projects.
Brexit and DCC
In line with the guidance issued by the Financial
Reporting Council (‘FRC’), the Board has
considered the consequential risks and
uncertainties in the political and economic
environment arising from the referendum vote
in favour of the UK leaving the EU (‘Brexit’) and
the impacts of those risks and uncertainties
on the DCC Group.
Regular updates on the potential impacts
of Brexit on DCC have been presented to the
Board on a range of issues, including operational
issues, currency implications, taxation, capital
markets and regulatory matters.
The Board, having considered these updates,
has concurred with the conclusion that the
short and medium-term impact of Brexit
remains uncertain and most likely issues will
arise that have not been contemplated or
foreseen. However, at this stage, the Board
believes that DCC is not likely to be materially
directly impacted by Brexit in the short or
medium term and that any trading or other
impacts can be managed.
Strategic Linkages
Market leading
positions
Operational
excellence
Extend our
geographic
footprint
Development
of our people
Financial
discipline
Risk
Impact
Principal Mitigation Measures
Movement and Development
1. Environmental
2. Major HSE incident
HSE management systems are appropriate
to the nature and scale of the risks. There is
a strong focus on process safety and ongoing
communication with the relevant safety
authorities, particularly within the LPG and
Retail & Oil divisions.
Emergency response and business continuity
plans are in place to minimise the impact
of any significant incidents. Inspection and
auditing processes in relation to HSE
management systems are conducted by
subsidiary management, by the Group HSE
function and by external assurance providers,
as appropriate.
Insurance cover is maintained at Group level
for all significant insurable risks.
While there have been no
significant changes to the
assessment of these risks,
management continue to
improve HSE practices, including
an update of the Group Health
& Safety Policy, further rollout
of the Safety First initiative and
process safety standards.
Detailed HSE due diligence
was completed in respect of the
agreements to acquire the Retail
West, Hong Kong and Macau and
TEGA LPG businesses.
The Group is subject to
HSE laws, regulations and
standards across multiple
jurisdictions.
The principal risks faced
relate to:
• fire, explosion or
multiple vehicle
accident resulting in
one or more fatalities;
• 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.
Such risks may give rise
to legal liability, significant
costs and damage to
the Group’s reputation.
DCC plc Annual Report and Accounts 2018
19
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Risk Report (continued)
Principal Risks and Uncertainties (continued)
Risk
Impact
Principal Mitigation Measures
Movement and Development
The Group promotes a culture of compliance
and ‘Doing the Right Thing’ in all activities.
A Code of Conduct is in place and is supported
by more detailed policies where needed,
including a Supply Chain Integrity Policy and
an Anti-Bribery and Corruption Policy.
Training programmes are provided for
employees on key compliance risks.
All employees can raise concerns, using the
Group’s whistleblowing facilities.
The Group Legal & Compliance function
performs compliance audits and a range of
compliance controls are reviewed by Group
Internal Audit as part of their audits.
Businesses in the Group operates quality
management systems and quality assurance
processes, which are subject to regulatory
review, and meet licensing requirements for all
manufacturing and product processing facilities.
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 of their strategic fit within the Group.
The Group conducts a stringent internal
evaluation process and external due diligence
prior to completing any acquisition.
Performance against original acquisition
proposals is formally reported to the Board on
an annual basis and account is taken of learnings.
Projects and change management programmes
are resourced by dedicated and appropriately
qualified internal personnel, supported by
external expertise, and are subject to oversight
by the Group Chief Information Officer and the
IT Assurance function, by divisional and Group
management and by the Audit Committee.
Group businesses have prepared
for the General Data Protection
Regulation ('GDPR') which comes
into force on 25 May 2018.
There have been no other
significant changes to legal and
ethical standards/regulations
impacting on the Group during
the year.
As the Group expands
geographically, we are taking
account of the compliance
requirements in new territories.
While acquisitions, change
management programmes and
projects continue, no significant
changes to the overall
assessment of these risks
are considered necessary.
It has been an active period
of corporate development,
with £670 million committed
to acquisitions, including the
Group's first acquisitions in
the US.
A large scale project in Exertis UK
to enhance the core ERP system
is in progress.
A central Project Management
Office has been established to
enhance the support provided
to key projects and change
management programmes.
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.
There have been no significant
changes to supplier/customer
concentrations during the year
and no significant change to the
assessment of this risk.
3. Compliance with
legal and ethical
standards
4. Product integrity
A material failure to comply
with applicable legal and
ethical standards or to
ensure that products sold
by Group businesses are
safe and compliant with
applicable legal and
regulatory standards could
result in penalties, costs,
reputational harm and
damage to relationships
with suppliers or
customers.
5. Acquisitions
6. Project/Change
management
A failure to identify,
execute or properly
integrate acquisitions
or to complete change
management
programmes or other
significant projects could
impact on profit targets
and impede the strategic
development of the
Group.
7. Loss of
significant
customer
or supplier
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
those businesses.
20
DCC plc Annual Report and Accounts 2018
Strategic Report
Although the IT system failure
and cybercrime risks continue
to evolve, the Group has
strengthened its mitigation
measures and no significant
change to the assessment of
the risk is required.
IT standards and policies have
been updated to reflect recent
changes in the underlying best
practice frameworks on which
they are based.
Following an external review of
the Group’s business continuity,
IT recovery and crisis
management plans last year,
updates to the plans in place
across the Group are being made
to ensure they continue to meet
best practice.
There have been no significant
changes to the overall
assessment of this risk.
Senior management changes
have been successfully
completed during the year in
a number of larger subsidiaries.
Strategic Linkages
Market leading
positions
Operational
excellence
Extend our
geographic
footprint
Development
of our people
Financial
discipline
Risk
Impact
Principal Mitigation Measures
Movement and Development
8. IT system failure/
Cybercrime
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.
Dedicated IT personnel in Group subsidiaries
implement IT standards and oversee IT security
and are provided with technical expertise
and support.
Cybersecurity reviews are performed by
a dedicated internal IT Assurance team and
external technical experts to provide
independent assurance.
Business continuity, IT disaster recovery and
crisis management plans are in place and
regularly tested.
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 could impact on
the attainment of strategic
objectives.
The Group maintains a constant focus on
this area with structured succession planning,
management development and remuneration
programmes, incorporating long and short-term
incentives. A graduate recruitment programme
is also in place.
These programmes are reviewed regularly
by Group Human Resources, divisional
management, the Chief Executive and
the Board.
9. Ability to
secure/retain
management
resource
10. Financial
reporting
The Group is exposed to
liquidity, foreign exchange,
commodity and interest
rate risk, as well as ongoing
demands for credit.
Failure to accurately report
or forecast financial results
through error or fraud
could damage the Group’s
reputation.
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.
Group financial risk management is governed
by policies and guidelines which are reviewed
and approved annually by the Board.
There have been no significant
changes to the overall
assessment of this risk.
The Group has continued its
programme of replacing legacy
systems with appropriate
enhanced financial
reporting systems.
Standard reporting packs are prepared,
including weekly forecasts and monthly
submissions, and are subject to review by
local, divisional and Group management
as well as Group Internal Audit.
DCC plc Annual Report and Accounts 2018
21
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Risk Report (continued)
Principal Risks and Uncertainties (continued)
Strategic Linkages
Market leading
positions
Operational
excellence
Extend our
geographic
footprint
Development
of our people
Financial
discipline
Risk
Impact
Principal Mitigation Measures
Movement and Development
The impact of these external factors
is mitigated through a focus on strong financial
management, a broad spread of products
and customers across the divisions and
careful geographical expansion.
The Group is focused on expanding its
operations in the non-heating segments
of the market.
The Group maintains a close focus on policy,
regulatory, technological and consumer
preference developments in the sectors
in which it operates.
There have been no significant
changes in the external factors
that may impact on the Group.
The Group continues to monitor
the specific implications of
climate change which may
impact on its businesses,
which are considered
to be emerging risks.
The Group has continued to
expand its operations in the
non-heating segments of the
market and geographically.
11. Changing market
dynamics
12. Extreme weather
13. Relevant
implications of
climate change
External factors outside
of the direct influence
of the Group, including
economic cycles,
technological changes and
weather, can significantly
impact on performance.
Demand for some of
the products sold by the
Group, most notably
heating products in the
LPG and Retail & Oil
divisions, is directly related
to weather conditions.
The inherent uncertainty
of weather conditions
therefore presents a risk
to profits generated.
Certain implications
of climate change, such
as changes in policy,
regulation, technologies
and consumer preference,
are emerging risks which
have the potential to
impact on demand for the
Group’s products and to
result in increased costs.
22
DCC plc Annual Report and Accounts 2018
Strategic Report
Financial Review
Consistent strategy,
proven business model
DCC has been building steadily
for 41 years with a consistent
strategy and deploying a proven
business model. Our overall
objective is to continue to build
a growing, sustainable and cash
generative business which
consistently provides returns
on capital employed significantly
ahead of our cost of capital.
DCC has continued to deliver
on this overall objective in the
year ended 31 March 2018
whilst maintaining a strong,
liquid and conservatively
financed balance sheet
We remain ambitious to grow
our business further in the
coming year to 31 March 2019,
both organically and by way
of acquisition, and to grow
our dividend to shareholders
whilst maintaining our
financial strength.
Fergal O’Dwyer
Chief Financial Officer
DCC plc Annual Report and Accounts 2018
23
Supplementary InfoFinancial StatementsGovernanceStrategic Report Financial Review (continued)
Highlights of 2018
Revenue – continuing 1
+16.3%
£14,265m
(2017: £12,270m)
Adjusted operating profit 2
– continuing 1
+11.1%
£383.4m
(2017: £345.0m)
Adjusted EPS 2 (pence)
– continuing 1
317.45p
(2017: 286.59p)
+10.8%
Currency
With approximately 45% of the Group’s revenue
and approximately 55% of the Group’s adjusted
operating profits generated outside of the UK,
the weakening of sterling against most
currencies has had a positive translation impact
on the Group’s reported results, increasing
both revenue from continuing operations and
adjusted operating profits from continuing
operations by 2.5%. To facilitate comparability,
most percentage variances versus the prior
year will be expressed both on a reported basis
and on a constant currency basis (which
retranslates current year metrics at prior
year exchange rates).
Revenue/Volumes – Continuing Operations
Revenue from continuing operations increased
by 16.3% (13.8% ahead on a constant currency
basis) to £14.3 billion.
DCC LPG volumes increased by 19.8% to
1.9 million tonnes, driven by the acquisitions
of Gaz Européen in the prior year and Shell
Hong Kong & Macau in January 2018. On a
like-for-like basis, volumes were 4.7% ahead of
the prior year. DCC LPG’s revenue increased by
30.8% (up 26.2% on a constant currency basis).
Volumes in DCC Retail & Oil increased by 6.4%
to 12.3 billion litres, reflecting the acquisitions
of Dansk Fuels in the prior year and Esso Retail
Norway in October 2017. Volumes were in line
with the prior year on an organic basis. DCC
Retail & Oil’s revenues increased by 15.8%
(up 13.3% on a constant currency basis).
Revenue excluding DCC LPG and DCC Retail
& Oil increased by 12.6% (11.1% ahead on
a constant currency basis) to £3.6 billion,
approximately half of which was organic.
Adjusted Operating Profit
– Continuing Operations
Group adjusted operating profit from
continuing operations increased by 11.1%
to £383.4 million (8.6% ahead on a constant
currency basis); approximately one third of the
constant currency adjusted operating profit
growth was organic. The average sterling/euro
translation rate for the year of 1.1366 was
4.9% weaker than the average of 1.1956
in the prior year.
Adjusted operating profit in DCC LPG was
4.4% ahead of the prior year (1.0% ahead
on a constant currency basis), despite the
anticipated headwind of a rising cost of product
and continued organic investment in its B2C
natural gas and electricity offering in France.
DCC LPG benefited from the acquisition of
Shell Hong Kong & Macau and strong organic
growth from the business in Britain, where
further progress was achieved in converting
Table 1: Trading Overview
Revenue (continuing)
Adjusted operating profit
DCC LPG
DCC Retail & Oil
DCC Healthcare
DCC Technology
Group adjusted operating profit (continuing)
Share of equity accounted investments’ profit after tax
Finance costs (net)
Profit before net exceptionals, amortisation of intangible
assets and tax (continuing)
Net exceptional items after tax and non-controlling interests
Amortisation of intangible assets
Profit before tax from continuing operations
Taxation
Profit after tax
Profit after tax from discontinued operations
Non-controlling interests
2018
£’m
2017
£’m
Change on
prior year %
14,264.6
12,269.8
+16.3%
167.5
113.8
54.3
47.8
383.4
0.4
(35.8)
348.0
11.4
(43.0)
316.4
(49.3)
267.1
0.8
(6.1)
160.4
+4.4%
94.5
49.0
41.1
+20.4%
+11.0%
+16.3%
345.0
+11.1%
0.7
(31.9)
313.8
+10.9%
(24.8)
(39.2)
249.8
+26.6%
(44.1)
205.7
+29.8%
15.2
(4.7)
1. Excluding DCC Environmental which was disposed
Net earnings
261.8
216.2
+21.1%
of in May 2017.
2. Excluding net exceptionals and amortisation
of intangible assets.
Adjusted earnings per share – total (pence)
318.35p
303.68p
+4.8%
Adjusted earnings per share – continuing (pence)
317.45p
286.59p
+10.8%
24
DCC plc Annual Report and Accounts 2018
Strategic Report Table 2: Revenue (Continuing Operations)
DCC LPG
DCC Retail & Oil
DCC Healthcare
DCC Technology
Total
Constant currency
Weighting %
2018
H2
£'m
H1
£'m
FY
£'m
H1
£'m
2017
H2
£'m
FY
£'m
H1
£'m
Growth
H2
£'m
FY
£'m
502.0
901.8
1,403.8
367.9
705.3
1,073.2
+36.5%
+27.9%
+30.8%
4,331.6
4,931.2
9,262.8
3,750.9
4,250.0
8,000.9
+15.5%
+16.0%
+15.8%
245.0
269.6
514.6
244.3
262.3
506.6
+0.3%
+2.8%
+1.6%
1,370.9
1,712.5
3,083.4
1,144.2
1,544.9
2,689.1
+19.8%
+10.9%
+14.7%
6,449.5
7,815.1
14,264.6
5,507.3
6,762.5
12,269.8
+17.1%
+15.6%
+16.3%
6,234.3
7,733.7
13,968.0
5,507.3
6,762.5
12,269.8
+13.2%
+14.4%
+13.8%
45.2%
54.8% 100.0%
44.9%
55.1%
100.0%
Table 3: Adjusted Operating Profit (Continuing Operations)
DCC LPG
DCC Retail & Oil
DCC Healthcare
DCC Technology
Total
Constant currency
Weighting %
H1
£'m
44.1
42.2
22.0
14.2
122.5
117.4
2018
H2
£'m
123.4
71.6
32.3
33.6
260.9
257.1
FY
£'m
167.5
113.8
54.3
47.8
383.4
374.5
H1
£'m
37.0
39.0
19.8
11.3
107.1
107.1
2017
H2
£'m
FY
£'m
H1
£'m
Growth
H2
£'m
FY
£'m
123.4
160.4
+19.2%
+0.0%
+4.4%
55.5
29.2
29.8
237.9
237.9
94.5
49.0
41.1
345.0
345.0
+8.0%
+29.0%
+20.4%
+11.6%
+10.6%
+11.0%
+25.8%
+12.8%
+16.3%
+14.4%
+9.7%
+9.7%
+8.1%
+11.1%
+8.6%
32.0%
68.0% 100.0%
31.0%
69.0%
100.0%
oil customers to LPG in the commercial and
industrial sectors.
In DCC Retail & Oil, adjusted operating profit
was 20.4% ahead of the prior year (18.0%
ahead on a constant currency basis).
Approximately half of the constant currency
growth was organic and broadly based, with
good profit growth across the division. The
business in Britain benefited from a marginally
colder than average winter, which drove
a modest increase in heating demand.
In Denmark, the business delivered strong
organic growth and also benefited from the
integration of the Dansk Fuels acquisition,
completed in the prior year.
Adjusted operating profit in DCC Healthcare
was 11.0% ahead of the prior year (10.6%
ahead on a constant currency basis) and
approximately half of the constant currency
growth was organic. DCC Vital performed
strongly, driven by the first full year contribution
from Medisource, which completed in January
2017, as well as good organic growth in medical
devices. DCC Health & Beauty Solutions
benefited modestly from the acquisition
of Elite One Source in January 2018 and
continued to deliver strong organic growth
in nutritional products.
In DCC Technology, adjusted operating profit
was 16.3% ahead of the prior year (15.5%
ahead on a constant currency basis), reflecting
a very strong organic performance in the
UK and Ireland, particularly in audio visual,
components and gaming, and the benefit
of the acquisitions of Hammer and MTR.
In France, the B2B business again delivered
good growth. The French consumer products
business remained very challenging and a
programme to significantly reduce costs while
improving its logistics and operational efficiency
is being implemented. The Nordics business
again delivered strong growth in IT and audio
visual products and benefited in particular from
continued investment in building out its
presence in Norway.
The Group’s operating margin on a continuing
basis (excluding amortisation of intangible
assets and net exceptionals) was 2.7%,
compared to 2.8% in 2017, however it is
important to note that this measurement
of the overall Group operating margin is of
limited relevance due to the influence of
changes in oil product costs on the percentage.
Whilst changes in oil product costs will change
percentage operating margins, this has little
relevance in the downstream energy market
in which DCC LPG and DCC Retail & Oil
operate, where profitability is driven by absolute
contribution per litre/tonne of product sold and
not by a percentage margin. Excluding DCC
LPG and DCC Retail & Oil, the operating margin
on a continuing basis for the Group’s other
divisions was 2.8%, the same as in 2017.
An analysis of the revenue and adjusted
operating profit performance for the first half,
the second half and the full year ended
31 March 2018 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
42 to 67.
The compound annual growth rate (‘CAGR’)
in DCC’s adjusted operating profits, from
continuing operations, over the last 24 (since
the company became a public company),
15 and 10 years is as follows:
24 years (i.e. since 1994)
15 years (i.e. since 2003)
10 years (i.e. since 2008)
CAGR %
14.4%
14.0%
14.8%
Finance Costs (net)
Net finance costs increased to £35.8 million
(2017: £31.9 million) and reflects an increase
in the Group’s gross debt due primarily to the
drawdown in September 2017 of a new £450
million US private placement debt issuance.
It also reflects the higher average net debt
during the year of £467 million compared to
£301 million during the prior year. The average
net debt increased due to the record level of
acquisition spend of approximately £670 million
during the year.
DCC plc Annual Report and Accounts 2018
25
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Financial Review (continued)
Interest was covered 13.4 times by Group
adjusted operating profit before depreciation
and amortisation of intangible assets (2017:
14.2 times).
Profit before net exceptional items,
amortisation of intangible assets and tax
Profit before net exceptional items,
amortisation of intangible assets and tax
increased by 10.9% to £348.0 million (8.4%
ahead on a constant currency basis).
Net exceptional credit and amortisation
of intangible assets
The Group incurred a net exceptional credit
after tax and non-controlling interests of
£11.4 million as follows:
Profit on disposal of discontinued
operations
Acquisition and related costs
Restructuring costs
IAS 39 mark-to-market gain and other
Tax and non-controlling interests
Net exceptional credit
£’m
29.8
(12.8)
(33.2)
1.2
26.4
11.4
The profit on disposal of discontinued
operations relates to the gain recorded on
the profitable sale of DCC’s environmental
division, which completed on 31 May 2017.
Acquisition and related costs include the
professional fees and tax costs (such as stamp
duty) relating to the evaluation and completion
of acquisition opportunities and amounted to
£12.8 million.
Restructuring costs amounted to £33.2 million
and principally reflect the costs associated with
the Group’s focus on increasing the efficiency
of its operating infrastructure and sales
platforms. The majority of the charge relates
to the Retail & Oil division where a large project
to bring greater efficiency and reduced capital
expenditure over time to the UK business’
nationwide depot network infrastructure is
underway and the project will result in a material
reduction in the number of depot locations.
An element of the charge also relates to the
integration and restructuring costs associated
with the prior year acquisition of Dansk Fuels
in Denmark.
The other material element of the restructuring
charge relates to the ongoing optimisation
of DCC Technology’s logistics and related
infrastructure. In the UK, the new national
distribution centre is now operational and
a number of the existing locations have
transferred into the new infrastructure.
The remaining existing locations will transition
during the coming year and the majority of
the legacy locations have now been sold
successfully. A programme to significantly
reduce costs whilst improving the logistics and
operational efficiency of DCC Technology’s
French consumer business is ongoing. This
project will also deliver a consolidation of two
existing warehouses into one new facility.
Finally, the business in the Nordics has recently
commissioned its new national distribution
centre and it is now operational.
Most of the Group’s debt has been raised in
the US Private Placement market and swapped,
using long-term interest and cross currency
interest rate 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 is charged or credited
as an exceptional item. In the year ended
31 March 2018, this amounted to an
exceptional non-cash gain of £0.3 million.
Table 4: Reconciliation of Adjusted Earnings from continuing operations
to Profit Attributable to Shareholders
Adjusted earnings (continuing)
Amortisation of intangible assets (net of tax)
Adjusted earnings relating to activities disposed of
Exceptional items (net of tax)
Profit attributable to shareholders
Adjusted EPS (continuing)
Amortisation of intangible assets (net of tax)
Adjusted earnings relating to activities disposed of
Exceptional items (net of tax)
Basic EPS
26
DCC plc Annual Report and Accounts 2018
Change on
prior year %
+11.2%
2018
£’m
282.9
(33.3)
0.8
11.4
2017
£’m
254.3
(28.5)
15.2
(24.8)
261.8
216.2
+21.1%
2018
pence
2017
pence
Change on
prior year %
317.45
286.59
+10.8%
(37.31)
(32.08)
0.90
12.79
17.09
(27.96)
293.83
243.64
+20.6%
Following this credit, the cumulative net
exceptional charge taken in respect of the
Group’s outstanding US Private Placement
debt and related hedging instruments is
£5.3 million. This, or any subsequent similar
non-cash charges or gains, will net to zero
over the remaining term of this debt and the
related hedging instruments.
The tax and non-controlling interests credit
of £26.4 million principally reflects the impact
of the recent reduction of the statutory
corporation tax rate in France and a
corresponding reduction in the Group’s
deferred tax liabilities associated with the
Group’s brand and other intangible assets
in France.
The charge for the amortisation of acquisition
related intangible assets increased to £43.0
million from £39.2 million in the prior year, with
the increase principally reflecting acquisitions
completed in the current and prior year.
Profit before tax
Profit before tax increased by 26.6% to
£316.4 million.
Taxation
The effective tax rate for the Group decreased
to 17.0% from 17.5% in the prior year. The
decrease primarily reflects reductions in
certain territorial tax rates and the change
in the geographical mix of earnings.
The Group’s tax strategy is to:
• ensure compliance with all applicable tax
laws and regulation in all countries in which
the Group operates; and
• support the Group’s business development
strategy through the appropriate
management of its tax affairs in line with
the Group’s commercial activities.
Discontinued operations
The Group’s discontinued operations represent
the activities of DCC Environmental which was
disposed of in May 2017.
Non-Controlling Interest
The non-controlled element of the Group’s
consolidated profit after tax (and before
exceptional items) amounted to £6.1 million
(2017: £4.7 million) and primarily relates to the
profit share of the Group’s partners in its Danish
Retail & Oil activities.
Adjusted Earnings Per Share
Adjusted earnings per share on a continuing
basis increased by 10.8% (8.3% on a constant
currency basis) to 317.5 pence.
Total adjusted earnings per share also
increased by 4.8% (2.5% on a constant
currency basis) to 318.4 pence.
Strategic Report Highlights of 2018
The compound annual growth rate (‘CAGR’)
in DCC’s total adjusted earnings per share over
the last 24, 15 and 10 years is as follows:
Dividend per share (pence)
+10.0%
122.98p
(2017: 111.80p)
Return on total capital employed 1
17.5%
(2017: 20.3%)
Free cash flow 2
£328.1m
(2017: £415.5m)
Free cash flow conversion
85%
(2017: 114%)
1. Excluding DCC Environmental which was disposed
of in May 2017.
2. Cash generated from operations before
net exceptionals and after net capital expenditure.
24 years (i.e. since 1994)
15 years (i.e. since 2003)
10 years (i.e. since 2008)
CAGR %
12.5%
11.2%
10.6%
Dividend
The Board is recommending an increase of
10.0% in the final dividend to 82.09 pence per
share, which, when added to the interim dividend
of 40.89 pence per share, gives a total dividend
for the year of 122.98 pence per share. This
represents a 10.0% increase over the total prior
year dividend of 111.80 pence per share. The
dividend is covered 2.6 times by adjusted
earnings per share on a continuing basis
(2.6 times in 2017). It is proposed to pay the final
dividend on 19 July 2018 to shareholders on the
register at the close of business on 25 May 2018.
Over its 24 years as a listed company, DCC
has an unbroken record of dividend growth
at a compound annual rate of 14.5%.
Return on Capital Employed
The creation of shareholder value through the
delivery of consistent, long-term returns well in
excess of its cost of capital is one of DCC’s core
strategic aims. The return on capital employed
by division was as follows:
DCC LPG
DCC Retail & Oil
DCC Healthcare
DCC Technology
Group – continuing
2018
%
17.4%
18.7%
16.7%
16.1%
17.5%
2017
%
22.9%
19.8%
17.5%
17.1%
20.3%
The decrease in the return on capital employed
versus the prior year principally reflects the
impact of the substantial acquisition spend
during the year as the Group entered
new geographies.
Cash Flow
Operating cash flow was £473.4 million
compared to £546.9 million in the prior year.
Working capital increased by £13.8 million
(£7.3m increase on a continuing basis). Overall
working capital days were negative 2.0 days
sales, compared to negative 3.3 days sales in
the prior year, reflecting the acquisition during
the year of businesses with positive working
capital characteristics. DCC Technology
selectively uses supply chain financing solutions
to sell, on a non-recourse basis, a portion of its
receivables relating to certain larger supply chain/
sales and marketing activities. The level of supply
chain financing at 31 March 2018 increased on
the prior year and supply chain financing had
a positive impact on Group working capital days
of 4.0 days (31 March 2017: 4.2 days) or £202.1
million (2017: £165.6 million).
Net capital expenditure amounted to £145.3
million for the year (2017: £131.4 million) and
was net of disposal proceeds of £7.6 million.
The increased level of gross capital expenditure
reflects the increased scale of the Group and
a number of investments being undertaken to
support continued growth and development.
In the current year, the principal items included
ongoing investment in new retail sites and site
upgrades in the Retail & Oil division, investment
to support the organic volume growth being
achieved in the LPG division, and the
completion of the new national distribution
centres and related infrastructure in the
Technology division. The net capital
expenditure exceeded the depreciation
charge in the year by £51.7 million.
The Group’s free cash flow amounted to
£328.1 million, an 85% conversion of adjusted
operating profit into free cash flow.
This performance continues a record of
significant cash conversion in the Group.
A summary of cash flows for the current year,
the prior year and cumulatively since the Group’s
flotation in 1994 is presented in Table 5.
Total cash spend on acquisitions
for the year ended 31 March 2018
The total cash spend on acquisitions
completed in the year was £691.0 million
and included the payment of deferred and
contingent acquisition consideration previously
provided of £26.9 million.
Acquisition activity
Committed acquisition expenditure in the
period amounted to £355.3 million. An analysis
by division is shown below:
DCC LPG
DCC Retail & Oil
DCC Healthcare
DCC Technology
TOTAL
Acquisitions
£'m
250.8
27.9
43.7
32.9
355.3
DCC LPG
Retail West
On 7 November 2017, DCC LPG announced
that it had reached agreement with NGL
Energy Partners LP (‘NGL’) to acquire its Retail
West LPG division, Hicksgas LLC (‘Retail West’
or ‘the business’). The acquisition completed
on 31 March 2018.
DCC plc Annual Report and Accounts 2018
27
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Financial Review (continued)
Headquartered in Illinois, Retail West has been
in business for over 70 years and employs 390
people. It sells approximately 130,000 tonnes
(assuming normal winter weather conditions)
of LPG annually from 43 customer service
locations and 58 satellite facilities. The business
trades under three prominent regional brands,
Hicksgas, Pacer Propane and Propane Central,
and a number of smaller, local brands. Retail
West has leading market positions in Illinois,
Indiana and Kansas and also operates in seven
other states across the Mid-West and
North-West regions. The acquisition
represents DCC LPG’s entry into the US
market and is a further significant step in
DCC’s strategy to build a global LPG business
over time. The US is one of the world’s largest
LPG markets and is an attractive and growing
market. It is also highly fragmented, with over
4,000 LPG distribution businesses operating
in the market. The acquisition of Retail West
will provide DCC with a substantial, high-quality
presence in the US with leading market
positions in a number of states. The business
has an excellent customer base, a strong and
well-invested operational infrastructure and
an experienced management team.
TEGA
On 4 January 2018, DCC LPG announced it
had reached agreement with Linde AG to
acquire Tega-Technische Gase und
Gasetechnik GmbH, its LPG and refrigerant
gas distribution business in Germany (‘TEGA’).
The transaction completed on 31 March 2018.
TEGA, headquartered in Würzburg, employs
approximately 100 people across five operating
sites, largely in southern Germany. TEGA has
revenue of c.€75 million evenly split between
LPG and refrigerants. The business supplies
c.35,000 tonnes of LPG annually to c.15,000
domestic and commercial customers. It also
supplies refrigerant gases to wholesalers
and end-users for use in air-conditioning,
commercial cooling systems and refrigerators.
The business has operated on a standalone
basis within The Linde Group and continues
to be led by its existing, highly experienced
management team.
The acquisition of TEGA provides DCC
LPG with a platform in the large, relatively
fragmented German LPG market and further
strengthens its position in the LPG market in
Europe. In addition, it provides an entry into the
refrigerant gas market, further enhancing the
service capability of the LPG business, following
the expansion into medical and aerosol gases
in recent years.
Countrywide LPG
On 11 January 2018, DCC LPG announced
it had reached agreement with Countrywide
Farmers plc to acquire the trade and assets
of its liquefied petroleum gas (LPG) distribution
business in Britain (‘Countrywide LPG’).
Countrywide LPG supplies bulk and cylinder
LPG to domestic, agricultural and commercial
customers in Britain. The business sells
approximately 20,000 tonnes of LPG annually.
The transaction completed on 28 February
2018 and is currently being held pending
merger clearance.
DCC Retail & Oil
Snap
In May 2018, DCC Retail & Oil acquired SNAP,
an end-to-end transaction processing and
payment system for HGV fleets. The business
facilitates cashless payments through licence
plate recognition for HGV fleets at truck stops.
The business, although modest, is growing
strongly and will be complementary to the
existing retail and oil businesses.
DCC Healthcare
Elite One Source
On 7 February 2018, DCC Health & Beauty
Solutions announced the acquisition of Elite
One Source Nutritional Services, Inc (‘Elite One
Source’), a provider of contract manufacturing
and related services to the growing healthcare
and dietary supplements market in the US.
Elite One Source focuses on complex-
formulation nutritional products in tablet
and capsule dosage forms, including organic
and probiotic products, across a variety
of packaging formats. Its service offering
encompasses product development,
formulation, manufacturing, packaging and
regulatory services. Its customer base includes
some of the leading specialist brands in the
US consumer healthcare market. Elite One
Source’s facilities in Missoula, Montana are
well-invested with significant scope to expand
capacity to meet its organic growth plans.
Table 5: Summary of Cash Flows
Adjusted operating profit (including discontinued operations)
(Increase)/decrease in working capital
Depreciation and other
Operating cash flow
Capital expenditure (net)
Free cash flow
Interest and tax paid
Free cash flow (after interest and tax payments)
Acquisitions
Dividends
Disposals/exceptional items
Share issues (net of buy backs)
Net outflow
Opening net debt
Translation and other
Closing net debt
EBITDA
Free cash flow conversion (%)
28
DCC plc Annual Report and Accounts 2018
2018
£’m
384.4
(13.8)
102.8
473.4
(145.3)
328.1
(96.0)
232.1
(691.0)
(102.9)
147.5
3.3
(411.0)
(121.9)
(9.8)
(542.7)
478.1
85%
2017
£’m
363.6
84.0
99.3
546.9
(131.4)
415.5
(91.2)
324.3
(262.4)
(95.3)
(31.5)
2.6
(62.3)
(54.5)
(5.1)
(121.9)
455.6
114%
24 years since
flotation
cumulatively
£’m
3,243.8
322.3
839.9
4,406.0
(1,098.7)
3,307.3
(724.8)
2,582.5
(2,729.2)
(864.5)
340.3
174.2
(496.7)
(1.6)
(44.4)
(542.7)
4,116.7
102%
Strategic Report
Highlights of 2018
Cash acquisition spend
£691.0m
(2017: £262.4m)
Cash balances
£964.3m
(2017: £924.8m)
EBITDA: net interest
13.4 times
(2017: 14.2 times)
The facilities comply with FDA cGMP (current
Good Manufacturing Practices) and Health
Canada standards and are certified by leading
third party regulatory bodies including NSF
and USDA Organic. The business is led by an
experienced management team and employs
180 people.
The acquisition of Elite One Source provides
an entry into the US market, the world’s largest
healthcare and dietary supplements market.
The US is an innovative, high-growth market,
with a fragmented contract manufacturing base,
which offers DCC significant opportunities for
organic and acquisitive growth.
DCC Technology
MTR
In July 2017, DCC Technology acquired MTR
Group Ltd (‘MTR’), a fast-growing UK-based
provider of second lifecycle solutions for mobile
and tablet devices.
Based in Harlow, Essex and employing 60
people, MTR provides a broad range of services
to retailers, mobile handset manufacturers and
insurance companies to source and refurbish
mobile phones and tablets for resale to
customers in the UK and abroad. In the year
ended 30 November 2016, MTR generated
service revenues of £11 million. The acquisition
of MTR advances the DCC Technology strategy
of expanding its service proposition to vendors
and customers and provides access to the high
growth second lifecycle solutions market.
Hypertec
In March 2018, DCC Technology acquired
Hypertec Ltd., a small UK-based distributor
of third party and own-brand memory and
accessory products. The business generated
revenues of £28.3 million in its most recent
financial year and employs approximately
50 people.
Key financial ratios
Net debt: EBITDA (times)
EBITDA: net interest (times)
EBITA: net interest (times) – continuing
Total equity (£’m)
Disposals
The cash flow on disposals relates to the
disposal of DCC’s Environmental division on
31 May 2017. Full details of the disposal were
set out in DCC’s Stock Exchange
announcement of 5 April 2017.
Since the year end, DCC Retail & Oil has
completed the disposal of both its fuel storage
terminal in Belfast to Valero Logistics UK Ltd,
a subsidiary of Valero Energy Corporation, and
its distribution business in Northern Ireland to
Nicholl Fuel Oils Ltd. The distribution business
sold approximately 250 million litres of product
in the year to 31 March 2018. The sale excludes
the retail business in Northern Ireland.
Balance Sheet and Group Financing
An integral part of the Group’s strategy is the
maintenance of a strong and liquid balance sheet
to enable it to take advantage of development
opportunities as they arise. As a result of the
continued strong cash flow performance,
DCC’s financial position remains very strong.
At 31 March 2018, the Group had net debt of
£542.7 million, total equity of £1.7 billion, cash
resources, net of overdrafts, of £964.3 million
and a further £400 million of undrawn committed
debt facilities. The Group’s outstanding term
debt at 31 March 2018 had an average maturity
of 6.3 years. Substantially all of the Group’s debt
has been raised in the US Private Placement
market with an average credit margin of 1.6%
over floating Euribor/Libor.
At 31 March 2018, the Group’s Net Debt: EBITDA
was 1.1 times, reflecting the large acquisition
spend in the second half of the financial year.
Further analysis of the Group’s cash, debt
and financial instrument balances at 31 March
2018 is set out in notes 3.8 to 3.11 in the
financial statements.
Key financial ratios as at 31 March 2018,
and the principal financial covenants included
in the Group’s various lending agreements,
are as follows:
2018
Actual
Lender
covenants
1.1
13.4
10.7
3.5
3.0
3.0
2017
Actual
0.3
14.2
10.8
1,677.9
425.0
1,507.7
DCC plc Annual Report and Accounts 2018
29
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Financial Review (continued)
Table 6: Performance Metrics
Growth (continuing operations):
Adjusted operating profit growth (%)
Adjusted operating profit growth on a constant currency basis (%)
Volume growth DCC LPG (%)
Volume growth DCC Retail & Oil (%)
Revenue growth – excl. DCC LPG & DCC Retail & Oil (%)
Adjusted operating profit margin – excl. DCC LPG & DCC Retail & Oil (%)
Adjusted earnings per share growth (%)
Adjusted earnings per share growth on a constant currency basis (%)
Return:
Return on capital employed – continuing (%)
Operating cash flow (£’m)
Free cash flow (£’m)
Conversion of adjusted operating profits to free cash flow (%)
Working capital days (days)
Debtor days (days)
Financial Strength/Liquidity/Financial Capacity for Development:
EBITA: net interest (times) – continuing
EBITDA: net interest (times)
Cash balances (net of overdrafts and short-term debt) (£’m)
Net debt (£’m)
Net debt as a % of total equity (%)
Net debt: EBITDA (times)
2018
2017
+11.1%
+8.6%
+19.8%
+6.4%
+12.6%
2.8%
+10.8%
+8.3%
17.5%
473.4
328.1
85%
(2.0)
31.2
10.7x
13.4x
964.3
(542.7)
32.3%
1.1x
+20.9%
+12.8%
+34.3%
+7.9%
+9.0%
2.8%
+18.1%
+10.3%
20.3%
546.9
415.5
114%
(3.3)
31.8
10.8x
14.2x
924.8
(121.9)
8.1%
0.3x
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 management,
in conjunction with Group Treasury, manage
foreign exchange exposures within approved
policies and guidelines.
Further detail in relation to the Group’s financial
risk management and its derivative financial
instrument position is provided in note 5.7 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 non-sterling and are primarily euro
denominated. Sterling weakened against the
euro by 2.2% from 1.1689 at 31 March 2017
to 1.1430 at 31 March 2018 and the average
sterling exchange rate at which the Group
translates its euro denominated operating
profits weakened by 4.9% from 1.1956 in
FY2017 to 1.1366 in FY2018.
The proportion of the Group’s profits
denominated in currencies other than sterling
is increasing mainly due to acquisitions.
Approximately 55% (2017: 50%) of the Group’s
adjusted operating profit for the year ended
31 March 2018 was denominated in currencies
other than sterling, primarily the euro and
Scandinavian currencies. 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 weakening of the average
translation rate of sterling, referred to above,
positively impacted the Group’s adjusted
operating profit by £8.9 million in the year
ended 31 March 2018.
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 cross currency interest rate
swaps into) the relevant currency or through
currency swaps related to intercompany
funding, 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 2.2% weakening in the value of sterling
against the euro during the year ended
31 March 2018 referred to above was largely
offset by a strengthening in the value of sterling
against Scandinavian currencies, resulting in
a modest translation gain of £0.7 million on
DCC’s non-sterling denominated net asset
position at 31 March 2018, as set out in the
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DCC plc Annual Report and Accounts 2018
Strategic Report 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
DCC, through its LPG and Retail & Oil divisions,
procures, markets and sells LPG, natural gas,
electricity and oil and, as such, is exposed to
changes in commodity cost prices.
In general, market dynamics are such that
commodity cost price movements are
promptly reflected in sales prices.
In certain markets, and in particular in the LPG
division, short-term or seasonal price stability
is preferred by certain customer segments
which requires hedging a proportion of
forecasted transactions, with such transactions
qualifying as ‘highly probable’ for IAS 39 hedge
accounting purposes. DCC uses both forward
purchase contracts and derivative commodity
instruments to support its pricing strategy for
a portion of expected future sales, typically
for periods of less than 12 months.
Fixed price supply contracts are occasionally
provided to certain customers for periods
typically less than 12 months in duration. DCC
fixes its cost of sales on contracted future
volumes where the customer contract contains
a take-or-pay arrangement that permits the
customer to purchase a fixed amount of
product for a fixed price during a specified
period, and requires payment even if the
customer does not take delivery of the product.
Where a take-or-pay clause is not included in
the customer contract, DCC hedges a portion
of forecasted sales volume recognising that
certain sales, such as natural gas and electricity
in particular, are exposed to volumetric risk in
the form of an uncertain consumption profile
arising from a range of factors, including supply
dynamics and the weather.
Certain activities of individual businesses have
been centralised under the supervision of the
DCC Group Commodity Risk Management
function. Divisional and subsidiary
management, in conjunction with the Group’s
Commodity Risk Management function,
manage commodity price exposures within
approved policies and guidelines.
All commodity hedging counterparties are
approved by the Chief Executive and the Chief
Financial Officer and are 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 our
relationship banks and borrows at both fixed
and floating rates of interest. At 31 March 2018,
86% 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. 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
performance against those plans. During the
year, the executive management team
presented at 10 capital market conferences,
conducted 266 institutional investor one-on-
one and group meetings and presented to 16
broking firms.
The LPG and Retail & Oil divisions do not hold
significant amounts of commodity inventory
relative to purchases and sales; however, for
certain inventory, such as marine gasoil and
natural gas, DCC may enter hedge contracts
to manage price exposures.
Share Price and Market Capitalisation
The Company’s shares traded in the range
£64.75 to £77.55 during the year. The share
price at 31 March 2018 was £65.60 (31 March
2017: £70.25) giving a market capitalisation
of £5.9 billion (2017: £6.2 billion).
The LPG and Retail & Oil divisions both enter
into commodity hedges to fix a portion of own
fuel costs.
Fergal O’Dwyer
Chief Financial Officer
14 May 2018
DCC plc Annual Report and Accounts 2018
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DCC LPG
East and west
geographic expansion
in DCC LPG
Shell Hong Kong and Macau
In January 2018, DCC LPG completed the
acquisition of Shell’s Hong Kong and Macau
LPG business, which will operate under a
long-term brand licence agreement with Shell
as 'DSG Energy Limited' to distribute c.75,000
tonnes annually of branded LPG.
The business is the market leader in Hong Kong
in supplying piped LPG to over 100,000
households based in very large apartment
complexes under long-term supply
agreements, has a number three position in the
cylinder market and supplies autogas on Shell’s
retail network. It also has a market leadership
position in the smaller Macau market.
Strategic linkage
DCC LPG's vision is to be a global leader in the
sales, marketing and distribution of LPG, natural
gas and electricity and related products
and services.
The Retail West acquisition gives DCC LPG
a material footprint in the US and a substantial
base for further development in one of the
world’s largest LPG markets.
The DSG business is ideally positioned in Hong
Kong and Macau to expand and develop the
business locally but also to provide a platform
for longer term growth in the growing and
maturing Australasia LPG market.
A new headquarters has been established in
Kowloon with some key individuals, including
the new Managing Director, Samson Lam,
transferring from Shell. A significant
recruitment and training program has been
completed to establish new sales, finance
and administration teams to ensure a smooth
transition. The business now employs 47
people and has traded strongly since go-live
with no disruption to our customers.
Market leading
positions
Extend our
geographic footprint
Read more: Strategy on pages 2 and 3
What we did in 2018
Retail West
DCC LPG made its entry in to the very large,
fragmented and growing US LPG market
through the acquisition of Hicksgas LLC (the
Retail West LPG division) from NGL Energy
Partners with effect from 31 March 2018.
The business, headquartered in Illinois, has
been in existence for over 70 years, employs
390 people and trades under three key regional
brands, Hicksgas, Pacer Propane and Propane
Central. There is a well-invested asset base
supporting the business, comprising a fleet
of 150 company owned vehicles, c.100 bulk
storage facilities and company ownership
of the majority of tanks on customer premises.
Annual sales of c.130,000 tonnes of LPG are
made to over 65,000 customers from 43
customer service locations and 58 satellite
facilities. The business holds market leading
positions in Illinois, Indiana and Kansas and has
further operations in seven other states across
the Mid-West and North-West regions.
The experienced management team, including
the President and COO, Shawn Coady, have all
been retained and ensures the business is very
well placed to continue its track record of
profitable organic growth and to provide a base
for further synergistic acquisitions.
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Supplementary InfoFinancial StatementsGovernanceStrategic Report Strategy in Action
DCC Retail & Oil
Tokenisation of
bankcards on our
French network
What we did in 2018
The need for paper receipts at our Esso
branded service stations in France has been
all but removed by making digital receipts
available via a web portal or email. The
innovative Cardivation technology, developed
internally by the Retail & Oil division, saves
the business money and enhances the
customer experience.
When a customer fills up and pays with a
bankcard at a Cardivation activated terminal,
a digital copy of their receipt is automatically
and anonymously stored ('tokenised').
Strategic linkage
The connection we have created with the
customer using a state of the art, internally
developed technology, further enhances the
customer experience, increasing customer
loyalty and thus fuelling organic growth.
Market leading
positions
Operating
efficiency
Read more: Strategy on pages 2 and 3
Through the Club Certas web portal
(www.club-certas.com), customers can elect
to have receipts automatically sent directly to
their phone or computer or they can download
specific receipts, making it easy for drivers on
business to track travel expenses and
reclaim VAT.
For the first time we have a complete picture
of how our different customer types are
behaving across the network and all data
complies fully with the new General Data
Protection Regulation (GDPR).
Cardivation also makes it possible for Certas
to cost-effectively personalise loyalty rewards.
The Cardivation web portal for digital receipts
has enhanced the customer experience and
improved operational efficiency in Certas
France. The multi-lingual system is fully proven
and scalable and there are plans to expand it
to Certas service station networks in other
countries as well as to external customers
as a revenue-generating product.
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Supplementary InfoFinancial StatementsGovernanceStrategic Report Strategy in Action
DCC Healthcare
DCC Healthcare’s
first acquisition
in the US
This evaluation resulted in a strategy to seek
to build a group of health & beauty CMO
businesses in the US operating in a similar
manner to our existing European business
i.e. individual facilities with their own specialist
focus areas (product or technology)and their
own strong local management teams
accountable for driving growth at an individual
facility level. This would be supported by a small
central team focused on oversight and
governance, driving cross selling, best practice
and other synergies and business development.
Over the last two years, we have spent time
building relationships in the US nutritional
CMO market, attending industry events and
building DCC’s profile as a credible acquirer.
One of the businesses that we identified as
part of our initial research was Elite One Source
Nutritional Services ('Elite'). DCC made a direct
approach to the shareholders of Elite and
during autumn 2017 entered into detailed
discussions which culminated in the
acquisition of Elite in January 2018.
Strategic linkage
The acquisition of Elite provides DCC with
an entry into the US nutritional CMO market.
Elite has a specialist focus on complex
formulation nutritional products in tablet
and capsule formats and is led by a strong
management team. This is the first stepping
stone in building a larger DCC H&BS business
in the US.
Market leading
positions
Extend our
geographic footprint
Read more: Strategy on pages 2 and 3
What we did in 2018
DCC Health & Beauty Solutions (DCC H&BS)
has a strong track record of organic growth
and bolt on acquisitions in the European
market. Over the last several years DCC H&BS
has built an excellent profile with health &
beauty brand owners in the European market,
other contract manufacturers and acquisition
intermediaries. We have ambitious plans to
continue our growth record in Europe both
organically and by acquisition.
More recently, DCC identified a strengthening
deal flow in the US health & beauty contract
manufacturing ('CMO') sector with an
increasing number of good quality businesses
transacting. The US nutritional market has a
retail value of c.$40 billion, approximately five
times the size of the of the equivalent market
in Europe due to higher levels of consumer
penetration. The same strong market growth
rates being experienced in Europe also prevail
in the US market and are projected to continue.
The market scale, high levels of innovation
and fragmentation of the US contract
manufacturing base are attractive to us.
These favourable market dynamics led us
to invest time and resources proactively
evaluating the US market as a potential growth
platform for DCC H&BS with a focus initially
on the nutritional sector. With the support of
a local market expert, we undertook a market
landscaping exercise to build our understanding
of local trends and dynamics and to identify
a long list of potential acquisition targets.
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Supplementary InfoFinancial StatementsGovernanceStrategic Report Strategy in Action
DCC Technology
Expansion of
the Exertis
service offering
What we did in 2018
In July 2018, DCC Technology acquired MTR,
a fast growing UK based provider of second
lifecycle solutions for mobile and tablet devices,
primarily to the insurance market.
Based in Harlow, Essex, MTR partners with
retailers, mobile handset manufacturers and
insurance companies to source and refurbish
mobile phones and tablets for resale to
customers in the UK and abroad. Employing 60
people at the date of acquisition, the business
has grown to 77 employees on the back of
significant growth in demand for solutions
from key vendor partners.
Since completion, DCC Technology has
successfully marketed the MTR service offering
to a number of UK retail customers, allowing
them to create further efficiencies in elements
of their reverse logistics processes.
DCC Technology is now investigating methods
of replicating the MTR processes and systems
across other Exertis locations, allowing the
service offering to be rolled out to customers
outside the UK. The first step in this
development is in Ireland, where we have
acquired premises and are beginning the roll
out of the IT system.
Strategic linkage
DCC Technology has a leading position
in the UK & Ireland market for IT distribution,
with a strong presence in mobile distribution.
Increasingly, our vendor and customer partners
are seeking a variety of value added services
from distributors. The acquisition of MTR
develops this service offering to both
customers and suppliers which will, in turn,
help to strengthen our market leading
position, in particular with solutions for
network operators.
Market leading
positions
Read more: Strategy on pages 2 and 3
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Supplementary InfoFinancial StatementsGovernanceStrategic Report Strategy in Action
People Development
Maria Hadd
Managing Director, Qstar and Swea
I joined the Qstar business, an unmanned retail
station chain in Sweden, in 1998 where I built
a strong knowledge of the business through
holding a number of roles across different
functions, including sales, marketing and
business development. When Qstar joined
the DCC Group in 2014, I transitioned to the
Managing Director role and since then, having
had prior experience of the bulk industry, I was
promoted to become Managing Director of
another DCC business, Swea, which distributes
bulk fuel to domestic, commercial and industrial
customers in Sweden.
Being part of DCC has expedited the growth
not only of the Qstar and Swea businesses
but it has also offered personal development
opportunities. I have been afforded the
opportunity to move into a larger role but have
remained part of the Qstar business which I am
very committed to and proud of. Qstar and
Swea have very different business models,
being retail and bulk businesses respectively,
and this has given my new role a greater
breadth of exposure.
DCC has supported me in the transition to this
larger leadership role through their Leadership
Development programme and the network of
support that comes with being part of the DCC
Group. I have built strong relationships through
DCC and have leveraged other senior leaders’
expertise from all across the European market.
DCC’s culture balances a strong focus
on drive for results together with our values
of safety, integrity, partnership and excellence.
This, when combined with the autonomy
DCC gives its leaders to drive and operate
their own businesses, results in strong and
open relationships. The sense of ownership
and autonomy I have to drive results, with
the support of DCC behind me, is
something unique.
Paul Mallon
Finance Manager, DSG Energy
I joined DCC’s Group Internal Audit function
in 2013. That role provided me with exposure
to many of DCC’s businesses and I gained
insights into each of the DCC divisions, whilst
establishing relationships with senior
management across the Group.
DCC has a track record of accelerating
the development of Group Internal Audit
personnel through international assignments
and promotions into Group, divisional and
subsidiary roles.
My first international assignment was as a Finance
Manager, based in Paris and working in the LPG
and Technology divisions, where I was involved
in various operational and developmental projects,
involving both local senior management and
divisional management. This included working
on the overall integration of these businesses.
When DCC completed the acquisition
of Shell’s LPG business in Hong Kong and
Macau, now renamed DSG Energy, I was offered
a secondment where my role is to assist with
the integration of the business into the Group.
Having worked on many integration projects
within DCC businesses, I have been able to
share my knowledge and experience with the
DSG Energy management team.
It is an exciting time to be part of DCC as
the Group continues to grow in its existing
markets as well as entering new markets in
the US and Asia. DCC offers invaluable
opportunities to develop your skills and
experience as well as the global mind-set
and the cross cultural competence needed
to operate on an international basis.
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Supplementary InfoFinancial StatementsGovernanceStrategic Report Operating Review
DCC LPG
What we do
How we do it
DCC LPG is a leading
liquified petroleum gas
('LPG') sales and marketing
business with a developing
business in the retailing of
natural gas and electricity.
Key brands
Benegas*, Butagaz*, Flogas*,
Gaz de Paris*, Tega*, Hicksgas*,
Propane Central*, Pacer Propane*
and Shell**.
* DCC owned brands.
** Operated under a long-term
brand licence agreement.
Our suppliers
E&P and refinery
Importation terminals
Inbound supply
DCC LPG activities
Inbound logistics
Storage and filling
Sales and marketing
Outbound logistics
Our customers
Domestic
Commercial/Industrial
Agriculture
Retailers/consumers
42
DCC plc Annual Report and Accounts 2018
Strategic Report Where we do it
How we create value
France
• No.2 in LPG market
Britain
• No.2 in LPG market
Ireland
• No.2 in LPG market
USA
• Leading player in LPG market
Germany
• No.3 in refrigerants market
No.2
No.2
No.2
• Strong health and safety ethos, delivering potentially hazardous products safely
and reliably.
• Passionate, experienced and committed team of people.
• Customer focused.
• Quality of service at competitive prices.
• Scale provides security of supply and ability to tailor contracts to
customers’ requirements.
Volume (tonnes)
19.8%
Adjusted operating profit
4.4%
Strategic objective:
Drive increase in sales volumes
Strategic objective:
Drive for enhanced operational performance
1.9m
£167.5m
No.3
2018
2017
1.9m
1.6m
2018
2017
£167.5m
160.4m
Hong Kong and Macau No.1
• No.1 in piped LPG to apartment blocks
in Hong Kong
• Leading player in the LPG market
in Hong Kong and Macau.
The Netherlands Joint No.1
• Joint No.1 in LPG market
Sweden
• No.1 in LPG market
Norway
• No.1 in LPG market
No.1
No.1
Adjusted operating profit per tonne
Return on capital employed
Strategic objective:
Grow adjusted operating profit per tonne
Strategic objective:
Deliver superior shareholder returns
£89.27
2018
2017
17.4%
£89.27
£102.49
2018
2017
17.4%
22.9%
Operating cash flow
10 year adjusted operating profit CAGR
Strategic objective:
Generate cash flows to fund organic
and acquisition growth and dividends
£227.6m
Strategic objective:
Deliver superior shareholder returns
23.0%
2018
2017
£227.6m
£234.8m
2018
2017
23.0%
21.8%
DCC plc Annual Report and Accounts 2018
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Supplementary InfoFinancial StatementsGovernanceStrategic Report Operating Review (continued)
DCC LPG (continued)
Performance for the
Year Ended 31 March 2018
DCC LPG recorded a good performance,
with operating profit increasing by 4.4% (1.0%
ahead on a constant currency basis), despite
the anticipated headwind of an increasing cost
of product and continued organic investment
in its B2C natural gas and electricity offering
in France. DCC LPG also made excellent
progress in expanding its geographic presence,
completing the acquisitions of Shell Hong Kong
& Macau in January 2018, as well as TEGA in
Germany and Retail West in the US, both on
31 March 2018.
The volume growth of 19.8% was driven by
the prior year acquisition of Gaz Européen and
the acquisition of Shell Hong Kong & Macau.
Volumes grew 4.7% on a like-for-like basis,
primarily reflecting strong growth in natural gas
volumes and continued growth in sales of LPG
to industrial and commercial customers.
Markets and Market Position
LPG
DCC LPG supplies LPG (propane and butane)
in both cylinder and bulk formats to
commercial, domestic, agricultural and
industrial customers across eight countries
in Europe (including the newly acquired TEGA
business in Germany). The geographical
footprint has recently expanded beyond Europe
with the recently acquired Shell business in
Hong Kong & Macau and the newly acquired
US based Hicksgas ('Retail West') business.
LPG is used where there is no natural gas grid for
agricultural and industrial processes and for space
heating, hot water and cooking. It is also used
as road fuel (autogas) and for powering fork lift
trucks. LPG markets across Europe are relatively
consolidated and DCC LPG has a leading position
in each European market in which it operates as
well as a leading position in the Hong Kong and
Macau market .
annually. Butagaz has a strong supply base and
sources LPG from a number of supply points
across France and also from Belgium, Spain and
Germany. The business has an experienced
management team and a high quality sales,
marketing and operating infrastructure.
Gaz Européen was acquired in January 2017
and was soon relocated to the same offices
as Butagaz in Paris. The business is a specialist
retailer of natural gas, focused on supplying
energy management companies, apartment
blocks (with collective heating systems), public
authorities and the service sector in France.
In October 2017 the business launched
‘Butagaz Natural Gas and Electricity’, a new
natural gas and electricity offering for domestic
consumers to leverage the strength of the
Butagaz brand and the combined Gaz Européen
and Butagaz experienced management teams.
Gaz Européen supplies approximately 6.4 TwH
of natural gas to c.10,000 sites across France.
As anticipated, the operating profit per tonne
declined versus the prior year due to a
significantly higher cost of product and the mix
impact of lower margin natural gas volumes
becoming more material.
Natural Gas and Electricity
DCC LPG supplies natural gas to industrial,
commercial, agricultural and domestic customers
in France, Ireland and Britain and has developing
electricity supply businesses in France and Ireland.
Britain
Flogas Britain is the clear number two LPG
distributor in Britain with a market share
of c.30% of the addressable market of
approximately 880,000 tonnes, served through
a nationwide infrastructure of 57 operating
locations. Flogas has successfully grown the
LPG market by switching oil consumers in
several industrial sectors to LPG, and by
supplying LPG to support the generation of
biomethane which is injected into the gas grid.
In addition to LPG, the business has continued
to develop its position as the leading distributor
of liquefied natural gas (‘LNG’) as an energy
solution primarily to large industrial businesses,
and continues to grow its position as a
distributor of natural gas to smaller commercial
customers. Flogas Britain distributes medical
gas to regional health authorities and also
distributes a wide range of LPG fuel appliances
such as mobile heaters and barbecues, as well
as renewable products.
Industrial
The newly acquired TEGA business supplies
both LPG and refrigerant gases, further
expanding the industrial gas portfolio which
already includes Flogas Britain’s medical gas
operations and the sale of LPG as an aerosol
propellant in Benegas.
LPG volumes by geography
69%
17%
14%
Continental Europe/Other
Britain
Ireland
France
Butagaz is the second largest LPG distribution
business in France where the market size is
approximately 2 million tonnes. Butagaz has a
market share of approximately 25% and operates
from 46 depots nationally, distributing to 250,000
customers, 16,000 points of sale (cylinder
resellers) and 10,000 B2B cylinder customers.
We estimate that Butagaz cylinders are used by
approximately 4 million end user customers
Following the completion of
recent acquisitions, DCC LPG
has operations across ten
countries and is very well placed
to continue its development in
existing territories, in both LPG
and related adjacencies, as well
as further developing its
geographic footprint.
The French business performed in line with
expectations, benefiting from strong cost
control and good margin management and the
business continues to progress organic new
product development and efficiency
opportunities. The ‘Click & Collect’ concept,
allowing 24/7 order and collection of cylinders
using a mobile application, is being expanded to
an increasing number of locations. The business
also continues to invest in its B2C offering in
natural gas and electricity, launched in the
second half of the year, which leverages the
existing B2B natural gas operating platform as
well as the Butagaz brand, the most recognised
gas brand in France.
In Britain, the business delivered strong organic
profit growth, despite the impact of supply
constraints across the industry in the peak
winter season. The business delivered strong
volume growth, reflecting its continued focus
on converting industrial and commercial users
of oil to LPG. In Ireland, the business also
benefited from growth in commercial volumes,
reflecting continued strong demand from
existing and new customers in the sector.
In Asia, Shell Hong Kong & Macau has been
successfully integrated into DCC LPG’s
operations and has performed in line with
expectations since acquisition.
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DCC plc Annual Report and Accounts 2018
Strategic Report
Case study:
Gaz Européen acquisition and
leveraging the Butagaz brand for B2C
DCC completed its largest acquisition to date in November 2015 when it acquired the French
based Butagaz LPG business from Shell. The transaction provided DCC with a substantial
presence in the French LPG market, an experienced management team and a high-quality sales,
marketing and operating infrastructure.
One of the key strengths identified during the acquisition of Butagaz
was its brand recognition amongst French gas consumers generally.
Butagaz identified that more than 10 years after the natural gas
and electricity markets opened to competition in France, a significant
majority of French households were still contracted to former
monopolies under regulated tariffs despite other more competitive
alternatives. Consumers were either unaware that more competitive
offerings were available or they had concerns about the quality and
reliability of these suppliers.
Butagaz believed that its 85 years of experience in marketing high
quality energy services to the residential consumer, underpinned by
its well recognised brand, could be leveraged to develop a successful
offering in the complementary natural gas and electricity markets.
In January 2017, Gaz Européen, a supplier of natural gas to
property management and co-op organisations in France, was
acquired. By June 2017, Gaz Européen launched an electricity
offering initially to these same customers before extending the
offer to all B2B customers. A new natural gas and electricity offering
for private individual consumers was developed and launched as
‘Butagaz Natural Gas and Electricity’ in October 2017.
The natural gas and electricity offering to businesses continues to
grow strongly and the new private consumer offering has been well
received with significant growth targeted for FY2019.
DCC plc Annual Report and Accounts 2018
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DCC LPG (continued)
Ireland
Flogas Ireland, operating in both the Republic
of Ireland and Northern Ireland, is the number
two LPG distributor in Ireland and has continued
to grow organically to an estimated 42% share
of the addressable market of approximately
215,000 tonnes. The business operates from six
depots throughout the country including three
importation facilities. Similar to Flogas Britain,
the business has successfully generated organic
growth by moving industrial energy consumers
across to LPG.
Flogas Ireland also markets a range of heaters
and barbecues and has developed a renewables
offering under the Clearpower brand.
Flogas Ireland has organically developed a
natural gas business and in the year to 31 March
2018 supplied 2.1 TwH (FY17: 1.9 TwH) of
natural gas to approximately 48,000 customers
across the island of Ireland. The business is a
leading supplier of natural gas to SME
customers as well as a modest position in the
domestic supply sector. Flogas Ireland also
provides a dual fuel offering to its commercial
customers through its electricity business.
USA
DCC LPG completed the acquisition of
Hicksgas LLC ('Retail West' division) from
NGL Energy Partners on 31 March, 2018.
The business is headquartered in Illinois
employing 390 people. Annual sales of 130,000
tonnes of LPG are made to over 65,000
customers from 43 customer service locations
and 58 satellite facilities with market leading
positions in three states and further operations
in seven other states across the Mid-West
and North-West regions.
The business trades under three key regional
brands, Hicksgas, Pacer Propane and Propane
Central and has a well-invested asset base
supporting the business through a fleet of
150 company owned vehicles and 100 bulk
storage facilities.
Germany
On 31 March 2018 DCC LPG completed the
acquisition of the LPG and refrigerant gas
distribution business Tega-Technische Gase
und Gasetechnik GmbH in Germany ('TEGA').
The business is headquartered in Würzburg and
employs c.100 people across five operating
sites, largely in southern Germany.
This acquisition provides an opportunity to
gain a material foothold in the fragmented
German LPG market and is a first step into the
evolving refrigerants market. Annual revenues
of c.€75 million are evenly split between LPG
and refrigerants. The LPG business supplies
c.35,000 tonnes annually to c.15,000 domestic
46
DCC plc Annual Report and Accounts 2018
and commercial customers. The refrigerant
gases are supplied to wholesalers and end-
users for use in air-conditioning, commercial
cooling systems and refrigerators. The business
operated previously on a standalone basis within
the Linde Group and the highly experienced
management team has been retained post
completion to continue to grow and develop
the business.
Hong Kong and Macau
In January 2018, DCC LPG completed the
acquisition of Shell’s LPG business in Hong
Kong & Macau. The business was renamed as
'DSG Energy Limited' and continues to
distribute Shell branded LPG, under a long-term
brand licence agreement with Shell. Based out
of a new headquarters in Kowloon, the business
employs 47 people and is supplied via the Shell
terminal and filling plant on Tsing Yi Island and
distributes c.75,000 tonnes of Shell branded
LPG annually.
The business is the market leader in Hong
Kong in supplying piped LPG to over 100,000
households based in very large apartment
complexes under long-term supply agreements
and has a number three position in the cylinder
market as well as supplying autogas in Shell’s
retail network. It has a market leader position
in the smaller Macau market.
The Netherlands & Belgium
In the Netherlands, where DCC LPG’s business
trades under the Benegas brand, the business
has an estimated overall market share of 27%
of the addressable market of approximately
290,000 tonnes and is joint market leader.
Operating from one central depot and a number
of third party locations, the business delivers to
commercial, industrial, agricultural and domestic
customers in the Netherlands and Belgium and
is also a significant player in the sale of LPG for
aerosol and autogas use.
Sweden & Norway
In Sweden and Norway, Flogas operates from
eight third party operated locations which
include three key importation facilities. Flogas
is the market leader in both these markets,
distributing LPG to large steel and industrial
customers as well as residential heating, and has
44% and 41% market shares in Sweden and
Norway respectively. The addressable market is
estimated to be approximately 350,000 tonnes
in Sweden and 205,000 tonnes in Norway.
Strategy and Development
DCC LPG’s vision is to be a global leader in the
sales, marketing and distribution of LPG, natural
gas and electricity and related products and
services to energy consumers:
•
•
target oil to LPG conversions;
target market share gains on a segment by
segment basis, particularly commercial bulk,
refrigerants and industrial gases;
• cross sell complementary green/renewable
energy products;
• optimise efficient use of assets across
•
our businesses;
leverage our strong brands by selling add-on/
related products e.g. natural gas, LNG; and
• expand into new geographies.
DCC LPG will further leverage our strong
market positions in LPG by driving organic profit
growth on a sector by sector basis. Building on
recent success, we will continue to target
growth by promoting LPG to industrial and
commercial entities looking to switch to more
environmentally friendly and competitively
priced energy sources. We will also seek to
expand into related product areas as
demonstrated by the recent acquisition of
TEGA’s refrigerants business and into new
geographic markets, as the recently completed
acquisition of DSG Energy (Hong Kong &
Macau), Retail West (USA) and TEGA
(Germany) demonstrate.
Operationally, the division will continue to look to
develop innovative solutions to drive efficiencies
and growth such as the 'Click & Collect' cylinder
collection solution in Butagaz, the new B2C
offering in Gaz Européen and further expansion
into new adjacencies such as refrigerants
in TEGA.
Customers
DCC LPG has a very broad customer base
selling directly to approximately 0.7 million
customers across the geographies in which the
businesses operate, and also has access to a
broad range of retail and cylinder consumers.
Customers are primarily spread over the
commercial, retail, industrial, domestic and
agricultural markets. DCC LPG has no material
customer dependencies.
LPG volumes by customer type
3% 3%
18%
76%
Commercial and Industrial
Domestic
Retail
Agricultural and Other
Strategic Report Suppliers
As with its customer base, DCC LPG’s supplier
portfolio is broadly based. The top five suppliers
represent less than 50% of total volumes
supplied with no one individual supplier
accounting for more than 20% of volumes
supplied in the current year. The major suppliers
to the division are Esso, BP, Gunvor, Philips66,
Shell, Sinopec, Statoil, Total and Valero Energy.
We have built long-term strategic partnerships
over many years with our suppliers and we have
continued to strengthen these relationships
during the year.
Our People
DCC LPG’s business is focused on developing
processes and practices that ensure the
well-being, development and engagement
of our people and to ensure that we deliver the
service levels expected by our customers in
a safe way, every day. DCC LPG continues to
invest in both developing our highly experienced
and ambitious management teams and also in
providing increased opportunities through our
expanding geographic footprint.
DCC LPG currently employs 2,619 people.
Health & Safety
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 and
process safety is managed through systems
and processes which identify, control and
monitor health and safety risks. The health
and safety performance of each business
is reviewed regularly by the DCC LPG Board
and senior management across the division.
The DCC LPG Board is focused on driving
continuous improvement across all aspects
of health and safety performance, including near
miss reporting, safety awareness and safety
culture, and has linked performance in these
areas to senior managers’ remuneration.
The potential for unplanned gas releases is a risk
that is managed daily. From domestic deliveries
to large storage facilities, 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 safely every day.
All DCC LPG businesses have adopted ‘Safety
F1rst’, an internally developed safety initiative
focused on improving attitudes and behaviour
towards safety and which is led by the senior
management teams.
Environment
DCC LPG recognises the reality of climate
change and the challenges arising from
changing weather patterns and more frequent
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, economies rely on fossil fuel derived
energy to function and grow. DCC LPG is
committed to assisting our customers to
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.
All unplanned releases have the potential to
cause local damage so in the event of any
unplanned release occurring, immediate action
is taken to minimise the impact on the
surroundings and to identify the root causes
of any incidents. No significant unplanned
releases occurred in the year.
DCC LPG’s businesses have a 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.
Key Risks
DCC LPG sold 1.9 million tonnes of product
during the year ended 31 March 2018 and the
businesses operate with inherent risks to the
environment and people. Ensuring that our
businesses maintain rigorous health and safety
standards is one of our core business principles.
Our focus is on reinforcing the ‘Safety F1rst’
programme and to continually drive
improvement through robust audit and review
processes, quarterly communications
campaigns and enhanced reporting structures.
DCC LPG’s expansion in to new territories
including Hong Kong (DSG Energy), the US
(Retail West) and Germany (TEGA) increases
the already broad customer base and reduces
the concentration on a single geographical
location. The expanded geographical spread
brings new challenges from a cultural,
governance and regulatory perspective but also
mitigates the impact from localised economic
cycles or changes to the market dynamics,
including increased taxation of fossil fuels.
A significant proportion of DCC LPG’s volumes
and margins are generated through the sale of
heating dependent products. Whilst localised
weather events can result in disruption to supply
as well as cost of product and volume volatility,
the increased geographical spread mitigates the
risk at a divisional level. The TEGA industrial/
refrigerant gas business expands the non-
heating product offering and provides
management expertise for further industrial
gas growth.
Cognisant of the fact that it has been a record
year of acquisition activity in DCC LPG, DCC
Group management resources have been made
available to the recently acquired businesses.
This ‘in country’ support provides assistance to
the businesses and facilitates the sharing of
best practice whilst also allowing the Group to
monitor progress towards a successful
integration process.
DCC LPG will further leverage our strong market positions in
LPG by driving organic profit growth on a sector by sector basis.
Building on recent success, we will continue to target growth by
promoting LPG to industrial and commercial entities looking to
switch to more environmentally friendly and competitively priced
energy sources.
DCC plc Annual Report and Accounts 2018
47
Supplementary InfoFinancial StatementsGovernanceStrategic Report Operating Review
DCC Retail & Oil
What we do
How we do it
DCC Retail & Oil is a leading
operator of retail petrol
stations in Europe and is
the leading reseller of fuel
cards in Britain. DCC Retail
& Oil is also a leading oil
distributor in Europe.
Key brands
Retail Brands
Esso, Gulf, Shell, Qstar*, Great Gas*.
Fuel Card Brands
BP, Diesel Direct, Esso, Fastfuels,
Gulf, Shell, Qstar*.
Oil Brands
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).
* DCC owned brands.
48
DCC plc Annual Report and Accounts 2018
Our suppliers
E&P and refinery
Importation terminals
Inbound supply
DCC Retail & Oil activities
Inbound logistics
Storage and filling
Branded fuel cards
Sales and marketing
Petrol stations
Outbound logistics
Our customers
Domestic
Agriculture
Commercial/
Industrial
Retail
forecourts
Customers of
DCC retail
forecourts
Aviation
Marine
Strategic Report Where we do it
How we create value
Britain
No.1
• No.1 in oil distribution
• Leading operator of unmanned
retail petrol stations
• Leading reseller of fuel cards
Denmark
No.2
• No.2 in oil distribution
• Leading operator of retail petrol stations
Norway
No.3
• No.3 operator of retail petrol stations
France
No.1
• No.1 operator of unmanned retail
petrol stations
Sweden
No.1
• No.1 in oil distribution
• Leading operator of unmanned
retail petrol stations
No.2
Austria
• No.2 in oil distribution
Ireland
• Leading player in oil distribution
• Strong health and safety ethos, delivering potentially hazardous products safely
and reliably.
• Passionate, experienced and committed team of people.
• Customer focused.
• Quality of service at competitive prices.
• Scale provides security of supply and ability to tailor contracts
to customers’ requirements.
Volume (litres)
6.4%
Adjusted operating profit
20.4%
Strategic objective:
Drive increase in sales volumes
12.3bn litres
Strategic objective:
Drive for enhanced operational performance
£113.8m
2018
2017
12.308bn litres
11.572bn litres
2018
2017
£113.8m
£94.5m
Adjusted operating profit per litre
Return on capital employed
Strategic objective:
Grow adjusted operating profit per litre
Strategic objective:
Deliver superior shareholder returns
0.92 pence
18.7%
2018
2017
0.92p
0.82p
2018
2017
18.7%
19.8%
Operating cash flow
10 year adjusted operating profit CAGR
Strategic objective:
Generate cash flows to fund organic
and acquisition growth and dividends
£162.4m
Strategic objective:
Deliver superior shareholder returns
13.9%
2018
2017
£162.4m
£146.6m
2018
2017
13.9%
17.9%
DCC plc Annual Report and Accounts 2018
49
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Operating Review (continued)
DCC Retail & Oil (continued)
Performance for the Year Ended
31 March 2018
DCC Retail & Oil had an excellent year, with
operating profit increasing to £113.8 million,
20.4% ahead of the prior year (18.0% ahead
on a constant currency basis). The strong
performance reflects organic profit growth
across all territories and acquisitions completed
in the current and prior year.
DCC Retail & Oil sold 12.3 billion litres of
product during the year, an increase of 6.4%
over the prior year, driven by the prior year
acquisition of Dansk Fuels and the acquisition
of Esso Retail Norway in October 2017. Organic
volumes were in line with the prior year.
operating infrastructure, enabling management
to commence driving improvements in what is a
difficult market environment. The businesses in
both Sweden and Austria performed well during
the year.
The network is the third largest in the market
with 4 key players including Circle K, St1,
Uno-X and Esso Retail Norway where we have
approximately 20% market share based on
retail volume.
Following a strategic review of the market
position and invested capital of the business
in Northern Ireland, DCC Retail & Oil completed
the sale of its fuel storage terminal and
distribution business in Northern Ireland in
April 2018. The business sold approximately
250 million litres of volume in the year ended
31 March 2018.
Retail – France
The Esso Retail France business comprises the
Esso unmanned retail petrol station network
(272 stations), the Esso motorway concessions
network (46 stations) and supply to a further 66
Esso branded dealer owned stations and sells
approximately 1.7 billion litres of diesel and
petrol to consumers across France. The
business operates from its office in Paris with
pricing, supply and back office support provided
by the retail hub based in Drogheda,
north of Dublin, Ireland.
Hypermarkets have a strong presence in the
French retail market with a combined market
share of approximately 60% and Total is the
largest individual network in the market with
an estimated 24% market share. Esso Retail
France’s market share in terms of volumes
is approximately 4%, however it is the market
leader in France in terms of unmanned
petrol stations.
Retail – Sweden
Trading under the Qstar brand, DCC Retail
& Oil sells approximately 360 million litres of
product per annum. Qstar provides national
coverage through a network of 335 unmanned
forecourts which is complemented by an
additional 44 dealer-operated retail petrol
stations trading under the Bilisten and
Pump brands.
The Qstar network is the fifth largest petrol
retailer in Sweden and holds approximately 14%
of the total share of sites in the market. The
four largest players (Circle K, Preem, St1 and
OKQ8) hold a combined market share of
approximately 80% in terms of site numbers.
Retail – Denmark
The Danish Shell-branded retail petrol network
includes 51 unmanned sites operated under the
Shell Express brand, 60 company-operated sites
under the 7-Eleven brand, 33 company-owned
sites operated by franchisees and contracts to
supply 82 dealer owned sites. The business was
fully integrated into DCC’s pricing, supply and
back office hub in Drogheda, Ireland during the
first half of FY2018. The business sells
approximately 490 million litres of diesel and
petrol to consumers across Denmark.
Circle K is the largest player in the Danish retail
market with a market share of c.32%. DCC
Retail & Oil is the fifth largest player in the
Danish market with a market share of 11%.
In the UK and Ireland, the business delivered
strong organic profit growth and benefited
modestly from good heating oil demand
following a marginally colder than average
winter. The business continues to make
good progress in developing its business in
differentiated premium products, cross-selling
value added products and services, such as
telemetry, and developing in adjacent product
areas such as lubricants and aviation. The
business also continued its plans to organically
invest in developing an unmanned retail
network in the UK and Ireland and now has
39 unmanned sites, with a pipeline of further
sites under consideration.
Following completion of the
acquisition of Esso Retail
Norway, DCC Retail & Oil now
has substantial operations
in eight countries and has
developed a scalable platform
to grow the business in existing
and new territories across its
distribution, retail and fuel
card activities.
The Fuel Card business performed well,
delivering organic profit growth whilst also
expanding its operations organically into the
German and French markets during the year.
In May 2018, DCC Retail & Oil acquired SNAP,
an end-to-end transaction processing and
payment system for HGV fleets. The business
facilitates cashless payments through licence
plate recognition for services to HGV fleets at
truck stops. The business, although modest,
is growing strongly and will be complementary
to the existing retail and oil businesses.
A strong performance in the Danish business
reflected organic growth in commercial,
agricultural and domestic volumes and a full
year’s contribution from Dansk Fuels, which
has been fully integrated. The Danish business
now has leading market positions across the
domestic, agricultural, commercial and aviation
markets, in addition to operating 144 retail sites
under the Shell brand. In France, the business
delivered good profit growth while operating
in a more competitive environment and
continued to invest in both its customer
proposition and upgrading its sites. In October
2017, DCC Retail & Oil completed, ahead of
schedule, the acquisition of Esso’s retail
network in Norway. The business has now
been integrated into DCC Retail & Oil’s retail
50
DCC plc Annual Report and Accounts 2018
Markets and Market Position
Retail and Fuel Card
The Retail business operates 1,038 retail petrol
stations in France, Sweden, Norway, Denmark,
Ireland and Britain and is one of the leading
resellers of branded fuel cards in Britain.
Retail – Norway
In October 2017, DCC Retail & Oil announced
that it had completed the acquisition of Esso’s
retail petrol station network in Norway ('Esso
Retail Norway'). Following a successful
integration of the business into the retail hub
based in Drogheda, north of Dublin, Ireland, the
business began trading for the final five months
of FY2018. The acquisition represented DCC
Retail & Oil’s second major acquisition from
Esso, following on from the acquisition of the
French retail station network in 2015. The Esso
network in Norway comprises 117 company-
operated stations with convenience stores
operated in partnership with Norgesgruppen,
the largest grocery retailer and wholesaler in
Norway, and an unmanned network of 21
stations. The business has contracts to supply
a further 114 Esso branded dealer-owned
stations, selling approximately 600 million litres
per annum.
Strategic Report
Fuel Card – Britain
DCC Retail & Oil is one of the leading resellers
of branded fuel cards in Britain. The business
sells approximately 1 billion litres of transport
fuels annually and provides its customers with
access to the breadth of the British retail petrol
station and bunker networks through its
portfolio of fuel cards under the BP, Esso,
Shell, Texaco, Allstar and Diesel Direct brands.
The business continues to expand in Britain,
opening its sixth sales office in Halifax during
the year and recently opened a new sales office
in Essen, in Germany. As well as selling fuel
cards, which are an essential tool for
commercial organisations to manage their
transport fuel costs, DCC also provides an
innovative range of value added services to help
further minimise spend on transport fuels.
Oil
DCC’s oil distribution business sells 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.
DCC Retail & Oil sells oil under a large portfolio
of leading brands in Europe.
Oil – Britain
DCC Retail & Oil has been the consolidator
of what was, and continues to be, a highly
fragmented oil distribution market in Britain.
DCC Retail & Oil first entered the market in
September 2001 with the acquisition of BP’s
business in Scotland and since then has
acquired and integrated 39 businesses
including the oil distribution businesses of Shell
(2004), Chevron Texaco (2008) and Total
(2011). DCC Retail & Oil has grown to become,
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 and is estimated to be
approximately 35 billion litres. In the year ended
31 March 2018, DCC Retail & Oil’s oil
distribution business in Britain sold 5.4 billion
litres of product, giving it a market share of
approximately 15%.
The total retail petrol station market in Britain
is approximately 36 billion litres with 44% of
volumes sold through supermarket sites, 18%
through company-owned and operated
stations and 38% through independent dealer
owned stations. DCC Retail & Oil operates in
the independent dealer-owned segment of the
retail market and now has approximately 460
Gulf branded retail sites to which DCC supplies
in Britain. DCC Retail & Oil has a market share
of c.3% of the total market and supplies to
approximately 11% of the dealer network.
Case study:
Cold Weather Priority initiative
in Certas UK
According to the National Institute of Clinical
Excellence (NICE), there are around 40,000 ‘excess’
or avoidable winter deaths in the UK each year and that
over 80% of these deaths occurred in people aged
75 and over.
The Cold Weather Priority ('CWP') scheme identifies people who may be
susceptible to colder conditions, enabling fuel suppliers across the UK to know
exactly who may be at risk, allowing them to take proactive steps to ensure fuel
deliveries to these customers in times of fuel shortages or extreme cold weather
conditions. Importantly, it costs customers absolutely nothing to be part of the
CWP initiative.
CWP addresses a fundamental societal need, to protect those most vulnerable
in the coldest conditions. Off grid fuel is delivered in batches and it is vital to
ensure that those most in need do not run dry. The initiative itself identifies this
group and places flags on the core business systems by which orders are taken,
routed and processed. We have ensured that CWP is fully compliant with all data
protection legislation, that customer consent to CWP is obtained and that we
provide such customers wherever possible with relevant associated services
such as tank telemetry for automatic fuel level readings.
The objective of CWP is to assist in reducing the number of excess winter deaths
by ensuring that deliveries of fuel are prioritised to the most vulnerable. We have
also worked collaboratively with the National Fire Chiefs’ Council to build into
CWP, referrals to local Fire and Rescue services for their 'Safe & Well' visits,
adding another layer of care for this group.
DCC plc Annual Report and Accounts 2018
51
Supplementary InfoFinancial StatementsGovernanceStrategic Report Operating Review (continued)
DCC Retail & Oil (continued)
Strategy and Development
DCC Retail & Oil’s vision is to be a global leader
in the sales, marketing and distribution of fuels
and related products and 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;
and
• generating high levels of return on
capital employed.
Retail and Fuel Card
DCC Retail & Oil’s strategy for the Retail sector
is to grow via:
• expanding business in the retail petrol
station market
• unmanned: key pillar for growth
•
retail company-owned: in partnership
with retailer;
retail dealer-owned
•
leveraging our pricing, supply and back office
hub to generate synergies from integration
of new networks; and
•
• building a pan-European fuel card business
leveraging our investment in retail networks.
The Retail business has been significantly
strengthened by acquisitions over the last three
years including Esso’s retail petrol station
networks in Norway and France, and Shell’s
retail petrol station network in Denmark which
are significant steps in DCC Retail & Oil’s
strategy of capturing a greater share of the
consumer margin in the transport sector
of the market.
Our experienced local management teams
in France, Sweden, Norway and Denmark are
focused on leveraging the business platforms
in those countries, expanding the networks
organically and increasing market share.
DCC Retail & Oil’s pricing, supply and back
office hub provides a platform to integrate
future acquisitions in new territories, further
enhancing the ability to grow its business.
In Fuel Card, DCC Retail & Oil is continuing to
target high levels of organic growth through our
extensive telesales team and by cross selling
fuel cards to our broad oil distribution customer
base. The Fuel Card business has expanded its
customer offering by 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.
Oil – Continental Europe
DCC’s Swedish oil distribution business,
Swea, is the market leader in Sweden
with a share of approximately 18% of the
addressable market which is estimated at 2
billion litres. The addressable oil distribution
market in Austria is estimated at 5 billion litres
and DCC’s subsidiary, Energie Direct, is number
two in this market with a share of 17%. In
Denmark, the addressable oil distribution
market is estimated at 2 billion litres, of which
DCC Energi Danmark has a market share of
24% making it the number two oil distributor.
DCC Energi Danmark is also the second largest
operator in the Danish aviation market,
operating in 7 of the 8 largest Danish airports,
with a market share of 19%.
Oil – Ireland
Emo Oil is one of the leading oil distributors in
the Republic of Ireland with a market share of
8%. DCC’s addressable oil market in Ireland is
estimated to be 6.5 billion litres. In April 2018,
DCC Retail & Oil completed the disposal of its
Northern Irish oil distribution activities. The
decision to exit its oil distribution activities in
Northern Ireland was made following a strategic
review of the business. DCC will continue to
operate and supply its network of Emo branded
retail petrol stations in the Northern
Irish market.
Retail & oil total volumes by business type
6%
42%
52%
Retail
Fuel Card
Oil
The Retail business has been
significantly strengthened by
acquisitions over the last three
years including Esso’s retail
petrol station networks in
Norway and France, and Shell’s
retail petrol station network
in Denmark.
52
DCC plc Annual Report and Accounts 2018
Oil
DCC Retail & Oil’s strategy for oil distribution
is to become the leading oil distribution
business in Europe by:
• continuing to consolidate existing oil
markets to drive greater customer density
and logistics efficiencies;
focusing on the non-heating dependent
segments of the market;
•
• expanding sales of differentiated products;
cross sell add-on products and services e.g.
lubricants, heating services;
• optimising and build greater flexibility into
logistics operations; and
• expanding into new geographies, where
strong returns can be achieved.
DCC Retail & Oil’s strategy for oil distribution
in Britain is to continue to grow its market share
(currently 15%) to in excess of 20% of its
addressable market. Key to achieving this
target is growth in transport fuels with a
particular focus on retail petrol stations (where
the business has been actively rolling out the
Gulf brand in both the dealer and unmanned
networks and now has 460 Gulf branded sites
supplied) and the marine and aviation sectors.
Customers
DCC Retail & Oil has a very broad customer
base selling directly to approximately 0.9 million
customers across the geographies in which the
businesses operate and also has access to a
broad range of retail consumers. Customers
are primarily spread over the commercial, retail,
industrial, domestic, agricultural and marine
markets. DCC Retail & Oil has no material
customer dependencies.
Retail & oil total volumes by customer type
14%
4%
4%
9%
38%
31%
Commercial &
industrial
Retail
Domestic
Agricultural
Marine
Other
Strategic Report
Suppliers
As with its customer base, DCC Retail & Oil’s
supplier portfolio is broadly based. The top five
suppliers represent approximately 58% of total
volumes supplied with no one individual supplier
accounting for more than 17% of volumes
supplied in the current year. The major suppliers
to the division are BP, Essar, Esso, Ineos,
Greenergy, Mabanaft, OMV, Philips66, Shell, St1,
Statoil, Total, Preem and Valero Energy. We have
built long-term strategic partnerships over
many years with our suppliers and we have
continued to strengthen these relationships
during the year.
Our People
DCC Retail & Oil’s business is a people business
at its core. Therefore we are very focused
on developing processes and practices that
ensure 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.
DCC Retail & Oil has highly experienced and
ambitious management teams with a deep
knowledge of 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.
DCC Retail & Oil currently employs 3,550 people.
Health & Safety
Safety is the responsibility of all line managers
and directors and remuneration is linked to
safety performance. Occupational and process
safety is managed through systems and
processes which identify, control and monitor
health and safety risks. Qualitative and
quantitative reporting focuses on delivering
continuous improvement to reduce accidents
and develop a positive safety culture.
All Retail & Oil businesses use DCC's ‘Safety
F1rst’ initiative to raise safety awareness and
promote safe behaviours.
Key Risks
DCC Retail & Oil sold 12.3 billion litres of
product during the year ended 31 March 2018
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. Having rolled out our Safety
F1rst campaign across the business, the focus
is now on reinforcing the programme through
quarterly communications campaigns to
ensure we drive continued improvement and
maintain momentum.
DCC Retail & Oil has a broad customer base
across a number of geographies and many
of the economies in which the division operates
have recovered since the financial crisis.
However, a deterioration in this economic
recovery and its impact on consumer spending
and confidence is a key risk faced by
the business.
A significant proportion of DCC Retail & Oil’s
volumes and margins are generated through
the sale of heating dependent products and,
accordingly, the division can be impacted by
significant movements in weather conditions.
The strategic focus has been to reduce the
heating dependence of the division through the
development of the non-heating segments of
the business while also ensuring that investors
have a clear understanding of the heating
dependencies in the business. The acquisitions
of the Esso retail petrol station networks in
France and Norway, Qstar in Sweden, and the
Shell retail petrol station business in Denmark
have been key building blocks in this strategy.
Demand for transport fuels is likely to be
impacted by vehicle efficiencies and
technological developments over the medium
to long-term. DCC Retail & Oil’s businesses,
which are characterised by:
• a low cost retail platform;
•
• partnerships with world class brands;
• a well-balanced network comprising urban,
investment in high quality retail assets;
rural and HGV/motorway sites; and
• a track record of margin management
all leave the Group well positioned to deliver
strong and sustainable returns on its invested
capital despite the potential impact on demand.
DCC Retail & Oil 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
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 safely every day.
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 the impact
on the surroundings and to identify the root
causes of any incidents. No significant spills
occurred in the year.
DCC Retail & Oil is committed to assisting our
customers in reducing 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.
DCC Retail & Oil 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.
DCC plc Annual Report and Accounts 2018
53
Supplementary InfoFinancial StatementsGovernanceStrategic Report Operating Review
DCC Healthcare
What we do
How we do it
DCC Healthcare is a leading
healthcare business, providing
products and services to
healthcare providers and health
& beauty brand owners.
DCC Vital
DCC Vital markets and sells
a range of medical and
pharmaceutical products to
healthcare providers across all
sectors of the healthcare market
in the UK and Ireland from acute
care through to community care
and general practitioners.
Key Brands (own and third party)
Biomet, BioRad, Carefusion, Cipla, CSL
Behring, Comfi*, Diagnostica Stago,
Espiner Medical*, Fannin*, ICU
Medical, Kent Pharmaceuticals*, LIP
Diagnostics*, Martindale Pharma,
Mölnlycke, Rosemont, Siemens, Skintact*,
Smiths Medical, Williams Medical*.
* DCC owned brands.
DCC Health & Beauty
Solutions
DCC Health & Beauty Solutions
provides a range of high quality
specialist services to international
brand owners including product
development, formulation,
manufacturing, regulatory services
and packaging.
Key Brands
Alliance Pharma, Apoteket, The Body
Shop, Boots, Child’s Farm, Elemis, Glanbia,
Healthspan, Liz Earle, Merck (Seven Seas,
Nature’s Best, Lamberts), Nestlé Health
Science, Omega Pharma, Oriflame, PZ
Beauty, Ren, Space NK, Target, Vitabiotics.
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DCC plc Annual Report and Accounts 2018
DCC Vital
Our suppliers
Third party brand owners
Own brand products
Our activities
Sales marketing and
distribution
Portfolio
development
Procurement
Vendor
management
Supply chain
management and
logistics services
Our customers
Hospitals
Pharma retailers
and wholesalers
Primary care (GPs and
Community Care)
DCC Health & Beauty Solutions
Our services
Product development, contract manufacturing
and packing of health & beauty products
Our customers
Health & beauty
brand owners
Specialist health
& beauty retailers
Direct sales/
mail order companies
Strategic Report Where we do it
How we create value
Principal operating locations
based in Britain, Ireland and
USA, servicing domestic and
international customers.
• Full range of contract manufacturing and related services for international health
and beauty brand owners from high quality facilities.
• Strong product development capability and flexible, responsive customer service.
• Comprehensive sales channel coverage across hospitals, GP surgeries, retail pharmacies
and community care providers in the British and Irish healthcare markets.
• Broad range of own and third-party medical devices and pharmaceuticals.
• Cost-effective operations with scalable IT platforms.
Britain
No.1
• No.1 supplier to GPs
• No.1 in health & beauty contract
manufacturing
Ireland
No.1
• No.1 supplier of devices and pharma
to hospitals
Revenue
1.6%
Adjusted operating profit
11.0%
Strategic objective:
Drive for enhanced
operational performance
£514.6m
Strategic objective:
Drive for enhanced
operational performance
£54.3m
2018
2017
£514.6m
£506.5m
2018
2017
£54.3m
£49.0m
Operating margin
Strategic objective:
Grow operating margin
10.6%
Return on capital employed
Strategic objective:
Deliver superior shareholder returns
16.7%
2018
2017
10.6%
9.7%
2018
2017
16.7%
17.5%
Operating cash flow
10 year adjusted operating profit CAGR
Strategic objective:
Generate cash flows to fund organic
and acquisition growth and dividends
£46.5m
Strategic objective:
Deliver superior shareholder returns
15.2%
2018
2017
£46.5m
£56.6m
2018
2017
15.2%
14.0%
DCC plc Annual Report and Accounts 2018
55
Supplementary InfoFinancial StatementsGovernanceStrategic Report Operating Review (continued)
DCC Healthcare (continued)
Performance for the Year
Ended 31 March 2018
DCC Healthcare again delivered strong growth,
with operating profit increasing by 11.0%
(10.6% ahead on a constant currency basis),
with approximately half of the growth being
organic. The business continued to improve
its operating margin and also completed the
acquisition of Elite One Source in January 2018,
its first acquisition in the large and growing
health supplements market in the US.
DCC Vital performed very strongly and
benefited from the prior year acquisition
of Medisource and good organic growth
in medical devices. In the British primary care
sector, DCC Vital enhanced its position as
the market leader in the supply of medical
consumables and equipment to GP surgeries
with the completion of two small
complementary bolt-on acquisitions.
The integration of both acquisitions into
DCC Vital’s existing infrastructure is
progressing to plan. DCC Vital’s pharma
activities also performed well, benefiting from
the strength of its supply chain for certain
essential medicines. A strong performance
in the Irish business reflected a full year
contribution from Medisource, acquired in
January 2017, and continued strong growth
in the supply of medical devices to the hospital
and community care sectors. DCC Vital’s
operating margin was further enhanced by
exiting the supply of certain low value
commodity products into hospitals in Britain,
continuing the product portfolio streamlining
of prior years.
DCC Health & Beauty Solutions generated
excellent organic growth in the nutrition sector
and benefited from the acquisition of Elite One
Source in January 2018, which has performed
in line with expectations since acquisition. The
organic growth was driven by the continued
focus on complex product formulations,
particularly soft gels, and benefited from
increasing end-user demand for nutritional
products in DCC Health & Beauty Solutions’
key markets of Europe, the US and Asia. In the
beauty sector, while the overall performance
was held back somewhat due to destocking
by certain customers, the business benefited
from excellent growth in sachet filling and
also generated a number of new business
development opportunities during the
second half of the year.
DCC Health & Beauty Solutions
is continuing to progress a
number of investment projects
across its manufacturing
facilities in Britain and in its
recently acquired facilities in
the US, which will add new
capacity and product capability,
enhancing its ability to meet
the growing market demand
for its services.
Revenue by business
34%
63%
66%
Vital
Health & Beauty Solutions
Revenue by geography
18%
19%
UK 63%
Ireland 19%
Rest of World 18%
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DCC plc Annual Report and Accounts 2018
Markets and Market Position
DCC Vital – sales, marketing and
distribution to healthcare providers
DCC Vital markets and sells a broad range of
own and third party medical and pharmaceutical
products to hospitals, GPs, pharmacies, and
other healthcare providers in Britain and Ireland.
DCC Vital’s range of medical devices and
consumables includes categories such as
wound care, electrodes, diathermy, critical care
(anaesthesia, endovascular, cardiology and IV
access), minimally invasive surgery and
diagnostics, as well as a full range of
consumables and equipment used by
GPs. These products are typically single
use in nature.
While maintaining our market leading position
as a third-party distributor of medical devices
in Ireland, DCC Vital continues to strengthen
its offering of own brand products which now
account for approximately 40% of DCC Vital’s
gross profit generated from medical devices.
The acquisition of the Skintact and Espiner
brands in recent years has provided DCC Vital
with a base from which to develop its portfolio
of own brand medical devices and to grow its
sales in Britain and internationally. DCC Vital has
successfully launched own brand IV products in
the UK market and is seeking US FDA approval
in order to launch the Espiner minimally invasive
surgery products in the US market.
DCC Vital also represents leading medical,
surgical and diagnostics brands including
BioRad, Carefusion, Diagnostica Stago, ICU
Medical, Mölnlycke, Omron, Oxoid, Roche,
Siemens and Smiths Medical.
DCC Vital is the market leader in the supply of
medical consumables, equipment and services
to GPs in Britain and has a growing presence in
the developing community healthcare sector.
DCC Vital services a customer base of some
9,000 GP surgeries and other primary
healthcare providers through a highly effective
telesales and e-commerce based customer
contact centre in Wales, in addition to field
based engineers and key account managers.
During the year, DCC Vital further strengthened
its leadership in GP supplies with the acquisition
of two small complementary businesses (On
Call Medical and Surgery Express). These
acquisitions are being integrated into DCC
Vital’s existing GP supplies activities, expanding
its customer base and enhancing its product
offering, as well as generating cost synergy
opportunities. DCC Vital has continued to
build market share in the provision of medical
supplies to GPs in Ireland, leveraging the
commercial and operational strengths of the
British business.
Strategic Report DCC Vital is involved in the development,
manufacture, marketing and sales of generic
pharmaceuticals for the British, Irish and
international markets. Its portfolio comprises
solid dose, injectable and inhaler products
across a range of therapy areas including beta
lactam and other antibiotics, respiratory, pain
management, haematology, anaesthesia,
addiction and emergency medicine. DCC Vital
is a market leader in Britain in beta lactam
antibiotics (particularly penicillin V and
flucloxacillin) and also operates a specialist beta
lactam manufacturing facility located in
Roscommon, Ireland. DCC Vital’s pharma
revenues are generated from products where
DCC Vital is the license holder and from
products where it provides sales and marketing
services for other licence holders in Britain and
Ireland. DCC Vital works with leading branded,
generic and contract manufacturing pharma
companies such as Accord Healthcare,
Cipla, CSL Behring, Martindale Pharma and
Rosemont. DCC Vital sells into the hospital and
community pharmacy channels in Britain and
Ireland. It also sells to other generic pharma
companies and international distributors.
DCC Vital also has a leadership position in
the specialist procurement and sale of exempt
medicinal products (‘EMPs’) in Ireland, following
the acquisition of Medisource in 2017. EMPs
are pharmaceutical products which are
imported into a market with the authorisation
of the relevant regulatory authority (the Health
Products Regulatory Authority in Ireland) in
order to meet requirements of specific patients
where no suitable licensed product is available
in that market. The products are typically
licensed in another jurisdiction. Medisource
has performed well since acquisition,
maintaining its leadership position in Ireland
which is based on its excellent customer service
and strong network of international suppliers.
DCC Vital has the most comprehensive sales
channel coverage in the British and Irish
healthcare markets selling into the hospital,
retail pharmacy, GP and community care
channels. DCC Vital’s unrivalled market
coverage enables the business to provide
holistic solutions to addressing the healthcare
market in Britain and Ireland. 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, focused principally on
operating theatre supplies.
DCC Vital has approximately 150 highly trained
customer-facing sales, marketing and
customer support professionals who have
strong relationships with senior management,
clinicians and procurement professionals in the
public healthcare sector (NHS in Britain and
HSE in Ireland), major and regional pharmacy
wholesale/retail groups and private healthcare
providers. Leveraging the strength of its
customer and supplier relationships and the
breadth and quality of its product portfolio, in
tandem with targeted acquisition activity, DCC
Vital has built strong market positions including
leadership positions in GP supplies, electrodes
and diathermy consumables in Britain and in
exempt medicinal products and hospital
supplies generally in Ireland.
DCC Vital principally operates in sectors of
the healthcare market that are government
funded. Fiscal budgets in Britain and Ireland
continue to be tightly managed while, in
common with the majority of developed
economies, the burden of care, particularly to
support ageing populations, continues to grow.
Healthcare providers are seeking cost-effective
solutions from their commercial partners.
Public healthcare policy makers are increasingly
focusing on shifting the point of care to the
most cost-effective location which is typically
away from expensive acute care settings to
primary and community care settings. In
addition, healthcare payers and providers are
seeking to leverage their procurement scale
through increased use of tendering, framework
agreements and reference pricing. They are
switching to equivalent quality, lower cost
medical devices and generic pharmaceuticals
as well as outsourcing activities deemed to be
non-core. DCC Vital is very well placed to
benefit from these trends.
Competitors in this market sector include
global healthcare companies as well as a large
number of smaller pharmaceutical, medical
and surgical brand owners, manufacturers
and distributors.
DCC Vital gross profit by channel
21%
25%
54%
Hospital
Pharmacy retail/wholesale
Primary care
DCC Health & Beauty Solutions – services
for health and beauty brand owners
DCC Health & Beauty Solutions is a leading
outsourced contract manufacturing service
provider to the health and beauty sector in
Europe and now also has a developing presence
in the US market. The business has a broad
customer base of international and local brand
owners, direct sales companies and specialist
retailers. DCC Health & Beauty Solutions’ range
of outsourced services is focused principally
on the areas of nutrition (vitamins and health
supplements) and beauty products (skin care,
hair care, bath and body). The comprehensive
service offering encompasses product
development, formulation, stability and other
testing and regulatory compliance, as well as
manufacturing and packing.
In January 2018, DCC Health & Beauty
Solutions entered the US market through
the acquisition of Elite One Source Nutritional
Services, Inc (‘Elite’), a leading provider of
contract manufacturing and related services
to the healthcare and dietary supplements
market in the US. Elite’s service offering
encompasses product development,
formulation, manufacturing, packaging
and regulatory services. Elite has particular
expertise in the manufacture of organic dietary
supplements and highly complex formulations.
Its customer base includes some of the
leading specialist brands in the US consumer
healthcare market. The US is the world’s largest
dietary supplements market and displays the
same high growth characteristics as the
European market with a greater level of
fragmentation within the contract
manufacturing base which offers DCC
significant opportunities for organic and
acquisitive growth.
DCC Health & Beauty Solutions has capability
across a wide variety of product formats
(tablets, soft gels, capsules, creams and liquids)
and packaging formats (pots, blisters, sachets,
bottles, tubes, pumps and sprays). The
business operates five Good Manufacturing
Practice (‘GMP’) certified facilities in Britain,
four of which are licensed by the Medicines
and Healthcare products Regulatory Agency
(‘MHRA’) and following the acquisition of Elite,
one facility in Missoula, Montana. The US facility
complies with FDA cGMP (current Good
Manufacturing Practices) and Health Canada
standards and is also certified by leading third
party regulatory bodies including NSF and
USDA Organic. Elite’s facility is well-invested
with significant scope to expand capacity to
meet its organic growth plans. DCC continually
invests in its manufacturing facilities to expand
capacity and enhance its service offering
to customers.
DCC plc Annual Report and Accounts 2018
57
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Operating Review (continued)
DCC Healthcare (continued)
DCC Health & Beauty Solutions has built
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. The business
has strong market shares in Britain, Scandinavia
and Benelux and is building market share in
Continental Europe (especially in Germany,
France and Poland) and now in the US.
Strategy and Development
DCC Healthcare’s vision is to build a substantial
healthcare business focused on the sales,
marketing and distribution of medical devices
and pharmaceuticals and the provision of
contract manufacturing and related services
for the health and beauty sector. DCC
Healthcare seeks to drive continued strong
profit growth in tandem with returns on capital
well above the DCC Group’s cost of capital.
Our competitors include Catalent, Aenova, IVC
Brunel and Ayanda in nutrition in Europe and LF
Beauty and Swallowfield in creams and liquids
in Britain.
DCC Health & Beauty
Proforma revenue by product category
40%
60%
Nutrition
Beauty
DCC Vital
DCC Vital has a good track record of growth
and operating margin improvement. This has
been achieved through the streamlining of its
activities, improving sales mix (increasing the
proportion of higher value-added products and
company owned brands), exiting lower margin
activities and consolidating back office
activities. This growth has been achieved
against a backdrop of challenging market
conditions in the public healthcare sector in
Britain and Ireland, which has reduced organic
growth opportunities.
DCC Vital gross profit by brand
43%
57%
Own Brand
Third Party
Our ongoing targeted acquisition activity,
with strong valuation discipline and integration
execution, has resulted in a significant
expansion of DCC Vital’s market coverage
in Britain and a broader product portfolio,
together with profit growth and increased
returns on capital.
DCC Vital aims to continue this track record
of growth through:
• expanding the product portfolio both
organically and by acquisition, with a
particular focus on own brand medical
products in product categories which
can deliver sustainable returns over the
longer term;
leveraging the breadth of our market
coverage in Britain as healthcare systems
seek to treat patients in the most
appropriate and cost effective setting;
and
•
• expanding our market reach into
Continental Europe, particularly Northern
European markets, organically and
by acquisition.
In January 2018, DCC Health
& Beauty Solutions entered
the US market through the
acquisition of Elite One Source
Nutritional Services, Inc (‘Elite’),
a leading provider of contract
manufacturing and related
services to the healthcare and
dietary supplements market
in the US.
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DCC plc Annual Report and Accounts 2018
DCC Vital has a strong regulatory capability
which, combined with its strength in product
sourcing, will generate opportunities for the
business to extend its activities into new
geographic markets over the coming years.
DCC Health & Beauty Solutions
DCC Health & Beauty Solutions has an
excellent track record of growth, the majority
of which has been organically driven. The scale
of the business has increased significantly over
the last number of years with operating profits
more than doubling over the last 4 years.
Operating margins have grown consistently
as the business focuses on higher value, more
complex products.
DCC Health & Beauty Solutions aims to
continue this track record of growth through:
• driving continued organic sales growth with
existing customers by leveraging the
strength and depth of our product
development and technical resources;
• attracting new customers with our high
quality facilities, strong business
development capability and highly
responsive and flexible customer service;
• enhancing and expanding the service
offering, organically and by acquisition, with
a particular focus on probiotics, nutritional
liquids and gels and sports nutrition; and
further expanding the geographic footprint
of our operations in both Europe and the US
markets, by acquisition.
•
Our high quality facilities, together with
the strength and depth of our 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 our customers and for assisting customers
in rapidly bringing new products from marketing
concept through to finished products.
Customers
DCC Vital services in excess of 15,000
customers across all channels to market
(public and private hospitals, procurement
groups, retail pharmacies, pharma wholesalers,
community healthcare providers and GPs)
in Britain and Ireland as well as international
distributors. DCC Vital has significantly
enhanced its market coverage in recent years
to offer unmatched primary and secondary
care access in Britain and Ireland.
Strategic Report DCC Health & Beauty Solutions principally
focuses on providing services to a broad
customer base of UK, US and international
brand owners, direct sales companies and
specialist retailers in the areas of nutrition
and beauty products. DCC Health & Beauty
Solutions works with leading brands (such as
Child’s Farm, Elemis, Liz Earle, Merck, Nestlé
Health Science, Omega Pharma, PZ Beauty,
Ren and Vitabiotics), direct selling companies
(such as Oriflame, Nature’s Best and
Healthspan), specialist health and beauty
retailers (such as Apoteket, The Body Shop,
Walgreen Boots and Holland & Barrett) and
pharma companies (such as Alliance Pharma,
Astellas Pharma and Stada). DCC Health &
Beauty Solutions has been investing to
accelerate the geographic expansion of the
customer base and today significantly more
than half of the output from our facilities is
consumed in markets outside of Britain
and Ireland.
DCC Healthcare has a broad customer base
and its ten largest customers account for
approximately 22% of revenue in the year
ended 31 March 2018.
Suppliers
DCC Vital represents leading medical,
surgical and diagnostics device brands including
BioRad, Carefusion, Diagnostica Stago, ICU
Medical, Mölnlycke, Omron, Oxoid, Roche,
Siemens and Smiths Medical. DCC Vital works
with leading innovative and generic pharma
companies such as Cipla, CSL Berhring,
Martindale Pharma and Rosemont, it also
operates its own specialist beta lactam
antibiotics manufacturing plant in Ireland.
DCC Health & Beauty Solutions sources from
high quality raw materials and ingredients
suppliers across the globe in order to provide
customers with high quality and cost-effective
solutions with an increasing focus on sourcing
sustainability-certified raw materials.
DCC Healthcare’s supplier portfolio is broadly
based with the top ten suppliers representing
approximately 20% of purchases in the year
ended 31 March 2018.
Our People
DCC Healthcare employs 2,176 people,
predominantly based in Britain, Ireland and the
US, led by strong, entrepreneurial management
teams. Developing and investing in our people
is a critical enabler of DCC Healthcare’s
strategy. DCC Healthcare is focused on
developing talent and actively supports,
and has benefited from, the DCC Graduate
Programme. Ongoing training and
development is particularly essential in
the highly regulated healthcare sector. We
continually invest in ensuring that our 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 conduct local training programmes
with an emphasis on driving performance
improvement in these businesses. Training
focuses on safety, supervisory, environmental,
technical and leadership skills. These training
programmes are reviewed on an ongoing basis
to ensure they meet the changing business
environment and continue to deliver value.
Continuous improvement in our safety
performance is a key priority within DCC
Healthcare, Safety is embedded in everything
we do within our operations and driving a
culture of 'safety first' across our business is
a key objective for all our employees. There is
ongoing employee engagement within each
business including regular ‘safety
conversations’ across each of the sites,
processes to identify and minimise risks,
increased near miss reporting by employees
and monitoring of safety performance and
objectives at management meetings. Safety
F1rst (the brand used across our business
to support safety communication) has clear
leadership from the top and buy-in across
the businesses. Safety is a key theme in our
monthly reporting and senior management
across all our businesses are actively involved
in the safety programme including participating
in regular management safety ‘walk-arounds’
in their businesses.
Key Risks
Governments (directly or indirectly) fund the
healthcare spending of the geographical
markets in which DCC Healthcare operates.
Our competitive product portfolio and growing
range of own brand products is providing new
growth opportunities and is mitigating the fiscal
pressures on governments’ healthcare
budgets. We are committed to working closely
with our suppliers and customers to find
innovative, cost-effective solutions to address
the challenges of future capacity and financial
constraints facing public healthcare systems.
DCC Healthcare is focused on expanding its
product portfolio with a particular focus on own
brand medical products in categories which can
deliver sustainable returns over the longer term.
There is an active pipeline of development
projects and we have invested in additional
resource to strengthen our capability in this
area. All development projects are subject to
detailed and regular review by management
and are tracked against project plans and we
maintain close communication with all relevant
third parties (regulatory bodies, contract
manufacturers and others).
We continually invest in 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 our manufacturing sites are
licensed or certified and subject to ongoing
regular internal and external third-party
audit reviews.
DCC Healthcare trades with a very broad
supplier and customer base and our constant
focus on providing a value-added service
ensures excellent commercial relationships.
Recent acquisitions and new commercial
relationships have introduced new supplier
relationships, an extended product portfolio
and expanded 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.
DCC Healthcare has considered the potential
impact of Brexit on its various businesses and
continues to keep developments under review.
DCC plc Annual Report and Accounts 2018
59
Supplementary InfoFinancial StatementsGovernanceStrategic Report Operating Review (continued)
DCC Healthcare (continued)
Environment
DCC Healthcare is focused on improving the
environmental sustainability of its businesses
and range of products and services. Many of
our customers monitor our progress in this
area and are keen to see their business and
brands share in the successes we have
delivered, particularly in the area of carbon
footprint reduction, use of products that are
sourced from sustainable sources and reduced
waste to landfill. DCC Healthcare has continued
to progress energy management initiatives,
particularly at our contract manufacturing sites,
including the installation of wind turbines at one
of our sites, installation of LED lighting across
a number of sites and the optimisation of
cleaning water temperatures. We have also
undertaken a number of projects to install
voltage optimisation technology in some of our
manufacturing sites. This technology allows us
to regulate, clean and condition the incoming
power supply in order to reduce the voltage
supplied to the optimum level for the on-site
electrical equipment. All of these projects will
deliver further reductions in carbon emissions,
energy use and costs. Our contract
manufacturing business continues to enhance
its procurement capability of sustainable
ingredients and now sources raw materials
certified by Friends of the Sea and the Marine
Stewardship Council and glycerol from
sustainable palm oil.
DCC Healthcare is focused
on improving the environmental
sustainability of its businesses
and range of products
and services.
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DCC plc Annual Report and Accounts 2018
Case study:
Growing our own
brand offering
DCC Vital has a strong track record of growth
in the sales, marketing and distribution of medical
and diagnostic products.
Strategic Report DCC Vital represents many leading medical device brands in the UK
and Ireland, whilst also offering a range of own Fannin brand products.
Following a market review, DCC Vital identified an opportunity to enter
the Intravenous ('IV') and Gravity Blood Set segment of the UK market.
This segment was traditionally dominated by leading international
medical device manufacturers. Working with a manufacturing partner
with the appropriate expertise and high quality standards, DCC Vital
developed a complete product range which met the requirements
of NHS healthcare professionals and offered a strong economic value
proposition. DCC Vital’s strength in regulatory affairs meant that CE
mark approval was achieved promptly.
Coincidently, the Fannin IV and Gravity Blood Set range was launched
at a time when a brand leader was experiencing supply issues. A robust
supply chain, the ability to move quickly and the capacity to invest in
inventory allowed DCC Vital to capitalise on this opportunity and build
market share rapidly. In-depth market knowledge, combined with
strong relationships with NHS Trusts has ensured continued market
share growth and now in excess of 100 hospitals and private healthcare
groups in the UK are using these products. Since launch, the product
offering has been further expanded in response to patient and
customer needs.
DCC plc Annual Report and Accounts 2018
61
Supplementary InfoFinancial StatementsGovernanceStrategic Report Operating Review
DCC Technology
What we do
How we do it
DCC Technology,
which trades as Exertis,
is a leading route-to-
market and supply
chain partner for global
technology brands.
Exertis provides a broad
range of consumer,
business and enterprise
technology products and
services to retail and
reseller customers.
Key brands
Acer, Apple, Asus, Dell, Epson,
Huawei, Intel, Lenovo, LG, Logitech,
Microsoft, MSI, Netgear, Nokia,
Plantronics, Samsung, Seagate,
Sonos, Toshiba and Western Digital.
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DCC plc Annual Report and Accounts 2018
Our suppliers
400+ Global technology brands
and manufacturers
DCC Technology activities and services
Proactive sales
& marketing
Category, product &
technical expertise
Product sourcing,
website & category
management
product lifecycle
solutions
End-user fulfilment,
white label services
& in-store product
positioning
Kitting, localisation
& customisation
of products
Demand & logistics
management, including
import/export
Stock hubbing,
bundling & returns
management
Our customers
Retail
Etailers
Resellers
Value added resellers
Strategic Report Where we do it
How we create value
Principal operating locations:
Britain, Ireland, France,
Sweden, Germany, the
Netherlands, Belgium, UAE,
Spain and Norway. Further
global supply chain capability
is enhanced with offices in
Poland, China and the USA.
• Proactive sales and marketing approach to a very broad customer base across
a number of countries.
• Excellent supplier portfolio.
• Agile, responsive and service-focused.
• Cost-effective and tailored solutions for customers and suppliers.
• Technical, supply chain and value-added services expertise.
• Financial strength.
Revenue
14.7%
Adjusted operating profit
16.3%
UK and Ireland
No.2
£3.1bn
Strategic objective:
Drive for enhanced
operational performance
Strategic objective:
Drive for enhanced
operational performance
£47.8m
• No. 2 distributor of technology products
France
No.7
• Leading player in distribution
of technology products
Sweden
No.3
• No. 3 distributor of technology products
2018
2017
£3.1bn
2018
£47.8m
£2.7bn
2017
£41.1m
Operating margin
Strategic objective:
Grow operating margin
1.6%
Return on capital employed
Strategic objective:
Deliver superior shareholder returns
16.1%
Europe
No.4
• No. 4 distributor of technology products
2018
2017
1.6%
1.5%
2018
2017
16.1%
17.1%
UAE
• Expanding share of technology
distribution market
Operating cash flow
10 year adjusted operating profit CAGR
Strategic objective:
Generate cash flows to fund organic
and acquisition growth and dividends
Strategic objective:
Deliver superior shareholder returns
£42.2m
2018
£42.2m
2017
£81.8m
6.4%
2018
2017
6.4%
7.5%
DCC plc Annual Report and Accounts 2018
63
Supplementary InfoFinancial StatementsGovernanceStrategic Report Operating Review (continued)
DCC Technology (continued)
Performance for the Year Ended
31 March 2018
DCC Technology achieved very strong
operating profit growth of 16.3% (15.5% ahead
on a constant currency basis), reflecting
acquisitions completed in the current and prior
year and organic profit growth in the UK, Ireland
and the Nordics.
In the UK, DCC Technology’s largest market,
the business achieved very strong revenue and
profit growth, driven by market share gains and
growth in key product categories including
audio visual, components and gaming. The
business continued to invest in both its product
and service capability to allow it to take
advantage of growth opportunities in audio
visual, home automation, enterprise software
and consumer product solutions.
Hammer, acquired in December 2016, achieved
strong growth in sales of server and storage
products into key markets, including the
datacentre market. The acquisition of MTR,
in July 2017, has allowed DCC Technology to
enhance its service offering in the mobile
market, strengthening its relationships with key
vendor and retail partners. The business has
performed very strongly since acquisition and
provides a platform to extend its service
offering outside of the UK. In February 2018,
DCC Technology acquired Hypertec, a small
specialist distributor of own-brand and third
party memory and accessory products to
reseller customers in the UK.
The new UK national distribution centre is now
operational and the business has successfully
disposed of most of its original warehousing.
The associated project to upgrade its
enterprise management system, which will
significantly enhance the capability of the
business to service its customers and suppliers,
is progressing well and is scheduled to be
completed by the end of the year.
The Irish business delivered strong organic
profit growth as it benefited from a good
performance in the enterprise segment
and the continued development of its
service proposition, including device life
cycle management.
notebooks and PCs), networking & security
products, communications products (including
smartphones, feature phones, accessories and
unified communications), servers & storage,
audio visual products, printers, peripherals,
cables & connectors and consumables.
DCC Technology provides technology
brand owners and manufacturers with an
exceptionally broad customer reach and
proactively markets their products through
product and customer focused sales teams.
The business provides a range of value-added
services in the reseller and retail channels to
both its customers and suppliers, including
end-user fulfilment, digital distribution, product
lifecycle solutions, category management and
merchandising, product customisation and
cross supplier bundling, third party logistics and
web site development and management. Key
to the provision of these services is access to,
and interpretation of, relevant data from across
the technology supply chain.
Revenue by business unit
8%
15%
77%
UK & Ireland
Continental Europe
Supply Chain Services
In France, the B2B segment performed strongly
as it benefited from expansion of its audio visual
offering and strong organic growth in its core
cabling business. The French consumer
products business remained very challenging
and a programme to significantly reduce costs,
while improving its logistics and operational
efficiency, has been implemented. In the
Nordics, the business experienced very strong
organic growth and continues to benefit from
investments made to broaden the reach of the
business in Norway, Denmark and Finland. The
business is making a significant investment in
warehousing capacity to support future growth,
in particular in audio visual and IT products.
The business in the Middle East generated very
strong revenue and profit growth reflecting
further development of its relationships with
key retailers in the region. Supply Chain Services
continues to invest in its global service offering
and also acts as an essential centre of
expertise, supporting the broader DCC
Technology business.
Markets and Market Position
DCC Technology partners with many of the
world’s leading technology brands to market
and sell a range of consumer, business and
enterprise technology products and services
to a very wide customer base of retailers,
etailers and resellers, primarily in the UK, France,
Ireland, Sweden, Benelux, Germany, Norway,
Spain and the Middle East. The business also
has operations in Poland, China and the USA
and increasingly our strong relationships with
suppliers and customers allows us to win
business on a pan-European or indeed
global basis.
The primary categories of consumer
technology products include consumer
electronics (including smart home products),
gaming consoles, peripherals & software,
wearable technology and accessories. Business
and enterprise technology products include
computing products (including tablets,
The performance in the current year, together with recent
investments made in its service offering and infrastructure,
leaves DCC Technology well positioned to drive further growth
in both its existing and new markets.
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DCC plc Annual Report and Accounts 2018
Strategic Report Case study:
Expansion of Exertis’ AV
offering across Europe
Exertis is a leading technology distributor of consumer, business and enterprise
products from established and emerging technology brands that provide solutions
for diverse markets which include IT, mobile, gaming and AV.
Exertis’ goal is to become the number one audio-visual ('AV')
distributor of choice in Europe for vendors, systems integrators
and resellers by expanding our geographic reach and leveraging
our professional AV capabilities and technical expertise within this
rapidly growing technology sector.
Exertis has already established a strong market position for AV
in the UK and Ireland, Nordics and France and is well positioned to
expand our business in this sector into the DACH, Benelux, Iberia
and other European territories. In addition, further expansion of the
team in the Nordics with planned investment in Finland, Norway
and Denmark is underway to capitalise on growth opportunities.
Partnering with the majority of mainstream AV vendors such as
Samsung, LG, NEC, Philips and Epson and other complementary
vendors, Exertis is able to take advantage of the convergence of IT
and AV markets by providing a complete end-to-end solution which
caters for the different needs of key vertical markets like retail,
hospitality and transport.
Furthermore, customers of Exertis can take advantage of a
comprehensive range of logistical, financial and supply chain services
that can support both vendor partners and resellers in the provision
of AV projects and solutions.
DCC plc Annual Report and Accounts 2018
65
Supplementary InfoFinancial StatementsGovernanceStrategic Report Operating Review (continued)
DCC Technology (continued)
Reflecting the global nature of the technology
supply chain, DCC Technology provides global
supply chain services through its dedicated
supply chain operations in Ireland, Poland, China
and the USA. These services include product
sourcing & procurement, supplier hubbing,
consignment stock programmes, supplier
identification & qualification, quality assurance
& compliance and supplier & customer
fulfilment and are designed to deliver cost,
capital and complexity optimisation for its
global partners.
Exertis’ principal addressable markets are the
retail and reseller channels for consumer and
business technology products in the UK,
Ireland, France, Sweden, Norway, Benelux,
Germany and Spain. The value of the
technology distribution market in these
territories is estimated to be €50 billion.
During the year, Exertis acquired MTR, a fast
growing UK based provider of second lifecycle
solutions for mobile and tablet devices. Based
in Harlow, Essex and employing 77 people,
MTR partners with retailers, mobile handset
manufacturers and insurance companies to
source and refurbish mobile phones and tablets
for resale to customers in the UK and abroad.
The acquisition of MTR advances the DCC
Technology strategy of expanding its service
proposition to vendors and customers and
provides access to the high growth second
lifecycle solutions market. DCC Technology
also acquired Hypertec, a small specialist
distributer of own-brand and third party
memory and accessory products to reseller
customers in the UK.
DCC Technology is the fourth largest
distributor of technology products in Europe
with leading positions in the UK & Ireland,
France and the Nordic region.
Strategy and Development
DCC Technology’s vision is to become the
leading specialist integrated technology
distribution and supply chain services business
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 focused on:
• creating an integrated, multi-country
operating model, with best-in-class
infrastructure;
• expanding our channel and geographic
presence in specialist areas and to be the
leading player in these areas; and
• establishing DCC Technology as the
industry leader in providing end-to-end
market development and channel
optimisation services.
DCC Technology will grow organically by
attracting new suppliers, opening new
channels and routes to market for our suppliers’
products and by continuing to develop value
added services. Exertis will seek to develop
a pan-European organisation focused on
a range of specific product sectors with
services tailored for the needs of the SME and
consumer markets. In particular, Exertis’ supply
chain operations are focused on ensuring that
it delivers solutions that minimise cost, capital
and complexity for its global clients.
Exertis is constantly reviewing trends and
innovations in technology products and
services and is focused on ensuring that the
business continues to be the best positioned
to benefit from these areas of future growth.
Revenue by product type
8%
4%
6%
20%
6%
8%
10%
14%
12%
12%
Computing
Networking, security & components
Communications & mobile
Consumer electronics
Server & storage
Services
Audio visual
Gaming hardware
Consumables
Other
DCC Technology will grow
organically by attracting new
suppliers, opening new
channels and routes to market
for our suppliers’ products and
by continuing to develop value
added services.
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DCC plc Annual Report and Accounts 2018
Customers
The business has a very broad customer base,
selling to approximately 45,000 customers.
In the year ended 31 March 2018 the largest
customer accounted for approximately 9% of
revenues and the ten largest customers
accounted for 36% of total revenues.
Exertis seeks to provide an excellent standard
of customer service by combining an extensive
range of services with a commitment to
identifying the most cost-effective and
flexible solutions to meet our customers’
requirements. By constantly focusing on
building the breadth of our reseller and retail
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.
The introduction of SAP into the UK business
will help to expand the customer breadth,
especially for products in the SME market due
to the introduction of a significantly enhanced
web offering.
Our supply chain services customers include
IT equipment manufacturers, outsourced
equipment manufacturers, consumer
electronics companies, telecommunications
equipment manufacturers and the business
has recently expanded its customer base into
the industrial and pharma sectors. Customer
relationships in this area of our business tend
to be long-term in nature and many of our
customers have been dealing with us for
over ten years.
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, Apple, Asus,
Dell, Epson, Huawei,Intel, Lenovo, LG, Logitech,
Microsoft, MSI, Netgear, Nokia, Plantronics,
Samsung, Seagate, Sonos, Toshiba and
Western Digital. The largest supplier accounted
for 8% of total revenues in the year ended
31 March 2018 and the top ten suppliers
represented 42% of total revenues.
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 partners.
Strategic Report
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 comply with 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 have been formalised
and communicated to our suppliers in our
‘Code of Practice’.
Our People
Exertis employs 2,707 people in 15 countries
and recognises that they are fundamental to
the continued success of the business. At all
levels, employees are encouraged to adopt a
service-oriented approach to meeting the
demands of suppliers and customers.
At senior management level, our operating
businesses are run by some of the most highly
regarded entrepreneurial management teams
in the industry. Exertis seeks to foster and
maintain an entrepreneurial culture, coupled
with a commitment to ensuring that the
highest ethical standards in business conduct
are maintained.
Exertis is committed to conducting its business
in a sustainable manner and this is reflected in
how we interact with customers, suppliers,
employees and the communities in which we
operate. 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.
Exertis operates a wide variety of employee
training programmes within individual
businesses to promote the ongoing
development of staff at all levels in the
organisation. Employee training encompasses
both personal development and role-specific
training, in addition to formal training in areas
such as health and safety, risk and compliance.
The business also undertakes regular employee
surveys in order to determine areas for
improvement. Exertis continues to place
specific focus on the development of
leadership skills for its management team;
at senior levels this is focused on building
leadership capability to deliver business
strategy over the longer term. Exertis is an
active participant in the DCC Graduate
Programme, supporting the development
of a high potential, mobile talent pool at
graduate level.
DCC Technology has a diverse supplier base and partners
with hundreds of suppliers including many of the world’s leading
technology brands. 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.
Key Risks
DCC Technology faces a number of strategic,
operational, compliance and financial risks.
The business interacts with a broad range of
suppliers and customers with whom we have
built excellent commercial relationships.
However, the business would be significantly
impacted by a decline in demand for particular
technology products or the loss of a small
number of key suppliers or customers. DCC
Technology’s market leading position in
geographic and product areas strengthened
by ongoing acquisition activity helps to mitigate
margin erosion in what is a competitive
environment. The potential impact from Brexit
has been considered as part of the ongoing
strategic plans.
In the UK, Exertis is upgrading its IT system.
A project steering committee is overseeing
the upgrade which is being run by experienced
project managers. To ensure that the
operations of the business are not adversely
affected, a phased project completion
approach is being taken. A number of other
entities in the division are investing in additional
warehouse space to facilitate future growth.
Successful project management of the move
to new premises will ensure a positive impact
for customers and suppliers.
Given the strength of DCC Technology’s
management team, the loss of a key number
of individuals represents a risk to the business.
There is an ongoing focus on leadership
development and succession planning to
mitigate the risks of management retention.
Acquisition activity remains a key driver of
growth for DCC Technology. Failure to identify,
execute or integrate acquisitions could have
a material impact on the business and, as
such, significant focus is placed on the due
diligence process for potential acquisitions.
DCC plc Annual Report and Accounts 2018
67
Supplementary InfoFinancial StatementsGovernanceStrategic Report Responsible Business Report
Creating
sustainable value
Conducting our operations responsibly, in line with societal
expectations and good practice, is critical to achieving our
strategic objective of building a sustainable business and
delivering long-term value to shareholders.
Introduction
The EU Non-Financial Reporting Directive
(2014/95) has been transposed into Irish
legislation and requires large organisations
to identify and report on those non-financial
areas which are material to their business
performance, including environmental matters,
social and employee matters, diversity, respect
for human rights and bribery and corruption.
This Responsible Business Report, and other
sections of the Annual Report, address the
requirements of the legislation.
An internal materiality assessment of non-
financial topics was completed in the reporting
period, with support from KPMG. Materiality
was determined by a range of factors including
regulatory requirements, internal risk
assessment processes, stakeholder interest
and management experience of the business
sectors in which we operate. Overall, the
assessment supported the Directors' view that
the non-financial topics currently reported on
in the Annual Report are the most material
issues at a Group level. Our objective is to
continually improve our reporting on these
topics (taking note of external standards such
as GRI) to provide stakeholders with concise,
relevant information on our Group-led policies,
initiatives and outcomes.
Other non-financial areas (for example waste
management, water use and conflict minerals)
are more effectively managed at a local
business level, as determined by their industry
practice and operating environment.
Safety
Safety is a core value of DCC. Nothing we
do is so important that it cannot be done
safely, every time. Group-wide tools, such
as our Safety F1rst programme, support
the development of a positive and proactive
safety culture, reinforced by appropriate
safety management systems and processes
in each business.
The Group Health & Safety Policy was revised
and substantially expanded in 2017 to include
a series of expectations in key areas including
leadership, risk management, training and
learning from events. The Policy is available
on our website www.dcc.ie. Individual business
safety management systems are aligned with
the Policy and form the basis of the Group H&S
audit programme.
Cross Group collaboration and communication
on key safety issues is supported by five
working groups which focus on specific areas
including transport safety, process safety and
occupational health & safety. Membership of
these working groups is drawn from all four
divisions and includes input from operational,
transport and HR functions as well as H&S
professionals. Sharing good practice, learning
from events and setting Group standards are
key objectives for the working groups.
In September 2017, the DCC HSE Conference
brought together over sixty H&S professionals
and managing directors from around the Group
to discuss and review medium-term strategic
H&S objectives and initiatives.
Performance
All incidents are systematically recorded and
assessed to identify control weaknesses and
learnings. Both qualitative and quantitative HSE
information is included in monthly reporting
processes at all levels of the organisation.
Our objective is to continually improve our
performance towards a goal of zero harm
to people or the environment.
In the reported period the frequency of lost
time injuries ('LTI') decreased significantly.
The majority of employee LTIs occur from slips/
trips/falls and manual handling. Increasing risk
awareness and raising unsafe condition reports
are key tools to accident prevention and are
promoted by the businesses in regular
briefings, training and communications.
The LTI severity rate (as measured by the
number of days out of work) increased
compared to the prior year – primarily due
to a relatively small number of accidents that
required extended recovery periods.
Lost Time Injury (‘LTI’)
40
30
20
10
39
36
27
27
23
1.9
1.7
1.7
1.6
1.1
6
4
2
2014
2015
2016
2017
2018
Number of lost time
injuries per 200,000
hours worked ('LTIFR')
Number of calendar
days lost per 200,000
hours worked ('LTISR')
Process Safety
Storing and transporting hazardous products
in the LPG and Retail & Oil divisions requires
a particular focus on process safety
management, defined as preventing the
release of hazardous products during a process
(e.g. unloading, storing, loading) which could
cause catastrophic harm to people or the
environment. This risk is managed through
detailed risk analysis, asset management,
high reliability engineering controls, employee
awareness training and the use of specific
leading indicators. Senior management receive
regular external training on process safety
leadership to ensure understanding of the
risks, controls and monitoring systems in place.
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DCC plc Annual Report and Accounts 2018
Strategic Report Nominations to our executive leadership
programme are connected to the annual
succession process which identifies the next
generation of leadership talent for the Group.
This integration with succession planning
ensures we develop a pipeline of talent to
meet current and future business needs.
International Leadership Pipeline
Working in another market offers an invaluable
opportunity as it accelerates the development
of the global mindset and cross-cultural skills
needed to operate internationally. We actively
identify and develop talent that can facilitate
growth in new markets and support our
geographic expansion. See Strategy in Action,
page 40. We offer rewarding career and
personal development experiences at different
operating locations throughout the Group
and the number of available international
opportunities continues to expand.
Graduates
The DCC Graduate Programme is an integral
part of the Group talent initiative. It aims to
create a pipeline of high potential, internationally
mobile, early career talent for the Group.
66%
DCC is a fast-paced environment, and
graduates on our two year programme gain
unrivalled on-the-job experience through
placements in our international operations
where they learn about the diversity of the
markets in which we operate. Graduates are
supported through targeted learning modules
and ongoing coaching and mentoring as they
transition from full-time education to the
full-time working environment.
Local Skills Based Training Support
DCC encourages and supports talent
development at all levels in the organisation.
Our operating companies conduct local training
programmes, often led by local dedicated
Learning and Development departments,
with an emphasis on driving performance
improvement in the business. Development
programmes are tailored to individual business
needs and the market in which they operate,
which allows our employees to develop to
their full potential and creates real value for
both the business and the broader Group.
These training programmes are reviewed on
an ongoing basis to ensure they meet the
changing business environment.
People
DCC’s success has been founded on delivering
performance and growth through our people.
At 31 March 2018 we employed 11,146 people.
DCC employees by division
1%
24%
23%
DCC LPG
DCC Retail & Oil
DCC Healthcare
DCC Technology
DCC Corporate
20%
32%
DCC employees by geographic area
5%
1%
9%
19%
UK
Continental
Europe
Ireland
USA
Other
Talent Development
DCC is committing significant resources
to ensure we have the current and future
leadership talent in place to support our
ambitious growth plans and meet our
strategic objectives.
Senior Leadership Talent
Leadership development at divisional and
Group levels focuses on building organisational
capability to deliver the Group’s strategy
through the next cycle of growth. Our approach
centres on developing leadership capacity
to perform in increasingly complex, larger
scale global operations. See Strategy in
Action, page 40.
Executive development in DCC brings acute
focus to personal leadership and actively
involves the business to ensure focused
development and application of learning
back in the business. We leverage the
strengths and identify areas of growth for
our senior talent against the DCC leadership
competencies and through set objectives
that are aligned to both personal development
and the Group’s overall strategy.
Diversity and Inclusion
DCC recognises the variety of characteristics
which make individuals unique and the benefits
of a workforce with diverse skills, qualities and
experience. Taking account of the DCC Group
Diversity and Equal Opportunities Policy, our
individual businesses continue to focus on ways
to increase the diversity of our workforce. All
recruitment, selection and promotion decisions
are made on individual merit.
Gender diversity
Male
Group
Female
66:34
Senior Management
83:17
Board
70:30
We welcome a greater representation of
female talent across all sectors of our business,
particularly at senior management level,
and we are committed to extending equal
opportunities to all individuals in line with our
policies. DCC is an active member of the 30%
Club, which consists of chairmen and chief
executives committed to better gender balance
at all levels of their organisations through
voluntary actions. In this regard, we actively
support the development of our high potential
female talent through partnerships with
organisations like The Mentoring Foundation
to ensure our female leaders are supported at
significant career stages. We are also members
of the Employers Network for Equality and
Inclusion which works in partnership with
our UK businesses to ensure we adopt best
practice approaches on all aspects of equality
and human rights in the workplace.
Rewarding Employees Fairly
DCC offers pay, social and pension benefits
in line with industry, local or national practice,
often with incentives linked to company and
individual performance targets. We are
committed to meeting high standards of
business conduct in every area of our activities.
As part of this commitment, we regularly review
our reward polices to ensure we reward
employees fairly and comply with any minimum
wage requirements.
Under new legislation, UK employers with more
than 250 employees are required to publish key
metrics on their Gender Pay Gap. Our affected
UK businesses have published individual reports
as required by legislation.
DCC plc Annual Report and Accounts 2018
69
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Responsible Business Report (continued)
Environment
Businesses have a responsibility to manage
their activities to support long-term
environmental sustainability.
Within DCC, businesses minimise the
environmental impact of their operations
with appropriate management systems and
processes. In some cases, management
systems are certified to the ISO14001 standard
where there is a business case for doing so.
Hazardous and non-hazardous waste is
managed in accordance with EU and local
legislation relating to, for example, waste
packaging, waste electrical and electronic
equipment and batteries. At a Group level, water
use is not material. Within the Health & Beauty
manufacturing businesses, waste process water
is managed to ensure appropriate treatment
and discharge under local consents.
Within the Retail & Oil businesses, oil spills and
leaks present a potential risk to the environment.
Continuous improvements in driver awareness
to highlight potential spill risks (in particular at
domestic customer sites) and monitoring of
underground tanks and pipelines reduces the
likelihood of any uncontrolled releases or loss
of containment during storage or delivery of
oil products. In the event of a spill, clean up and
remediation activities are undertaken to contain
and remove contamination.
Climate Change
The physical and transitional impacts of climate
change bring both risks and opportunities for all
businesses and these are highlighted in the Risk
Report on page 22.
Since 2010, DCC has reported carbon
emissions data to CDP and will continue
to use the CDP’s reporting process as a
benchmarking tool and to identify opportunities
for improvement and best practice. In 2018,
CDP has aligned its questionnaire with the
voluntary recommendations arising from
the Financial Stability Board’s Task Force
on Climate-related Financial Disclosures.
Greenhouse Gas Emissions
Energy data (transport fuels, heating fuels
and electricity use) is reported by all DCC
businesses and converted into greenhouse
gas ('GHG') emissions using CDP
accredited software.
The divestment of the Environmental division
in May 2017 has reduced DCC’s Scope 1 and 2
GHG emissions by approximately 20%
compared to the prior year. Investments in
energy efficiency (see case study), consolidation
of warehousing, optimisation of vehicle routing
and ongoing decarbonisation of the electricity
grid – in particular in the UK – have contributed
to a reduction in emissions. Organic growth,
acquisitions and, in some areas, increasing
heating requirements due to colder weather
Case study:
Certas Energy France
Certas Energy France operate 270 unmanned Esso Express forecourts across France. In
2017, in partnership with their energy provider, EDF, Certas began a programme to install over
3,000 energy efficient lighting units across the portfolio, including canopy lights, fascia signs,
general site lighting and pole signage. Using state of the art LED lighting technology, energy
efficiency gains of 80% are expected, saving costs and reducing carbon emissions. Motion
detection sensors allow the LEDs to partially dim in off peak times, returning to full light when
a customer is detected.
contributed to an increase in greenhouse gas
emissions. Overall, on a continuing business
basis, Group GHG emissions have decreased
by 5% against the prior year.
Scope 2 (indirect GHG emissions from use
of electricity) is reported using location based
electricity grid factors. We will update internal
systems in order to report market based Scope
2 emissions for FY2019.
The combined effect of an increase in Group
revenues and the decrease in absolute
greenhouse gas emissions, has reduced the
relative intensity metric by 34% against the
prior year.
KPMG has undertaken limited assurance over
selected data marked with the
this report in relation to Scope 1 and Scope 2
greenhouse gas emissions and their assurance
opinion is set out on page 214.
symbol within
Performance
Absolute CO2e emissions (000’s tonnes)
by source
150
100
50
127
128
4
2
2
9
6
2
1
9
120
118
3
2
6
8
1
2
7
8
89
6
1
5
6
0
1
1
1
1
1
1
1
8
2014
2015
2016
2017
2018
On-site fuel use (Scope 1)
Company transport (Scope 1)
Electricity (Scope 2, Location based)
DCC Group carbon intensity
(tonnes CO2e/£m Revenue) 1
11.9
11.3
11.3
9.5
6.3
Additional benefits include reduced maintenance requirements due to the long life of new
bulbs and a 33% increase in lumen output on sites enhancing the brand image and security.
2014
2015
2016
2017
2018
1. Continued and discontinued operations.
70
DCC plc Annual Report and Accounts 2018
Strategic Report
Human Rights
DCC is committed to conducting all our
activities in accordance with high standards
of business conduct. We have set out specific
standards on human rights in our Code of
Conduct and in our Supply Chain Integrity Policy.
The large majority of DCC Group businesses
operate in countries where breaches of human
rights do not present a material risk. DCC has
suitable HR policies and procedures which apply
to every business in the Group and ensure that
the rights of employees in those businesses
are fully respected.
DCC has issued a statement under section 54
of the Modern Slavery Act 2015 covering the
year ended 31 March 2018. A number of DCC
Group businesses are subject to that reporting
provision in their own right and have issued
statements on their own websites.
Supply Chain Integrity
DCC adopted a Supply Chain Integrity Policy
in 2016 which sets out specific steps that
businesses in the Group must take to assess
risks (including product safety failures and
human rights abuses) arising within their supply
chains. The Policy is available on our website,
www.dcc.ie. The key steps that Group
businesses are required to take under the
Policy are:
• To have a suitable process to assess their
supply relationships from the perspective
of both product quality and supplier integrity;
• To carry out additional due diligence where
this risk assessment requires; and
• To maintain, where needed, suitable
preventative controls to ensure, insofar as
practicable, that human rights abuses and
other compliance breaches do not arise.
In the year under review, we made some
improvements in our internal reporting to assist
Group businesses in assessing and controlling
relevant supply chain risks. We will make further
improvements in this area in 2019.
Anti-Bribery and Corruption
DCC has a detailed Anti-Bribery and Corruption
Policy in place, which states that no employee
or representative of any Group business is to
offer or accept any bribe, including small
facilitation payments, or engage in any other
form of corrupt practice. The Policy is available
on our website, www.dcc.ie. The Policy is
provided to every employee of the Group as
part of their induction and training on the key
provisions of the Policy is also provided to
relevant employees.
In addition to prohibiting involvement in bribery
or other forms of corruption, the Policy requires
that every business in the Group:
• Maintains suitable policies, procedures
and records in relation to the provision
and acceptance of gifts, hospitality
and sponsorship;
• Employs enhanced due diligence and
controls when doing business with a party
in a country where corruption is a particular
problem, in particular when appointing
any representatives.
As the Group expands into geographies where
the risk of these practices is greater, DCC will
continue to ensure that a robust approach is
taken to the prevention of bribery and corruption.
Community Engagement
DCC plc continues its long-term partnership
with Social Entrepreneurs Ireland ('SEI'), an Irish
not-for-profit organisation that supports people
with new solutions to Ireland’s biggest social
problems. SEI provides structured technical and
practical support to social entrepreneurs to scale
up and increase their impact. DCC is the lead
sponsor of the annual awardee selection process
and employees participate in the assessment
of applicants’ proposals.
DCC businesses support local communities
and national organisations both financially
and practically with volunteer days,
sponsorship, fund raising and hands-on
education programmes.
Case study:
CyberSafeIreland, SEI Awardee
Today’s children are growing up in an increasingly more connected world and are fluent in the
use of technology in a way that their parents will never be. They are not, however, equipped
with the skills needed to navigate the online world safely and responsibly.
CyberSafeIreland, a 2016 Social Entrepreneurs Ireland awardee, believes that the solution lies
in education. It focuses on children in primary schools, aged between 8 and 13, a time when
they first start to use smartphones, tablets and access online content independently.
Through interactive, fun workshops, children engage with important topics such as peer
pressure and equipping themselves with key information to more safely navigate today’s
connected world.
Through the Awards programme, which includes the provision of both financial and non-
financial assistance, Social Entrepreneurs Ireland has supported CyberSafeIreland to further
develop its organisation, focus on its business model and long-term strategy and also
significantly increase its social impact. To date CyberSafeIreland has engaged almost 11,500
children and, with its increased capacity and refined strategy, aims to reach at least 200,000
families over the next three years.
DCC plc Annual Report and Accounts 2018
71
Supplementary InfoFinancial StatementsGovernanceStrategic Report Governance
In this section
73 Chairman’s Introduction
74
76
Board of Directors
Senior Management
78 Corporate Governance Statement
84 Nomination and Governance Committee Report
87 Audit Committee Report
92
Remuneration Report
116 Report of the Directors
72
DCC plc Annual Report and Accounts 2018
Governance Chairman's Introduction
The Board acknowledges
that good governance is key
to the continuing success of
DCC and is committed to
ensuring that the Group’s
values and high standards
are set from the top and are
embedded at all levels of
the DCC Group.
Dear Shareholder
The Board of DCC remains committed to high
standards of governance across the Group, in line
with our core values of excellence and integrity.
Board Diversity
The Board has a formal Board Diversity Policy
in place and believes in the value of diversity
of background, nationality and experience.
The Directors are also encouraged to undertake
training provided to Group management and
employees, including in relation to the Group’s
Code of Conduct and IT security.
On behalf of the Board, I am pleased to report
full compliance by DCC with the 2016 version
of the UK Corporate Governance Code (‘the
Code’), which applied to DCC for the year
ended 31 March 2018.
The Nomination and Governance Committee
has been monitoring the FRC’s review of the Code
and the changes set out in the proposed revised
Code. Once published, the revised Code will first
apply to DCC for the financial year ending
31 March 2020.
We are also conscious of the merits of gender
diversity on the Board, which comprised at least
30% female Directors during the year
under review.
Board Effectiveness
In 2018, the performance evaluation of the Board,
its Committees and individual Directors was
externally facilitated by Independent Audit, in
accordance with the requirement under the Code
to have the process externally facilitated every
three years.
Highlights
The highlights of the year from a governance
perspective include Chief Executive succession,
the appointment of a new non-executive
Director and the completion of an externally
facilitated Board evaluation process.
Chief Executive Succession
On 14 July 2017, Donal Murphy, then an
executive Director and Managing Director of
DCC Energy, DCC’s largest division, succeeded
Tommy Breen as Chief Executive. Full details of
this change were set out in last year’s Annual
Report. It is pleasing to note that the transition
of Chief Executive has been seamless
and effective.
Board Changes
On an ongoing basis, I seek to ensure we have the
right balance of skills, knowledge and experience
on the Board, taking account of the growth in the
scale of the Group and geographic expansion, and
also the ability to meet vacancies as they arise.
Mark Ryan joined the Board on 13 November
2017 and is a highly experienced board director
and business leader who has successfully
operated at senior management level in Ireland
and internationally.
I am pleased to report that the results of the
review were positive. Following consideration
by the Board and Committees of the report
from Independent Audit, and the results of the
other elements of the evaluation process,
a number of actions were agreed which will
be implemented during the current year.
These are designed to continue to drive Board
effectiveness in DCC as the Group continues
to develop.
All action items arising from the 2017 evaluation
were substantially completed during the year
ended 31 March 2018.
More information on the 2018 process can
be found on page 83 of the Corporate
Governance Statement.
Board Development
As part of their ongoing development, the
non-executive Directors made a number of site
visits to Group subsidiaries during the year
ended March 2018, both on a group and
individual basis. The Directors also undertook
external training and development courses
relevant to their roles as non-executive Directors
and Committee members.
Independence and Re-Election
There are currently eight non-executive
Directors and two executive Directors on our
Board. We recently conducted our annual review
of the independence of non-executive Directors
and are satisfied that each of the non-executive
Directors is independent. Further detail on the
independence of non-executive Directors is set
out on page 81.
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.
In accordance with the Code and our practice, all
of the Directors will be presenting themselves for
re-election at the 2018 Annual General Meeting.
Board Committees
Our Board Committees have continued to
perform effectively. You will find, on pages 84
to 115, individual reports, introduced by the
Chairman of each Committee, giving details
of their activities during the year.
Priorities for the Year Ahead
The governance priorities for the coming year
include Board renewal, consideration of the
proposed revised Code and DCC’s response,
and a focus on diversity, both at Board and
management levels.
Conclusion
I hope that the detailed information included
in the following sections clearly demonstrates
our commitment to ongoing excellence in
corporate governance.
John Moloney
Chairman
14 May 2018
DCC plc Annual Report and Accounts 2018
73
Supplementary InfoFinancial StatementsGovernanceStrategic Report Board of Directors
Committee Membership Key:
A Audit Committee Chair
A Audit Committee Member
N Nomination and Governance Committee Chair
N Nomination and Governance Committee Member
R Remuneration Committee Chair
R Remuneration Committee Member
1
2
3
4
5
1
R 2
N R 3
4
5
N R
Emma FitzGerald (age 51)
Non-executive Director
John Moloney (age 63)
Non-executive Chairman
Fergal O’Dwyer (age 58)
Chief Financial Officer
Donal Murphy (age 52)
Chief Executive
Pamela Kirby (age 64)
Non-executive Director
Irish
Irish
Irish
British
Joined the Board in February
2009 and appointed
non-executive Chairman
in September 2014.
Mr. Moloney has extensive top
management and board level
experience internationally and
domestically in the dairy, meat
and nutritionals sectors,
covering processing,
marketing and distribution. He
was Group Managing Director
of Glanbia plc until November
2013, having previously held a
number of roles with that
organisation including CEO
Agribusiness and CEO Food
Ingredients. He also worked
with the Department of
Agriculture and Food and in
the meat industry in Ireland.
He currently serves as
chairman of Coillte Teo (the
Irish State Forestry Company)
and is a non-executive director
of Greencore Group plc,
Smurfit Kappa plc and a
number of private companies.
Joined the Board
in February 2000.
Joined the Board
in December 2008.
Joined the Board
in September 2013.
Mr. O’Dwyer has worked in
DCC in senior management
positions for over 27 years
and during that time has
worked on a range of financial
management, treasury,
strategic, capital deployment
and development matters.
He 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.
Mr. Murphy joined DCC in 1998
and has held a number of
senior leadership roles across
the Group. He was Managing
Director of DCC Technology
from 2004 to 2006 and
Managing Director of DCC
Energy from 2006 until 2017.
He led the very significant
growth of the Energy division
and its transition from a small
UK and Irish business to a
substantial international
business operating in ten
countries. In July 2017,
Mr. Murphy was appointed
Chief Executive, following
Mr. Tommy Breen’s retirement
from this position.
Dr. Kirby has significant
knowledge of the international
healthcare sector, having
worked in the pharmaceutical
industry for more than 25
years. 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
was CEO of Quintiles
Transnational Corporation
based in the USA. She is
currently a non-executive
director of Victrex plc, Hikma
Pharmaceuticals plc, Reckitt
Benckiser Group plc and a
member of the supervisory
board of Akzo Nobel N.V. She
was previously a non-executive
director of Novo Nordisk A/S,
Informa plc and Smith and
Nephew plc.
Nationality
British
Date of appointment
Joined the Board
in December 2016.
Expertise
Dr. FitzGerald was an executive
director of Severn Trent plc
until December 2017. She was
previously CEO of Gas
Distribution at National Grid
plc (2013 to 2015). Prior to
joining National Grid, she had
a 20-year career with Royal
Dutch Shell plc, where she
held a variety of general
management roles in China,
Asia and Europe. These
included the positions of
Vice President Global Retail
Network, Shell International,
Managing Director, Shell
China/Hong Kong Lubricants
and Managing Director, Shell
Gas UK (LPG). She is also an
association member of BUPA,
a member of the International
Advisory Panel of the Prime
Ministers Office of the
Singapore Government and
part of the Oxford Sciences
Innovation Advisory Board.
Until December 2015, she
was a non-executive director
of Alent plc (2012 to 2015),
formerly Cookson Group plc
(2011 to 2012).
74
DCC plc Annual Report and Accounts 2018
Governance Board diversity, by gender
30% female
Nationality
Irish (5)
British (4)
French (1)
10%
3 female
7 male
40%
50%
6
7
8
9
10
6
A 7
A 8
A 9
Mark Ryan (age 59)
Non-Executive Director
David Jukes (age 59)
Non-executive Director
Jane Lodge (age 63)
Non-executive Director
Cormac McCarthy (age 55)
Non-executive Director
A 10
R N
Leslie Van De Walle (age 62)
Non-executive Director
Senior independent Director
Nationality
Irish
Date of appointment
Joined the Board
in November 2017.
Expertise
Mr. Ryan is a highly experienced
board director and business
leader who has successfully
operated at senior
management level in Ireland
and internationally. Mark was
Country Managing Director
of Accenture in Ireland
between 2005 and 2014.
During his career with
Accenture, he served in
numerous management and
executive roles in delivering
major strategy, IT and business
change programmes for
Accenture’s clients locally and
internationally. He also worked
for Accenture in the USA and
the UK during his career. Mark
is a Science graduate of Trinity
College Dublin and a member
of the Institute of Directors. He
is a non-executive director of
Wells Fargo Bank International,
Immedis, Econiq and is
chairman of Blueface.
British
British
Irish
French
Joined the Board
in March 2015.
Joined the Board
in October 2012.
Joined the Board
in May 2016.
Joined the Board
in November 2010.
Mr. Jukes has almost 40 years
of international chemical
distribution experience. In May
2018, he was appointed
President, CEO and a director
of Univar Inc. He previously
served as President and Chief
Operating Officer of Univar,
with overall responsibility for
managing Univar’s commercial
and supply chain operations
globally. Prior to this, he was
Executive Vice President of
Univar and President of Univar
USA and Latin America (2016
to 2017) and President of
Univar EMEA and APAC (2011
to 2016). From July 2009 to
January 2011, Mr. Jukes served
as Vice President, Sales and
Marketing Univar EMEA and
from 2002 to 2009 as Chief
Executive of Distrupol Europe,
Univar UK, Ireland and the
Nordics. Prior to joining Univar,
Mr. Jukes was Senior Vice
President of Global Sales,
Marketing and Industry
Relations for Omnexus, a
plastics industry consortium
e-commerce platform and
VP Business Development
for Ellis & Everard Plc.
Ms. Lodge was a senior audit
partner with Deloitte, where
she spent over 25 years
advising multinational
manufacturing companies
including businesses in the
food and automotive sectors.
Her extensive experience with
manufacturing companies and
her strategic work with Deloitte
has given her a strong
international business
perspective. She has very
strong and recent financial
skills to bring to the Audit
Committee. She was a
member of the CBI
Manufacturing Council until
2011. She is currently a
non-executive director of
Devro plc, Costain Group PLC,
Sirius Minerals plc and
Bakkavor Group plc and of a
number of private companies.
Mr. McCarthy was Chief
Financial Officer (‘CFO’)
of Paddy Power plc, an
international multi-channel
betting and gaming group,
having joined the company
in 2011 as a non-executive
director and being appointed
CFO in 2012. Following the
successful completion of the
merger of Paddy Power plc and
Betfair Group plc, he stepped
down as CFO of Paddy Power
plc in February 2016.
Mr. McCarthy was previously
Chief Executive of Ulster Bank
(a subsidiary of Royal Bank of
Scotland) from 2004 to 2011,
during which time he also
served in various roles within
Royal Bank of Scotland,
including Deputy Chief
Executive of their retail division
in the UK (2010 to 2011) and
Chief Executive of their retail
and commercial division in
Europe and the Middle East
(2007 to 2009). He is chairman
of University College Dublin
Foundation Limited.
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. He is a
former Chief Executive Officer
of Rexam plc and 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 senior management
positions with Cadbury
Schweppes plc and United
Biscuits plc where he was CEO.
He is currently non-executive
director of Crest Nicholson
Holdings plc and HSBC UK
Bank plc, is a former
non-executive chairman of
SIG plc and Robert Walters plc
and a former non-executive
director of Cape plc and
Aviva plc.
DCC plc Annual Report and Accounts 2018
75
Supplementary InfoFinancial StatementsGovernanceStrategic Report Senior Management
Group
Chief Executive
Chief Financial Officer
Donal Murphy
Fergal O’Dwyer
Company Secretary & Head of Enterprise Risk Management
Ger Whyte
Head of Group HR
Chief Information Officer
Head of Group Strategy & Development
Head of Capital Markets
Head of Group Financial Planning & Control
Managing Director, DCC Corporate Finance
Head of Group Accounting
Head of Group Legal & Compliance
Head of Group Internal Audit
Head of Group Sustainability
Head of Group Tax
Head of Group Treasury
DCC LPG
Managing Director
Finance Director
Director of Corporate Development
Managing Director, Butagaz
Managing Director, Flogas Britain
Managing Director, Flogas Ireland
Managing Director, DSG Energy
Managing Director, DCC Propane
Managing Director, TEGA
Managing Director, Flogas Scandinavia
Managing Director, Benegas
DCC Retail & Oil
Managing Director
Finance & Development Director
Finance & Development Director
Managing Director, Certas Energy UK
Managing Director, Fuel Card Services
Managing Director, Certas Energy Norway
Managing Director, Certas Energy France
Managing Director, DCC Energi Danmark
Managing Director, Qstar Retail
Nicola McCracken
Peter Quinn
Clive Fitzharris
Kevin Lucey
Conor Murphy
Michael Scholefield
Gavin O’Hara
Darragh Byrne
Caroline Davis
John Barcroft
Yvonne Divilly
Niall Kelly
Henry Cubbon
Stephen Johnston
Tom McElwee
Emmanuel Trivin
Lee Gannon
John Rooney
Samson Lam
Shawn Coady
Jürgen Zöller
Thomas Edvardsen
Bauke van Kalsbeek
Eddie O’Brien
Daire Keating
Morgan McElligott
Steve Taylor
Denise Frost
Lars Østbye
Laurent de Seré
Christian Heise
Maria Hadd
Managing Director, Energie Direct (Austria & Bavaria)
Hans-Peter Hintermayer
Managing Director, Swea Energi
Managing Director, Oil Ireland
Managing Director, Card Network Solutions
Maria Hadd
Martin Clancy
Ben Jordan
76
DCC plc Annual Report and Accounts 2018
Governance DCC Healthcare
Managing Director
Finance & Development Director
Managing Director, DCC Vital
Managing Director, DCC Health & Beauty Solutions
DCC Technology
Managing Director
Finance & Development Director
Managing Director, Exertis Distribution
Managing Director, Exertis Supply Chain Services
Conor Costigan
Redmond McEvoy
Harry Keenan
Stephen O’Connor
Tim Griffin
Stephen Casey
Gerry O’Keeffe
Neal Johnston
DCC plc Annual Report and Accounts 2018
77
Supplementary InfoFinancial StatementsGovernanceStrategic Report Corporate Governance Statement
This statement describes DCC’s governance principles and practices.
For the year ended 31 March 2018, DCC’s corporate governance practices were
subject to the 2016 version of the UK Corporate Governance Code, which was
issued by the FRC in April 2016 (‘the Code’).
This statement details how DCC has applied the principles and complied with the
provisions set out in the Code. We can confirm full compliance with the Code.
DCC plc – Corporate Governance Framework
Board of Directors
Nomination
and Governance Committee
Audit
Committee
Remuneration
Committee
• Responsible for considering the
composition and structure of the
Board and succession planning
• Reviewing leadership needs of the
organisation, both executive and
non-executive
• Monitoring the Company’s compliance
with corporate governance, best
practice and legal, regulatory and listing
requirements
Further details of the activities of
the Nomination and Governance
Committee are set out in its Report
on pages 84 to 86.
Chief Executive
• Assisting the Board in assessing the
• Responsible for determining the
principal risks facing the Company and
monitoring risk management and
internal control systems
• Monitoring the integrity of the Group’s
financial statements, including
reviewing significant financial reporting
judgements contained in them
• Review the operation of the Group
Internal Audit function
Further details of the activities of the
Audit Committee are set out in its
Report on pages 87 to 91.
Remuneration Policy
• Responsible for determining the
remuneration packages of the
Chairman, executive Directors and
Senior Management
• Oversight of other remuneration
structures
• Operation of the Company’s long term
incentive schemes
Further details of the activities of the
Remuneration Committee are set
out in the Remuneration Report
on pages 92 to 115.
The Chief Executive is responsible for:
• day-to-day management of the running of the Group’s operations and for the implementation of Group strategy and policies
agreed by the Board.
• playing a key role in the process for the setting and review of strategy.
• instilling the Company’s values, 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 Risk Committee
Senior Management Group
The responsibilities of the Executive Risk Committee are set out
in the Risk Report on page 17.
Supports the Chief Executive in executing his responsibilities and
reports to the Chief Executive at weekly management meetings.
78
DCC plc Annual Report and Accounts 2018
Governance Board Activities
Values
• Continued to promote the Group’s values across the DCC Group
Identified opportunities to improve our organisation culture
•
Strategy and Development
• At a two-day Board meeting in December, discussed the strategic
priorities across the Group and approved key actions for the next
three years for each of the four divisions
• Received regular divisional strategy updates
• Reviewed future capital allocation plans
• Considered potential acquisition opportunities requiring Board level
approval and received updates at every Board meeting on other
development opportunities
Operational and Financial Performance
• Received reports from the Chief Executive at every meeting
in respect of operational and financial performance and outlook
• External briefings on relevant topics
• Approved the Group Budget for the year to 31 March 2019
including capital expenditure
• Approved the Group’s Annual Report and Accounts, Interim Report
and Half Year Group Accounts and Interim Management Statements
Leadership and Employees
• Reviewed the Board’s composition, diversity and succession plans
• Ensured smooth transition of succession of the Chief Executive
• Considered detailed presentations from the Chief Executive and
Group HR on the Talent Strategy and Roadmap, to ensure the
appropriate focus on management development and
succession planning
• Supported the professional development of the Board members
and senior management
• Approved the appointment of Mark Ryan as a non-executive
Director and as a member of the Audit Committee
Risk
• Received a report at each meeting from the Chairman of the
Audit Committee on its risk activities
• Reviewed the Risk Report at every Board meeting
• Considered the Group Risk Register and Integrated Assurance
Report at regular intervals during the year
• Received a quarterly HSE Report from the Head of
Group Sustainability
• Received regular Legal & Compliance Reports from the Head
of Group Legal & Compliance
• Considered the Principal Risks and Uncertainties for the
Annual Report
• Reviewed the Group’s progress on Business Continuity Planning,
IT project assurance, IT risk and security and cyber security
Shareholder Engagement/Investor Relations
• Received regular Investor Reports during the year and briefings
from the Company’s brokers
• Discussed a presentation on Market Perception and Investor Focus
• Ensured consultation with larger shareholders and proxy advisory
agencies in relation to changes to Remuneration Policy and Chief
Executive succession remuneration arrangements
Governance
• Received a report at each meeting from the Chairman of the
Nomination and Governance Committee on its activities
• Discussed the latest regulatory changes including the proposed
changes to the UK Corporate Governance Code
• Conducted an externally facilitated Board evaluation process
• Received updates on corporate regulatory matters
• Received training on the new Group Code of Conduct which was
introduced during the year
Remuneration
• Received a report at each meeting from the Chairman of the
Remuneration Committee on its activities
• Approved the remuneration of the Chairman and the other
non-executive Directors
The Board of Directors
Role
The Board of DCC currently comprises the
non-executive Chairman, seven other
non-executive Directors and two 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 is also responsible for
ensuring that 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 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 84 to 115. The Board receives
reports at its meetings from the Chairmen
of each of the Committees on their
current activities.
The main areas where decisions remain with
the Board are summarised on page 80.
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.
DCC plc Annual Report and Accounts 2018
79
Supplementary InfoFinancial StatementsGovernanceStrategic Report Corporate Governance Statement (continued)
Board of Directors: Attendance at meetings during the year ended 31 March 2018:
Meetings held during the year ended 31 March 2018
John Moloney
Tommy Breen1
Emma FitzGerald
David Jukes
Pamela Kirby
Jane Lodge
Cormac McCarthy
Donal Murphy
Fergal O’Dwyer
Mark Ryan2
Leslie Van De Walle
Board
Audit
Committee
Remuneration
Committee
Nomination and
Governance
Committee
10
10
3
10
9
10
10
10
10
10
3
10
4
–
–
–
3
–
4
4
–
–
–
4
6
6
–
6
–
6
–
–
–
–
–
6
6
6
–
–
–
6
–
–
–
–
–
6
1. Tommy Breen retired as Chief Executive and Director at the conclusion of the AGM on 14 July 2017.
2. Mark Ryan was appointed as non-executive Director on 13 November 2017.
Both Mr. Breen and Mr. Ryan attended all meetings held during their period as Directors.
Geographic location of Directors
(as at 31 March 2018)
1
1
4
Ireland 50%
UK 40%
USA 10%
Nationality of Directors
(as at 31 March 2018)
4
Irish 50%
British 40%
French 10%
5
5
Schedule of Matters Reserved for the Board
The Schedule of Matters Reserved for Board
Decision is regularly reviewed to ensure it
meets with current best practice.
The schedule includes the matters set
out below:
• Group strategy.
• Annual budget.
• Oversight of the Group’s operations.
•
Interim and annual accounts.
• Major acquisitions and disposals.
• Significant capital expenditure proposals.
• Approval of changes to the Group’s
capital structure.
• Appointment of Directors.
• Dividend policy and dividends.
• Treasury policy.
• Risk management policy.
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 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 two years, which
includes the key agenda items for each
meeting. Further details on these agenda items
are outlined below under ‘Board Meetings’.
Senior Independent Director
The duties of the Senior Independent Director
are set out in writing and formally approved by
the Board.
The Senior Independent Director 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 process, as detailed under ‘Board
Performance Evaluation’ on page 83.
The Senior Independent Director is available
to shareholders who may have concerns that
cannot be addressed through the Chairman
or Chief Executive.
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.
Board Meetings
A schedule of Board and Committee meetings
is circulated to the Board for the following two
years, which includes the key agenda items for
each meeting. Board papers are circulated
electronically in the week preceding the
80
DCC plc Annual Report and Accounts 2018
Governance meeting. During the year ended 31 March
2018, the Board held ten meetings, one of
which was held at Butagaz in Paris and two
meetings took place in London.
Individual attendance at Board meetings and
attendance at Committee meetings is set out in
the table on page 80. There is regular contact as
required between meetings in order to progress
the Group’s business.
The key recurrent Board agenda themes are
divided into normal business (including trading
performance, investor relations, human
resources, IT, health & safety and risk matters)
and developmental issues (including strategy,
acquisitions, sectoral and divisional reviews,
succession planning, management talent
development and Directors’ education).
The Board also conducts a detailed review
of post-acquisition business performance.
A two-day Board meeting each December is
principally focused on 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 overall strategy update in
Healthcare, specific reviews of the French LPG,
natural gas and retail operations and of the
overall talent strategy for the Group.
The Board schedule includes a significant agenda
item on succession planning and management
talent development. The Chief Executive and the
Head of Group HR brings a detailed plan and gap
analysis covering leadership development and
succession plans, which is presented to the Board,
discussed and approved.
The non-executive Directors meet a number of
times each year without executives being present.
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 appointment process is set out in
the Nomination and Governance Committee
Report on page 85.
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.
Details of the length of tenure of each Director
on the Board are set out on page 82.
Induction and Development of Directors
New non-executive Directors undertake a
structured 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 relevant industry and sectoral matters and
on developments in corporate governance, risk
management and executive remuneration.
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, all Directors
have access to an online database 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 83 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 judgement and free from relationships
or circumstances which are likely to affect, or
could appear to affect, the Directors’ judgement.
The Board is satisfied that each of the
current non-executive Directors fulfils the
independence requirements of the Code.
John Moloney has been Chairman of the
Company since September 2014. On his
appointment as Chairman, Mr. Moloney 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. Moloney holds several other
directorships outside of the DCC Group, the
Board is satisfied that these do not interfere
with the discharge of his duties to DCC.
Directors’ Compliance Statement
The Directors have drawn up a Compliance
Policy Statement as defined in section 225(3)
(a) of the Irish Companies Act 2014.
Arrangements and structures have been
put in place that are, in the Directors’ opinion,
designed to secure a material compliance with
the Company’s relevant obligations. These
arrangements and structures were reviewed
during the financial year to ensure they
remained appropriate and comprehensive. The
Directors’ Compliance Statement is set out in
full in the Report of the Directors on page 119.
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, reviewing
leadership needs 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 its Report on pages 84 to 86.
Audit Committee
The primary functions of the Audit Committee
are to assist the Board in fulfilling its financial
and risk oversight responsibilities and to
monitor the integrity of the Group’s financial
statements. Further details of the activities of
the Audit Committee are set out in its Report
on pages 87 to 91.
Remuneration Committee
The Remuneration Committee is responsible
for determining the Remuneration Policy,
conditions of employment for executive
Directors and senior management and
DCC plc Annual Report and Accounts 2018
81
Supplementary InfoFinancial StatementsGovernanceStrategic Report Corporate Governance Statement (continued)
operation of the Company’s long term incentive
schemes. Further details of the activities of the
Remuneration Committee are set out in the
Remuneration Report on pages 92 to 115.
Share Ownership and Dealing
Details of the Directors’ interests in DCC shares
are set out in the Remuneration Report on
page 109.
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
values, 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 Director and Senior
Management Group
The Senior Management Group including
Mr. O'Dwyer supports 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.
Remuneration
It had been the Company’s practice since 2009
to put the Remuneration Report to an advisory,
non-binding shareholder vote at the AGM.
As the Remuneration Policy remains unchanged,
it will not be put to shareholders at the
2018 AGM.
The DCC Share Dealing Code, (‘the Dealing
Code’) 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. Under the Dealing
Code, 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
Dealing Code.
In addition, the Dealing Code 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 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
detailed 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 88.
9.0 years
Length of Tenure on Board
Non-executive
John Moloney
Emma FitzGerald 1.3 years
David Jukes 3.0 years
Pamela Kirby
4.5 years
Jane Lodge
5.5 years
Cormac McCarthy 1.8 years
Mark Ryan 0.5 years
Leslie Van De Walle
7.5 years
Executive
Donal Murphy
Fergal O’Dwyer
82
DCC plc Annual Report and Accounts 2018
9.3 years
18.0 years
The Board itself receives a Risk Report at each
meeting, which focuses on principal risks,
emerging risks and risk mitigation activities.
In addition, the Chairman of the Audit
Committee reports to the Board at each
meeting on the activities of the Committee.
In accordance with the revised guidance,
entitled ‘Guidance on Risk Management,
Internal Control and Related Financial and
Business Reporting’ issued by the FRC in
September 2014, which applied to the financial
year ended 31 March 2018, 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 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. Further details on this annual
assessment are set out in the Risk Report on
page 17 and in the Audit Committee Report
on page 88.
The consolidated financial statements are
prepared subject to the oversight and control
of the 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.
Compliance
Compliance Programme
The key message of the Group compliance
programme is that directors, 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, but also exercising good
judgement to ensure that their actions are
seen as fair and ethical.
Code of Conduct
A new Group Code of Conduct, which is
available on our website www.dcc.ie, was
introduced in 2017. The Code sets out the
general standards that are expected of
directors, managers and employees across
the Group in a range of areas, including
anti-bribery and corruption, protection of
personal information and competition law.
The Code is available in all of the major
languages used across the Group. A copy
of the Code is provided to every employee
in the Group. Its use is supported by training
and related internal communications.
Governance Board Performance Evaluation
The Board conducts an annual evaluation of its
own performance, that of each of its principal
committees, the Nomination and Governance,
Audit, and Remuneration Committees, and that
of the Chairman, Committee Chairmen and
individual Directors.
In 2018, the entire performance evaluation
process was externally defined and conducted
by Independent Audit, in accordance with the
requirement to have it externally facilitated every
three years under Provision B.6.2 of the Code.
The various phases of the external
performance evaluation process which
commenced in early March 2018 and
concluded in May are set out below:
• The Chairman spoke with each of the
Directors to appraise their individual
performance and to enquire if they had
any views they wished to express on the
performance of any other Director. The
Chairman prepared a short report on
individual Director performance.
• An experienced evaluator from Independent
Audit conducted a confidential and open
interview with each Director and with
regular attendees at Board or Committee
meetings. He also observed an Audit
Committee meeting and a Board meeting.
• Leslie Van de Walle, as Senior Independent
Director, spoke with each of the Directors
to seek their views on John Moloney’s
performance as Chairman, taking into
account the views of the executive Directors.
• The non-executive Directors assessed the
performance of the executive Directors.
• Each of the Remuneration Committee, the
Audit Committee and the Nomination and
Governance Committee reviewed their
own performance taking account of the
Independent Audit findings.
• At the Board meeting on 14 May, the Board
considered a report from Independent Audit
and Independent Audit attended to facilitate
a discussion on their report.
• Following this discussion, the Board formally
concluded on its own performance, on the
performance of Committees and on the
performance of individual Directors, including
the Chairman. A number of actions, primarily
derived from Independent Audit’s report,
were agreed which will be implemented by
the Chairman during the year.
Compliance Policies and Training
The Group also maintains more detailed
policies on a range of relevant areas,
complementing the general requirements set
out in the Code of Conduct. The areas covered
by more detailed policies include health and
safety, anti-bribery and corruption, supply chain
integrity, competition law, information security,
diversity and equal opportunities and share
dealing. Depending on the nature of their role,
employees of the Group receive more detailed
training on those policies.
Whistleblowing
Employees across the Group are required to
raise a concern if any of our activities are being
undertaken in a manner that may not be legal
or ethical, and are supported if they do so.
Concerns can be raised with a member of
management in the business where the
employee works, with the Head of Group Legal
& Compliance or externally with SafeCall, a third
party facility which is independent of DCC and
available in multiple languages and on a 24 hour
basis. Employees may raise concerns
anonymously if they wish. DCC’s internal policies
make clear that retaliation against any employee
who raises a concern is prohibited. Where
concerns are raised, they are investigated in an
appropriate and independent manner.
The Audit Committee has oversight responsibility
for the Group’s whistleblowing facilities and how
they operate. This is referred to on page 91, as
part of the Audit Committee Report.
Compliance Auditing
The Group Legal & Compliance function carries
out compliance audits in Group subsidiaries to
ensure that controls are being followed and are
operating effectively.
World’s Most Ethical Certification
Following an application made in late 2017,
DCC was recognised by Ethisphere as one of
the World’s Most Ethical Companies® for 2017.
This is the fourth year in which DCC has
achieved this certification. It reflects the
Group’s commitment to high standards of
business conduct – consistent with DCC’s core
value of integrity – and how that commitment
is translated into practice through compliance
policies and procedures.
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 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
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.
The Board also receives briefings from the
Company’s brokers.
Investor Days for major shareholders are held
periodically and feature presentations by the
executive Directors and the divisional managing
directors. These events are attended by the
Chairman and the non-executive Directors,
as well as various brokers, analysts and fund
managers. The next Investor Day will be held
in September 2018.
On an ongoing basis, our Investor Relations
team acts as a focal point for contact with
investors and provide information and deal with
queries as they arise.
The Company Secretary engages annually
with proxy advisors in advance of the
Company’s AGM.
The Company’s AGM provides shareholders
with the opportunity to question the Chairman,
the Committee Chairmen and the Board.
Further details on the Company’s AGM is set
out in the Report of the Directors on page 117.
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 116 to 119.
Compliance Statement
DCC has complied, throughout the year ended
31 March 2018, with the provisions set out in
the Code.
John Moloney, Donal Murphy
Directors
14 May 2018
DCC plc Annual Report and Accounts 2018
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Supplementary InfoFinancial StatementsGovernanceStrategic Report Nomination and Governance Committee Report
John Moloney
Chairman, Nomination and
Governance Committee
The Nomination and
Governance Committee
is focused on ensuring that
the Board and senior
management have the skills,
knowledge and experience to
meet the evolving needs of
the Group and ensuring
compliance with corporate
governance best practice.
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 2018.
The Nomination and Governance Committee
is responsible for keeping Board composition
under constant review, reviewing leadership
needs and monitoring the Company’s
compliance with corporate governance, legal
and best practice requirements, taking account
of the Group’s businesses, strategic direction
and diversity objectives.
This report sets out the Nomination and
Governance Committee’s key areas of focus
for the year ended 31 March 2018, as well as
the Committee’s priorities for the year ending
31 March 2019.
Key Areas of Focus in 2018
Succession planning was a key area of focus
for the Committee in the past year, culminating
with the appointment of Donal Murphy as the
successor as Chief Executive to Tommy Breen,
who retired from that position at the conclusion
of the Annual General Meeting on 14 July 2017.
The Committee also seeks to maintain
the optimum balance of background and
experience on our Board. This year, the
Committee undertook a process which led
to the recommendation to the Board that
Mark Ryan be appointed as a new non-
executive Director of the Company on
13 November 2017. Mark is a highly
experienced international board director
and business leader.
The Committee is cognisant of all elements
of diversity, including gender diversity, on the
Board, and this is dealt with on page 86 of
this Report.
The Committee also had oversight of the
annual evaluation of Board performance,
which was externally facilitated this year,
and is described in detail on page 83 of the
Corporate Governance Statement.
Priorities for the Year Ahead
Our priorities for the coming year will be
on Board renewal, taking account of skill
sets required and retirements in the next
few years, and on senior management
development and succession planning, taking
account of the growth in scale of the Group
and expansion into new business areas and
geographic areas.
The Committee is also responsible for
monitoring the Company’s compliance with
corporate governance best practice. In this
regard, we will also be monitoring changes
resulting from the FRC’s review of the UK
Corporate Governance Code, in particular
the proposed changes in regard to board and
management diversity, director independence,
promotion of culture and effective engagement
with stakeholders, including employees.
On behalf of the Nomination and
Governance Committee.
John Moloney
Chairman, Nomination
and Governance Committee
14 May 2018
Terms of Reference
The responsibilities of the Nomination and Governance Committee are summarised in the table on page 85 and are set out in full in its Terms
of Reference, which are available on the DCC website, www.dcc.ie.
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DCC plc Annual Report and Accounts 2018
Governance
Composition
The Nomination and Governance Committee
comprises John Moloney (Chairman) and two
independent non-executive Directors, Pamela
Kirby and Leslie Van de Walle. Each member’s
length of tenure at 31 March 2018 is set out
in the table below. Biographical details for the
members of the Committee are set out on
page 74.
The Company Secretary is the secretary to
the Nomination and Governance Committee.
Meetings
The Nomination and Governance Committee
met six times during the year ended 31 March
2018 and there was full attendance by all
members of the Committee.
Typically, the Chief Executive is invited to attend
all meetings of the Committee and other
executives and external advisors are invited
to attend as necessary.
The Committee also meets separately, as
required, to discuss matters in the absence
of any invitees.
Board Composition and Renewal
At each of its meetings, the Nomination
and Governance Committee considers the
composition of the Board to ensure it has
the appropriate combination of skills, knowledge
and experience, taking account of the
development of the Group and of the length of
tenure of the existing non-executive Directors.
Role and Responsibilities
Appointment of Non-executive Director
Mark Ryan was appointed as a non-executive
Director on 13 November 2017, following a
formal internal process.
At the commencement of the process, the
Nomination and Governance Committee
agreed with the Board on a set of skills and other
criteria required of potential non-executive
Director candidates.
Following a series of interviews with the Chairman
and other Board members, it was agreed that
Mark had a balance of skills, knowledge and
experience which matched the requirements
set. The Committee then recommended his
appointment to the Board, following which Mark
was appointed as a non-executive Director.
Mark was subsequently appointed as a member
of the Audit Committee, replacing Leslie Van de
Walle, on 10 April 2018.
The Committee has recently commenced a
process to identify further non-executive
Director candidates, again on the basis of an
agreed skill set requirement, taking account of
the need for Board renewal, planned retirements
and developments in the Group’s business.
The Committee and the Board are satisfied that
the internal formal process is comprehensive
in nature and has been effective in securing
appropriate candidates. On that basis, they do
not believe it is necessary at this point to utilise
an external search consultancy or open
advertising in the recruitment processes.
Reappointment of Non-executive Directors
During the year, David Jukes and John Moloney
each completed terms as non-executive
Directors. After detailed consideration, including
of performance and independence, the
Committee made recommendations to the
Board and the Board requested that they both
serve additional terms.
The length of tenure of the Directors on the
Board is set out on page 80. The length of tenure
of members of Board Committees is dealt with
in the individual Committee reports.
Succession Planning
The Committee has particular regard to the
leadership needs of the organisation and gives
full consideration to succession planning for
Directors, in particular the Chairman, the Chief
Executive and Chief Financial Officer, taking into
Length of Tenure on Nomination and Governance Committee as at 31 March 2018
John Moloney (Chairman)
3.8 years
Pamela Kirby
1.7 years
Leslie Van de Walle
7.0 years
Board Composition and Renewal
Leadership Needs
Corporate Governance
• Give consideration to succession planning
for Directors, in particular the Chairman
and the Chief Executive.
• 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.
• 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
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.
• 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.
• Make recommendations to the Board
as regards the reappointment of
non-executive Directors at the conclusion
of their specified term of office and the
re-election of all Directors by shareholders
at the Annual General Meeting.
• Keep under review the Board Diversity
Policy and the setting of measurable
objectives for implementing the Policy.
DCC plc Annual Report and Accounts 2018
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Supplementary InfoFinancial StatementsGovernanceStrategic Report Nomination and Governance Committee Report (continued)
account Group strategy, as well as the
challenges and opportunities facing the Group
and the skills and expertise required.
The Committee also has oversight of Group
management talent development programmes
and reviews these with the Chief Executive
and the Head of Group HR before they are
presented to the Board.
France Advisory Board
During the year the Board decided that, as
the France Advisory Board had achieved its
objectives, as outlined in last year’s Annual
Report, it should be wound down and be
replaced by direct interaction between the
members of the Advisory Board and the
Group’s French management teams.
Diversity
In reviewing the composition of the Board and
giving consideration to the appointment of new
non-executive Directors, the Committee takes
into account the benefits of diversity of skills,
experience, business background and
geographical location, as well as gender
diversity. For the year under review, the Board
comprised at least 30% female Directors.
Board diversity was a regular agenda item at
Committee meetings during the year. A Board
Diversity Policy, developed by the Committee
and approved by the Board in 2013, is available
on the Company’s website, www.dcc.ie.
A Group Diversity and Equal Opportunities
Policy Statement, developed by Group Human
Resources, has also been implemented in
Group subsidiaries.
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 UK Corporate Governance
Code. The Committee recommends any
necessary action required to be adopted and
implemented by the Board in respect of the
Code, with particular reference to any revisions
to the Code.
Annual Evaluation of Performance
The Board conducts an annual evaluation
of its own performance and that of its
Committees, Committee Chairmen and
individual Directors. In 2018, this process was
externally facilitated in accordance with the
Code. The conclusion from this process was
that the performance of the Committee and
of the Chairman of the Committee was
satisfactory and that no changes were
necessary to the Committee’s Terms
of Reference.
Full details of this process are set out in the
Corporate Governance Statement on page 83.
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 Committee’s activities and
matters within the scope of the
Committee’s responsibilities.
The Committee has reviewed the Company’s
corporate governance practices against the
Code issued in April 2016, which applied to the
financial year ended 31 March 2018, and can
confirm full compliance with the Code.
The FRC has undertaken a fundamental
review of the UK Corporate Governance Code.
The review has been wide-ranging, with the
structure, content and the balance of Principles
and Provisions all being considered. The
Committee has reviewed the proposed revised
Code, with particular reference to board and
management diversity, director independence,
promotion of culture and effective engagement
with stakeholders, in particular employees.
The revised Code is due to be published in June
2018 and the Committee will, after publication,
report to the Board on how DCC will comply
when the new Code takes effect, in DCC’s case
for the financial year ending 31 March 2020.
The Nomination and Governance Committee
reviewed and approved the Corporate
Governance Statement in the Annual Report
and other material being made public in respect
of the Company’s corporate governance.
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DCC plc Annual Report and Accounts 2018
Governance Audit Committee Report
Jane Lodge
Chairman, Audit Committee
The Audit Committee
is focused on maintaining
sound risk management
and internal control systems
across the Group.
As Chairman of DCC’s Audit Committee,
I am pleased to present the report of the
Committee for the year ended 31 March 2018.
the information necessary for shareholders to
assess the Company’s performance, business
model and strategy. The work done in this
regard is set out on page 90.
The Board, the Audit Committee and
Group management are fully committed
to continuous improvement of risk and
financial management across the Group.
On behalf of the Audit Committee
Jane Lodge
Chairman, Audit Committee
14 May 2018
This report sets out the Audit Committee’s
principal activities and key areas of focus,
as set out on page 88, during the year ended
31 March 2018, as well as the Committee’s
priorities for the year ending 31 March 2019.
The Committee is responsible for assisting
the Board in regard to the assessment of the
principal risks facing the Company, including
reviewing the Group’s risk management and
internal control systems.
The work done by the Committee in this regard,
encompassing ongoing monitoring and the
review of effectiveness, is detailed on page 88.
The Committee is also responsible for
monitoring the integrity of the Group’s financial
statements and in assisting the Board in
determining that the Annual Report and
Accounts, when taken as a whole, is fair,
balanced and understandable and provides
The Audit Committee considered the
requirements of the Irish Companies Act 2014
in relation to the Directors’ Compliance
Statement, and is satisfied that appropriate
steps have been taken to ensure full compliance
by DCC with these requirements.
Our engagement with the Group Internal Audit
function and external auditors is detailed on
pages 89 and 91.
Priorities for the Year Ahead
The Committee’s key priorities for the coming
year will include oversight of the acquisition
integration and other projects in progress
across the Group, IT and cyber security,
interaction with the new Head of Group Internal
Audit and the completion of actions arising
from the external Board and Committee
evaluation process.
Terms of Reference
The responsibilities of the Audit Committee are summarised in the table on page 89 and are set out in full in its Terms of Reference,
which are available on the DCC website, www.dcc.ie.
DCC plc Annual Report and Accounts 2018
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Supplementary InfoFinancial StatementsGovernanceStrategic Report Audit Committee Report (continued)
Key Areas of Focus in 2018
In addition to the work performed by the Committee in regard to risk management, and the
Group’s financial statements, the Committee also placed a particular focus on the following:
Action Points Arising from Group Internal Audit reviews
The Committee discussed with executive management and with Group Internal Audit how
the process to clear issues arising from Group Internal Audit reviews could be streamlined
and improved.
IT Projects
The Committee focused on the criteria to be utilised by IT Assurance, part of the Group
Internal Audit function, in assessing critical IT projects across the Group.
Accounting Standards
The Committee considered the timetable for implementation of and the potential impact
of the new IFRS 16 – Leases accounting standard on the Group’s financial statements,
including on the calculation of ROCE.
Head of Group Internal Audit
During the year, the Head of Group Internal Audit, Stephen Johnston, was promoted to the
position of Finance Director of DCC LPG, the Group’s largest division. The Committee had
oversight of the process to recruit Caroline Davis as successor to the position.
Brexit
The Committee considered a series of papers prepared by Fergal O’Dwyer, the Chief Financial
Officer, on the potential impact of Brexit on the Group’s activities and risk profile.
The Committee meets separately a number
of times each year with the external auditor
and with the Head of Group Internal Audit,
without other executive management
being present.
The Committee also meets in private, as
required, to discuss matters in the absence
of any invitees.
Risk Management and Internal Control
Details of the Group’s system of risk
management and internal control are set
out in the Risk Report on pages 16 to 23.
At each meeting, the Audit Committee
considers:
• The Group Risk Register, the divisional Risk
Registers and the Integrated Assurance
Report, updated to reflect changes in risk
and in assurance activities.
• A report on emerging risks, prepared by
an external risk consultancy.
• A report on the activities of the Group
Internal Audit (‘GIA’) function, including
company audits, IT assurance reviews
and special investigations.
• Report from the Group Legal &
Compliance function.
The Chairman of the Audit Committee reported
to the Board at each meeting on the
Committee’s activities in regard to the Group’s
risk management and internal control systems.
The Board also received a summary risk report,
prepared by the Head of Enterprise Risk
Management, at each Board meeting and
received a report on Health, Safety and
Environmental matters on a quarterly basis.
Meetings
The Committee met four times during the year
ended 31 March 2018 and there was full
attendance by all members of the Committee
apart from David Jukes, who was unable to
attend one meeting.
The Chief Executive, Chief Financial Officer,
Head of Enterprise Risk Management, Head
of Group Internal Audit, Head of Capital
Markets, Head of Group Financial Planning
& Control, Head of Group Legal & Compliance
and representatives of the external auditor are
typically invited to attend all meetings of the
Committee. Other Directors and executives
are invited to attend as necessary.
Length of Tenure on Audit Committee as at 31 March 2018
Jane Lodge (Chairman)
Cormac McCarthy
1.8 years
David Jukes
Leslie Van de Walle
3.0 years
5.5 years
5.7 years
Note: Mark Ryan joined the Board on 13 November 2017 and became a member of the Audit
Committee on 10 April 2018, replacing Leslie Van de Walle.
Composition
The Audit Committee comprises four
independent non-executive Directors,
Jane Lodge (Chairman), David Jukes, Cormac
McCarthy and Mark Ryan. Mark Ryan was
appointed as a member of the Audit
Committee in place of Leslie Van de Walle on
10 April 2018. Each member’s length of tenure
at 31 March 2018 is set out in the table below.
Biographical details for the members of the
Committee are set out on page 74.
The Board is satisfied that the members of
the Audit Committee bring a wide range of
skills, expertise and experience in commercial,
financial and audit matters arising from the
senior positions they hold or held in other
organisations and that Jane Lodge and Cormac
McCarthy meet the specific requirements
for recent and relevant financial experience,
as set out in the UK Corporate Governance
Code (‘the Code’). The Board is also satisfied
that the Committee, as a whole, has
competence relevant to the sectors
in which DCC operates.
The Company Secretary is the secretary
to the Audit Committee.
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DCC plc Annual Report and Accounts 2018
Governance
The Audit Committee conducted, on behalf
of the Board, the annual assessment of the
operation of the Group’s system of risk
management and internal control, as required
under the Code. This assessment was based on
a detailed review carried out by Enterprise Risk
Management and GIA, utilising the risk register
process described in the Risk Report on page 17.
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. Where
areas for improvement have been identified the
necessary actions in respect of the relevant
control procedures have been or are being taken.
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.
Group Internal Audit
The Audit Committee approves the annual
work programme for the GIA function, ensures
that it is adequately resourced and has
appropriate standing within the Group.
The Audit Committee receives regular reports
from GIA, which includes summaries of the key
findings of each audit in the period, special
investigations and other projects.
GIA uses the market leading audit
management system, Teammate, to prepare
workpapers and audit reports and to record
and monitor progress with respect to issues
arising from audit reviews and related
corrective action plans.
The Teammate system is also used as a central
platform for all related assurance activities
including the recording and monitoring of
corrective actions arising from Group HSE,
Group Legal & Compliance, external audit
and management self-assessment reviews.
The Audit Committee reviews progress on
these corrective actions at each of its meetings.
External Quality Assessments (‘EQA’) by
independent external consultants are
conducted at least every five years to confirm
compliance by the GIA function with the
International Professional Performance
Framework of the Institute of Internal Auditors.
The most recent EQA was completed by
Deloitte in 2017. All agreed actions from this
review have been completed. An internal review
against the same standards is completed on
an annual basis. The results of both internal
and external reviews are considered by the
Audit Committee.
The Audit Committee ensures co-ordination
between GIA and the external auditor, KPMG,
with four meetings being held each year
to maximise the benefits from clear
communication and co-ordinated activities.
The Head of Group Internal Audit has direct
access to the Chairman of the Audit Committee
and the Audit Committee meets with the Head
of Group Internal Audit on a regular basis
without the presence of management.
IT Assurance
The Chief Information Officer and the Head
of IT Assurance presented regular reports
to the Committee on progress on major IT
projects and the role of IT Assurance in the
oversight of these projects.
The Head of IT Assurance reported to each
meeting of the Committee on work being
undertaken in regard to cyber security,
in particular on the use of cyber security related
tools and cyber security focused audits.
In addition, the Group IT Security Advisor,
who is part of the GIA team, provides technical
expertise with respect to key areas including IT
security and mandatory user awareness training.
A Group Information Security policy has
been developed and is underpinned by the IT
Standards framework, which is subject to review
by the IT Assurance team. Data analytics tools
(including ACL and Qlikview) continue to be
developed to support the audit process.
Role and Responsibilities
• Monitor the integrity of the Group’s
financial statements, including reviewing
significant financial reporting judgements
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.
• Assist the Board in its responsibilities
in regard to the assessment of the
principal risks facing the Company, the
monitoring of risk management and
internal control systems, including the
review of effectiveness, and the going
concern and viability statements.
• 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 ten 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 arrangements
for its employees to raise concerns, in
confidence, about possible wrongdoing
in financial reporting or other matters.
DCC plc Annual Report and Accounts 2018
89
Supplementary InfoFinancial StatementsGovernanceStrategic Report Audit Committee Report (continued)
Financial Reporting and Significant
Financial Judgements
In regard to the 2018 Annual Report and
Accounts, the Committee assessed whether
suitable accounting policies had been adopted
and whether management had made
appropriate estimates and judgements.
The Committee obtained support from the
external auditor, in making these assessments.
The Committee paid particular attention to
matters it considered to be important by virtue
of their impact on the Group’s results and
particularly those which involved a relatively
higher level of complexity, judgement or
estimation by management. The table opposite
sets out the significant issues considered by
the Committee in relation to the financial
statements for the year ended 31 March 2018.
Management confirmed to the Committee
that they were not aware of any material
misstatements in the financial statements and
KPMG confirmed that they had found no material
misstatement in the course of their work.
Fair, Balanced and Understandable
The Code requires 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 2018 Annual Report
and Accounts met these requirements.
The Committee considered and discussed with
management the established and documented
process put in place by management for the
preparation of the 2018 Annual Report and
Accounts, in particular planning, co-ordination
and review activities. The Committee also noted
the formal process undertaken by KPMG. This
enabled the Committee, and then the Board,
to conclude 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.
Going Concern and Viability Statement
The Audit Committee reviewed the draft Going
Concern and Viability Statements prior to
recommending them for approval by the Board.
These statements are included in the Risk
Report on page 18.
90
DCC plc Annual Report and Accounts 2018
Significant Issues in relation to the Financial Statements
for the year ended 31 March 2018
Goodwill and Intangible Assets
As set out in note 3.2 to the Group financial statements, the Group had goodwill and
intangible assets of £1,937.0 million at 31 March 2018. 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 three year plan as approved by the Board and
discounted using discount rates that reflected the risks associated with each CGU.
Sensitivity analysis was considered on the discount rate, cash flows and the long-term
growth rate. The Committee considered and discussed with management the 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. The Committee agreed with management’s conclusion that the cash flow forecasts
supported the carrying value of goodwill and intangible assets.
Business Combinations
As set out in note 5.2 to the Group financial statements, the Group completed a number
of acquisitions during the year, the most significant of which were the acquisitions of Esso
Retail Norway, Retail West, Shell Hong Kong & Macau and TEGA. The Group committed
£691.8 million in total consideration to acquisitions completed during the year. This total
consideration was satisfied by a net cash outflow of £664.1 million and acquisition related
liabilities of £27.7 million.
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, being the date the Group obtains control of the acquiree. 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.
Management reported to the Committee that in conducting their review of the fair values
of the acquired assets and liabilities at the date of acquisition, identifiable net assets
of £286.5 million and goodwill of £405.3 million were acquired. Management engaged
independent experts to assist with the valuation of intangible assets on the Esso Retail
Norway and Shell Hong Kong & Macau acquisitions. In addition, the Committee discussed
and agreed with management’s recommendations on the estimated useful lives of
intangible assets arising on the Group’s acquisitions. The Committee considered and
discussed with management the key assumptions used in determining the fair value of
assets and liabilities acquired and was satisfied that the process and assumptions used
in determining the fair values of assets and liabilities had been appropriately scrutinised,
challenged and were sufficiently robust. The Committee agreed with management’s
assessment of the fair values of assets and liabilities acquired through business
combinations and was satisfied that the related disclosures required under IFRS 3 were
complete, accurate and understandable.
Other Matters
In addition, the Committee has considered and is satisfied with a number of other
judgements which have been made by management including revenue recognition,
financial instruments, exceptional items, provisioning for impairment of trade receivables
and inventories and tax provisioning.
Governance 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 KPMG
external audit plan at the meeting held in
November 2017 and received an update at the
meeting in April 2018, at the commencement
of the audit. Following the audit, the Audit
Committee met with KPMG to review the
findings from their audit of the Group
financial statements.
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.
Effectiveness
The Audit Committee reviews the
effectiveness of the external audit process.
As part of this process, audit effectiveness
questionnaires were completed by Group
and subsidiary finance executives and the
responses were summarised by management
in a report to the Audit Committee. Based on
its consideration of this report and its own
interaction with KPMG, in the form of reports
and meetings, the Audit Committee noted that
the overall feedback was positive and that a
number of areas for improvement had been
agreed. Its conclusions on the effectiveness
of the external audit process were reported
to the Board.
Independence
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 review
of fees paid to the external auditor for audit and
non-audit work and seeking confirmation from
the external auditor that they are in compliance
with relevant ethical and professional guidance
and that, in their professional judgement, they
are independent from the Group.
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.
Non-Audit Services
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 2.3 on page 140. The table below
sets out the audit and non-audit fees paid to the
external auditor over the five-year period from
2014 to 2018 inclusive (to KPMG for 2016 to
2018 and to PricewaterhouseCoopers for 2014
and 2015).
Audit vs Non-Audit Fees
2018
2017
2016
2015
2014
Audit £’000
Non Audit £’000
Non-Audit as
% of Audit
2,241
42
2%
2,229
257
12%
574
33%
748
46%
756
47%
1,730
1,607
1,600
Governance
Whistleblowing Arrangements
The Audit Committee is responsible for
ensuring that the Group maintains suitable
whistleblowing arrangements for employees.
Those arrangements are outlined in the
Corporate Governance Statement on page 83
and are also described in our Code of Conduct
which is available on the Company’s website,
www.dcc.ie. The Committee reviewed the
Group’s whistleblowing facilities during the year,
on the basis of a report from the Head of Group
Legal & Compliance, to ensure that they meet
the needs of the Group, in particular as it grows
and develops into new geographies and areas
of activity.
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. In 2018, the process
was externally facilitated in accordance with the
Code. The conclusion from the 2018 process
was that the performance of the Committee
and of the Chairman of the Committee were
satisfactory and no changes were necessary
to the Committee’s terms of reference. The
Committee will focus on agreed actions arising
from the external evaluation process.
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.
DCC plc Annual Report and Accounts 2018
91
Supplementary InfoFinancial StatementsGovernanceStrategic Report Remuneration Report
Leslie Van de Walle
Chairman, Remuneration Committee
The Remuneration
Committee is satisfied that
our remuneration policy
continues to reward strong
Company performance and
personal contribution
Chairman’s Introduction
As Chairman of DCC’s Remuneration
Committee, I am pleased to present the
Remuneration Report for the year ended
31 March 2018.
The Report includes the following sections:
• This Chairman’s Introduction
• Remuneration at a Glance (page 94)
• Remuneration Policy Report (pages 95
to 102)
• Annual Report on Remuneration (pages
103 to 115)
The purpose of DCC’s Remuneration Policy
is to incentivise executive Directors and other
senior Group executives to create shareholder
value. Consequently, their remuneration is
weighted towards performance related
elements, with targets incentivising delivery
of strategy over the short and long term.
Performance for the year ended 31 March 2018
DCC delivered a strong performance in the year
ended 31 March 2018.
Group adjusted operating profit from
continuing activities was 11.1% ahead of the
prior year.
Adjusted earnings per share grew by 10.8% on a
continuing basis and it is proposed that the total
dividend for the year will be increased by 10.0%.
Return on capital employed, a key metric for
DCC, was 17.5% and is again substantially in
excess of the Group’s cost of capital.
DCC has generated a total shareholder return
of 217% over the last five years and 594% over
the last ten years as demonstrated in the charts
on page 93.
The Group’s strong performance is reflected
in the executive Directors’ short and longer
term remuneration, as detailed below.
Bonuses
Annual bonuses for the executive Directors
were based on actual performance against
targets for growth in Group adjusted earnings
per share (‘Group EPS’) and overall contribution
and attainment of personal/strategic objectives.
Strong Group and individual Director
performance against these targets has been
reflected in bonus outcomes of 151% of salary
for each of the current executive Directors,
Donal Murphy and Fergal O’Dwyer (compared
to maximum potentials of 180%).
In relation to Tommy Breen, the former Chief
Executive, his bonus outcome was pro-rated
to 44% to reflect time served by him during
the financial year.
Further details of the performance targets
and achievement against those targets is set
on pages 103 to 104.
Composition and Terms of Reference
The Remuneration Committee comprises three independent non-executive Directors, Leslie Van de Walle (Chairman), Emma FitzGerald
and Pamela Kirby, and the Chairman of the Board, John Moloney. The members of the Committee have significant financial and business
experience, including in the area of executive remuneration. The responsibilities of the Remuneration Committee are summarised in the table
on page 113 and are set out in full in its Terms of Reference, which are available on the DCC website, www.dcc.ie.
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DCC plc Annual Report and Accounts 2018
Governance Long Term Incentive Plan
Vesting of Long Term Incentives
In November 2017, the Remuneration
Committee determined that 100% of the share
options granted in November 2014 under the
LTIP would vest in November 2019, based on
DCC’s performance over the three-year period
ended 31 March 2017 under the ROCE, EPS
and TSR conditions (this was the same as the
estimated vesting of 100% included in last
year’s Report). The earliest exercise date, taking
account of the two-year holding period, will be
November 2019.
The extent of vesting of the share options
granted in November 2015, which was based
on DCC’s performance over the three-year
period ended 31 March 2018, under the ROCE,
EPS and TSR conditions, will be formally
determined by the Remuneration Committee
in November 2018. It is expected that 100% of
the share options granted will vest. The earliest
exercise date will be November 2020.
Further details on these vestings are set out on
page 105.
Further details in relation to the LTIP are set out
on page 97.
Grant of Long Term Incentives
Details of options granted to the executive
Directors during the year are set out in the table
on page 110. Details of the performance
conditions are set out on page 111.
Non-Executive Directors
Taking account of advice from the Company’s
external remuneration consultants, Willis
Towers Watson, on the level of fees in a range
of comparable Irish and UK companies, the
Board has increased the basic non-executive
Director’s fee and the Chairman’s total fee
by 2.5% with effect from 1 April 2018.
Slightly higher increases were agreed for the
Senior Independent Director, Chairman of the
Remuneration Committee and Chairman of the
Audit Committee fees, again based on the fee
comparison advice.
Full details of these fees are set out on page 113.
Shareholder Engagement
DCC recognises the importance of engaging
with shareholders to understand their views on
directors’ remuneration. As noted in last year’s
Report, we had substantial engagement with
a number of the Company’s major shareholders
and with shareholder and proxy voting
organisations in early 2017 to hear their views
on last year’s proposed changes to our
remuneration policy, which were related to the
transition of Chief Executive. I would like to
thank shareholders for their time in engaging
with us and for their support for the changes.
Details of shareholders’ proxy votes on the
2017 Remuneration Report and Remuneration
Policy are set out in the chart below, along with
a history of votes on remuneration reports and/
or policies since 2009.
Format of Report and Shareholder Votes
In the UK, the Large and Medium-sized
Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013
(‘the 2013 UK Regulations’) require certain
disclosures in regard to remuneration and
binding shareholder votes on remuneration
policy and implementation. While DCC, as an
Irish incorporated company, is not subject to
the 2013 UK Regulations, we nonetheless
recognise that they represent best practice
in remuneration reporting and, given our listing
on the London Stock Exchange, we continue
to substantially apply the 2013 UK Regulations
to this report on a voluntary basis.
At the 2018 Annual General Meeting, a
resolution on the Remuneration Report
(excluding the Remuneration Policy) will again
be put to shareholders, on an advisory rather
than on a binding basis. As we are not making
any changes to Remuneration Policy (which was
approved by shareholders last year), we will not
be putting this to a shareholder vote.
It is our intention to operate in line with the
approved Policy. We welcome and will consider
any shareholder feedback on the Remuneration
Policy and the 2018 Remuneration Report.
AGM Votes on Directors’ Remuneration
Report and Policy
Remuneration
Policy 2017
Remuneration
Report 2017
Remuneration
Policy 2016
Remuneration
Report 2016
Remuneration
Report 2015
Remuneration
Policy 2014
Remuneration
Report 2014
Remuneration
Report 2013
Remuneration
Report 2012
Remuneration
Report 2011
Remuneration
Report 2010
Remuneration
Report 2009
97.8
98.5
98.9
99.5
98.8
98.9
99.2
98.6
99.9
99.8
99.9
99.9
% For
% Against
2.2
1.5
1.1
0.5
1.2
1.1
0.8
1.4
0.1
0.2
0.1
0.1
Priorities for the Year Ahead
Our priorities for the coming year will include:
• Consideration of remuneration matters
contained in the proposed revised UK
Corporate Governance Code, in particular
in regard to the extension of the oversight
role of remuneration committees to include
workforce policies and practices.
• Actions and reporting around the gender
pay gap and the ‘fair pay’ agenda.
• Review of the existing parameters and criteria
underlying the Company’s bonus and long
term incentive plans and consideration of
other appropriate parameters.
Conclusion
I am satisfied that the Remuneration
Committee has implemented the Group’s
existing Remuneration Policy in the year ended
31 March 2018 in a manner that properly
reflects the performance of the Group in the
year. I would strongly recommend that
shareholders vote in favour of the 2018
Remuneration Report at the 2018 AGM.
On behalf of the Remuneration Committee
Leslie Van de Walle
Chairman, Remuneration Committee
14 May 2018
DCC’s TSR vs the FTSE 350 since 1 April 2013
400
300
200
100
0
217%
37%
2013
2014
2015
2016
2017
2018
DCC’s TSR vs the FTSE 350 since 1 April 2008
800
700
600
500
400
300
200
100
0
594%
84%
2008 2009
2010
2011
2012
2013
2013
2014
2015
2016 2017
2018
DCC
FTSE 350
The charts above show the growth of a hypothetical £100
holding in DCC plc shares since 1 April 2013 and 1 April
2008 respectively, relative to the FTSE 350 index.
DCC plc Annual Report and Accounts 2018
93
Supplementary InfoFinancial StatementsGovernanceStrategic Report Remuneration Report (continued)
Remuneration at a Glance
The purpose of DCC’s Remuneration Policy is to incentivise executive Directors to create shareholder value. Consequently, their remuneration
is weighted towards performance related elements with targets incentivising delivery of strategy over the short and long term.
This overview summarises the current remuneration arrangements and illustrates how the executive Directors’ short and long term remuneration
for the year ended 31 March 2018 is aligned with and reflects the Company’s strong performance during the year.
Salary
Donal Murphy
Fergal O’Dwyer
Year ended
31 March 2017
€
466,075
466,075
Year ended 31 March 2018
1 April 2017 to
13 July 2017
€
480,057
500,000
14 July 2017 to
31 March 2018
€
820,000
500,000
Year to
31 March 2019
€
840,500
512,500
The increases in the salaries of the executive Directors for the year ended 31 March 2018 reflected Company and personal performance and the
results of a review of the remuneration policy carried out in early 2017. In Mr. Murphy’s case, his salary was changed on his appointment of Chief
Executive on 14 July 2017.
The salaries of both executive Directors were increased by 2.5% on 1 April 2018, which is in line with the expected salary inflationary increase of 2%
to 3% across the Group.
Annual Bonus
The performance weightings set in respect of the annual bonus for the executive Directors for the year ended 31 March 2018 were as follows:
• 70% based on growth in Group EPS
• 30% based on overall contribution and attainment of personal/strategic objectives
The performance targets, the actual performance achieved and resultant payouts are set out in the table below:
Target %
Actual %
Max bonus
% of salary
Actual bonus
% of salary
Actual bonus
€’000
Minimum Maximum
Donal
Murphy
Fergal
O’Dwyer
Donal
Murphy
Fergal
O’Dwyer
Donal
Murphy
Fergal
O’Dwyer
Growth in Group adjusted EPS
5.0
12.5
10.8
Attainment of personal/strategic objectives
See below
TOTAL
126.0
54.0
180.0
126.0
54.0
180.0
97.4
54.0
97.4
54.0
151.4
151.4
1,241
757
The Remuneration Committee, in determining that there had been full achievement of personal/strategic objectives, considered the factors set out
on page 104.
In accordance with the bonus deferral arrangement, 33% of these bonuses, net of tax and social security deductions, will be invested in DCC shares,
which will be made available after three years.
Long Term Incentive Plan
The extent of vesting of the LTIP awards granted in November 2015 was based on results for the three year period ended 31 March 2018.
The earliest vesting date, taking account of the two-year holding period, is November 2020 (five years after the grant date).
The performance conditions which applied to the 2015 awards, the actual performance under those conditions and the expected vesting are
detailed on page 105 and are summarised in the table below.
Conditions
ROCE
EPS excess over UK RPI
TSR outperformance of FTSE 350 Index
Extent of
vesting
Range for minimum
to maximum vesting Actual outcome Expected vesting
Up to 40%
Up to 40%
13% to 17%
3% to 7%
Up to 20%
At the Index to 8%
19.9%
9.6%
15.9%
40%
40%
20%
100%
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DCC plc Annual Report and Accounts 2018
Governance 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 recognise the need for our
remuneration policies, practices and reporting to reflect best corporate governance practice.
As such, we submitted our Remuneration Policy to an advisory, non-binding vote at the 2017 Annual General Meeting (’AGM‘).
The Company is operating its remuneration arrangements in line with the approved Remuneration Policy, which came into effect from the date
of the 2017 AGM on 14 July. As no changes are being made to this Policy, it will not be subject to a shareholder vote at the 2018 AGM.
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 salary 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 are base salary, 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 within similar sized UK listed and Irish
companies to ensure that remuneration remains competitive and structures continue to support the key remuneration policy objectives.
Benchmarking data is used to inform remuneration decisions, but not to drive changes.
Key elements of pay of executive Directors under the Policy are set out in the table below:
Element and link to strategy Operation
Maximum opportunity
Base Salary
Attract and retain
skilled and experienced
senior executives.
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 versus companies of similar size and complexity
within UK and Irish markets
When setting pay policy, account is taken of movements in pay generally
across the Group.
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.
Benefits
To provide market
competitive benefits.
Benefits include the use of a company car, life/disability cover, health insurance
and club subscriptions.
No maximum level has been set
as payments depend on individual
Director circumstances.
DCC plc Annual Report and Accounts 2018
95
Supplementary InfoFinancial StatementsGovernanceStrategic Report Remuneration Report (continued)
Element and link to strategy Operation
Maximum opportunity
The maximum bonus potential,
as a percentage of base salary, for the
executive Directors is 200%.
The maximum bonus potentials set for
each year will be disclosed in the Annual
Report on Remuneration.
A defined target level of performance has
been set for which 50% of maximum
bonus is payable.
Annual Bonus
To reward the
achievement of annual
performance targets.
Bonus payments to executive Directors are based upon meeting pre-
determined targets for a number of key measures, including Group earnings
and overall contribution and attainment of personal/strategic objectives. The
personal/strategic targets are focused on areas such as delivery on strategy,
organisational development, IT, investor relations, financing, 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 112. The targets are considered commercially confidential and will
not be disclosed on a prospective basis, but, to the extent no longer
confidential, will be disclosed retrospectively.
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 pre-determined target return on capital employed
is not achieved.
In regard to the executive Directors, 33% of any bonus earned, once the
appropriate tax and social security deductions have been made, will be
invested in DCC shares which will be made available to them after three years,
or on their employment terminating if earlier, together with accrued dividends.
A formal clawback policy is in place for the executive Directors, 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 99.
The Committee has discretion in relation to bonus payments to joiners
and leavers.
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DCC plc Annual Report and Accounts 2018
Governance Element and link to strategy Operation
Maximum opportunity
Long Term Incentive
Plan (‘LTIP’)
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 market value of the shares subject
to the options granted in respect of any
accounting period may not exceed 200%
of base salary.
If, as a result of dealing restrictions,
it is not possible to grant options at the
normal award date, the Remuneration
Committee may grant the options at a
later date, as soon as practicable after
the dealing restrictions cease to apply.
In these circumstances, the market value
used will be the market value at the later
award date and the base salary used will
be the base salary at the normal
award date.
If the later award date occurs in an
accounting period subsequent to that
in which the normal award date occurred,
the award will be treated, for the purposes
of the 200% maximum, as having been
made in the preceding accounting period.
The LTIP provides for the Remuneration Committee to grant nominal cost
(€0.25) options to acquire shares to Group employees, including
executive Directors.
The vesting period is normally five years from the date of grant, with the
extent of vesting being determined over the first three years, based on the
performance conditions set out below.
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, three-year plans for the Group and
prevailing business and economic circumstances.
Percentage excess over WACC
% of total award vesting
Below % set as threshold
As % set as threshold
Between % set as threshold and
% set as maximum
Above % set as maximum
0%
10%
10%-40% pro rata
40%
The range set will be disclosed in the Annual Report on Remuneration.
DCC plc Annual Report and Accounts 2018
97
Supplementary InfoFinancial StatementsGovernanceStrategic Report Remuneration Report (continued)
Element and link to strategy Operation
Long Term Incentive
Plan (‘LTIP’) continued
Maximum opportunity
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 financial 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%
% if total
award vesting
0%
10%
3% – specified maximum %
10%-40% pro rata
Above specified maximum %
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, three-year plans for the
Group and prevailing business and economic circumstances. The range set
will be disclosed in the Annual Report on Remuneration.
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 financial 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.
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 99.
Pension
To reward sustained
contribution.
The executive Directors are eligible to participate in a defined contribution
pension scheme (or receive cash in lieu of contributions to a defined
contribution pension scheme).
Pension contributions (paid into the
defined contribution scheme or paid
as cash in lieu) can be between 15%
and 25% of base salary.
Existing executive Directors are eligible
to receive 15% of base salary.
Pensionable salary is defined as
base salary.
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DCC plc Annual Report and Accounts 2018
Governance Element and link to strategy Operation
Maximum opportunity
Restricted
Retirement Stock
To replace the cash
allowance in lieu of
defined benefit pension
benefits foregone.
A one-off arrangement, commenced in the year to 31 March 2018, for the
current CFO, Fergal O’Dwyer, only.
Annual award of DCC shares with
a value of €575,000.
The Restricted Retirement Stock is treated as fixed pay and therefore will not
be subject to performance targets or leaver provisions and will vest after the
CFO retires.
(For the avoidance of doubt, if the CFO leaves to take an equivalent role
elsewhere, the shares will not vest until DCC is informed of his retirement
from any equivalent role.)
The value of the annual Restricted
Retirement Stock award is based on
an actuarial assessment of the defined
benefit pension cash allowance foregone
less the defined contribution pension
payment at 15% of base salary. It is not
subject to change and will be fixed until
the current CFO’s retirement.
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.
Payments under Legacy Defined Benefit Pension Scheme
Defined benefit pensions were previously 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 104). The executive Directors 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 were 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.
Donal Murphy remained eligible for this cash allowance until his appointment as Chief Executive on 14 July 2017, at which time he became subject to
the new pension policy for executive Directors. As noted above, Fergal O’Dwyer’s entitlement to this cash allowance was replaced by the Restricted
Retirement Stock arrangement.
Tommy Breen remained eligible for this cash allowance up to the date of his retirement on 14 July 2017.
In addition, as noted on page 105, each of the Directors agreed to accept a transfer value in respect of their past service accrued benefits under the
defined benefit pension plan.
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 LTIP allows for 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 plc Annual Report and Accounts 2018
99
Supplementary InfoFinancial StatementsGovernanceStrategic Report Remuneration Report (continued)
DCC employs approximately 11,000 people in 15 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 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.
The Committee acknowledges that shareholders have a right to have a ‘say on pay’ by putting the Remuneration Report and the Remuneration
Policy, as required, to advisory votes at the AGM.
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 for the relevant notice period. The Committee may in its discretion also allow for the payment
of benefits (such as payments in lieu of defined contribution pension) for the notice period. 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.
In relation to deferred bonuses which have been invested in DCC shares, they will be made available on the participant’s cessation date, together with
accrued dividends.
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 and defined contribution pension schemes contain detailed provisions in respect of termination
of employment.
Restricted Retirement Stock
The Restricted Retirement Stock awards made to the CFO will vest in full after his retirement.
Service Contracts
Donal Murphy has a service agreement with the Company with a notice period of six months. This service agreement provides that either he or the
Company could terminate his employment by giving six months’ notice in writing. The Company may, at its sole discretion, require that Mr. Murphy,
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 agreement does not include any provisions for compensation for loss of office, other
than the notice period provisions set out above.
Fergal O’Dwyer has a letter of appointment which provides for a three month notice period.
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DCC plc Annual Report and Accounts 2018
Governance Scenario Charts
Set out below is an illustration of the potential future remuneration that could be received by each executive Director for the year commencing 1 April
2018 at minimum, median and maximum performance. As 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.
Donal Murphy, Chief Executive
Fergal O’Dwyer, Executive Director and Chief Financial Officer
€
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
€4.22m
40%
€2.62m
32%
29%
39%
36%
24%
€1.03m
100%
0
0
Minimum
Median
Maximum
€
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
€2.19m
23%
21%
56%
€1.21m
100%
0
0
€3.16m
32%
29%
39%
Minimum
Median
Maximum
Fixed
Annual
Long term
Fixed
Annual
Long term
Notes:
1. Fixed pay comprises base salary, benefits, retirement benefit expense and, for Fergal O’Dwyer only, restricted retirement stock.
2. Annual pay comprises bonus. The proposed maximum bonus potentials for the year to 31 March 2019 of 180% of base salary, as set out in the
Annual Report on Remuneration, are included in these charts.
3. Long term pay comprises the maximum value of options that can be granted under the DCC plc Long Term Incentive Plan 2009.
4. Total pay for minimum performance comprises fixed pay.
5. Total pay for median performance comprises fixed pay, 50% of maximum bonus potential (annual) and 50% of maximum LTIP value (long).
6. Total pay for maximum performance comprises fixed pay, 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.
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 2018 is set out in the Annual Report on Remuneration
on page 112.
Policy on External Board Appointments
Executive Directors may accept external non-executive directorships with the prior approval of the Board. The Board recognises the benefits that
such appointments can bring both to the Company and to the Director in terms of broadening their knowledge and experience. The fees received
for such roles may be retained by the executive Directors.
The executive Directors do not currently hold any external board appointments.
DCC plc Annual Report and Accounts 2018
101
Supplementary InfoFinancial StatementsGovernanceStrategic Report Remuneration Report (continued)
Policy for non-executive Directors
Fees
Operation
Maximum Opportunity
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 Senior
Independent Director.
Additional fees may be paid in respect of
Company advisory boards.
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 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 €650,000 was set at
the 2014 Annual General Meeting.
Non-executive Directors do not participate
in the Company’s LTIP and do not receive any
pension benefits from the Company.
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.
102
DCC plc Annual Report and Accounts 2018
Governance Annual Report on Remuneration
This section of the Remuneration Report gives details of remuneration outcomes for the year ended 31 March 2018, sets out how DCC’s
Remuneration Policy, as described on pages 95 to 102, will operate in the year to 31 March 2019 and provides additional information on the operation
of the Remuneration Committee.
Remuneration outcomes for the year ended 31 March 2018
The table below sets out the total remuneration and breakdown of the elements received by each serving Director in relation to the year ended
31 March 2018, together with prior year comparatives. An explanation of how the figures are calculated follows the table.
Executive Directors’ Remuneration Details
Salary
Benefits
Bonus
2018
€’000
2017
€’000
2018
€’000
2017
€’000
2018
€’000
Retirement
Benefit Expense
2017
2018
€’000
€’000
Restricted
Retirement Stock
2017
€’000
2018
€’000
Donal Murphy
Fergal O’Dwyer
Tommy Breen
722
500
225
466
466
759
61
50
20
42
46
1,241
757
107
345
1,366
388
88
75
61
613
762
–
575
–
1,447
1,691
131
195
2,343
3,044
551
1,436
575
2017
€’000
839
839
LTIP
2018
€’000
2017
€’000
Audited Total
2018
€’000
2017
€’000
809
1,366
2,921
2,774
832
1,431
2,789
3,395
1,054
2,325
2,032
5,319
2,695
5,122
7,742
11,488
–
–
–
–
Tommy Breen retired as Chief Executive and from the Board on 14 July 2017. As such, the 2018 payments above relate to the period from 1 April
2017 until 14 July 2017.
Salary
The salaries of the executive Directors for the year ended 31 March 2018 represented increases over the prior year as shown in the table below:
Donal Murphy
Fergal O’Dwyer
Tommy Breen
Salary
€
820,000
500,000
781,833
Increase
%
*
7.3%
3.0%
* Donal Murphy’s salary was increased to €480,057 (+3.0%) on 1 April 2017 and to €820,000 on 14 July 2017, on his appointment
as Chief Executive.
Benefits
Benefits include the use of a company car, life/disability cover, health insurance and club subscriptions.
Determination of Bonuses for the year ended 31 March 2018
The table below sets out the actual performance in the year ended 31 March 2018 in terms of growth in Group adjusted earnings per share
(‘Group EPS’) compared to the performance target set for the year.
Growth in Group EPS
Target
Minimum
Maximum
5%
12.5%
Actual
10.8%
The actual increase of 10.8% in Group EPS compared to the range set resulted in the Remuneration Committee determining that there should
be payment of 77.3% of the bonuses related to this performance target.
DCC plc Annual Report and Accounts 2018
103
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Remuneration Report (continued)
In regard to the achievement of targets set for overall contribution and personal/strategic objectives, the Remuneration Committee considered the
following matters:
Achievements
Donal Murphy Successful transition to the role of Chief Executive; demonstrated visible leadership of the Group’s core values; enhanced
communications across the Group; strong progress on management development and succession planning at Group, divisional
and subsidiary levels; development of dedicated strategy function; effective co-ordination of strategic developments.
Fergal O’Dwyer Provided very effective support to Donal Murphy in ensuring smooth transition by him into the Chief Executive role; excellent
financial leadership of the Group, in particular with regard to US Private Placement and cash management; increased role in regard
to acquisition activity; good progress on management development and succession.
The Remuneration Committee decided that there should be full payment of bonuses related to overall contribution and personal/strategic objectives
for Mr. Murphy and Mr. O’Dwyer. In relation to Mr. Breen, the Committee also concluded that his performance against personal/strategic objectives during
the period up to 14 July 2017 merited full payment in respect of this element of remuneration.
The resultant bonus payout levels for the year ended 31 March 2018 were as follows:
Component
Group EPS
Contribution and Personal/Strategic
Donal Murphy
% of Salary
Fergal O’Dwyer
% of Salary
Tommy Breen
% of Salary
Max %
126.0
54.0
180.0
Payout %
97.4
54.0
151.4
Max %
126.0
54.0
180.0
Payout %
Max %
Payout %
97.4
54.0
151.4
36.7
15.8
52.5
28.4
15.8
44.2
Mr. Breen’s bonus related to his period of service from 1 April 2017 to 14 July 2017.
In the case of Mr. Murphy and Mr. O’Dwyer, 33% of their bonuses, net of tax and social security deductions, will be invested in DCC shares, which will
be made available to them after three years, or on their employment terminating if earlier, together with accrued dividends.
As noted in last year’s Annual Report on Remuneration, Mr. Breen retired on 14 July 2017 and, to avoid administrative costs, deferral was not applied
to his 2017/2018 bonus payment.
Retirement Benefit Expense
Retirement Benefit Expense comprised 15% of salary in the form of a cash allowance, in lieu of contribution to a defined contribution pension
scheme, for Donal Murphy and Fergal O’Dwyer and an amount of €388,300 for Tommy Breen, being a cash allowance of €479,300 less the value
of a reversal of previously funded benefits of €91,000, for the period 1 April to 14 July 2017 inclusive.
Defined Benefit Pensions
The table below sets out the change in the accrued pension benefits to which current and former executive Directors have become entitled during
the year ended 31 March 2018 and the transfer value of the change in accrued benefit, under the Company’s defined benefit pension scheme:
Change in accrued pension benefit
(excl inflation) during the year 1
€’000
Transfer value equivalent to the
change in accrued pension benefit
€’000
Total accrued pension
benefit at year end 1
€’000
Donal Murphy
Fergal O’Dwyer
Tommy Breen
Total
0
0
(3)
(3)
0
0
(91)
(91)
0
0
0
0
Note:
1. Figures represent the total accrued pension payable from normal retirement date, based on pensionable service at 31 March 2018, after the
reduction in respect of the Irish pension levy.
As previously reported, 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, who were then members of the defined benefit pension 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.
The current Remuneration Policy, which was approved by shareholders at the AGM on 14 July 2017, ended the practice of paying cash allowances
in lieu of defined benefit pension benefits foregone and introduced a cash allowance paid in lieu of defined contribution pension at 15% to 25% of
salary, with 15% applying for existing executive Directors, Donal Murphy and Fergal O’Dwyer.
104
DCC plc Annual Report and Accounts 2018
Governance
In May 2017, the Company agreed with each of Donal Murphy, Fergal O’Dwyer and Tommy Breen that they would take a transfer value in respect
of their past service accrued benefits under the defined benefit pension plan. These transfer values, which were determined on the basis of actuarial
advice, were at a discount to the accounting reserve and resulted in a gain to the Company.
Restricted Retirement Stock
Fergal O’Dwyer receives an annual award of DCC shares with a value of €575,000, which do not vest until he retires.
Long Term Incentive Plan
The values of the LTIP as shown in the table on page 103 for 2018 and 2017 relate to awards made in November 2015 and November 2014 respectively.
The vesting criteria which applied to these awards are summarised in the Remuneration Policy Report on pages 95 to 102.
2018 (November 2015 grants)
The LTIP awards granted in November 2015 will vest in November 2020 (five years after the grant date). The extent of vesting will be formally
determined by the Committee in November 2018 and will be based on ROCE performance (40% of the total award), EPS performance
(40% of the total award) and TSR performance (20% of the total award) over the three-year period ended 31 March 2018.
DCC’s average ROCE for the three years ended 31 March 2018 was 19.9%. As this was in excess of the range of 13% – 17% set for minimum
to maximum vesting, 100% of this portion of the award (40% of the total award) will vest.
DCC’s adjusted EPS increased by 12.3% annualised over the three-year period. UK RPI increased by 2.7% annualised over the same period.
As the excess over RPI was greater than the 7% excess set for maximum vesting, 100% of this portion of the award (40% of the total award)
will vest.
An analysis was conducted by Willis Towers Watson to measure the level of DCC’s TSR performance relative to the FTSE 350 index over the
three year period ended 31 March 2018. This analysis showed that DCC’s TSR annualised outperformance of the FTSE 350 index was 15.9%.
As this was greater than the 8% outperformance set for maximum vesting, 100% of this portion of the award (20% of the total award) will vest.
Consequently, the Group’s ROCE, EPS and TSR performance is expected to give rise to a vesting of 100%.
The value of the LTIP for the year ended 31 March 2018 is estimated using the number of options expected to vest in November 2020 and the
share price at 31 March 2018 of €74.98 (£65.60) less the amount payable to purchase the shares (i.e. the exercise cost).
In the case of Mr. Breen, the value of his LTIP reflects the expected level of vesting and completed service since the start of the performance period.
2017 (November 2014 grants)
The LTIP awards granted in November 2014 will vest in November 2019 (five years after the grant date). The extent of vesting, which has been
determined by the Committee, was based on ROCE performance (40% of the total award), EPS performance (40% of the total award) and TSR
performance (20% of the total award) over the three-year period ended 31 March 2017.
DCC’s average ROCE for the three years ended 31 March 2017 was 19.9%. As this was in excess of the range of 13% – 17% set for minimum
to maximum vesting, 100% of this portion of the award (40% of the total award) will vest.
DCC’s adjusted EPS increased by 18.2% annualised over the three-year period. UK RPI increased by 1.9% annualised over the same period.
As the excess over RPI was greater than the 7% excess set for maximum vesting, 100% of this portion of the award (40% of the total award)
will vest.
An analysis was conducted by Willis Towers Watson to measure the level of DCC’s TSR performance relative to the FTSE 350 index over the
three year period ended 31 March 2017. This analysis showed that DCC’s TSR annualised outperformance of the FTSE 350 index was 27.3%.
As this was greater than the 8% outperformance set for maximum vesting, 100% of this portion of the award (20% of the total award) will vest.
Consequently, the Remuneration Committee determined that 100% of the 2014 awards will vest in November 2019.
The value of the LTIP for the year ended 31 March 2017 is based on the number of options which will vest in November 2019 and the share price
at 31 March 2017 of €82.12 (£70.25) less the amount payable to purchase the shares (i.e. the exercise cost).
DCC plc Annual Report and Accounts 2018
105
Supplementary InfoFinancial StatementsGovernanceStrategic Report Remuneration Report (continued)
LTIP – Vesting
The extent of vesting of awards made under the LTIP since its introduction in 2009 is set out in the table below.
2009 award: vested/lapsed in 2012
2010 award: vested/lapsed in 2013
2011 award: vested/lapsed in 2014
2012 award: vested/lapsed in 2015
2013 award: vested/lapsed in 2016
2014 award: to vest/to lapse in 2019
2015 award: to vest/to lapse in 2020
% vested
% lapsed
25.8%
42.4%
59.4%
100%
100%
100%
100%
74.2%
57.6%
40.6%
Chief Executive’s Remuneration
The chart below show the total remuneration for the Director undertaking the role of Chief Executive for the nine years from 1 April 2009 to 31 March
2018. The years 2010 to 2017 inclusive relate to Tommy Breen and the year 2018 relates to Donal Murphy.
€2.39m
42%
100%
€1.67m
€1.64m
95%
%3
€1.55m
100%
57%
26%
30%
100%
91%
62%
Notes:
1. Fixed pay comprises salary, benefits and retirement
84%
benefit expense.
2. Variable pay comprises the annual bonus; the
percentage shown is the value of the bonus paid
as a percentage of the maximum opportunity.
3. 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 2018); the percentage shown is the
value of the awards vested as a percentage of the
maximum opportunity (actual vesting for 2010 to 2017
and expected vesting for 2018).
€5.32m
100%
100%
€4.78m
100%
€4.29m
100%
€3.16m
59%
100%
€2.92m
100%
€000
5,400
4,500
3,600
2,700
1,800
900
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
Fixed pay
Variable pay
Long term pay
106
DCC plc Annual Report and Accounts 2018
Governance Chief Executive’s Remuneration versus EPS and TSR
This graph maps the total remuneration for the Director undertaking the role of Chief Executive against the nine-year trend in EPS and TSR, using
a base of 100 for 2010 for comparator purposes.
500
450
400
350
300
250
200
150
100
50
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
TSR
CEO total pay
EPS
Base of 100 for 2010
Changes in Chief Executive Remuneration compared to Group Employees
The table below sets out the changes in elements of remuneration paid to the Director undertaking the role of Chief Executive and the average
overall percentage change for employees of the Group as a whole.
D Murphy/T Breen 1
All Group employees
% change between 2017 and 2018
Salary
+8%
Benefits
-43%
Bonus
-9%
Pension
-88%
Overall
-26%
+2%
1. This shows the percentage change between data for Mr. Breen for the year ended 31 March 2017 and the annualised data for Mr. Murphy for the
year ended 31 March 2018.
The Chief Executive’s total remuneration for the year ended 31 March 2018 (annualised) is 70 times that of the average Group employee for the
same period.
Relative Importance of Spend on Pay
The chart below sets out the amount paid in remuneration to all employees of the Group compared to dividends to shareholders, for 2018 and 2017.
£’000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2018
2017
Dividends
Remuneration received
by all employees
DCC plc Annual Report and Accounts 2018
107
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Remuneration Report (continued)
Total Shareholder Return
The chart below shows the growth of a hypothetical £100 holding in DCC plc shares since 1 April 2009, relative to the FTSE 350 index. Total
Shareholder Return over the last five years and ten years is set out on the charts on page 93.
900
800
700
600
500
400
300
200
100
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
DCC
FTSE 350
Non-executive Directors’ Remuneration Details
The remuneration paid to non-executive Directors for the year ended 31 March 2018 is set out in the table below. Non-executive Directors are paid a
basic fee. Additional fees are paid to the members and the Chairmen of Board Committees, to the Chairman and to the 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 advice from external remuneration consultants on the level
of fees in a range of comparable Irish and UK companies.
Audited Total
2018
€’000
2017
€’000
300
243
75
78
78
90
78
27
121
–
–
847
22
78
77
90
69
–
117
57
33
786
Basic Fee
Committee Chair and
Membership Fees
2018
€’000
2017
€’000
2018
€’000
2017
€’000
Chairman/Senior
Independent Director Fees France Advisory Board Fee
2017
€’000
2017
€’000
2018
€’000
2018
€’000
Non-executive Directors
John Moloney
Emma FitzGerald 1
David Jukes
Pamela Kirby
Jane Lodge
Cormac McCarthy 2
Mark Ryan 3
Leslie Van de Walle 4
Róisín Brennan 5
David Byrne 6
Total
70
70
70
70
70
70
27
70
–
–
70
21
70
70
70
62
–
70
53
21
517 7
507
8
5
8
8
20
8
–
24
–
–
81
8
1
8
7
20
7
–
24
4
2
81
222
165
–
–
–
–
–
–
12
–
–
234
–
–
–
–
–
–
3
–
10
178
–
–
–
–
–
–
–
15
–
–
15
–
–
–
–
–
–
–
20
–
–
20
1. Emma FitzGerald was appointed as a Director and a member of the Remuneration Committee on 14 December 2016.
2. Cormac McCarthy was appointed as a Director and a member of the Audit Committee on 16 May 2016.
3. Mark Ryan was appointed as a Director on 13 November 2017.
4. The operation of the France Advisory Board was discontinued in November 2017.
5. Róisín Brennan retired as a non-executive Director on 14 December 2016.
6. David Byrne retired as a non-executive Director on 15 July 2016.
7. Compares to current shareholder approved limit of €650,000.
108
DCC plc Annual Report and Accounts 2018
Governance Total Directors’ Remuneration
Executive Directors
Salary
Benefits
Bonus
Retirement Benefit Expense
Restricted Retirement Stock
LTIP
Total executive Directors’ remuneration
Non-executive Directors
Fees
Total non-executive Directors’ remuneration
Audited Total
2018
€’000
2017
€’000
1,447
131
2,343
551
575
2,695
7,742
847
847
1,691
195
3,044
1,436
–
5,122
11,488
786
786
Total Directors’ remuneration
8,589
12,274
Executive and Non-executive Directors’ and Company Secretary’s Interests
The interests of the Directors and the Company Secretary (including shares held by connected persons) in the share capital of DCC plc at 31 March
2018 (together with their interests at 31 March 2017) are set out below:
No. of Ordinary Shares
At 31 March 2018
No. of Ordinary Shares
At 31 March 20171
Directors
John Moloney
Donal Murphy 2
Emma FitzGerald
David Jukes
Pamela Kirby
Jane Lodge
Cormac McCarthy
Mark Ryan
Leslie Van de Walle
Fergal O’Dwyer 2
Tommy Breen 3
Company Secretary
Gerard Whyte
2,000
104,060
224
94
2,500
3,000
1,200
9,696
670
210,451
221,574
2,000
93,532
148
94
2,500
3,000
1,200
9,696
670
208,889
221,574
155,000
155,000
1. Or date of appointment if later.
2. Includes 1,562 shares held under the deferred bonus arrangement as detailed on page 96.
3. Tommy Breen retired from the Board on 14 July 2017. His holding is at the date of his leaving.
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 2018.
There were no changes in the above Directors’ and Secretary’s interests between 31 March 2018 and 14 May 2018.
The shareholdings held by the executive Directors are substantially in excess of the share ownership guidelines in place, which are set out on page
112 of this Report.
The Company’s Register of Directors’ Interests (which is open to inspection) contains full details of Directors’ shareholdings and share options.
DCC plc Annual Report and Accounts 2018
109
Supplementary InfoFinancial StatementsGovernanceStrategic Report 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 (€0.25) options, under the DCC plc Long Term
Incentive Plan 2009 are set out in the table below:
Number of options
At
31 March
2017
Granted
in year
Exercised
in year
Lapsed
in year
At
31 March
20181
Date of
grant
Market
price on
grant
Three-year
performance
period end
Normal exercise period
Market
price at
date of
exercise
£
Executive Directors
Donal
Murphy
Fergal
O’Dwyer
Tommy
Breen2
8,011
13,584
17,652
12,059
16,686
10,830
11,707
–
–
–
–
–
–
–
–
20,783
(8,011)
–
–
–
–
–
–
–
90,529 20,783
(8,011)
8,011
13,584
17,652
12,647
17,481
11,138
11,707
–
–
–
–
–
–
–
–
12,672
(8,011)
–
–
–
–
–
–
–
92,220 12,672
(8,011)
28,526
37,070
24,706
28,406
18,140
19,068
155,916
Company Secretary
Gerard
Whyte
6,240
8,109
5,559
5,834
3,574
3,758
–
3,875
33,074
3,875
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
15.11.10
€21.25 31 Mar 2013 15 Nov 2013 – 14 Nov 2017
£74.50
13,584
15.11.11
€17.50 31 Mar 2014 15 Nov 2014 – 14 Nov 2018
17,652
12.11.12
€22.66 31 Mar 2015 12 Nov 2015 – 11 Nov 2019
12,059
12.11.13
£28.54 31 Mar 2016 12 Nov 2016 – 11 Nov 2020
16,686
12.11.14
£34.56 31 Mar 2017 12 Nov 2019 – 11 Nov 2021
10,830
17.11.15
£57.35 31 Mar 2018 17 Nov 2020 – 16 Nov 2022
11,707
10.02.17
£67.75 31 Mar 2019
10 Feb 2022 – 9 Feb 2024
20,783
16.11.17
£70.95 31 Mar 2020 16 Nov 2022 – 15 Nov 2024
103,301
0
15.11.10
€21.25 31 Mar 2013 15 Nov 2013 – 14 Nov 2017
£74.50
13,584
15.11.11
€17.50 31 Mar 2014 15 Nov 2014 – 14 Nov 2018
17,652
12.11.12
€22.66 31 Mar 2015 12 Nov 2015 – 11 Nov 2019
12,647
12.11.13
£28.54 31 Mar 2016 12 Nov 2016 – 11 Nov 2020
17,481
12.11.14
£34.56 31 Mar 2017 12 Nov 2019 – 11 Nov 2021
11,138
17.11.15
£57.35 31 Mar 2018 17 Nov 2020 – 16 Nov 2022
11,707
10.02.17
£67.75 31 Mar 2019
10 Feb 2022 – 9 Feb 2024
12,672
16.11.17
£70.95 31 Mar 2020 16 Nov 2022 – 15 Nov 2024
96,881
28,526
15.11.11
€17.50 31 Mar 2014 15 Nov 2014 – 14 Nov 2018
37,070
12.11.12
€22.66 31 Mar 2015 12 Nov 2015 – 11 Nov 2019
24,706
12.11.13
£28.54 31 Mar 2016 12 Nov 2016 – 11 Nov 2020
28,406
12.11.14
£34.56 31 Mar 2017 12 Nov 2019 – 11 Nov 2021
18,140
17.11.15
£57.35 31 Mar 2018 17 Nov 2020 – 16 Nov 2022
19,068
10.02.17
£67.75 31 Mar 2019
10 Feb 2022 – 9 Feb 2024
155,916
6,240
8,109
5,559
5,834
3,574
3,758
3,875
36,949
15.11.11
€17.50 31 Mar 2014 15 Nov 2014 – 14 Nov 2018
12.11.12
€22.66 31 Mar 2015 12 Nov 2015 – 11 Nov 2019
12.11.13
£28.54 31 Mar 2016 12 Nov 2016 – 11 Nov 2020
12.11.14
£34.56 31 Mar 2017 12 Nov 2019 – 11 Nov 2021
17.11.15
£57.35 31 Mar 2018 17 Nov 2020 – 16 Nov 2022
10.02.17
£67.75 31 Mar 2019
10 Feb 2022 – 9 Feb 2024
16.11.17
£70.95 31 Mar 2020 16 Nov 2022 – 15 Nov 2024
1. Or date of retirement if earlier.
2. Tommy Breen retired from the Board on 14 July 2017. The options shown above are those held by him at the date of retirement. Vested options
(those originally granted in 2011, 2012, 2013 and 2014) have since been exercised. Outstanding unvested options (those originally granted
in 2015 and 2017) will be pro-rated based on the final level of vesting and completed service since the start of the performance period.
110
DCC plc Annual Report and Accounts 2018
Governance As at 31 March 2018, the total number of options granted under the LTIP, net of options lapsed, amounted to 1.3% of issued share capital, of which
0.8% is currently outstanding.
The extent of vesting of the LTIP awards which were granted in November 2017 will be based on the three-year performance period from 1 April
2017 to 31 March 2020. The ranges set by the Remuneration Committee in respect of these performance conditions were set out at page 96 of the
2017 Annual Report.
DCC plc 1998 Employee Share Option Scheme
Details of the executive Directors’ and the Company Secretary’s basic tier 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
2017
Granted
in year
Exercised
in year
Lapsed
in year
At
31 March
20181
Date of
grant
Option
price
Normal exercise period
Options exercised in year
Market
price at
date of
exercise
£
Option
price
€
Executive Directors
Donal
Murphy
Fergal
O’Dwyer
Tommy
Breen 2
15,000
15,000
30,000
22,500
15,000
37,500
40,000
20,000
60,000
Company Secretary
Gerard
Whyte
10,000
10,000
–
–
–
–
–
–
–
–
–
–
–
(15,000)
–
(15,000)
(22,500)
–
(22,500)
(40,000)
(20,000)
(60,000)
(10,000)
(10,000)
–
–
–
–
–
–
–
–
–
–
–
1. Or date of retirement if earlier.
2. Tommy Breen retired from the Board on 14 July 2017.
0
23.07.07
€23.35
23 Jul 2010 – 22 Jul 2017
€23.35
£74.50
15,000
20.05.08
€15.68 20 May 2011–19 May 2018
–
–
15,000
0
23.07.07
€23.35
23 Jul 2010 – 22 Jul 2017
€23.35
£74.50
15,000
20.05.08
€15.68 20 May 2011 – 19 May 2018
–
–
15,000
0
0
0
0
0
23.07.07
€23.35
23 Jul 2010 – 22 Jul 2017
20.05.08
€15.68 20 May 2011–19 May 2018
€23.35
€15.68
£74.50
£74.50
20.05.08
€15.68 20 May 2011 – 19 May 2018
€15.68
£74.50
The ten-year period during which share options could be granted under the DCC plc 1998 Employee Share Option 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 0.06% is currently outstanding.
There are no second tier options outstanding under this Scheme.
The basic tier options cannot 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 can 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 could 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 2018 was £65.60 and the range during the year was £64.75 to £77.55.
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 2.5 on pages 142 to 144.
For the purposes of Section 305 of the Companies Act 2014 (Ireland), the aggregate gains by Directors on the exercise of share options during the
year ended 31 March 2018 was €7.715 million (2017: €5.273 million).
DCC plc Annual Report and Accounts 2018
111
Supplementary InfoFinancial StatementsGovernanceStrategic Report Remuneration Report (continued)
Share Ownership Guidelines
The shareholdings held by the executive Directors as at 31 March 2018, as shown below, are substantially in excess of the guidelines set out on page 101.
Executive
Donal Murphy
Fergal O’Dwyer
Number of
shares held as at
31 March 2018
104,060
210,451
Shareholding as
a multiple of
base salary for
the year ended
31 March 2018
Share ownership
guideline
9.5
31.6
3.0
2.0
The shareholdings in the table comprise the shares held by the executive Directors (including those shares held in trust as part of the deferred bonus
arrangement), valued based on the share price at 31 March 2018 of £65.60 (€74.98). Unvested and unexercised share options are not included.
Operation of Remuneration Policy in the year to 31 March 2019
Salary
The salaries of the executive Directors for the year commencing on 1 April 2018, together with comparative figures, are as follows:
Executive Director
Donal Murphy
Fergal O’Dwyer
Year to
31 March 2019
€
14 July 2017 to
31 March 2018
€
1 April 2017 to
13 July 2017
€
840,500
512,500
820,000
500,000
480,057
500,000
Donal Murphy’s salary increased from €480,057 to €820,000 upon his appointment as Chief Executive on 14 July 2017.
The increases in salaries for the executive Directors for the year to 31 March 2019 of 2.5% are in line with the expected salary inflationary increase
of 2%-3% across the Group.
Benefits
Benefits payable to the executive Directors for the year to 31 March 2019 include the use of a company car, life/disability cover, health insurance
and club subscriptions.
Bonus
The Remuneration Committee has maintained the maximum bonus potential that will apply for the year to 31 March 2019 at 180%, which is below
the Policy maximum of 200%, as shown in the table below.
Executive Director
Donal Murphy
Fergal O’Dwyer
Maximum bonus potential
Deferral of bonus
180% of salary
180% of salary
33% of any bonus earned by the executive Directors will be deferred into
DCC shares and be available after three years.
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
Donal Murphy
Fergal O’Dwyer
Performance Targets
70% based on growth in Group adjusted EPS and 30% based on overall
contribution and attainment of personal/strategic objectives.
Growth in Group adjusted EPS is measured against a pre-determined range, with zero payment below threshold up to full payment at the maximum
of the range.
The Committee considers that information on the Group adjusted EPS range and on the personal/strategic objectives 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 in full on a
retrospective basis.
The Committee will keep the performance targets under review in light of acquisition and other development activity during the year to 31 March 2019.
Retirement benefits
Retirement benefits comprise a cash allowance paid in lieu of contributions to a defined contribution pension plan at 15% to 25% of salary, with 15%
applying for existing Directors, Donal Murphy and Fergal O’Dwyer.
Restricted Retirement Stock
Mr. O’Dwyer will receive an annual award of DCC shares with a value of €575,000. The value of these annual awards is based on an actuarial
assessment of the defined benefit pension cash allowance foregone less the defined contribution payment at 15% of base salary. It is not subject
to change and will be fixed until his retirement.
112
DCC plc Annual Report and Accounts 2018
Governance Long Term Incentives
Details of the LTIP are set out in the Remuneration Policy Report on page 95.
For the purposes of the ROCE performance condition, the Remuneration Committee has set a ROCE range for threshold and maximum vesting
of 14% to 17% for awards to be made in the year to 31 March 2019.
For the purposes of the EPS performance condition, the Remuneration Committee has set EPS growth equal to UK RPI plus 7% per annum
compound for maximum vesting of awards to be made in the year to 31 March 2019.
Both the ROCE range and the EPS range will be kept under review and adjusted if necessary in light of acquisition and other development activity
in the year to 31 March 2019.
Non-executive Directors Remuneration
The non-executive Director fee structure for the year to 31 March 2019, together with comparative figures, is set out below:
Chairman (to include basic and Committee fees)
Basic Fee
Committee Fees:
Audit
Nomination and Governance
Remuneration
Additional Fees:
Audit Committee Chairman
Remuneration Committee Chairman
Senior Independent Director Fee
Year to
31 March 2019
€
Year ended
31 March 2018
€
307,500
71,750
300,000
70,000
8,000
3,000
5,000
15,000
15,000
15,000
8,000
3,000
5,000
12,000
7,500
12,000
Taking account of advice from the Company’s external remuneration consultants, Willis Towers Watson, on the level of fees in a range of comparable
Irish and UK companies, the Board has increased the basic non-executive Director’s fee and the Chairman’s total fee by 2.5% with effect from
1 April 2018.
Slightly higher increases were agreed for the Senior Independent Director, Chairman of the Remuneration Committee and Chairman of the Audit
Committee fees, again based on the fee comparison advice.
Governance
Role and Responsibilities
The responsibilities of the Remuneration Committee are summarised in the table below.
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 plc Annual Report and Accounts 2018
113
Supplementary InfoFinancial StatementsGovernanceStrategic Report Remuneration Report (continued)
Composition
The Remuneration Committee comprises three independent non-executive Directors, Leslie Van de Walle (Chairman), Emma FitzGerald and
Pamela Kirby and the Chairman of the Board, John Moloney.
The members of the Committee have significant financial and business experience, including in the area of executive remuneration. Each member’s
length of tenure at 31 March 2018 is set out in the table below. Further biographical details regarding the members of the Remuneration Committee
are set out on pages 74 and 75.
The Company Secretary acts as secretary to the Remuneration Committee.
Length of Tenure on Remuneration Committee
Leslie Van de Walle (Chairman)
Emma FitzGerald 1.3 years
Pam Kirby
John Moloney
3.8 years
3.8 years
7.5 years
Meetings
The Committee met six times during the year ended 31 March 2018. Details of attendance by members of the Committee are set out on page 80.
The main agenda items included remuneration policy, remuneration trends and market practice, the remuneration packages of the Chairman, the
Chief Executive and the other executive Directors, pension matters, grants of share options under the Company’s LTIP, gender pay gap reporting and
approval of this report.
Typically, the Chief Executive, the Head of Group Human Resources and representatives of Willis Towers Watson are invited to attend all meetings
of the Committee. Other Directors and executives 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. External advisors are invited to attend meetings
when required.
The Committee also meets separately, as required, to discuss matters in the absence of any invitees.
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.
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. In accordance with the UK Corporate Governance Code, the process was externally facilitated in 2018. The conclusion from the
2018 process was that the performance of the Remuneration Committee and of the Chairman of the Committee were satisfactory and that no
changes were necessary to the Committee’s Terms of Reference.
Gender Pay Gap Reporting
As noted in the Responsible Business Report, under the UK Gender Pay Gap Regulations, UK employers with more than 250 employees are required
to publish key metrics on their Gender Pay Gap. The Remuneration Committee reviewed the work carried out in our affected UK businesses, which
were subject to these Regulations, and received a full briefing in advance of the publication of their individual reports on their businesses’ websites.
External Advice
During the year, Willis Towers Watson provided advice in relation to market trends, competitive positioning and developments in remuneration policy
and practice. Willis 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 ended 31 March 2018, Willis Towers Watson received fees of €64,483 in respect of advice provided to the Committee in regard to
executive Director remuneration. Willis Towers Watson also provided services to the Group on market trends, incentive design, the Remuneration
Report and in relation to the LTIP.
In the year ended 31 March 2018, Mercer received fees of €31,016 as pension advisors to the Committee. Mercer also provides specific advice
on pension practice and developments and act as actuaries and pension advisors to a number of companies in the Group.
114
DCC plc Annual Report and Accounts 2018
Governance 2017 Annual General Meeting Votes on Remuneration Policy and Annual Report on Remuneration
Vote
Total votes cast
Total votes for
Total votes against
Total abstentions
Advisory vote on 2017 Remuneration Policy
62,407,963
61,062,471
1,345,492
3,965,654
Advisory vote on 2017 Annual Report on Remuneration
66,105,632
65,112,064
(97.8%)
(98.5%)
(2.2%)
993,568
(1.5%)
267,985
This table shows the voting outcome at the 2017 AGM in relation to the Remuneration Policy and the Annual Report on Remuneration.
DCC plc Annual Report and Accounts 2018
115
Supplementary InfoFinancial StatementsGovernanceStrategic Report Report of the Directors
The Directors of DCC plc present their report and the audited financial statements for the year ended 31 March 2018.
Principal Activities
DCC plc is an international sales, marketing and support services group headquartered in Dublin with operations in Europe, the USA and Asia.
DCC has four divisions – DCC LPG, DCC Retail & Oil, DCC Healthcare and DCC Technology. DCC employs over 11,000 people in 15 countries.
DCC’s shares are listed on the London Stock Exchange and are included in the FTSE 100 Index.
Results and Review of Activities
Revenue for the year (on a continuing basis) amounted to £14,264.6 million (2017: £12,269.8 million). The profit for the year attributable to owners
of the Parent Company amounted to £261.8 million (2017: £216.2 million). Adjusted earnings per share (on a continuing basis) amounted to
317.5 pence (2017: 286.6 pence). Further details of the results for the year are set out in the Group Income Statement on page 126.
The Chairman’s Statement on pages 6 to 7, the Chief Executive’s Review on pages 8 to 11, the Operating Reviews on pages 42 to 67 and the
Financial Review on pages 23 to 31 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 2018, of recent events and of likely future developments. Information in respect of events since the year end
is included in these sections and in note 5.8 on page 190.
Dividends
An interim dividend of 40.89 pence per share, amounting to £36.4 million, was paid on 11 December 2017. The Directors recommend the payment
of a final dividend of 82.09 pence per share, amounting to £73.242 million (based on the number of shares in issue at 14 May 2018). Subject to
shareholders’ approval at the Annual General Meeting on 13 July 2018, this dividend will be paid on 19 July 2018 to shareholders on the register on
25 May 2018. The total dividend for the year ended 31 March 2018 amounts to 122.98 pence per share, a total of £109.59 million. This represents an
increase of 10% on the prior year’s total dividend per share.
The profit attributable to owners of the Parent Company, which has been transferred to reserves, and the dividends paid during the year ended
31 March 2018 are shown in note 4.3 on page 176.
Share Capital and Treasury Shares
DCC’s authorised share capital is 152,368,568 ordinary shares of €0.25 each, of which 89,221,903 shares (excluding treasury shares) and 3,207,501
treasury shares were in issue at 31 March 2018. 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 3,613,043 (4.07%
of the then issued share capital (excluding treasury shares)) with a nominal value of €0.903 million.
A total of 405,542 shares (0.45% of the issued share capital (excluding treasury shares)) with a nominal value of €0.101 million were re-issued during
the year at prices ranging from €0.25 to €85.04 consequent to the exercise of share options under the DCC plc 1998 Employee Share Option
Scheme, the DCC plc Long Term Incentive Plan 2009 and the deferred bonus arrangements for executive Directors, leaving a balance held as
treasury shares at 31 March 2018 of 3,207,501 shares (3.59% of the issued share capital (excluding treasury shares)) with a nominal value of
€0.801 million.
At the Annual General Meeting (‘AGM’) held on 14 July 2017:
• The Company was granted authority to purchase up to 8,907,261 of its own shares (10% of the issued share capital (excluding treasury shares))
with a nominal value of €2.227 million. This authority has not been exercised and will expire on 13 July 2018, the date of the next AGM of
the Company.
• The Directors were given authority to exercise all the powers of the Company to allot shares up to an aggregate amount of €7.42 million,
representing approximately one third of the issued share capital (excluding treasury shares) of the Company. They were also given authority
to allot shares for cash, other than strictly pro-rata to existing shareholdings. This authority was 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 (excluding treasury shares) of
the Company.
In addition, the Directors sought authority to allot additional shares for cash other than strictly pro-rata to existing shareholdings. This proposed
authority was limited to the allotment of shares for cash up to approximately 5% of the issued share capital (excluding treasury shares) and would
only be used in connection with an acquisition or other capital investment which was announced contemporaneously with the allotment, or that
took place in the preceding six-month period and was disclosed in the announcement of the allotment.
•
These authorities have not been exercised and will expire on 13 July 2018, the date of the next AGM of the Company.
At the 2018 AGM:
•
In addition to the authority to buy back shares referred to above, the Directors will seek authority to exercise all the powers of the Company
to allot shares up to an aggregate amount of €7.44 million representing approximately one third of the issued share capital (excluding
treasury shares).
• The Directors will 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 (excluding treasury shares).
116
DCC plc Annual Report and Accounts 2018
Governance •
In addition, the Directors will seek authority to allot additional shares for cash other than strictly pro-rata to existing shareholdings. This proposed
authority is limited to the allotment of shares for cash up to approximately 5% of the issued share capital (excluding treasury shares) and will only
be used in connection with an acquisition or other capital investment which is announced contemporaneously with the allotment, or has taken
place in the preceding six-month period and is disclosed in the announcement of the allotment.
The figure of 10% reflects the Pre-Emption Group 2015 Statement of Principles for the disapplication of pre-emption rights (the ‘Statement
of Principles’). The Directors will have due regard to the Statement of Principles in relation to any exercise of this power and in particular:
• as regards the first 5%, the Directors will take account of the requirement for advance consultation and explanation before making any non-pre-
emptive cash issue pursuant to this resolution which exceeds 7.5% of the Company’s issued share capital in any rolling three year period; and
• as regards the second 5%, the Directors confirm that they intend to use this power only in connection with an acquisition or specified capital
investment (within the meaning of the Statement of Principles from time to time) which is announced contemporaneously with the issue,
or which has taken place in the preceding six month period and is disclosed in the announcement of the issue.
Details of the share capital of the Company are set out in note 4.1 on page 174 and are deemed to form part of this Report.
Principal Risks and Uncertainties
Under Section 327(1)(b) of the Companies Act 2014 and Regulation 5(4)(c)(ii) of the Transparency (Directive 2004/109/EC) Regulations 2007, 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 22.
Directors
The names of the Directors and a short biographical note on each Director appear on pages 74 and 75. In accordance with the UK Corporate
Governance Code, all Directors submit to re-election at each Annual General Meeting. Donal Murphy has a service agreement with the Company since
his appointment as Chief Executive on 14 July 2017 with a notice period of six months. This service contract provides that either he or the Company
could terminate his employment by giving six months’ notice in writing. Fergal O’Dwyer has a letter of appointment which provides for a three month
notice period. Details of the Directors’ interests in the share capital of the Company are set out in the Remuneration Report on pages 92 to 115.
Corporate Governance
The Corporate Governance Statement on pages 78 to 83 sets out the Company’s appliance of the principles and compliance with the provisions of
the UK Corporate Governance Code and the Group’s system of risk management and internal control. The Corporate Governance Statement shall
be treated as forming part of this Report.
DCC plc is fully compliant with the 2016 version of the UK Corporate Governance Code, which applied to the Company for the year ended 31 March 2018.
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 are set out in the Corporate Governance Statement.
General Meetings
The Company’s AGM provides shareholders the opportunity to question the Chairman, the Board and the Chairmen of the Audit, Remuneration and
Nomination and Governance Committees. 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.
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 21 clear days’ notice.
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 on 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, have the right to requisition a general
meeting. A shareholder or a group of shareholders, holding at least 3% of the issued share capital, have 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.
The 2018 AGM will be held at 11.00 a.m. on 13 July 2018 at the InterContinental Hotel, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland.
DCC plc Annual Report and Accounts 2018
117
Supplementary InfoFinancial StatementsGovernanceStrategic Report Report of the Directors (continued)
Memorandum and Articles of Association
The Company’s Memorandum and Articles of Association set 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 SI 277/2007 Transparency (Directive 2004/109/EC) Regulations 2007, the following sections of the Annual Report shall be treated
as forming part of this Report: the Chairman’s Statement on pages 6 to 7, the Chief Executive’s Review on pages 8 to 11, the Operating Reviews on
pages 42 to 67, the Financial Review on pages 23 to 31, the Principal Risks and Uncertainties on pages 19 to 22, the earnings per ordinary share in
note 2.12 on page 151, the Key Performance Indicators on page 12 and the derivative financial instruments in note 3.9 on page 160.
Substantial Holdings
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 2018 and 14 May 2018:
FMR LLC and FIL Limited on behalf of its direct and indirect subsidiaries*
10,011,114
11.22%
9,850,028
11.04%
As at 31 March 2018
As at 14 May 2018
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)
Blackrock*
Allianz*
Capital Group*
Mawer*
Jim Flavin
7,549,934
5,653,443
4,727,645
2,723,830
2,684,000
8.46%
6.34%
5.30%
3.05%
3.01%
7,439,946
6,500,370
4,727,645
2,742,852
2,684,000
8.34%
7.29%
5.30%
3.07%
3.01%
* 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 207 to 210.
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 281 to 285 of the Companies Act, 2014,
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, Leopardstown Road,
Foxrock, Dublin 18, Ireland.
Takeover Regulations
The Company has certain financing 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.
118
DCC plc Annual Report and Accounts 2018
Governance Directors’ Compliance Statement
It is the policy of the Company to comply with its relevant obligations (as defined in the Companies Act 2014). The Directors confirm that there
is a Compliance Policy Statement in place, as defined in section 225(3)(a) of the Companies Act 2014.
The Directors confirm that the arrangements and structures that have been put in place are, in the Directors’ opinion, designed to secure a material
compliance with the Company’s relevant obligations and that these arrangements and structures were reviewed by the Company during the financial year.
As required by section 225(2) of the Companies Act 2014, the Directors acknowledge that they are responsible for the Company’s compliance
with the relevant obligations. In discharging their responsibilities under section 225, the Directors relied on the advice of persons employed by the
Company and of third parties, whom the Directors believe have the requisite knowledge and experience to advise the Company on compliance with
its relevant obligations.
Audit Committee
The Company has an Audit Committee, the members of which are set out on page 88.
Disclosure of Information to the Auditors
Each of the Directors individually confirm that:
•
• That they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information
In so far as they are aware, there is no relevant audit information of which the Company’s auditors are unaware; and
and to establish that the Company’s auditors are aware of such information.
Auditors
The auditors, KPMG, will continue in office in accordance with the provisions of Section 383 of the Companies Act 2014.
As required under Section 381(1) (b) of the Companies Act 2014, a resolution authorising the Directors to determine the remuneration of the
auditors will be proposed at the 2018 AGM.
John Moloney, Donal Murphy
Directors
14 May 2018
DCC plc Annual Report and Accounts 2018
119
Supplementary InfoFinancial StatementsGovernanceStrategic Report Financial
Statements
In this section
121 Statement of Directors’ Responsibilities
122
Independent Auditors’ Report
126 Group Income Statement
127 Group Statement of Comprehensive Income
128 Group Balance Sheet
129 Group Statement of Changes in Equity
130 Group Cash Flow Statement
131 Notes to the Financial Statements
131 Section 1 Basis of Preparation
135 Section 2 Results for the Year
153 Section 3 Assets and Liabilities
174 Section 4 Equity
177 Section 5 Additional Disclosures
199 Company Balance Sheet
200 Company Statement of Changes in Equity
201 Company Cash Flow Statement
202 Section 6 Notes to the Company Financial
Statements
120
DCC plc Annual Report and Accounts 2018
Financial Statements
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements, in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company financial statements each year. Under that law, the Directors are required to
prepare the Group financial statements in accordance with IFRS as adopted by the European Union and have elected to prepare the Parent Company
financial statements in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of Companies Act 2014.
Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the
assets, liabilities and financial position of the Group and Parent Company and of the Group and Parent Company’s profit or loss for that year.
In preparing each of the Group and Parent Company financial statements, the Directors are required to:
• select suitable accounting policies and apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state that the financial statements comply with IFRS as adopted by the European Union, and as regards the Parent Company, as applied in
accordance with the Companies Act 2014; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will
continue in business.
The Directors are also required by the Transparency (Directive 2004/109/EC0) Regulations 2007 and the Transparency Rules of the Central Bank of
Ireland to include a directors’ report containing a fair review of the business and a description of the principal risks and uncertainties facing the Group.
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the assets, liabilities, financial
position and profit or loss of the Parent Company and which enable them to ensure that the financial statements comply with the provision of the
Companies Act 2014. The Directors are also responsible for taking all reasonable steps to ensure such records are kept by its subsidiaries which enable
them to ensure that the financial statements of the Group comply with the provision of the Companies Act 2014. They are also responsible for
safeguarding the assets of the Parent Company and the Group, and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities. The Directors are also responsible for preparing a Directors’ Report that complies with the requirements of the Companies Act 2014.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s and Parent Company’s
website (www.dcc.ie). Legislation in the Republic of Ireland concerning the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
Responsibility Statement as required by the Transparency Directive and UK Corporate Governance Code
Each of the Directors, whose names and functions are listed on pages 74 and 75 of this Annual Report, confirm that, to the best of each person’s
knowledge and belief:
•
the Group financial statements, prepared in accordance with IFRS as adopted by the European Union and the Parent Company financial
statements prepared in accordance with IFRS as adopted by the European Union as applied in accordance with the provisions of Companies Act
2014, give a true and fair view of the assets, liabilities, financial position of the Group and Parent Company at 31 March 2018 and of the profit or
loss of the Group for the year then ended;
the Report of the Directors contained in the Annual Report includes a fair review of the development and performance of the business and the
position of the Group and Parent Company, together with a description of the principal risks and uncertainties that they face; and
the Annual Report and financial statements, taken as a whole, provide the information necessary to assess the Group’s performance, business
model and strategy and is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
•
•
On behalf of the Board
John Moloney
Non-executive Chairman
Donal Murphy
Chief Executive
DCC plc Annual Report and Accounts 2018
121
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Independent Auditors’ Report to the Members of DCC plc
1 Opinion: our opinion is unmodified
We have audited the financial statements of DCC plc ('the Company') for the year ended 31 March 2018 which comprise the Group Income
Statement, the Group Statement of Comprehensive Income, the Group and Parent Company Balance Sheet, the Group and Parent Company
Statement of Changes in Equity, the Group and Parent Cash Flow Statement, and the related notes, including the summary of accounting policies.
The financial reporting framework that has been applied in their preparation is Irish Law and International Financial Reporting Standards (IFRS) as
adopted by the European Union and, as regards the Company financial statements, as applied in accordance with the provisions of the Companies
Act 2014. Our audit was conducted in accordance with International Standards on Auditing (Ireland) ('ISAs (Ireland)').
In our opinion:
•
the Group financial statements give a true and fair view of the assets, liabilities and financial position of the Group as at 31 March 2018 and
of its profit for the year then ended;
the Company statement of financial position gives a true and fair view of the assets, liabilities and financial position of the Company as at
31 March 2018;
the Group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union;
the Company financial statements have been properly prepared in accordance with IFRS as adopted by the European Union as applied in
accordance with the provisions of the Companies Act 2014; and
the Group financial statements and Company financial statements have been properly prepared in accordance with the requirements
of the Companies Act 2014 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
•
•
•
•
Basis for opinion
We conducted our audit in accordance with ISAs (Ireland) and applicable law. Our responsibilities under those standards are further described in
the 'Auditor’s Responsibilities' section of our report. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the Audit Committee.
We were appointed as auditor by the shareholders on 31 July 2015. The period of total uninterrupted engagement is the 3 years ended 31 March
2018. We have fulfilled our ethical responsibilities under, and we remained independent of the Group in accordance with, ethical requirements
applicable in Ireland, including the Ethical Standard issued by the Irish Auditing and Accounting Supervisory Authority ('IAASA') as applied to listed
public interest entities. No non-audit services prohibited by that standard were provided.
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the Group financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:
Valuation of goodwill and intangible assets £1,937 million (2017: £1,423 million)
Refer to notes 5.9 (accounting policy) and 3.2 (financial disclosures)
The key audit matter
How the matter was addressed in our audit
The Group has significant goodwill and intangible
assets arising from acquisitions. There is a risk
that the carrying amounts of goodwill and
intangible assets will be more than the estimated
recoverable amount. The recoverable amount
of goodwill and intangible assets is arrived at by
forecasting and discounting future cash flows to
determine value in use calculations for each Cash
Generating Unit (‘CGU’). These cash flows are
inherently highly judgemental and rely on certain
key assumptions including future trading
performance, future long-term growth rates,
and country specific discount rates.
We considered the key judgements made by the Directors in the cash flow forecasts used in the
determination of the values in use for each CGU. We also considered the manner in which CGU’s
were identified. We assessed the Group’s cash flow forecast models calculations by:
• Checking the mathematical accuracy of the cash flow forecasts;
• Considering the accuracy of management’s cash flow estimates in previous years by
comparing historical forecasts to actual outturns;
• Assessing the appropriateness of the country specific discount rates applied in determining
the value in use of each CGU with the assistance of an in-house valuation specialist;
• Evaluating and challenging the key assumptions used to develop the projected financial
information regarding future profitability and the long-term economic growth rates applied;
• Performing an overall evaluation of the individual CGU discounted cash flow models based on
our knowledge of the Group, our reading of the Group’s Strategic Plan combined with external
data which we considered relevant;
• Comparing the value in use for the Group as a whole to the Group’s market capitalisation;
• Evaluating the sensitivity analysis carried out by management in relation to the key
assumptions used in developing the projections; and
• Reading the description of the impairment testing of goodwill and intangible assets set out
in Note 3.2 to the financial statements.
Our procedures in respect of this risk were performed as planned. We found that the
assumptions applied in management’s cash flow forecast models used in the determination
of value in use were appropriate. We read the disclosures of key assumptions and found them
to be appropriate.
122
DCC plc Annual Report and Accounts 2018
Financial Statements Acquisition accounting on business combinations totalling £692 million (2017: £231 million)
Refer to notes 5.9 (accounting policy) and 5.2 (financial disclosures)
The key audit matter
During the year ended 31 March 2018, the Group completed three significant
acquisitions; the acquisition of Esso Norway at a cost of £241 million, the acquisition
of Retail West at a cost of £147 million and the acquisition of Shell Hong Kong
& Macau at a cost of £114 million.
The year ended 31 March 2018, represents the most acquisitive year historically for
the Group with acquisitions costing a total of £692 million during the year. As such,
acquisition accounting on business combinations is an audit area where we allocate
significant resources in directing the efforts of the engagement team.
This was not identified as a significant audit risk in the prior year, however given the
scale and nature of acquisitions in the current year we have identified specific risks
in respect of these transactions noted below.
How the matter was addressed in our audit
For significant acquisitions completed during the year, our
audit engagement team, supported by our tax and valuation
specialists, challenged the purchase price allocation
adjustments, and the identification and valuation of acquired
intangible assets as such elements involved significant
judgement by management.
Our procedures included the following:
• Considering the appropriateness of the acquisition
accounting applied, including the timing at which control
is deemed to have passed;
• Considering the appropriateness of the fair values ascribed
to assets and liabilities of the acquired business by
management;
Significant judgement has been exercised by management in establishing the initial
estimates of the fair values of the identifiable acquired assets and liabilities together
with the goodwill, intangible assets and deferred tax arising on acquisition in preparing
their purchase price allocation.
• Consideration of the appropriateness of the period over
which identified intangible assets will be amortised; and
• We also considered the adequacy of the related disclosures
in the notes to the financial statements.
Management engaged a specialist valuation expert to assist in the valuation of the
goodwill and intangible assets arising on the Esso Retail Norway and Shell Hong
Kong & Macau acquisitions, in addition to considering the estimated useful lives
of the identified intangible assets.
For acquisitions completed close to year end (including Retail West and TEGA)
management have not identified any intangible assets other than goodwill
and made no fair value adjustments given the timing of completion of these
acquisitions. Under IFRS 3 Business Combinations management have up to
12 months from the date of acquisition to make adjustments to provisional
purchase accounting allocations.
Significant audit resources were allocated to these
procedures, including evaluation of the work done by experts
utilised by management, involvement of our own specialists,
and audit of the opening balance sheets by our KPMG
component teams.
Our audit procedures in respect of this risk were performed
as planned and without exception.
Parent Company key audit matters
Due to the nature of the Parent Company’s activities, there are no key audit matters that we are required to communicate in accordance with
ISAs (Ireland).
3 Our application of materiality and an overview of the scope of our audit
The materiality for the Group financial statements as a whole was set at £13 million (2017: £14 million). This has been calculated as 5% of the Group
profit before taxation from continuing operations of £260 million which we consider to be one of the principal considerations for members of the
Company in assessing the financial performance of the Group. The materiality for the prior year Group financial statements as a whole was set at
£14 million. This amount was based on 5% of the Group profit before taxation and exceptional items. We report to the Audit Committee all corrected
and uncorrected misstatements we identified through our audit with a value in excess of £0.65 million (2017: £0.7 million), in addition to other audit
misstatements below that threshold that we believe warranted reporting on qualitative grounds.
Materiality for the Company financial statements as a whole was set at £11.8 million (2017: £11.4 million), determined with reference to a benchmark
of the Company’s total assets of which it represents 1.25% (2017: 1.5%).
All of the Group’s reporting components, were subjected to audits for Group reporting purposes. The Group audit team instructed component
auditors as to the significant areas to be covered, including the relevant risks detailed above and the information to be reported back. The Group
audit team approved the materiality for components, which ranged from £1.5 million to £5 million, having regard to the mix of size and risk profile
of the Group across the components. The work on all components was performed by component auditors.
The Group audit team visited all significant components in order to assess the audit risk and strategy and work undertaken. Video and telephone
conference meetings were also held with these component auditors and certain others that were not physically visited. At these visits and meetings,
the findings reported to the Group audit team were discussed in more detail, and any further work required by the Group audit team was then
performed by the component auditor.
DCC plc Annual Report and Accounts 2018
123
Supplementary InfoFinancial StatementsGovernanceStrategic Report Independent Auditors’ Report to the Members of DCC plc (continued)
4 We have nothing to report on going concern
We are required to report to you if:
• we have anything material to add or draw attention to in relation to the Directors’ statement on page 18 of the financial statements on the use
of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and Company’s use of
that basis for a period of at least twelve months from the date of approval of the financial statements; or
if the related statement under the Listing Rules is materially inconsistent with our audit knowledge.
•
We have nothing to report in these respects.
5 We have nothing to report on the other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the
financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information
therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Based solely on our work on the other information;
• we have not identified material misstatements in the Directors’ Report;
•
•
in our opinion, the information given in the Directors’ Report is consistent with the financial statements; and
in our opinion, the Directors’ Report has been prepared in accordance with the Companies Act 2014.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in relation to:
•
•
the Principal Risks disclosures describing these risks and explaining how they are being managed and mitigated;
the Directors’ confirmation on page 18 that they have carried out a robust assessment of the principal risks facing the Group, including those that
would threaten its business model, future performance, solvency and liquidity; and
the Directors’ explanation in the Risk Report of how they have assessed the prospects of the Group, over what period they have done so and why
they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
•
Other corporate governance disclosures
We are required to address the following items and report to you in the following circumstances:
• Fair, balanced and understandable: if we have identified material inconsistencies between the knowledge we acquired during our financial
statements audit and the Directors’ statement that they consider that the Annual Report and financial statements taken as a whole is fair,
balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy;
• Report of the Audit Committee: if 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; or
• Statement of compliance with UK Corporate Governance Code: if the Directors’ statement does not properly disclose a departure from provisions
of the UK Corporate Governance Code specified by the Listing Rules for our review.
We have nothing to report in these respects.
In addition as required by the Companies Act 2014, we report, in relation to information given in the Corporate Governance Statement on pages
78 to 83, that:
• based on the work undertaken for our audit, in our opinion, the description of the main features of internal control and risk management systems
in relation to the financial reporting process, and information relating to voting rights and other matters required by the European Communities
(Takeover Bids (Directive 2004/EC)) Regulations 2016 and specified for our consideration, is consistent with the financial statements and has
been prepared in accordance with the Act; and
• based on our knowledge and understanding of the Company and its environment obtained in the course of our audit, we have not identified any
material misstatements in that information.
We also report that, based on work undertaken for our audit, other information required by the Act is contained in the Corporate Governance Statement.
124
DCC plc Annual Report and Accounts 2018
Financial Statements 6 Our opinions on other matters prescribed the Companies Act 2014 are unmodified
We have obtained all the information and explanations which we consider necessary for the purpose of our audit.
In our opinion, the accounting records of the Company were sufficient to permit the financial statements to be readily and properly audited and the
Company’s statement of financial position is in agreement with the accounting records.
7 We have nothing to report on other matters on which we are required to report by exception
The Companies Act 2014 requires us to report to you if, in our opinion, the disclosures of Directors’ remuneration and transactions required by
Sections 305 to 312 of the Act are not made.
The Listing Rules of the UK Listing Authority require us to review:
•
•
the Directors’ statement, set out on page 18, in relation to going concern and longer-term viability; and
the part of the Corporate Governance Statement on pages 78 to 83 relating to the Company’s compliance with the provisions of the UK
Corporate Governance Code specified for our review.
8 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 121, the Directors are responsible for the preparation of the financial statements including
being satisfied that they give a true and fair view, such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error, assessing the Group and Parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an
audit conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud,
other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements. The risk of not detecting a material misstatement resulting from fraud or other
irregularities is higher than for one resulting from error, as they may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control and may involve any area of law and regulation not just those directly affecting the financial statements.
A fuller description of our responsibilities is provided on IAASA’s website at https://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-
a98202dc9c3a/Description_of_auditors_responsiblities_for_audit.pdf
9 The purpose of our audit work and to whom we owe our responsibilities
Our report is made solely to the Company’s members, as a body, in accordance with Section 391 of the Companies Act 2014. Our audit work has
been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for our report, or for the opinions we have formed.
Ruaidhri Gibbons
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Stokes Place
St. Stephen’s Green
Dublin 2
Ireland
14 May 2018
DCC plc Annual Report and Accounts 2018
125
Supplementary InfoFinancial StatementsGovernanceStrategic Report Group Income Statement
For the year ended 31 March 2018
Continuing operations
Revenue
Cost of sales
Gross profit
Administration expenses
Selling and distribution expenses
Other operating income
Other operating expenses
Adjusted operating profit
Amortisation of intangible assets
Operating profit
Finance costs
Finance income
Share of equity accounted investments’ profit after tax
Profit before tax
Income tax expense
2018
Pre
exceptionals
£’000
Exceptionals
(note 2.6)
£’000
Note
Total
£’000
Pre
exceptionals
£’000
2017
Exceptionals
(note 2.6)
£’000
Total
£’000
2.1 14,264,639
(12,857,814)
1,406,825
(384,701)
(652,636)
–
–
–
–
–
14,264,639 12,269,802
– 12,269,802
(12,857,814) (11,006,805)
– (11,006,805)
1,406,825
1,262,997
(384,701)
(323,320)
(652,636)
(605,182)
–
–
–
1,262,997
(323,320)
(605,182)
2.2
2.2
2.1
2.1
2.7
2.7
2.8
28,652
1,156
29,808
28,297
1,879
30,176
(14,740)
(46,269)
(61,009)
(17,787)
(38,176)
(55,963)
383,400
(45,113)
338,287
345,005
(36,297)
308,708
(43,059)
–
(43,059)
(39,130)
–
(39,130)
340,341
(45,113)
295,228
305,875
(36,297)
269,578
(73,156)
37,421
368
–
299
–
(73,156)
(72,910)
–
(72,910)
37,720
40,973
10,101
51,074
368
712
–
712
304,974
(44,814)
260,160
274,650
(26,196)
248,454
2.9
(49,289)
25,407
(23,882)
(44,113)
(1,756)
(45,869)
Profit for the year from continuing operations
255,685
(19,407)
236,278
230,537
(27,952)
202,585
Profit for the year from discontinued operations
2.10
801
Profit after tax for the financial year
256,486
29,842
10,435
30,643
15,160
–
15,160
266,921
245,697
(27,952)
217,745
Profit attributable to:
Owners of the Parent Company
Non-controlling interests
Earnings per ordinary share
Basic earnings per share
Diluted earnings per share
Basic adjusted earnings per share
Diluted adjusted earnings per share
Earnings per ordinary share – continuing operations
Basic earnings per share
Diluted earnings per share
Basic adjusted earnings per share
Diluted adjusted earnings per share
2.12
2.12
2.12
2.12
2.12
2.12
2.12
2.12
250,420
11,404
261,824
241,011
(24,814)
216,197
6,066
(969)
5,097
4,686
(3,138)
1,548
256,486
10,435
266,921
245,697
(27,952)
217,745
293.83p
292.79p
318.35p
317.21p
259.44p
258.52p
317.45p
316.31p
243.64p
242.00p
303.68p
301.63p
226.56p
225.04p
286.59p
284.66p
126
DCC plc Annual Report and Accounts 2018
Financial Statements Group Statement of Comprehensive Income
For the year ended 31 March 2018
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
Movements 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 Company
Non-controlling interests
Attributable to:
Continuing operations
Discontinued operations
Note
2018
£’000
2017
£’000
266,921
217,745
3.12
3.13
3.12
682
(4,548)
(3,030)
433
(6,463)
5,215
(665)
4,550
37,084
–
(6,803)
1,334
31,615
(3,056)
413
(2,643)
(1,913)
265,008
28,972
246,717
259,336
242,735
5,672
3,982
265,008
246,717
234,365
30,643
265,008
230,199
16,518
246,717
DCC plc Annual Report and Accounts 2018
127
Supplementary InfoFinancial StatementsGovernanceStrategic Report Group Balance Sheet
As at 31 March 2018
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets and goodwill
Equity accounted investments
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 Company
Share capital
Share premium
Share based payment reserve
Cash flow hedge reserve
Foreign currency translation reserve
Other reserves
Retained earnings
Equity attributable to owners of the Parent Company
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred income tax liabilities
Post employment benefit obligations
Provisions for liabilities
Acquisition related liabilities
Government grants
Current liabilities
Trade and other payables
Current income tax liabilities
Borrowings
Derivative financial instruments
Provisions for liabilities
Acquisition related liabilities
Liabilities associated with assets classified as held for sale
Total liabilities
Total equity and liabilities
John Moloney, Donal Murphy, Directors
128
DCC plc Annual Report and Accounts 2018
Note
2018
£’000
2017
£’000
3.1
3.2
3.3
3.12
3.9
3.4
3.5
3.9
3.8
4.1
4.1
4.2
4.2
4.2
4.2
4.3
4.4
3.10
3.9
3.12
3.13
3.15
3.14
3.16
3.6
3.10
3.9
3.15
3.14
933,038
1,936,962
24,461
26,154
103,085
3,023,700
530,473
1,426,217
8,050
1,038,827
3,003,567
–
3,003,567
6,027,267
15,455
280,533
22,883
(16,178)
101,096
932
1,237,937
1,642,658
35,259
750,020
1,422,572
24,938
22,619
273,767
2,493,916
456,395
1,222,597
18,233
1,048,064
2,745,289
193,170
2,938,459
5,432,375
15,455
277,211
18,146
(13,581)
105,537
932
1,074,434
1,478,134
29,587
1,677,917
1,507,721
1,598,521
10,732
152,552
(286)
278,890
71,454
237
2,112,100
2,063,260
19,769
74,897
8,474
44,451
26,399
2,237,250
–
2,237,250
4,349,350
6,027,267
1,319,967
506
155,297
29
255,650
66,617
261
1,798,327
1,820,517
25,051
148,445
5,894
31,022
28,300
2,059,229
67,098
2,126,327
3,924,654
5,432,375
Financial Statements Group Statement of Changes in Equity
For the year ended 31 March 2018
Attributable to owners of the Parent Company
Share
capital
(note 4.1)
£’000
Share
premium
(note 4.1)
£’000
Retained
earnings
(note 4.3)
£’000
Other
reserves
(note 4.2)
£’000
Non-
controlling
interests
(note 4.4)
£’000
Total
£’000
Total
equity
£’000
At 1 April 2017
15,455
277,211 1,074,434
111,034
1,478,134
29,587
1,507,721
Profit for the financial year
Other comprehensive income:
Currency translation:
– arising in the year
– recycled to the Income Statement on disposal
Group defined benefit pension obligations:
– remeasurements
– movement in deferred tax asset
Movements 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
At 31 March 2018
For the year ended 31 March 2017
–
–
–
–
–
–
–
–
–
–
–
–
261,824
–
261,824
5,097
266,921
–
–
–
–
–
–
–
–
–
5,215
(665)
–
–
107
107
575
(4,548)
(4,548)
–
–
5,215
(665)
(3,030)
(3,030)
433
433
–
–
–
–
–
682
(4,548)
5,215
(665)
(3,030)
433
266,374
(7,038)
259,336
5,672
265,008
3,322
–
–
–
–
–
4,737
3,322
4,737
(102,871)
–
(102,871)
–
–
–
3,322
4,737
(102,871)
15,455
280,533 1,237,937
108,733
1,642,658
35,259
1,677,917
Attributable to owners of the Parent Company
Share
capital
(note 4.1)
£’000
Share
premium
(note 4.1)
£’000
Retained
earnings
(note 4.3)
£’000
Other
reserves
(note 4.2)
£’000
Non-
controlling
interests
(note 4.4)
£’000
Total
£’000
Total
equity
£’000
At 1 April 2016
15,455
277,211
948,316
78,661
1,319,643
30,833
1,350,476
Profit for the financial year
Other comprehensive income:
Currency translation
Group defined benefit pension obligations:
– remeasurements
– movement in deferred tax asset
Movements 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
At 31 March 2017
–
–
–
–
–
–
–
–
–
–
–
216,197
–
216,197
1,548
217,745
–
–
–
–
–
–
–
–
–
–
34,650
34,650
2,434
37,084
(3,056)
413
–
–
(3,056)
413
–
–
(6,803)
(6,803)
1,334
1,334
–
–
–
–
(3,056)
413
(6,803)
1,334
213,554
29,181
242,735
3,982
246,717
2,600
–
–
3,192
2,600
3,192
–
–
2,600
3,192
(90,036)
–
(90,036)
(5,228)
(95,264)
15,455
277,211 1,074,434
111,034
1,478,134
29,587
1,507,721
DCC plc Annual Report and Accounts 2018
129
Supplementary InfoFinancial StatementsGovernanceStrategic Report Group Cash Flow Statement
For the year ended 31 March 2018
Operating activities
Cash generated from operations before exceptionals
Exceptionals
Cash generated from operations
Interest paid
Income tax paid
Net cash flow from operating activities
Investing activities
Inflows:
Proceeds from disposal of property, plant and equipment
Dividends received from equity accounted investments
Disposals of subsidiaries
Interest received
Outflows:
Purchase of property, plant and equipment
Acquisition of subsidiaries
Payment of accrued acquisition related liabilities
Net cash flow from investing activities
Financing activities
Inflows:
Proceeds from issue of shares
Net cash inflow on derivative financial instruments
Increase in interest-bearing loans and borrowings
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 Company
Dividends paid to non-controlling interests
Net cash flow 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
Cash and cash equivalents consist of:
Cash and short-term bank deposits
Overdrafts
Cash and short-term deposits attributable to assets held for sale
130
DCC plc Annual Report and Accounts 2018
Note
5.3
2.10
5.2
3.14
2018
£’000
2017
£’000
473,434
(12,602)
460,832
(69,900)
(65,437)
325,495
7,617
1,980
160,063
37,399
207,059
546,870
(31,269)
515,601
(70,108)
(62,180)
383,313
12,315
125
–
40,966
53,406
(152,997)
(664,109)
(143,698)
(203,327)
(26,910)
(59,069)
(844,016)
(406,094)
(636,957)
(352,688)
3,322
11,275
458,593
766
2,600
14,212
–
–
473,956
16,812
(58,130)
(108,140)
(4)
2.11
(102,871)
–
(177)
(90,036)
(5,228)
(161,005)
(203,581)
312,951
(186,769)
1,489
(156,144)
(10,018)
38,929
972,822
1,090,037
3.8
964,293
972,822
3.8
3.8
3.8
1,038,827
1,048,064
(74,534)
–
(88,041)
12,799
964,293
972,822
Financial Statements Notes to the Financial Statements
Notes to the financial statements provide additional information required by statute, accounting standards or Listing Rules. For clarity,
each note begins with a simple introduction outlining the purpose of the note.
Section 1 Basis of Preparation
1.1 Statement of Compliance
International Financial Reporting Standards ('IFRS') require an entity whose financial statements comply with IFRS
to make an explicit and unreserved statement of such compliance in the notes to the financial statements.
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 Act, 2014 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 Parent Company has availed of the exemption in Section 304(2) of the Companies
Act, 2014 not to present its individual Income Statement and related notes that form part of the approved Parent Company financial statements.
The Parent Company has also availed of the exemption from filing its individual Income Statement with the Registrar of Companies as permitted
by Section 304(2) of the Companies Act, 2014.
The Going Concern Statement on page 18 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.
1.2 Basis of Preparation
This section includes information on new accounting standards, amendments and interpretations, whether they
are effective for the current year or in later years, and how they are expected to impact the financial position and
performance of the Group.
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 2018 are set out in note 5.9. These
policies have been applied consistently by the Group's subsidiaries and equity accounted investments for all periods presented in these consolidated
financial statements.
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 detailed in note 1.4.
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:
Amendments to IAS 7 Statement of Cash Flows – Disclosure Initiative:
These amendments are intended to improve the information provided to users of financial statements regarding the entity's financing activities.
This amendment, which was EU endorsed in November 2017, did not have a significant impact on the Group's consolidated financial statements; and
Amendments to IAS 12 Income Taxes – Recognition of Deferred Tax Assets for Unrealised Losses:
These amendments clarify, inter alia, that unrealised losses on debt instruments measured at fair value (and measured at cost for tax purposes) give
rise to a deductible temporary difference regardless of whether the instrument is recovered through sale or by holding it to maturity or whether it is
probable that the issuer will pay all contractual cash flows. Entities are therefore required to recognise deferred taxes for temporary differences from
unrealised losses of debt instruments measured at fair value if all other recognition criteria for deferred taxes are met. This amendment, which was
EU endorsed in November 2017, did not have a significant impact on the Group's consolidated financial statements.
There are 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.
DCC plc Annual Report and Accounts 2018
131
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Notes to the Financial Statements (continued)
1.2 Basis of Preparation continued
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 9 Financial Instruments (effective date: DCC financial year beginning 1 April 2018):
This standard is designed to replace IAS 39 Financial Instruments: Recognition and Measurement and has been completed in a number of phases with
the final version issued by the IASB in July 2014 and endorsed by the EU in November 2016. The Standard includes requirements for recognition and
measurement, classification, and de-recognition of financial instruments, a new expected credit loss model for calculating impairment on financial
assets and new rules for hedge accounting.
The new impairment model requires the recognition of impairment provisions based on expected credit losses rather than only incurred credit losses
as is the case under IAS 39. It applies to financial assets classified at amortised cost, contract assets under IFRS 15 Revenue from Contracts with
Customers, lease receivables, loan commitments and certain financial guarantee contracts. Based on the assessment undertaken by the Group to date,
while the new model may result in an earlier recognition of credit losses, the Group expects no material impact on the consolidated financial statements.
The new hedge accounting rules are intended to align the accounting for hedging instruments more closely with the Group's risk management
practises. As a general rule, more hedge relationships may be eligible for hedge accounting, as the standard introduces a more principles-based
approach. The Group has made the accounting policy choice allowed under IFRS 9 to continue to apply the hedge accounting requirements of IAS 39
until the amended standard resulting from an IASB project on macro hedge accounting becomes effective. Accordingly, there will be no impact on
the accounting for hedging relationships. The new standard also introduces expanded disclosure requirements and changes in presentation. The
Group will apply IFRS 9 from its effective date.
IFRS 15 Revenue from Contracts with Customers (effective date: DCC financial year beginning 1 April 2018):
This standard will replace IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. IFRS 15 was endorsed by the EU in September
2016. The standard establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and
uncertainty of revenue and cash flows arising from contracts with customers. It specifies how and when revenue should be recognised as well as
requiring enhanced disclosures. Revenue is recognised when an identified performance obligation has been met and the customer can direct the
use of, and obtain substantially all the remaining benefits from, a good or service as a result of obtaining control of that good or service.
The Group continues to perform a detailed analysis of the impact of IFRS 15. This analysis includes a focus on principal versus agent considerations
and examining whether any revenue might be deemed to be more appropriately recorded on an agency or net basis, rather than on a gross basis.
In the Group's capacity as a reseller of fuel through the use of fuel cards, it has been established that the Group's fuel card business is deemed to be
acting as an agent under the new principles of IFRS 15. Applying the principles of the new standard to the Group's results for the financial year ended
31 March 2018 would have resulted in a reduction in revenues of approximately £1 billion with a corresponding decrease in cost of sales. Gross profit
would remain unchanged. The Group will apply IFRS 15 from its effective date; and
IFRS 16 Leases (effective date: DCC financial year beginning 1 April 2019):
This standard will replace IAS 17 Leases. IFRS 16 was endorsed by the EU in October 2017. The changes under IFRS 16 are significant and will
predominantly affect lessees, the accounting for which is substantially reformed. The lessor accounting requirements contained in IFRS 16's
predecessor, IAS 17, will remain largely unchanged. The main impact on lessees is that almost all leases will be recognised on the balance sheet as
the distinction between operating and finance leases is removed for lessees. Under IFRS 16, an asset (the right to use the leased item) and a financial
liability to pay rentals are recognised. The only exemptions are short-term and low-value leases. The standard introduces new estimates and
judgemental thresholds that affect the identification, classification and measurement of lease transactions. More extensive disclosures, both
qualitative and quantitative, are also required.
At transition date, the Group will calculate the lease commitments outstanding at that date and apply appropriate discount rates to calculate the
present value of the lease commitment which will be recognised as a liability and a right of use asset on the Group's Balance Sheet. In the Income
Statement, the Group currently recognises operating lease rentals in operating expenses. Under the new standard, a right of use asset will be
capitalised and depreciated over the term of the lease with an associated finance cost applied annually to the lease liability.
As detailed in note 5.4, the Group's future minimum rentals payable under non-cancellable operating leases at 31 March 2018 amounted to
£344.979 million and the charge recognised on continuing operations in the Income Statement for the year ended 31 March 2018 amounted to
£84.771 million. These amounts provide an indication of the scale of leases held at 31 March 2018 but should not be used as a proxy for the impact
of IFRS 16 as a number of factors impact the calculation such as the discount rate, the expected term of leases including renewal options and
exemptions for short-term leases and low-value leases.
The Group continues to perform a full review of all agreements to assess whether any additional contracts will now become a lease under IFRS 16's
new definition in addition to determining which optional accounting simplifications to apply and assessing the additional disclosures that will be
required. The new standard offers options on transition; either full retrospective application or modified retrospective application (which means
comparatives do not need to be restated). At this stage the Group expects to adopt the modified retrospective approach. In order to assist with
meeting the requirements of the new standard, the Group has selected a lease accounting software solution which is in the process of being
implemented across the Group.
The Group will apply IFRS 16 from its effective date.
Other changes to IFRS have been issued but are not yet effective for the Group. However, they are either not expected to have a material effect
on the consolidated financial statements or they are not currently relevant for the Group.
132
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 123456 1.3 Basis of Consolidation
This section details how the Group accounts for the different types of interests it has in subsidiaries and equity
accounted investments.
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group has power
over its relevant activities, is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity.
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.
Equity accounted investments
The Group's interests in equity accounted investments comprise interests in associates and joint ventures. Associates are those entities in which the
Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which
the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for
its liabilities. Interests in associates and joint ventures are accounted for using the equity method. They are initially recognised at cost, which includes
transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group's share of the profit or loss and other
comprehensive income of the equity accounted investments, until the date on which significant influence or joint control ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised
gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the
investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
1.4 Critical Accounting Estimates and Judgements
This section sets out the key areas of judgement and estimation that management has identified as having
a potentially material impact on the Group's consolidated financial statements.
The Group's main accounting policies affecting its results of operations and financial condition are set out in note 5.9. 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 £1,436.6 million at 31 March 2018. 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 3.2.
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.
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.
DCC plc Annual Report and Accounts 2018
133
Supplementary InfoFinancial StatementsGovernanceStrategic Report
1.4 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 residual values 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.
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 £89.4 million at 31 March 2018. 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. At 31 March 2018 the Group has plan assets totalling £89.7 million. 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 3.13.
Cylinder and tank deposits provisions
An obligation arises in DCC LPG's operations from the receipt of deposit fees paid by customers for LPG cylinders and tanks. On receipt of a deposit
the Group recognises a liability equal to the deposit received. This deposit will subsequently be refunded at an amount equal to the original deposit
on return of the cylinder or tank together with the original deposit receipt. The majority of this obligation will unwind over a 25-year timeframe but the
exact timing and amount of ultimate settlement of this provision is not certain. Management judgement is used to determine the provisions required and is
based on a broad range of information and prior experience.
Environmental and remediation provisions
This provision relates to obligations governing site remediation and improvement costs to be incurred in compliance with environmental
regulations together with the costs associated with removing LPG tanks from customer sites. The majority of the obligations will unwind over a
30-year timeframe but the exact timing and amount of ultimate settlement of these provisions is not certain. Management judgement is involved in
evaluating currently available facts based on a broad range of information and prior experience. Inherent uncertainties exist in such evaluations which
are outside of management's control primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability
together with the protracted nature of these liabilities. The liabilities provided in the financial statements reflect the information available to
management at the time of determination of the liability and are reassessed at each reporting date.
134
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 213456Notes to the Financial Statements (continued) Section 2 Results for the Year
2.1 Segment Information
The Group is organised into four operating segments. This section provides information on the financial performance
for the year on both a segmental and geographic basis.
Segmental analysis
DCC is a leading international sales, marketing and 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. Donal Murphy, Chief Executive and his executive management team.
As noted in the Group's Annual Report for the year ended 31 March 2017, DCC is presenting DCC LPG and DCC Retail & Oil as separate reportable
segments from 1 April 2017, in line with the revised management and organisational structures of the businesses. Previously, these two segments
comprised the Group's former DCC Energy segment. Following these changes in the composition of operating segments, segmental reporting has
been revised and the comparative disclosures have been restated as required under IFRS 8.
The Group is organised into four operating segments: DCC LPG, DCC Retail & Oil, DCC Healthcare and DCC Technology.
DCC LPG is a leading liquefied petroleum gas ('LPG') sales and marketing business with operations in Europe, Asia and the US with a developing
business in the retailing of natural gas and electricity;
DCC Retail & Oil is a leader in the sales, marketing and retailing of transport and commercial fuels, heating oils and related products and services in Europe;
DCC Healthcare is a leading healthcare business, providing products and services to healthcare providers and health and beauty brand owners; and
DCC Technology is a leading route-to-market and supply chain partner for global technology brands.
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 ('adjusted operating profit'). 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.
Intersegment revenue is not material and thus not subject to separate disclosure.
DCC plc Annual Report and Accounts 2018
135
Supplementary InfoFinancial StatementsGovernanceStrategic Report 2.1 Segment Information continued
The segment results for the year ended 31 March 2018 are as follows:
Income Statement items
Continuing operations
Segment revenue
Adjusted operating profit
Amortisation of intangible assets
Net operating exceptionals (note 2.6)
Operating profit
Finance costs
Finance income
Share of equity accounted investments΄ profit after tax
Profit before income tax
Income tax expense
Profit for the year (continuing operations)
Continuing operations
Segment revenue
Adjusted operating profit
Amortisation of intangible assets
Net operating exceptionals (note 2.6)
Operating profit
Finance costs
Finance income
Share of equity accounted investments' profit after tax
Profit before income tax
Income tax expense
Profit for the year (continuing operations)
Year ended 31 March 2018
DCC
LPG
£'000
DCC
Retail & Oil
£'000
DCC
Healthcare
£'000
DCC
Technology
£'000
Total
£'000
1,403,779
9,262,836
514,564
3,083,460
14,264,639
167,485
(21,312)
113,757
(8,983)
(8,127)
(21,788)
54,318
(7,198)
(3,034)
47,840
(5,566)
(12,164)
383,400
(43,059)
(45,113)
138,046
82,986
44,086
30,110
295,228
(73,156)
37,720
368
260,160
(23,882)
236,278
Year ended 31 March 2017 (restated)
DCC
LPG
£'000
DCC
Retail & Oil
£'000
DCC
Healthcare
£'000
DCC
Technology
£'000
Total
£'000
1,073,212
8,000,923
506,562
2,689,105
12,269,802
160,462
(18,277)
94,479
(9,962)
(6,854)
(13,633)
48,944
(7,258)
(2,695)
41,120
(3,633)
(13,115)
345,005
(39,130)
(36,297)
135,331
70,884
38,991
24,372
269,578
(72,910)
51,074
712
248,454
(45,869)
202,585
136
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 213456Notes to the Financial Statements (continued) 2.1 Segment Information continued
Balance Sheet items
As at 31 March 2018
DCC
LPG
£'000
DCC
Retail & Oil
£'000
DCC
Healthcare
£'000
DCC
Technology
£'000
Total
£'000
Segment assets
1,708,598
1,677,527
453,873
986,692
4,826,690
Reconciliation to total assets as reported in the Group Balance Sheet:
Equity accounted investments
Derivative financial instruments (current and non-current)
Deferred income tax assets
Cash and cash equivalents
Total assets as reported in the Group Balance Sheet
24,461
111,135
26,154
1,038,827
6,027,267
Segment liabilities
598,979
1,034,579
105,017
647,731
2,386,306
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)
Acquisition related liabilities (current and non-current)
Government grants (current and non-current)
Total liabilities as reported in the Group Balance Sheet
DCC
LPG
£'000
1,673,418
19,206
172,321
97,853
246
4,349,350
Total
£'000
As at 31 March 2017 (restated)
DCC
Retail & Oil
£'000
DCC
Healthcare
£'000
DCC
Technology
£'000
Segment assets
1,202,913
1,341,568
404,029
903,074
3,851,584
Reconciliation to total assets as reported in the Group Balance Sheet:
Equity accounted investments
Derivative financial instruments (current and non-current)
Deferred income tax assets
Cash and cash equivalents
Assets classified as held for sale
Total assets as reported in the Group Balance Sheet
24,938
292,000
22,619
1,048,064
193,170
5,432,375
Segment liabilities
459,810
936,521
109,234
601,644
2,107,209
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)
Acquisition related liabilities (current and non-current)
Government grants (current and non-current)
Liabilities associated with assets classified as held for sale
Total liabilities as reported in the Group Balance Sheet
1,468,412
6,400
180,348
94,917
270
67,098
3,924,654
DCC plc Annual Report and Accounts 2018
137
Supplementary InfoFinancial StatementsGovernanceStrategic Report 2.1 Segment Information continued
Other segment information
DCC
LPG
£'000
DCC
Retail & Oil
£'000
Year ended 31 March 2018
DCC
Technology
£'000
DCC
Healthcare
£'000
Discontinued
operations
£'000
Total
£'000
Capital expenditure – additions (note 3.1)
Capital expenditure – business combinations (note 3.1)
Depreciation (note 3.1)
70,261
65,041
48,860
55,298
69,762
30,732
Total consideration – business combinations (note 5.2)
364,815
250,354
Intangible assets acquired – business combinations (note 3.2)
306,146
181,676
6,077
7,237
7,214
43,724
32,128
25,535
392
6,916
32,897
29,005
24
157,195
–
–
–
–
142,432
93,722
691,790
548,955
Year ended 31 March 2017 (restated)
DCC
LPG
£'000
DCC
Retail & Oil
£'000
DCC
Healthcare
£'000
DCC
Technology
£'000
Discontinued
operations
£'000
Total
£'000
Capital expenditure – additions (note 3.1)
Capital expenditure – business combinations (note 3.1)
Depreciation (note 3.1)
51,995
(1,661)
44,169
Total consideration – business combinations (note 5.2)
102,774
Intangible assets acquired – business combinations (note 3.2)
95,556
41,533
9,256
27,679
33,424
16,804
7,799
37,749
7,851
146,927
50
6,686
28,396
29,082
620
5,613
66,252
44,246
–
7,868
–
–
8,265
92,015
230,846
185,688
Geographical analysis
The Group has a presence in 15 countries worldwide. The following represents a geographical analysis of revenue and non-current assets 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. Revenue from continuing operations is derived almost entirely from the sale of goods and is disclosed based on the location
of the entity selling the goods. The analysis of non-current assets is based on the location of the assets. There are no material dependencies or
concentrations on individual customers which would warrant disclosure under IFRS 8.
Republic of Ireland (country of domicile)
United Kingdom
France
Other
Revenue
2018
£'000
2017
£'000
Non-current assets*
2018
£'000
2017
£'000
927,133
759,439
129,050
7,741,143
7,239,193
1,050,804
2,712,240
2,402,290
2,884,123
1,868,880
882,276
832,331
123,348
985,717
869,895
218,570
14,264,639
12,269,802
2,894,461
2,197,530
* Non-current assets comprise intangible assets, property, plant and equipment and equity accounted investments.
138
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 213456Notes to the Financial Statements (continued) 2.2 Other Operating Income/Expenses
This note provides an analysis of the amounts included in other operating income and expenses presented in the
Group Income Statement.
Other operating income and expenses 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
Total other operating income
Other operating expenses
Expensing of employee share options and awards (note 2.5)
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
Total other operating expenses
2018
£'000
2017
£'000
548
2,312
6,471
3,488
10,032
5,801
28,652
1,156
29,808
(4,737)
(548)
(2,690)
(6,765)
(14,740)
(46,269)
(61,009)
1,659
2,424
4,254
3,177
6,813
9,970
28,297
1,879
30,176
(3,192)
(1,659)
(2,051)
(10,885)
(17,787)
(38,176)
(55,963)
DCC plc Annual Report and Accounts 2018
139
Supplementary InfoFinancial StatementsGovernanceStrategic Report 2.3 Group Profit for the Year
The Group profit for the year includes some key amounts which are presented separately below.
Group profit for the year has been arrived at after charging/(crediting) the following amounts which include amounts relating to discontinued operations:
Depreciation (note 3.1)
Amortisation of intangible assets (note 3.2)
Impairment of property, plant and equipment (note 3.1)
Profit on sale of property, plant and equipment
Amortisation of government grants (note 3.16)
Foreign exchange loss/(gain)
Operating lease rentals:
– land and buildings
– plant and machinery
– motor vehicles
Continuing
operations
2018
£'000
Discontinued
operations
2018
£'000
Total
2018
£'000
Continuing
operations
2017
£'000
Discontinued
operations
2017
£'000
93,722
43,059
3,735
(7,518)
(24)
1,264
71,712
1,584
11,475
84,771
–
–
–
(14)
(12)
–
85
292
288
665
93,722
43,059
3,735
(7,532)
(36)
1,264
71,797
1,876
11,763
85,436
84,206
39,130
1,164
(58)
(169)
(663)
33,946
946
12,792
47,684
7,809
38
–
(115)
(66)
(2)
512
1,753
1,726
3,991
Total
2017
£'000
92,015
39,168
1,164
(173)
(235)
(665)
34,458
2,699
14,518
51,675
During the year the Group obtained the following services from the Group's auditors (KPMG) which include amounts relating to discontinued operations:
2018
£'000
2017
£'000
1,192
20
1,212
1,049
22
1,071
1,000
189
1,189
1,229
68
1,297
KPMG Ireland (statutory auditor):
Audit fees
Tax compliance and advisory services
Other KPMG network firms:
Audit fees
Tax compliance and advisory services
140
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 213456Notes to the Financial Statements (continued) 2.4 Employment
This section provides an analysis of the average number of employees in the Group by segment together with their
related payroll expense for the year. Further information on the compensation of key management personnel is
included in note 5.6, Related Party Transactions.
The average weekly number of persons (including executive Directors) employed by the Group in continuing and discontinued operations during
the year, analysed by class of business, was:
DCC LPG
DCC Retail & Oil
DCC Healthcare
DCC Technology
Continuing operations
Discontinued operations (DCC Environmental)
The employee benefit expense (excluding termination payments – note 2.6) for the above were:
Wages and salaries
Social welfare costs
Share based payment expense (note 2.5)
Pension costs – defined contribution plans
Pension costs – defined benefit plans (note 3.13)
The employee benefit expense is analysed as:
Continuing operations
Discontinued operations
2018
Number
1,944
3,569
2,054
2,677
10,244
186
10,430
Restated
2017
Number
1,844
3,540
2,023
2,343
9,750
1,098
10,848
2018
£'000
2017
£'000
385,989
393,132
56,871
4,737
14,055
56,109
3,192
13,716
(303)
(118)
461,349
466,031
455,494
5,855
461,349
427,323
38,708
466,031
Directors' emoluments (which are included in operating costs) and interests are presented in the Remuneration Report on pages 92 to 115.
Details of the compensation of key management personnel for the purposes of the disclosure requirements under IAS 24 are provided in note 5.6.
DCC plc Annual Report and Accounts 2018
141
Supplementary InfoFinancial StatementsGovernanceStrategic Report 2.5 Employee Share Options and Awards
Share options and awards are used to incentivise Directors and employees of the Group. A charge is recognised over
the vesting period in the Consolidated Income Statement to record the cost of these share options and awards,
based on the fair value of the share option/award at the grant date.
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 £4.737 million (2017: £3.192 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.
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:
Date of grant
DCC plc Long Term Incentive Plan 2009
12 November 2013
12 November 2014
17 November 2015
10 February 2017
10 November 2017
Total expense
Grant
price
Minimum
duration of
vesting period
Number of
share awards/
options
granted
Weighted
average fair
value
Expense in
Income Statement
2018
£'000
2017
£'000
£28.54
£34.56
£57.35
£67.75
£70.95
3 years
5 years
5 years
5 years
5 years
153,430
192,407
131,455
137,269
128,451
£14.42
£26.96
£49.56
£54.17
£56.52
–
1,108
1,581
1,564
484
4,737
467
1,098
1,503
124
–
3,192
Share options and awards
DCC plc Long Term Incentive Plan 2009
At 31 March 2018, under the DCC plc Long Term Incentive Plan 2009, Group employees hold awards to subscribe for 719,170 ordinary shares.
The general terms of the DCC plc Long Term Incentive Plan 2009 are set out in the Remuneration Report on pages 97 and 98.
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:
2018
Number of
share awards
2017
Number of
share awards
825,519
128,451
822,442
137,269
(232,416)
(134,192)
(2,384)
–
719,170
825,519
At 1 April
Granted
Exercised
Expired
At 31 March
142
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 213456Notes to the Financial Statements (continued) 2.5 Employee Share Options and Awards continued
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 £71.83 (2017: £65.59). The share awards outstanding at the year end have a weighted average remaining contractual life of 4.4 years
(2017: 4.1 years).
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 2018
Granted during the year ended 31 March 2017
£56.52
£54.17
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
2018
0.78
1.7
22.0
6.0
2017
0.59
1.6
23.0
6.0
£70.95
£67.75
The expected volatility is based on historic volatility over the past 3 years. The expected life is the average expected period to exercise. The risk free
rate of return is the yield on government bonds of a term consistent with the assumed option life.
Analysis of closing balance:
Date of grant
Date of expiry
15 November 2010
15 November 2011
12 November 2012
12 November 2013
12 November 2014
17 November 2015
10 February 2017
10 November 2017
Total outstanding at 31 March
Total exercisable at 31 March
15 November 2017
15 November 2018
12 November 2019
12 November 2020
12 November 2021
17 November 2022
10 February 2024
10 November 2024
2018
Number of
share awards
2017
Number of
share awards
–
35,922
71,501
57,999
156,573
131,455
137,269
128,451
719,170
165,422
22,246
81,359
129,017
132,078
192,095
131,455
137,269
–
825,519
364,700
DCC plc Annual Report and Accounts 2018
143
Supplementary InfoFinancial StatementsGovernanceStrategic Report 2.5 Employee Share Options and Awards continued
DCC plc 1998 Employee Share Option Scheme
At 31 March 2018, under the DCC plc 1998 Employee Share Option Scheme, Group employees hold basic tier options to subscribe for 55,000
ordinary shares.
The general terms of the DCC plc 1998 Employee Share Option Scheme are set out in the Remuneration Report on page 111.
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 grant date 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.
A summary of activity under the DCC plc 1998 Employee Share Option Scheme over the year is as follows:
At 1 April
Exercised
At 31 March
2018
2017
Average
exercise price
in € per share
19.17
20.30
15.68
Options
225,000
(170,000)
55,000
Average
exercise price
in € per share
19.22
19.29
19.17
Options
380,750
(155,750)
225,000
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 £74.42 (2017: £65.87). The share options outstanding at the year end have a weighted average remaining contractual life
of 0.1 years (2017: 0.8 years).
Analysis of closing balance:
Date of grant
23 July 2007
20 May 2008
Total outstanding and exercisable at 31 March
Date of expiry
Exercise price
per share
Options
Exercise price
per share
2018
2017
23 July 2017
20 May 2018
–
€15.68
–
55,000
55,000
€23.35
€15.68
Options
102,500
122,500
225,000
144
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 213456Notes to the Financial Statements (continued) 2.6 Exceptionals
Exceptional items are those items which, in the judgement of the Directors, need to be disclosed separately by virtue
of their scale and nature. These exceptional items, detailed below, could distort the understanding of our underlying
performance for the year and comparability between periods and are therefore presented separately.
Restructuring costs
Acquisition and related costs
Impairment of property, plant and equipment
Adjustments to contingent acquisition consideration
Other operating exceptional items
Net operating exceptional items
Mark to market of swaps and related debt (note 2.7)
Net exceptional items before taxation
Deferred tax
Net exceptional items after taxation (continuing operations)
Profit on disposal of discontinued operations (note 2.10)
Net exceptional items after taxation
Non-controlling interest share of net exceptional items after taxation
Net exceptional items attributable to owners of the Parent Company
2018
£'000
2017
£'000
(29,419)
(12,789)
(3,735)
477
353
(45,113)
299
(44,814)
25,407
(19,407)
29,842
10,435
969
(19,345)
(10,308)
(1,164)
(5,114)
(366)
(36,297)
10,101
(26,196)
(1,756)
(27,952)
–
(27,952)
3,138
11,404
(24,814)
The profit on disposal of discontinued operations of £29.842 million relates to the gain recorded on the profitable sale of DCC's environmental
division, which completed on 31 May 2017.
Acquisition and related costs include the professional fees and tax costs (such as stamp duty) relating to the evaluation and completion of acquisition
opportunities and amounted to £12.789 million.
Restructuring costs amounted to £29.419 million and principally reflect the costs associated with the Group's focus on increasing the efficiency
of its operating infrastructure and sales platforms. The majority of the charge relates to the Retail & Oil division where a large project to bring greater
efficiency and reduced capital expenditure over time to the UK business' nationwide depot network infrastructure is underway and the project will
result in a material reduction in the number of depot locations. The Group incurred a related impairment charge on property, plant and equipment
of £3.735 million on this project. An element of the overall charge also relates to the integration and restructuring costs associated with the prior year
acquisition of Dansk Fuels in Denmark.
The other material element of the restructuring charge relates to the ongoing optimisation of DCC Technology's logistics and related infrastructure.
In the UK, the new national distribution centre is now operational and a number of the existing locations have transferred into the new infrastructure.
The remaining existing locations will transition during the coming year and the majority of the existing locations have now been sold successfully.
A programme to significantly reduce costs while improving the logistics and operational efficiency of DCC Technology's French consumer business
is ongoing. This project will also deliver a consolidation of two existing warehouses into one new facility. Finally, the business in the Nordics has
recently commissioned its new national distribution centre and it is now operational.
Most of the Group's debt has been raised in the US Private Placement market and swapped, using long-term interest and cross currency interest
rate 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, is charged or credited as an exceptional item. In the year ended 31 March 2018, this amounted to an
exceptional non-cash gain of £0.299 million. Following this credit, the cumulative net exceptional charge taken in respect of the Group's outstanding
US Private Placement debt and related hedging instruments is £5.3 million. This, or any subsequent similar non-cash charges or gains, will net to zero
over the remaining term of this debt and the related hedging instruments.
The deferred tax credit of £25.407 million principally reflects the impact of the recent reduction of the statutory corporation tax rate in France
and a corresponding reduction in the Group's deferred tax liabilities associated with the Group's brand and other intangible assets in France.
There was a non controlling interest credit of £0.969 million in relation to certain of the above exceptional charges.
DCC plc Annual Report and Accounts 2018
145
Supplementary InfoFinancial StatementsGovernanceStrategic Report 2.7 Finance Costs and Finance Income
This note details the interest income generated by our financial assets and the interest expense incurred on our
financial liabilities. Finance income principally comprises interest on cash and term deposits whilst finance costs mainly
comprise interest on Unsecured Notes, bank debt and finance leases. The net gain/loss arising on derivative financial
instruments and the net finance income/cost arising on defined benefit pension schemes are included as a net
income/cost as appropriate.
2018
£'000
2017
£'000
(61,762)
(64,022)
(35)
(665)
(2,377)
(1,796)
(6,521)
(22)
(751)
(1,956)
(1,942)
(4,217)
(73,156)
(72,910)
2,133
35,164
57
67
37,421
299
37,720
2,248
38,586
42
97
40,973
10,101
51,074
(35,436)
(21,836)
(9,866)
(137,647)
148,378
865
(35,994)
35,428
(566)
299
(2,109)
68,703
(56,493)
10,101
13,737
(13,737)
–
10,101
Finance costs
On bank loans, overdrafts and Unsecured Notes
On finance leases
Unwinding of discount applicable to acquisition related liabilities
Unwinding of discount applicable to provisions for liabilities
Facility fees
Other interest
Finance income
Interest on cash and term deposits
Net income on interest rate and currency swaps
Net interest income on defined benefit pension schemes (note 3.13)
Other income
Mark to market of swaps and related debt*
Net finance cost
*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
Movement on cross currency interest rate swaps designated as cash flow hedges
Transferred to cash flow hedge reserve
Total mark to market of swaps and related debt
146
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 213456Notes to the Financial Statements (continued)
2.8 Share of Equity Accounted Investments' Profit after Tax
Share of equity accounted investments' profit after tax represents the results of businesses we do not control,
but instead exercise joint control or significant influence and generally have an equity holding of up to 50%.
The Group's share of equity accounted investments' (i.e. joint ventures and associates) profit after tax is equity accounted and presented as a single
line item in the Group Income Statement. The profit after tax generated by the Group's equity accounted investments is analysed as follows under
the principal Group Income Statement captions:
Group share of:
Revenue
Joint ventures
2018
£'000
Associates
2018
£'000
Total
2018
£'000
Joint ventures
2017
£'000
Associates
2017
£'000
Total
2017
£'000
27,032
2,485
29,517
25,082
2,368
27,450
Operating profit and profit before tax
Income tax expense
Profit after tax
412
(40)
372
(4)
–
(4)
408
(40)
368
789
(95)
694
18
–
18
807
(95)
712
Income Tax Expense
2.9
Tax is payable in the territories in which we operate. This note details the current tax charge which is the tax payable
on this year's taxable profits and the deferred tax charge which represents the tax expected to arise in the future due
to differences in the accounting and tax bases of profit.
(i) Income tax expense recognised in the Income Statement
Current taxation
Irish corporation tax at 12.5%
United Kingdom corporation tax at 19% (2017: 20%)
Other overseas tax
Over provision in respect of prior years
Total current taxation
Deferred tax
Irish at 12.5%
United Kingdom at 17% (2017: 18%)
Other overseas deferred tax
Exceptional deferred tax (note 2.6)
Under provision in respect of prior years
Total deferred tax
Total income tax expense
(ii) Deferred tax recognised in Other Comprehensive Income
Deferred tax relating to defined benefit pension obligations
Deferred tax relating to cash flow hedges
Total deferred tax recognised in Other Comprehensive Income
2018
£'000
2017
£'000
4,820
17,319
35,096
(2,852)
54,383
649
(996)
(5,192)
(25,407)
445
(30,501)
23,882
2018
£'000
665
(433)
232
3,510
12,310
36,592
(911)
51,501
157
(413)
(7,722)
1,756
590
(5,632)
45,869
2017
£'000
(413)
(1,334)
(1,747)
DCC plc Annual Report and Accounts 2018
147
Supplementary InfoFinancial StatementsGovernanceStrategic Report
2.9
(iii) Reconciliation of effective tax rate
Income Tax Expense continued
Profit before taxation (continuing operations)
Less: share of equity accounted investments' profit after tax
Add back: amortisation of intangible assets
Profit before share of equity accounted investments' profit after tax and amortisation of intangible assets
Add back: net exceptional items before tax
2018
£'000
2017
£'000
260,160
248,454
(368)
(712)
43,059
39,130
302,851
286,872
44,814
26,196
Profit before share of equity accounted investments' profit after tax, amortisation of intangible assets and net exceptionals
347,665
313,068
Profit before share of equity accounted investments' profit after tax and amortisation of intangible assets
302,851
286,872
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
Other differences
Income tax expense
Exceptional deferred tax (note 2.6)
Deferred tax attaching to amortisation of intangible assets
Total income tax expense
Income tax expense as a percentage of profit before share of equity accounted investments' profit after tax,
amortisation of intangible assets and net exceptionals
Impact of share of equity accounted investments' profit after tax, amortisation of intangible assets and net exceptionals
Total income tax expense as a percentage of profit before tax
37,856
(2,407)
21,683
1,971
59,103
(25,407)
35,859
(321)
19,578
(329)
54,787
1,756
(9,814)
(10,674)
23,882
45,869
2018
%
2017
%
17.0%
(7.8%)
9.2%
17.5%
1.0%
18.5%
(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 is 19%. A UK tax rate of 18% applies with effect from 1 April 2020. A French corporate income tax rate of 34.4% applies
for the year ended 31 March 2018. The French corporate income tax rate will progressively reduce on an annual basis to 25.8% by 1 January 2022.
As the legislation to give statutory effect to the reduction in the French corporate income tax rate had been enacted by the reporting 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 or intention to remit earnings.
148
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 213456Notes to the Financial Statements (continued) 2.10 Discontinued Operations
The Environmental division was disposed of during the year. This segment is treated as a discontinued operation,
the results of which are detailed separately below.
As announced on 31 May 2017, the Group completed the disposal of the Environmental division. The proceeds on disposal will be used to fund the
continued development of DCC's continuing operations. The conditions for the segment to be classified as a discontinued operation were satisfied
during the year ended 31 March 2017 and the results of the Environmental segment were presented separately in the 2017 Annual Report as
discontinued operations in the Group Income Statement and the assets and liabilities of this segment were classified as an asset held for sale at
the reporting date.
The following table summarises the consideration received, the profit on disposal of discontinued operations and the net cash flow arising on the
disposal of this segment:
Net consideration:
Net proceeds received
Costs of disposal
Total net consideration
Assets and liabilities disposed of:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net identifiable assets and liabilities disposed of
Recycling of foreign exchange gain previously recognised in foreign currency translation reserve
Profit on disposal of discontinued operations
Net cash flow on disposal of discontinued operations:
Total proceeds received
Cash and cash equivalents disposed of
Net cash inflow on disposal of discontinued operations
Disposal costs paid
Net cash flow on disposal of discontinued operations
2018
£'000
164,526
(4,463)
160,063
145,675
34,198
(4,358)
(40,746)
134,769
(4,548)
130,221
29,842
174,321
(9,795)
164,526
(4,463)
160,063
DCC plc Annual Report and Accounts 2018
149
Supplementary InfoFinancial StatementsGovernanceStrategic Report 2.10 Discontinued Operations continued
The following table details the results of discontinued operations included in the Group Income Statement:
Revenue
Cost of sales
Gross profit
Operating expenses
Adjusted operating profit
Amortisation of intangible assets
Operating profit
Net finance costs
Income tax expense
Profit on disposal of discontinued operations
Profit from discontinued operations after tax
The following table details the cash flow from discontinued operations included in the Group Cash Flow Statement:
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from discontinued operations
2018
£'000
2017
£'000
29,614
175,232
(20,292)
(119,654)
9,322
55,578
(8,341)
(37,032)
981
–
981
(16)
965
(164)
801
29,842
30,643
18,546
(38)
18,508
(163)
18,345
(3,185)
15,160
–
15,160
2018
£'000
2017
£'000
(5,602)
(1,332)
(6,934)
22,461
(6,661)
15,800
2.11 Dividends
Dividends represent one type of shareholder return and are paid as an amount per ordinary share held. The Group
retains part of the profits generated in the year to meet future growth plans.
Dividends paid per ordinary share are as follows:
Final: paid 74.63 pence per share on 20 July 2017 (2017: paid 64.18 pence per share on 21 July 2016)
Interim: paid 40.89 pence per share on 11 December 2017 (2017: paid 37.17 pence per share on 12 December 2016)
2018
£'000
2017
£'000
66,520
36,351
102,871
57,621
32,415
90,036
The Directors are proposing a final dividend in respect of the year ended 31 March 2018 of 82.09 pence per ordinary share (£73.242 million).
This proposed dividend is subject to approval by the shareholders at the Annual General Meeting.
150
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 213456Notes to the Financial Statements (continued)
2.12 Earnings per Ordinary Share
Earnings per ordinary share ('EPS') is the amount of post-tax profit attributable to each ordinary share. Basic EPS
is the amount of profit for the year divided by the weighted average number of shares in issue during the year. Diluted
EPS shows what the impact would be if all outstanding and exercisable options were exercised and treated as ordinary
shares at year end.
Continuing
operations
2018
£'000
Discontinued
operations
(note 2.10)
2018
£'000
Continuing
operations
2017
£'000
Discontinued
operations
(note 2.10)
2017
£'000
Total
2018
£'000
Total
2017
£'000
Profit attributable to owners of the Parent Company
Amortisation of intangible assets after tax
Exceptionals after tax (note 2.6)
231,181
33,245
18,438
30,643
261,824
201,037
15,160
216,197
–
33,245
(29,842)
(11,404)
28,456
24,814
6
–
28,462
24,814
Adjusted profit after taxation and non-controlling interests
282,864
801
283,665
254,307
15,166
269,473
Basic earnings per ordinary share
Basic earnings per ordinary share
Amortisation of intangible assets after tax
Exceptionals after tax
Adjusted basic earnings per ordinary share
Continuing
operations
2018
pence
Discontinued
operations
2018
pence
Total
2018
pence
Continuing
operations
2017
pence
Discontinued
operations
2017
pence
Total
2017
pence
259.44p
37.31p
20.70p
317.45p
34.39p
293.83p
226.56p
17.08p
243.64p
–
37.31p
(33.49p)
(12.79p)
32.07p
27.96p
0.01p
–
32.08p
27.96p
0.90p
318.35p
286.59p
17.09p
303.68p
Weighted average number of ordinary shares in issue (thousands)
89,106
88,735
Basic earnings per ordinary share is calculated by dividing the profit attributable to owners of the Parent Company 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 (a non-GAAP financial measure) are intended to demonstrate the results of the Group after eliminating the impact
of amortisation of intangible assets and net exceptionals.
Diluted earnings per ordinary share
Diluted earnings per ordinary share
Amortisation of intangible assets after tax
Exceptionals after tax
Adjusted diluted earnings per ordinary share
Continuing
operations
2018
pence
Discontinued
operations
2018
pence
Total
2018
pence
Continuing
operations
2017
pence
Discontinued
operations
2017
pence
Total
2017
pence
258.52p
37.18p
20.61p
316.31p
34.27p
292.79p
225.04p
16.96p
242.00p
–
37.18p
(33.37p)
(12.76p)
31.84p
27.78p
0.01p
–
31.85p
27.78p
0.90p
317.21p
284.66p
16.97p
301.63p
Weighted average number of ordinary shares in issue (thousands)
89,425
89,338
The earnings used for the purposes of the continuing diluted earnings per ordinary share calculations were £231.181 million (2017: £201.037 million)
and £282.864 million (2017: £254.307 million) for the purposes of the continuing adjusted diluted earnings per ordinary share calculations.
The earnings used for the purposes of the discontinued diluted earnings per ordinary share calculations were £30.643 million (2017: £15.160 million)
and £0.801 million (2017: £15.166 million) for the purposes of the discontinued adjusted diluted earnings per ordinary share calculations.
DCC plc Annual Report and Accounts 2018
151
Supplementary InfoFinancial StatementsGovernanceStrategic Report 2.12 Earnings per Ordinary Share continued
The weighted average number of ordinary shares used in calculating the diluted earnings per ordinary share for the year ended 31 March 2018 was
89.425 million (2017: 89.338 million). A reconciliation of the weighted average number of ordinary shares used for the purposes of calculating the
diluted earnings per ordinary 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
2018
ʼ000
89,106
319
89,425
2017
ʼ000
88,735
603
89,338
Diluted earnings per ordinary 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 would not have been satisfied as at the end of the
reporting period if that were the end of the vesting period.
The adjusted figures for diluted earnings per ordinary share (a non-GAAP financial measure) are intended to demonstrate the results of the Group
after eliminating the impact of amortisation of intangible assets and net exceptionals.
152
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 312456Notes to the Financial Statements (continued) Section 3 Assets and Liabilities
3.1 Property, Plant and Equipment
This note details the tangible assets utilised by the Group to generate revenues and profits. The cost of these assets
primarily represents the amounts originally paid for them. All assets are depreciated over their useful economic lives.
Land &
buildings
£’000
Plant &
machinery &
cylinders
£’000
Fixtures,
fittings & office
equipment
£’000
Motor
vehicles
£’000
Total
£’000
Year ended 31 March 2018
Opening net book amount
Exchange differences
Arising on acquisition (note 5.2)
Additions
Disposals
Depreciation charge
Impairment charge (note 2.6)
Reclassifications
Closing net book amount
At 31 March 2018
Cost
255,375
381,555
585
75,779
27,549
(14,246)
(8,604)
(484)
(5,561)
644
54,869
95,721
(3,215)
(60,242)
(2,929)
(10,073)
330,393
456,330
52,666
330
4,832
22,939
(2,233)
(322)
15,306
79,533
60,424
750,020
178
6,952
10,962
(1,171)
–
328
1,737
142,432
157,171
(20,865)
(93,722)
(3,735)
–
66,782
933,038
(13,985)
(10,891)
372,308
923,568
176,932
150,938
1,623,746
Accumulated depreciation and impairment losses
(41,915)
(467,238)
(97,399)
(84,156)
(690,708)
Net book amount
330,393
456,330
79,533
66,782
933,038
Year ended 31 March 2017
Opening net book amount
Exchange differences
Arising on acquisition (note 5.2)
Additions
Disposals
Depreciation charge
Impairment charge (note 2.6)
Assets classified as held for sale
Reclassifications
Closing net book amount
At 31 March 2017
Cost
Accumulated depreciation and impairment losses
Net book amount
251,531
367,987
8,662
3,493
41,738
(5,575)
(8,353)
(1,051)
14,547
3,813
68,593
(4,250)
(57,679)
–
(36,176)
(16,654)
1,106
5,198
54,860
2,268
793
18,809
(1,211)
(13,379)
(113)
(3,078)
(6,283)
65,125
739,503
720
166
17,787
(1,106)
(12,604)
–
(9,643)
(21)
26,197
8,265
146,927
(12,142)
(92,015)
(1,164)
(65,551)
–
255,375
381,555
52,666
60,424
750,020
291,947
787,194
140,643
143,390
1,363,174
(36,572)
(405,639)
255,375
381,555
(87,977)
52,666
(82,966)
(613,154)
60,424
750,020
Assets held under finance leases
The net carrying amount of assets held under finance leases and accordingly capitalised in property, plant and equipment are as follows:
Motor vehicles
Fixtures, fittings & office equipment
Net book amount
2018
£’000
734
533
1,267
2017
£’000
682
174
856
DCC plc Annual Report and Accounts 2018
153
Supplementary InfoFinancial StatementsGovernanceStrategic Report Intangible Assets and Goodwill
3.2
The Group Balance Sheet contains significant intangible assets and goodwill. Goodwill, customer and supplier
relationships and brands can arise on the acquisition of a business. Goodwill arises when we pay an amount which
is higher than the fair value of the net assets acquired (primarily due to expected synergies). This goodwill is not
amortised but is subject to annual impairment reviews whereas customer and supplier relationships and brands
are amortised over their useful economic lives.
Year ended 31 March 2018
Opening net book amount
Exchange differences
Arising on acquisition (note 5.2)
Adjustments to contingent consideration (note 3.14)
Amortisation charge
Closing net book amount
At 31 March 2018
Cost
Customer &
supplier related
intangibles
£’000
Brand
related
intangibles
£’000
Goodwill
£’000
Total
£’000
1,030,527
246,390
145,655
1,422,572
631
4,734
3,063
8,428
548,955
66
–
–
405,342
143,613
–
66
–
(38,382)
(4,677)
(43,059)
1,436,566
356,355
144,041
1,936,962
1,475,273
529,128
155,531
2,159,932
Accumulated amortisation and impairment losses
(38,707)
(172,773)
(11,490)
(222,970)
Net book amount
1,436,566
356,355
144,041
1,936,962
Year ended 31 March 2017
Opening net book amount
Exchange differences
Arising on acquisition (note 5.2)
Adjustments to contingent consideration (note 3.14)
Assets classified as held for sale
Amortisation charge
Closing net book amount
At 31 March 2017
Cost
960,154
31,657
117,175
876
(79,335)
210,063
126,848
1,297,065
15,505
56,051
–
–
10,284
12,462
–
–
57,446
185,688
876
(79,335)
(39,168)
–
(35,229)
(3,939)
1,030,527
246,390
145,655
1,422,572
1,068,660
381,004
152,498
1,602,162
Accumulated amortisation and impairment losses
(38,133)
(134,614)
(6,843)
(179,590)
Net book amount
1,030,527
246,390
145,655
1,422,572
Customer and supplier related intangible assets principally comprise contractual and non-contractual customer and supplier relationships arising
from business combinations and are amortised over their estimated useful lives. The weighted average remaining amortisation period for customer
related intangibles is 14.3 years (2017: 11.0 years). Brand related intangible assets comprise registered trade names and logos which are well
established and recognised within the industries in which the Group operates. The weighted average remaining amortisation period for brand related
intangibles is 34.2 years (2017: 35.3 years). There are no internally generated brand related intangibles recognised on the Group Balance Sheet.
154
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 312456Notes to the Financial Statements (continued) 3.2
In accordance with IAS 38 Intangible Assets, details of individually significant intangible assets and their remaining amortisation periods are as follows:
Intangible Assets and Goodwill continued
Butagaz
Gaz Européen
Segment
DCC LPG
DCC LPG
Esso Retail Norway
DCC Retail & Oil
Shell Hong Kong & Macau
DCC LPG
Others
Closing net book amount
Customer &
supplier related
intangibles
£’000
Remaining
amortisation
period in
years
Brand
related
intangibles
£’000
Remaining
amortisation
period in
years
149,535
12.5 years
128,527
37.5 years
10.8 years
19.6 years
24.8 years
34,121
53,382
67,539
51,778
356,355
12,276
18.8 years
–
–
–
–
3,238
144,041
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 29
CGUs (2017: 28 CGUs) have been identified and these are analysed between the Group’s operating segments below together with a summary of
the allocation of the carrying value of goodwill by segment.
DCC LPG
DCC Retail & Oil
DCC Healthcare
DCC Technology
Discontinued operations (DCC Environmental)
Cash-generating units
2017
number
2018
number
Goodwill
2018
£’000
2017
£’000
9
9
5
6
29
–
29
6
8
4
6
24
4
28
538,718
535,644
224,380
137,824
303,545
413,611
198,407
114,964
1,436,566
1,030,527
–
79,335
1,436,566
1,109,862
In accordance with IAS 36 Impairment of Assets, the CGUs to which significant amounts of goodwill have been allocated are as follows:
CGU
Segment
Certas Energy UK Group
DCC Retail & Oil
Butagaz
DCC Vital Group
Esso Retail Norway
Exertis UK Group
Others
Closing net book amount
DCC LPG
DCC Healthcare
DCC Retail & Oil
DCC Technology
2018
£’000
2017
£’000
258,750
189,884
175,101
117,966
89,103
605,762
256,801
186,037
168,689
–
72,593
425,742
1,436,566
1,109,862
For the purpose of impairment testing, the discount rates applied to these CGUs to which significant amounts of goodwill have been allocated
were 8.6% (2017: 8.6%) for the Certas Energy UK Group, Butagaz and Esso Retail Norway, 9.8% (2017: 7.8%) for the DCC Vital Group and 9.9%
(2017: 8.6%) for the Exertis UK Group. The long-term growth rate assumed for the Certas Energy UK, DCC Vital and Exertis UK Groups was 1.7%
(2016: 1.9%), with no growth assumed for Butagaz and Esso Retail Norway. The remaining goodwill balance of £605.762 million is allocated across
24 CGUs (2017: £425.742 million over 24 CGUs), none of which are individually significant.
DCC plc Annual Report and Accounts 2018
155
Supplementary InfoFinancial StatementsGovernanceStrategic Report Intangible Assets and Goodwill continued
3.2
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 1.2% (2017: 1.3%).
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 8.6% to 9.9% (2017:
7.8% to 8.6%).
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, no impairment charge arose in 2018 (2017: nil).
Sensitivity Analysis
Sensitivity analysis was performed by increasing the discount rate by 1%, 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 28 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. In relation to
the remaining CGU which forms part of the DCC Technology segment, the value in use of £62.6 million represented an excess of £0.9 million over its
carrying value of £61.7 million. The table below identifies the amounts by which each of the key assumptions must change in order for its’ recoverable
amount to be equal to its’ carrying amount:
Increase in discount rate
Reduction in long-term growth rate
Reduction in cash flow
0.9 percentage points
0.1 percentage points
1.9%
3.3 Equity Accounted Investments
Equity accounted investments represent the Group’s interests in certain joint ventures and associates where we
exercise joint control or significant influence and generally have an equity holding of up to 50%.
At 1 April
Acquisition of equity accounted investments (note 5.2)
Share of profit after tax
Dividends received
Exchange and other
At 31 March
Investments in associates and joint ventures at 31 March 2018 include goodwill of £17.129 million (2017: £17.220 million).
2018
£’000
2017
£’000
24,938
22,139
497
368
(1,980)
638
24,461
404
712
(125)
1,808
24,938
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DCC plc Annual Report and Accounts 2018
Financial StatementsSection 312456Notes to the Financial Statements (continued)
3.3 Equity Accounted Investments continued
Summarised financial information for the Group’s investment in joint ventures and associates which are accounted for using the equity method
is as follows:
As at 31 March 2018
Joint ventures
Associates
Total
As at 31 March 2017
Joint ventures
Associates
Total
Non-current
assets
£’000
Current
assets
£’000
Current
liabilities
£’000
Net assets
£’000
5,876
25,684
31,560
5,539
25,050
30,589
2,874
2,706
5,580
4,241
2,233
6,474
(4,262)
(8,417)
(12,679)
(3,893)
(8,232)
(12,125)
4,488
19,973
24,461
5,887
19,051
24,938
Details of the Group’s principal joint ventures and associates are included in the Group Directory on page 210.
Inventories
3.4
Inventories represent assets that we intend to convert or sell in order to generate revenue in the short-term.
The Group’s inventory consists primarily of finished goods, net of an allowance for obsolescence.
Raw materials
Work in progress
Finished goods
2018
£’000
2017
£’000
35,284
3,937
491,252
530,473
26,554
2,246
427,595
456,395
Write-downs of inventories recognised as an expense within cost of sales amounted to £4.0 million (2017: £7.0 million).
3.5 Trade and Other Receivables
Trade and other receivables mainly consist of amounts owed to the Group by customers, net of an allowance for bad
and doubtful debts, together with prepayments and accrued income.
Trade receivables
Provision for impairment of trade receivables
Prepayments and accrued income
Value added tax recoverable
Other debtors
2018
£’000
2017
£’000
1,264,019
1,084,215
(22,120)
112,666
25,461
46,191
(21,347)
85,284
22,990
51,455
1,426,217
1,222,597
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3.5 Trade and Other Receivables continued
Included in the Group’s trade and other receivables as at 31 March 2018 are balances of £144.672 million (2017: £121.330 million) which are past due
at the reporting date but not impaired. The aged analysis of these balances is as follows:
Less than 1 month overdue
1 – 3 months overdue
3 – 6 months overdue
Over 6 months overdue
2018
£’000
100,552
25,707
12,242
6,171
2017
£’000
79,820
23,938
10,208
7,364
144,672
121,330
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:
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
Provision for impairment of trade receivables attributable to assets held for sale
2018
£’000
21,347
7,439
(679)
(7,268)
1,072
209
–
2017
£’000
17,563
4,632
(183)
(4,442)
3,600
872
(695)
At 31 March
22,120
21,347
The vast majority of the provision for impairment relates to trade and other receivables balances which are over 6 months overdue.
3.6 Trade and Other Payables
The Group’s trade and other payables mainly consist of amounts we owe to our suppliers that have been either
invoiced or accrued and are due to be settled within twelve months.
2018
£’000
2017
£’000
1,583,297
1,398,523
383,656
310,140
13,032
67,820
9
4,775
10,671
15,056
85,906
9
4,534
6,349
2,063,260
1,820,517
Trade payables
Other creditors and accruals
PAYE and National Insurance or equivalent
Value added tax
Government grants (note 3.16)
Interest payable
Amounts due in respect of property, plant and equipment
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DCC plc Annual Report and Accounts 2018
Financial StatementsSection 312456Notes to the Financial Statements (continued)
3.7 Movement in Working Capital
Working capital represents the net of inventories, trade and other receivables and trade and other payables.
This note details the overall movement in the year under each of these headings.
Year ended 31 March 2018
At 1 April 2017
Translation adjustment
Arising on acquisition (note 5.2)
Exceptional items, interest accruals, capital accruals and other
Increase/(decrease) in working capital (note 5.3)
At 31 March 2018
Year ended 31 March 2017
At 1 April 2016
Translation adjustment
Arising on acquisition (note 5.2)
Assets and liabilities classified as held for sale
Exceptional items, interest accruals, capital accruals and other
Inventories
£’000
Trade
and other
receivables
£’000
Trade
and other
payables
£’000
Total
£’000
456,395
1,222,597
(1,820,517)
(141,525)
912
35,132
(1,440)
39,474
4,785
51,984
(1,376)
(5,796)
(38,000)
(25,004)
(99)
49,116
(27,820)
148,227
(173,943)
13,758
530,473
1,426,217
(2,063,260)
(106,570)
393,948
916,069
(1,437,832)
(127,815)
10,133
32,207
(1,922)
236
32,186
206,528
(33,265)
(177)
(43,202)
(164,777)
35,791
(3,499)
(883)
73,958
604
(3,440)
Increase/(decrease) in working capital (note 5.3)
21,793
101,256
(206,998)
(83,949)
At 31 March 2017
456,395
1,222,597
(1,820,517)
(141,525)
3.8 Cash and Cash Equivalents
The majority of the Group’s cash and cash equivalents are held in deposit accounts with maturities of up to
three months.
Cash at bank and in hand
Short-term deposits
2018
£’000
2017
£’000
454,399
584,428
363,805
684,259
1,038,827
1,048,064
Cash at bank earns interest at floating rates based on daily bank deposit rates. The short-term deposits, which include bank and money market
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 deposits
Bank overdrafts
Cash and short-term deposits attributable to assets held for sale
Bank overdrafts are included within current borrowings (note 3.10) in the Group Balance Sheet.
2018
£’000
2017
£’000
1,038,827
1,048,064
(74,534)
(88,041)
–
964,293
12,799
972,822
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3.9 Derivative Financial Instruments
Derivatives are financial instruments that derive their value from the price of underlying items such as interest rates,
foreign exchange rates, commodities or other indices. This note details the derivative financial instruments used
by the Group to hedge certain risk exposures arising from operational, financing and investment activities. These
derivatives are held at fair value.
Non-current assets
Cross currency interest rate swaps – fair value hedges
Cross currency interest rate swaps – cash flow hedges
Interest rate swaps – fair value hedges
Commodity forward contracts – cash flow hedges
Current assets
Cross currency interest rate swaps – fair value hedges
Interest rate swaps – fair value hedges
Currency swaps – not designated as hedges
Foreign exchange forward contracts – cash flow hedges
Foreign exchange forward contracts – not designated as hedges
Commodity forward contracts – cash flow hedges
Commodity forward contracts – not designated as hedges
Total assets
Non-current liabilities
Cross currency interest rate swaps – cash flow hedges
Interest rate swaps – fair value hedges
Commodity forward contracts – cash flow hedges
Current liabilities
Currency swaps – not designated as hedges
Foreign exchange forward contracts – cash flow hedges
Foreign exchange forward contracts – not designated as hedges
Commodity forward contracts – cash flow hedges
Commodity forward contracts – not designated as hedges
Total liabilities
2018
£’000
2017
£’000
87,429
223,384
5,771
9,813
72
36,512
13,747
124
103,085
273,767
–
–
2,194
228
106
4,976
546
8,050
111,135
(4,545)
(5,567)
(620)
(10,732)
(1,204)
(841)
(130)
(5,754)
(545)
(8,474)
(19,206)
12,968
365
–
515
122
4,203
60
18,233
292,000
–
–
(506)
(506)
–
(623)
(57)
(5,119)
(95)
(5,894)
(6,400)
Net asset arising on derivative financial instruments
91,929
285,600
The full fair value of a hedging derivative is classified as a non-current asset or non-current liability if the remaining maturity of the hedged item
is more than twelve months and as a current asset or current 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 2018 total
£197.5 million and €300.0 million. At 31 March 2018, the fixed interest rates vary from 1.96% to 4.49% and the floating rates are based on sterling
LIBOR and EURIBOR.
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DCC plc Annual Report and Accounts 2018
Financial StatementsSection 312456Notes to the Financial Statements (continued) 3.9 Derivative Financial Instruments continued
Cross currency interest rate swaps
The Group utilises cross currency interest rate swaps to swap fixed rate US$ denominated debt of US$1,098.0 million into floating rate sterling debt
of £305.957 million and floating rate euro debt of €438.022 million. At 31 March 2018 the fixed interest rates vary from 3.41% to 6.19%. These swaps
are designated as fair value hedges under IAS 39.
The Group utilises cross currency interest rate swaps to swap fixed rate US$ denominated debt of US$317.0 million into fixed rate sterling debt of
£61.189 million and fixed rate euro debt of €163.045 million. At 31 March 2018 the fixed US$ interest rates vary from 4.04% to 4.98% and the average
swapped fixed rates for sterling and euro were 4.47% and 3.74% respectively. These swaps are designated as cash flow hedges under IAS 39.
Currency swaps
During the year ended 31 March 2018, the Group entered into currency swaps to manage currency risk related to the intercompany funding of
certain acquisitions. The principal amounts of outstanding currency swaps at 31 March 2018 total £335.332 million.
Forward foreign exchange contracts
The notional principal amounts of outstanding forward foreign exchange contracts at 31 March 2018 total £117.025 million (2017: £114.429 million).
Gains and losses recognised in the cash flow hedge reserve in equity (note 4.2) at 31 March 2018 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 reporting date.
Commodity price forward contracts
The notional principal amounts of outstanding forward commodity contracts at 31 March 2018 total £158.384 million (2017: £104.548 million). Gains
and losses recognised in the cash flow hedge reserve in equity (note 4.2) at 31 March 2018 on forward commodity contracts designated as cash flow
hedges under IAS 39 will be released to the Income Statement at various dates up to thirty-three months after the reporting date.
3.10 Borrowings
The Group utilises long-term debt funding together with committed credit lines with our relationship banks.
We use derivatives to manage risks associated with interest rates and foreign exchange.
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
2018
£’000
2017
£’000
692
165
1,597,829
1,319,802
1,598,521
1,319,967
74,534
363
–
88,041
190
60,214
74,897
148,445
1,673,418
1,468,412
2018
£’000
2017
£’000
318
436,097
1,162,106
109
500,538
819,320
1,598,521
1,319,967
DCC plc Annual Report and Accounts 2018
161
Supplementary InfoFinancial StatementsGovernanceStrategic Report
3.10 Borrowings continued
Bank borrowings and finance leases
Interest on bank borrowings is at floating rates set in advance for periods ranging from overnight to three 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.
The Group has a £400 million five year committed revolving credit facility with nine relationship banks: Barclays, BNP Paribas, Danske Bank, HSBC,
ING, JP Morgan, RBS, Bank of Ireland and Deutsche Bank. This was put in place in March 2016 and extended during the current financial year until
March 2023. The Group had various other uncommitted bank facilities available at 31 March 2018.
Unsecured Notes
The Group’s Unsecured Notes which fall due between 2019 and 2029 are comprised of fixed rate debt of US$157.0 million issued in 2007 and
maturing in 2019 (the ‘2019 Notes’), fixed rate debt of US$217.0 million issued in 2010 and maturing in 2020 and 2022 (the ‘2020/22 Notes’), fixed
rate debt of US$525 million issued in 2013 and maturing in 2020, 2023 and 2025 (the ‘2020/23/25 Notes’), fixed rate debt of US$516.0 million,
€85.0 million and £70.0 million issued in 2014 and maturing in 2021, 2024, 2026 and 2029 (the ‘2021/24/26/29 Notes’), fixed rate debt of
£127.5 million and €215.0 million issued in September 2017 and maturing in 2027 and 2029 (the ‘2027/29 Notes’) and floating rate debt of
€145.0 million issued in September 2017 and maturing in 2024, 2027 and 2029 (the ‘2024/27/29 Notes’).
The 2019 Notes denominated in US dollars have been swapped (using cross currency interest rate swaps designated as fair value hedges under
IAS 39) from fixed US dollars to floating sterling rates, repricing quarterly based on sterling LIBOR.
Of the 2020/22 Notes denominated in US dollars, $152.0 million has been swapped (using cross currency interest rate swaps designated as fair value
hedges under IAS 39) from fixed US$ to floating sterling rates, repricing quarterly based on sterling LIBOR and $65.0 million has been swapped (using cross
currency interest rate swaps designated as fair value hedges under IAS 39) from fixed US$ to floating euro rates, repricing quarterly based on EURIBOR.
Of the 2020/23/25 Notes denominated in US dollars, $255.0 million has been swapped (using cross currency interest rate swaps designated as fair
value hedges under IAS 39) from fixed US$ 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.
Of the 2021/24/26/29 Notes denominated in US dollars, $269.0 million has been swapped (using cross currency interest rate swaps designated as
fair value hedges under IAS 39) from fixed US$ 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. The 2021/24/26/29 Notes denominated in euro have 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. The 2021/24/26/29 Notes
denominated in sterling have been swapped (using interest rate swaps designated as fair value hedges under IAS 39) from fixed sterling to floating
sterling rates, repricing quarterly based on sterling LIBOR.
The 2027/29 Notes denominated in sterling have been swapped (using interest rate swaps designated as fair value hedges under IAS 39) to floating
sterling rates, repricing half yearly based on sterling LIBOR. The 2027/29 Notes denominated in euro have been swapped (using interest rate swaps
designated as fair value hedges under IAS 39) to floating euro rates, repricing half yearly based on EURIBOR.
The 2024/27/29 Notes are at floating euro rates, repricing half yearly based on EURIBOR.
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
*
Issued and repayable at par.
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DCC plc Annual Report and Accounts 2018
2018
2017
6.3 years
5.6 years
4.69%
3.36%
2.34%
2.22%
1.28%
4.73%
4.91%
3.23%
1.87%
1.53%
Financial StatementsSection 312456Notes to the Financial Statements (continued) 3.11 Analysis of Net Debt
Net (debt)/cash is a key metric of the Group and represents cash and cash equivalents less borrowings and derivative
financial instruments.
Reconciliation of opening to closing net debt
The reconciliation of opening to closing net debt for the year ended 31 March 2018 is as follows:
Fair value adjustment
At
1 April
2017
£’000
Cash flow
£’000
Income
Statement
£’000
Cash Flow
Hedge Reserve
£’000
Translation
adjustment
£’000
At
31 March
2018
£’000
Cash and short-term deposits
1,060,863
(11,900)
Overdrafts
Finance leases
Unsecured Notes
(88,041)
972,822
(355)
13,389
1,489
(762)
(1,380,016)
(400,463)
148,378
–
–
–
–
–
–
–
–
–
(10,136)
1,038,827
118
(74,534)
(10,018)
964,293
62
(1,055)
34,272
(1,597,829)
Derivative financial instruments (net)
285,600
(10,812)
(148,079)
(35,428)
648
91,929
Group net debt (including cash attributable
to assets classified as held for sale)
Group net debt (excluding cash attributable
to assets classified as held for sale)
(121,949)
(410,548)
(134,748)
(398,071)
299
299
(35,428)
24,964
(542,662)
(35,428)
25,286
(542,662)
The reconciliation of opening to closing net debt for the year ended 31 March 2017 is as follows:
Fair value adjustment
At
1 April
2016
£’000
Cash flow
£’000
Income
Statement
£’000
Cash Flow
Hedge Reserve
£’000
Translation
adjustment
£’000
At
31 March
2017
£’000
Cash and short-term deposits
Overdrafts
Finance leases
Unsecured Notes
1,182,034
(160,491)
(91,997)
4,347
1,090,037
(156,144)
(506)
177
(1,360,722)
108,140
Derivative financial instruments (net)
216,689
(12,928)
–
–
–
–
(56,493)
66,594
–
–
–
–
–
39,320
1,060,863
(391)
38,929
(26)
(88,041)
972,822
(355)
(70,941)
(1,380,016)
13,737
1,508
285,600
Group net debt (including cash attributable
to assets classified as held for sale)
Group net debt (excluding cash attributable
to assets classified as held for sale)
(54,502)
(60,755)
10,101
13,737
(30,530)
(121,949)
(69,473)
(58,597)
10,101
13,737
(30,516)
(134,748)
DCC plc Annual Report and Accounts 2018
163
Supplementary InfoFinancial StatementsGovernanceStrategic Report 3.11 Analysis of Net Debt continued
Currency profile
The currency profile of net debt at 31 March 2018 is as follows:
Euro
£’000
Sterling
£’000
US Dollars
£’000
Cash and cash equivalents
337,102
559,673
Borrowings
Derivatives
(964,058)
(706,096)
29,543
62,802
48,599
(2,248)
(491)
Danish
Krone
£’000
38,931
–
91
Swedish
Krona
£’000
38,722
(1,016)
Other
£’000
Total
£’000
15,800
1,038,827
–
(1,673,418)
–
(16)
91,929
(597,413)
(83,621)
45,860
39,022
37,706
15,784
(542,662)
The currency profile of net debt at 31 March 2017 is as follows:
Euro
£’000
Sterling
£’000
US Dollars
£’000
Danish
Krone
£’000
Swedish
Krona
£’000
Other
£’000
Total
£’000
Cash and cash equivalents
384,203
567,553
20,399
39,610
37,434
11,664
1,060,863
Borrowings
Derivatives
(737,221)
(730,603)
129,929
155,241
(245)
503
–
(73)
(343)
–
–
–
(1,468,412)
285,600
(223,089)
(7,809)
20,657
39,537
37,091
11,664
(121,949)
Interest rate profile
Cash and cash equivalents at 31 March 2018 and 31 March 2017 have maturity periods up to three months (note 3.8).
Bank borrowings are at floating interest rates for periods less than three months while the Group’s Unsecured Notes due 2019 to 2029 have been
swapped to a combination of fixed rates and floating rates which reset on a quarterly and semi-annual basis. The majority of finance leases are at
fixed rates (note 3.10).
3.12 Deferred Income Tax
Deferred tax is an accounting adjustment to provide for tax that is expected to arise in the future as a result
of differences in the accounting and tax bases of assets and liabilities.
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 2018:
Property,
plant and
equipment
£’000
Intangible
assets
£’000
Tax losses
and credits
£’000
Retirement
benefit
obligations
£’000
Derivative
financial
instruments
£’000
Short-term
temporary
differences
and other
£’000
Total
£’000
At 1 April 2017
Consolidated Income Statement
Recognised in Other
Comprehensive Income
Arising on acquisition
Exchange differences and other
18,151
1,026
–
(4,693)
(219)
132,175
(37,084)
(1,036)
1,031
–
27,997
2,644
–
(886)
55
(836)
At 31 March 2018
14,265
125,732
Analysed as:
Deferred tax asset
Deferred tax liability
(6,802)
21,067
14,265
(77)
(1,345)
125,809
125,732
509
(836)
164
DCC plc Annual Report and Accounts 2018
(425)
725
665
–
(30)
935
(510)
1,445
935
(3,257)
(12,930)
132,678
(50)
3,851
(30,501)
(433)
–
–
–
(619)
(260)
232
21,799
2,190
(3,740)
(9,958)
126,398
(3,740)
(13,680)
(26,154)
–
(3,740)
3,722
(9,958)
152,552
126,398
Financial StatementsSection 312456Notes to the Financial Statements (continued)
3.12 Deferred Income Tax continued
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 2017:
Property,
plant and
equipment
£’000
Intangible
assets
£’000
Tax losses
and credits
£’000
Retirement
benefit
obligations
£’000
Derivative
financial
instruments
£’000
Short-term
temporary
differences
and other
£’000
Total
£’000
At 1 April 2016
Consolidated Income Statement
15,834
2,214
113,857
(10,603)
(1,588)
580
(2,494)
2,607
(3,679)
1,756
(9,569)
(2,420)
112,361
(5,866)
Recognised in Other
Comprehensive Income
Arising on acquisition
Deferred tax attributable to
assets held for sale
Exchange differences and other
–
–
(129)
232
–
19,889
–
9,032
At 31 March 2017
18,151
132,175
–
–
–
(28)
(1,036)
Analysed as:
Deferred tax asset
Deferred tax liability
(1,127)
19,278
18,151
(280)
(1,036)
132,455
132,175
–
(1,036)
(413)
(1,334)
–
–
(125)
(425)
(670)
245
(425)
–
–
–
–
(47)
70
(964)
(1,747)
19,842
(59)
8,147
(3,257)
(12,930)
132,678
(3,257)
(16,249)
(22,619)
–
3,319
(3,257)
(12,930)
155,297
132,678
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 deferred tax asset at 31 March 2018 of £26.154 million is expected to be settled/
recovered more than twelve months after the reporting 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.
3.13 Post Employment Benefit Obligations
The Group operates a number of defined benefit and defined contribution pension schemes for our employees.
All of the Group’s defined benefit pension schemes are closed to new members.
The Group operates defined benefit and defined contribution schemes. The pension scheme assets are held in separate trustee administered funds.
The Group operates five defined benefit pension schemes in the Republic of Ireland, four in the UK and four in Germany. 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 April 2014 and 31 December 2017. 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 2018 for IAS 19 by a qualified actuary.
DCC plc Annual Report and Accounts 2018
165
Supplementary InfoFinancial StatementsGovernanceStrategic Report
3.13 Post Employment Benefit Obligations continued
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 reporting 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:
2018
2017
n/a*
n/a*
1.25% – 2.50%
1.25% – 2.50%
2.10%
1.75%
2.00%
1.75%
0.00% – 3.15%
0.00% – 3.25%
1.58% – 4.00%
1.63% – 3.25%
2.65%
3.15%
2.50%
1.00% – 1.70%
2.10%
1.70%
2.55%
3.25%
n/a**
n/a**
n/a**
n/a**
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
German schemes
Rate of increase in salaries
Rate of increase in pensions in payment
Discount rate
Inflation assumption
* There is no future service accrual for the Irish schemes.
** Data for the German schemes relates to TEGA, which was acquired during the current year.
166
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 312456Notes to the Financial Statements (continued) 3.13 Post Employment Benefit Obligations continued
The post-retirement 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 mortality assumptions disclosed for ‘current retirees’ relate to assumptions based on longevity, in years, following retirement at the balance
sheet date, with ‘future retirees’ being that relating to an employee retiring in 20 years time. The mortality assumptions are as follows:
2018
Years
2017
Years
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
Investment funds
Cash
Total fair value at 31 March 2018
Present value of scheme liabilities
23.1
25.0
25.3
27.4
2018
UK
£’000
Germany
£’000
295
194
93
–
262
844
24.3
26.2
27.1
29.1
Total
£’000
26,107
48,993
1,532
5,825
7,194
89,651
ROI
£’000
16,896
31,453
47
2,874
5,661
8,916
17,346
1,392
2,951
1,271
56,931
31,876
(48,657)
(30,281)
(10,427)
(89,365)
Net pension asset/(liability) at 31 March 2018
8,274
1,595
(9,583)
286
Equities
Bonds
Property
Investment funds
Cash
Total fair value at 31 March 2017
Present value of scheme liabilities
Net pension asset/(liability) at 31 March 2017
ROI
£’000
20,320
41,606
177
690
7,223
70,016
2017
UK
£’000
11,202
17,637
1,295
–
1,328
31,462
Total
£’000
31,522
59,243
1,472
690
8,551
101,478
(68,708)
(32,799)
(101,507)
1,308
(1,337)
(29)
DCC plc Annual Report and Accounts 2018
167
Supplementary InfoFinancial StatementsGovernanceStrategic Report 3.13 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 credit
Administration expenses
Total, included in employee benefit expense
Exceptional settlement gain
Total, included in net exceptional items
Interest cost on scheme liabilities
Interest income on scheme assets
Net interest income, included in net finance costs (note 2.7)
2018
£’000
(132)
95
(74)
(111)
414
414
(1,957)
2,014
57
Based on the assumptions employed for the valuation of assets and liabilities at 31 March 2018, the net charge (excluding the exceptional
item above) in the Group Income Statement in the year ending 31 March 2019 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 gain from changes in demographic assumptions
Actuarial gain/(loss) from changes in financial assumptions
Total, included in Other Comprehensive Income
2018
£’000
36
1,453
2,464
1,262
5,215
2017
£’000
(78)
256
(60)
118
–
–
(2,252)
2,294
42
2017
£’000
6,424
(95)
–
(9,385)
(3,056)
Cumulatively since transition to IFRS on 1 April 2004, £51.153 million has been recognised as a charge in the Group Statement of Comprehensive Income.
168
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 312456Notes to the Financial Statements (continued) 3.13 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
Benefit and settlement payments
Arising on acquisition
Exchange
At 31 March
The actual return on plan assets was a gain of £2.050 million (2017: gain of £8.718 million).
The movement in the present value of defined benefit obligations is as follows:
At 1 April
Current service cost
Past service credit
Interest cost
Remeasurements:
– experience variations
– actuarial gain from changes in demographic assumptions
– actuarial (gain)/loss from changes in financial assumptions
Contributions by members
Benefit and settlement payments
Exceptional settlement gain
Arising on acquisition
Exchange
At 31 March
2018
£’000
101,478
2,014
36
4,325
9
(74)
(20,650)
849
1,664
2017
£’000
88,522
2,294
6,424
3,202
10
(60)
(3,997)
–
5,083
89,651
101,478
2018
£’000
2017
£’000
101,507
88,869
132
(95)
1,957
(1,453)
(2,464)
(1,262)
9
(20,650)
(414)
10,485
1,613
89,365
78
(256)
2,252
95
–
9,385
10
(3,997)
–
–
5,071
101,507
The weighted average duration of the defined benefit obligation at 31 March 2018 was 20.2 years (2017: 21.4 years).
Employer contributions for the forthcoming financial year are estimated at £4.2 million. The difference between the actual employer contributions
paid in the current year of £4.3 million and the expectation of £4.1 million included in the 2017 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 2017
financial statements.
DCC plc Annual Report and Accounts 2018
169
Supplementary InfoFinancial StatementsGovernanceStrategic Report 3.13 Post Employment Benefit Obligations continued
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
Change in assumption
Impact on Irish plan liabilities
Impact on UK plan liabilities
Impact on German plan liabilities
Discount rate
Increase/decrease by 0.25%
Decrease/increase by 4.9% Decrease/increase by 5.6% Decrease/increase by 4.5%
Price inflation
Increase/decrease by 0.25%
Increase/decrease by 2.3% Increase/decrease by 4.8% Increase/decrease by 2.9%
Mortality
Increase/decrease by one year
Increase/decrease by 3.5% Increase/decrease by 3.5% Increase/decrease by 4.3%
Republic of Ireland
2017
2018
£’000
£’000
UK
Germany
Total
2018
£’000
2017
£’000
2018
£’000
2017
£’000
2018
£’000
2017
£’000
295
–
177
17
–
262
93
844
–
–
–
–
–
–
–
–
24,344
29,549
1,763
1,973
9,026
39,967
5,825
7,194
11,298
47,945
690
8,551
1,532
1,472
89,651
101,478
Split of scheme assets
Investments quoted in active markets:
Equity instruments:
– developed markets
– emerging markets
Debt instruments:
15,677
18,853
8,372
10,696
1,219
1,467
544
506
– non government debt instruments
– government debt instruments
Investment funds
Cash and cash equivalents
236
2,940
31,217
38,666
2,874
5,661
690
7,223
8,613
8,733
2,951
1,271
8,358
9,279
–
1,328
Unquoted investments:
Property
47
177
1,392
1,295
56,931
70,016
31,876
31,462
170
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 312456Notes to the Financial Statements (continued) 3.14 Acquisition Related Liabilities
Acquisition related liabilities arising on business combinations comprise debt like items and contingent consideration.
Contingent consideration arises when a portion of the purchase price is deferred into the future and represents the
fair value of the estimate of amounts payable to acquire the remaining shareholding.
The Group’s acquisition related liabilities of £97.853 million (2017: £94.917 million) as stated on the Balance Sheet are payable as follows:
Within one year
Between one and two years
Between two and five years
Analysed as:
Non-current liabilities
Current liabilities
The currency profile of the Group’s acquisition related liabilities, which are all floating rate liabilities, is as follows:
Sterling
Euro
Swedish krona
Hong Kong dollar
Other
The movement in the Group’s acquisition related liabilities is as follows:
At 1 April
Arising on acquisition
Unwinding of discount applicable to acquisition related liabilities
Adjustments to contingent consideration (adjustment to goodwill) (note 3.2)
Adjustments to contingent consideration (recognised in the Income Statement) (note 2.6)
Paid during the year
Acquisition related liabilities attributable to assets held for sale
Exchange and other
At 31 March
2018
£’000
26,399
27,228
44,226
97,853
71,454
26,399
97,853
24,939
56,246
3,105
13,404
159
97,853
2018
£’000
94,917
27,840
665
66
(477)
(26,910)
–
1,752
97,853
2017
£’000
28,300
20,147
46,470
94,917
66,617
28,300
94,917
19,473
72,516
2,928
–
–
94,917
2017
£’000
122,642
41,041
751
876
5,114
(59,069)
(23,204)
6,766
94,917
DCC plc Annual Report and Accounts 2018
171
Supplementary InfoFinancial StatementsGovernanceStrategic Report 3.15 Provisions for Liabilities
A provision is recorded when an obligation exists, resulting from a past event and it is probable that cash will be paid
to settle it but there is uncertainty over either the amount or timing of the outflow. The main provisions held by the
Group are in relation to reorganisation programs, environmental obligations, cylinder and tank deposits and
insurance liabilities.
The reconciliation of the movement in provisions for liabilities for the year ended 31 March 2018 is as follows:
At 1 April 2017
Provided during the year
Unwinding of discount applicable to provisions for liabilities
32,752
27,612
–
5,789
263
86,790
149,700
Rationalisation,
restructuring
and redundancy
£’000
Environmental
and
remediation
£’000
Cylinder and
tank deposits
£’000
Insurance
and other
£’000
8,669
2,114
(2,537)
(4,440)
8,128
3,351
17,430
9,623
–
(4,618)
(172)
4,794
253
Total
£’000
286,672
51,693
2,377
(32,505)
(5,089)
14,987
5,206
(15,784)
(9,566)
(477)
26
622
–
2,039
980
44,751
86,295
164,985
27,310
323,341
26,203
18,548
44,751
82,229
4,066
86,295
161,996
2,989
164,985
8,462
18,848
27,310
278,890
44,451
323,341
Utilised during the year
Unutilised/reversed during the year
Arising on acquisition (note 5.2)
Exchange and other
At 31 March 2018
Analysed as:
Non-current liabilities
Current liabilities
The reconciliation of the movement in provisions for liabilities for the year ended 31 March 2017 is as follows:
Rationalisation,
restructuring
and redundancy
£’000
Environmental
and remediation
£’000
Cylinder and
tank deposits
£’000
Insurance
and other
£’000
At 1 April 2016
Provided during the year
Unwinding of discount applicable to provisions for liabilities
Utilised during the year
Unutilised/reversed during the year
Arising on acquisition (note 5.2)
Provisions for liabilities attributable to assets held for sale
Reclassifications
Exchange and other
At 31 March 2017
Analysed as:
Non-current liabilities
Current liabilities
22,264
12,021
–
(12,666)
(836)
12,906
–
(2,527)
1,590
32,752
18,556
14,196
32,752
65,713
3,848
–
(643)
–
3,540
(3,800)
13,377
4,755
86,790
82,698
4,092
86,790
134,752
7,087
1,956
(1,673)
(2,467)
–
–
(925)
10,970
149,700
145,422
4,278
149,700
172
DCC plc Annual Report and Accounts 2018
Total
£’000
244,488
30,668
1,956
21,759
7,712
–
(3,750)
(18,732)
–
–
–
(9,925)
1,634
17,430
8,974
8,456
17,430
(3,303)
16,446
(3,800)
–
18,949
286,672
255,650
31,022
286,672
Financial StatementsSection 312456Notes to the Financial Statements (continued) 3.15 Provisions for Liabilities continued
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 three years.
Environmental and remediation
This provision relates to obligations governing site remediation and improvement costs to be incurred in compliance with environmental regulations
together with the costs associated with removing LPG tanks from customer sites. 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. 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.
Cylinder and tank deposits
This provision relates to DCC LPG’s operations where an obligation arises from the receipt of deposit fees paid by customers for LPG cylinders and
tanks. On receipt of a deposit the Group recognises a liability equal to the deposit received. This deposit will subsequently be refunded at an amount
equal to the original deposit on return of the cylinder or tank together with the original deposit receipt. Cylinder and tank deposits acquired through
business combinations are measured initially at their fair value at the acquisition date (i.e. net present value) and the unwinding of the discount
element is reflected in the Income Statement. The majority of this obligation will unwind over a 25-year timeframe but the exact timing of settlement
of this provision is not certain.
Insurance and other
The Group operates a level of self-insurance for motor liability and public and products liability. Under these arrangements the Group retains certain
insurance exposure up to pre-determined self-insurance thresholds. This provision reflects an estimation of claims that are classified as incurred but
not reported and also the outstanding loss reserve. A significant element of the provision is subject to external assessments. The utilisation of the
provision is dependent on the timing of settlement of the outstanding claims. Historically, the average time for settlement of outstanding claims
ranges from 3-5 years from the date of the claim.
3.16 Government Grants
Government grants relate to capital grants received by the Group and are amortised to the Income Statement over
the estimated useful lives of the related capital assets.
At 1 April
Amortisation in year
Government grants attributable to assets held for sale
Exchange and other adjustments
At 31 March
Analysed as:
Non-current liabilities
Current liabilities (note 3.6)
2018
£’000
270
(24)
–
–
246
237
9
246
2017
£’000
930
(235)
(431)
6
270
261
9
270
DCC plc Annual Report and Accounts 2018
173
Supplementary InfoFinancial StatementsGovernanceStrategic Report Section 4 Equity
4.1 Share Capital and Share Premium
The ordinary shareholders of DCC plc own the Company. This note details how the total number of ordinary shares
in issue has changed during the year and how many of these ordinary shares are held as Treasury Shares.
Authorised
152,368,568 ordinary shares of €0.25 each
Issued
Year ended 31 March 2018
2018
£’000
2017
£’000
25,365
25,365
Number
of shares
Share
capital
£’000
Share
premium
£’000
Total
£’000
At 31 March 2017 (including 3,613,043 ordinary shares held as treasury shares)
92,429,404
15,455
277,211
292,666
Premium arising on re-issue of treasury shares (net of expenses)
–
–
3,322
3,322
At 31 March 2018 (including 3,207,501 ordinary shares held as treasury shares)
92,429,404
15,455
280,533
295,988
Year ended 31 March 2017
Number
of shares
Share
capital
£’000
At 31 March 2017 (including 3,613,043 ordinary shares held as treasury shares)
92,429,404
15,455
Share
premium
£’000
277,211
Total
£’000
292,666
As at 31 March 2018, the total authorised number of ordinary shares is 152,368,568 shares (2017: 152,368,568 shares) with a par value of €0.25 per
share (2017: €0.25 per share). Share premium relates to the share premium arising on the issue of shares.
During the year the Company re-issued 405,542 treasury shares for a consideration (net of expenses) of £3.322 million.
All shares, with the exception of ordinary shares held as treasury 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 2.5 to the financial statements and in the Remuneration Report on pages 110 and 111.
Restriction on transfer of shares
The Directors may, at 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.
174
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 412356Notes to the Financial Statements (continued) 4.2 Other Reserves
This note details the movement in the Group’s other reserves which are treated as different categories of equity
as required by accounting standards.
At 1 April 2016
Currency translation
Cash flow hedges:
– fair value gain in year – private placement debt
– fair value gain in year – other
– tax on fair value net gains
– transfers to sales
– transfers to cost of sales
– transfers to operating expenses
– tax on transfers
Share based payment
At 31 March 2017
Currency translation:
– arising in the year
– recycled to the Income Statement on disposal
Cash flow hedges:
– fair value loss in year – private placement debt
– fair value gain in year – other
– tax on fair value net losses
– transfers to sales
– transfers to cost of sales
– transfers to operating expenses
– tax on transfers
Share based payment
At 31 March 2018
Share based
payment
reserve1
£’000
Cash flow
hedge
reserve2
£’000
14,954
(8,112)
Foreign
currency
translation
reserve3
£’000
70,887
34,650
–
–
–
–
–
–
–
–
Other
reserves4
£’000
932
–
–
–
–
–
–
–
–
–
Total
£’000
78,661
34,650
13,737
27,853
(7,133)
1,117
(28,252)
(21,258)
8,467
3,192
–
13,737
27,853
(7,133)
1,117
(28,252)
(21,258)
8,467
–
(13,581)
105,537
932
111,034
–
–
107
(4,548)
(35,428)
20,024
2,536
(1,273)
(18,825)
32,472
(2,103)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
107
(4,548)
(35,428)
20,024
2,536
(1,273)
(18,825)
32,472
(2,103)
4,737
(16,178)
101,096
932
108,733
–
–
–
–
–
–
–
–
3,192
18,146
–
–
–
–
–
–
–
–
–
4,737
22,883
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 reporting date.
4. The Group’s other reserves comprise a capital conversion reserve fund and an unrealised gain on the disposal of an associate.
DCC plc Annual Report and Accounts 2018
175
Supplementary InfoFinancial StatementsGovernanceStrategic Report
4.3 Retained Earnings
Retained Earnings represents the accumulated earnings of the Group not distributed to shareholders and is shown
net of the cost to the Group of acquiring shares held as Treasury Shares.
At 1 April
Net income recognised in Income Statement
Net income recognised in Other Comprehensive Income:
– remeasurements of defined benefit pension obligations
– deferred tax on remeasurements
Re-issue of treasury shares (net of expenses)
Dividends
At 31 March
2018
£’000
2017
£’000
1,074,434
261,824
948,316
216,197
5,215
(665)
–
(3,056)
413
2,600
(102,871)
(90,036)
1,237,937
1,074,434
The cost to the Group and the Company of €46.143 million to acquire the 3,207,501 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: €14.39) between
27 November 2003 and 19 June 2006 and are primarily held to satisfy exercises under the Group’s share options and awards schemes.
4.4 Non-Controlling Interests
Non-controlling interests principally comprises the 40% equity interest in our Danish subsidiary DCC Holding A/S
which is not owned by the Group.
At 1 April
Share of profit for the financial year
Dividends to non-controlling interests
Exchange
At 31 March
2018
£’000
29,587
5,097
–
575
35,259
2017
£’000
30,833
1,548
(5,228)
2,434
29,587
176
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 512346Notes to the Financial Statements (continued) Section 5 Additional Disclosures
5.1 Foreign Currency
This note details the exchange rates used to translate non-sterling Income Statement and Balance Sheet amounts
into sterling, which is the Group’s presentation currency.
The Group’s financial statements are presented in sterling, denoted by the symbol ‘£’. Results and cash flows of operations based in non-sterling
countries have been translated into sterling at average rates for the year, and the related balance sheets have been translated at the rates of
exchange ruling at the balance sheet date. The principal exchange rates used for translation of results and balance sheets into sterling were
as follows:
Euro
Danish Krone
Swedish Krona
Norwegian Krone
US Dollar
Hong Kong Dollar
Average rate
Closing rate
2018
Stg£1=
2017
Stg£1=
2018
Stg£1=
2017
Stg£1=
1.1366
8.4603
11.0482
10.7901
1.3236
10.3312
1.1956
8.9150
11.3729
10.9811
1.3181
10.2260
1.1430
8.5187
11.7548
11.0607
1.4083
11.0522
1.1689
8.6942
11.1423
10.7169
1.2497
9.7106
5.2 Business Combinations
The Group acquired a number of businesses during the year. This note provides details on the consideration paid
and/or payable as well as the provisional fair values of the net assets acquired.
A key strategy of the Group is to create and sustain market leadership positions through 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 on 31 March 2018 of 100% of NGL Energy Partners LP’s Retail West LPG division, Hicksgas LLC (‘Retail West’). Retail West is a US
based LPG distributor with leading market positions in Illinois, Indiana and Kansas and also operates in seven other states across the Mid-West
and North-West regions;
the acquisition on 31 March 2018 of 100% of Tega-Technische Gase und Gasetechnik GmbH (‘TEGA’). TEGA is an LPG and refrigerant gas
distribution business and operates across five sites largely based in southern Germany;
the acquisition in February 2018 of 100% of the trade and assets of the British LPG distribution business (‘Countrywide LPG’) of Countrywide
Farmers plc. Countrywide LPG supplies bulk and cylinder LPG to domestic, agricultural and commercial customers in Britain;
the acquisition of 100% of Elite One Source Nutritional Services Inc (‘Elite’) in February 2018. Elite is a US based provider of contract
manufacturing and related services to the growing healthcare and dietary supplements market in the US;
the completion of the acquisition of Shell Gas (LPG) Holdings BV’s LPG business in Hong Kong and Macau (‘Shell Hong Kong & Macau’), as
announced in January 2018. The business provides LPG in bulk, cylinder and autogas formats to domestic, commercial and industrial customers
in the region;
the completion of the acquisition of Esso’s retail petrol station network in Norway, as announced in October 2017, comprising a national network
of company-operated sites and contracts to supply Esso-branded dealer owned stations (together referred to as ‘Esso Retail Norway’); and
the acquisition of 100% of MTR Group Ltd (‘MTR’) in July 2017. MTR is a UK based provider of second lifecycle solutions for mobile and
tablet devices.
•
•
•
•
•
•
DCC plc Annual Report and Accounts 2018
177
Supplementary InfoFinancial StatementsGovernanceStrategic Report 5.2 Business Combinations continued
The acquisition data presented below reflects the fair value of the identifiable net assets acquired (excluding net cash/debt acquired) in respect
of acquisitions completed during the year.
Esso Retail
Norway
2018
£’000
Others
2018
£’000
Total
2018
£’000
Total
2017
£’000
63,822
55,885
–
6,047
78,610
87,728
497
362
142,432
143,613
497
6,409
8,265
68,513
404
60
125,754
167,197
292,951
77,242
6,587
6,945
13,532
28,545
45,039
73,584
35,132
51,984
87,116
32,207
206,528
238,735
(12,853)
(15,355)
–
(6,042)
–
(9,636)
(4,674)
(102)
(28,208)
(9,636)
(10,716)
(102)
(19,902)
–
(11,129)
–
(18,895)
(29,767)
(48,662)
(31,031)
(798)
(37,202)
(38,000)
(164,777)
–
–
–
(4,271)
(2,629)
(57)
(4,271)
(2,629)
(5,317)
12,341
(57)
(13,522)
(798)
(44,159)
(44,957)
(171,275)
119,593
120,925
240,518
166,855
284,417
451,272
286,448
405,342
691,790
240,518
441,943
682,461
–
240,518
(18,352)
423,591
(18,352)
664,109
–
27,681
27,681
240,518
451,272
691,790
113,671
117,175
230,846
242,018
(38,691)
203,327
27,519
230,846
Assets
Non-current assets
Property, plant and equipment (note 3.1)
Intangible assets – other intangible assets (note 3.2)
Equity accounted investments (note 3.3)
Deferred income tax assets
Total non-current assets
Current assets
Inventories (note 3.7)
Trade and other receivables (note 3.7)
Total current assets
Liabilities
Non-current liabilities
Deferred income tax liabilities
Post employment benefit obligations
Provisions for liabilities
Acquisition related liabilities
Total non-current liabilities
Current liabilities
Trade and other payables (note 3.7)
Provisions for liabilities
Current income tax (liability)/asset
Acquisition related liabilities
Total current liabilities
Identifiable net assets acquired
Goodwill (note 3.2)
Total consideration
Satisfied by:
Cash
Cash and cash equivalents acquired
Net cash outflow
Acquisition related liabilities
Total consideration
178
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 512346Notes to the Financial Statements (continued) 5.2 Business Combinations continued
The acquisition of Esso Retail Norway has been deemed to be a substantial transaction and separate disclosure of the fair values of the identifiable
assets and liabilities has therefore been made. None of the remaining business combinations completed during the period 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:
Esso Retail Norway
Non-current assets (excluding goodwill)
Current assets
Non-current liabilities
Current liabilities
Identifiable net assets acquired
Goodwill arising on acquisition
Total consideration
Others
Non-current assets (excluding goodwill)
Current assets
Non-current liabilities
Current liabilities
Identifiable net assets acquired
Goodwill arising on acquisition
Total consideration
Total
Non-current assets (excluding goodwill)
Current assets
Non-current liabilities
Current liabilities
Identifiable net assets acquired
Goodwill arising on acquisition
Total consideration
Book
value
£’000
Fair value
adjustments
£’000
Fair
value
£’000
69,869
13,532
55,885
–
125,754
13,532
(6,042)
(12,853)
(18,895)
(520)
76,839
163,679
240,518
(278)
42,754
(42,754)
–
Book
value
£’000
Fair value
adjustments
£’000
80,296
73,977
(14,623)
(43,953)
95,697
355,575
451,272
86,901
(393)
(15,144)
(206)
71,158
(71,158)
–
Book
value
£’000
Fair value
adjustments
£’000
150,165
87,509
(20,665)
(44,473)
172,536
519,254
691,790
142,786
(393)
(27,997)
(484)
113,912
(113,912)
–
(798)
119,593
120,925
240,518
Fair
value
£’000
167,197
73,584
(29,767)
(44,159)
166,855
284,417
451,272
Fair
value
£’000
292,951
87,116
(48,662)
(44,957)
286,448
405,342
691,790
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. The acquisitions of Retail West and TEGA both completed on 31 March 2018 and,
as such, it has not yet been feasible to perform a preliminary assignment of fair values to identifiable net assets. Any amendments to fair values within
the twelve month timeframe from the date of acquisition will be disclosable in the 2019 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.
£101.086 million of the goodwill recognised in respect of acquisitions completed during the financial year is expected to be deductible for tax purposes.
Acquisition and related costs included in other operating expenses in the Group Income Statement amounted to £12.789 million.
No contingent liabilities were recognised on the acquisitions completed during the financial year or the prior financial years.
DCC plc Annual Report and Accounts 2018
179
Supplementary InfoFinancial StatementsGovernanceStrategic Report 5.2 Business Combinations continued
The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to £53.056 million. The fair value
of these receivables is £51.984 million (all of which is expected to be recoverable) and is inclusive of an aggregate allowance for impairment of
£1.072 million. In relation to the acquisition of Esso Retail Norway, the gross contractual value of trade and other receivables as at the date of
acquisition amounted to £7.223 million. The fair value of these receivables is £6.945 million (all of which is expected to be recoverable) and is
inclusive of an aggregate allowance for impairment of £0.278 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 £15.346 million to
£51.737 million.
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
Profit for the financial year
2018
£’000
347,397
(314,658)
32,739
(18,244)
14,495
(208)
14,287
(2,774)
11,513
The revenue and profit of the Group for the financial year (on a continuing basis) 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
The acquisition of Esso Retail Norway during the year contributed £263.4 million to revenues and £2.6 million to profit after tax.
2018
£’000
14,977,892
274,482
180
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 512346Notes to the Financial Statements (continued) 5.3 Cash Generated from Operations
This note reconciles how the Group’s profit for the year translates into cash flows generated from operating activities.
Profit for the financial year
Add back non-operating expenses/(income):
– tax
– share of equity accounted investments’ profit
– net operating exceptionals
– net finance costs
Operating profit before exceptionals
– share-based payments expense (note 2.5)
– depreciation (note 3.1)
– amortisation of intangible assets (note 3.2)
– profit on disposal of property, plant and equipment
– amortisation of government grants
– other
Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation):
– inventories (note 3.7)
– trade and other receivables (note 3.7)
– trade and other payables (note 3.7)
Cash generated from operations before exceptionals
2018
£’000
2017
£’000
266,921
217,745
24,046
(368)
15,271
35,452
49,054
(712)
36,297
21,999
341,322
324,383
4,737
93,722
43,059
(167)
(36)
4,555
3,192
92,015
39,168
(173)
(235)
4,571
(39,474)
(21,793)
(148,227)
(101,256)
173,943
473,434
206,998
546,870
5.4 Commitments
A commitment represents an obligation to make a payment in the future as long as the counterparty meets its
obligations, and mainly relates to leases and agreements to buy capital assets. These amounts are not included
in the Group’s Balance Sheet as we have not yet received the goods or services from the supplier.
Capital Expenditure Commitments
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
2018
£’000
2017
£’000
17,259
30,439
149,047
166,306
101,188
131,627
DCC plc Annual Report and Accounts 2018
181
Supplementary InfoFinancial StatementsGovernanceStrategic Report 5.4 Commitments continued
Commitments under Operating and Finance Leases
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
2018
£’000
2017
£’000
52,769
138,854
153,356
344,979
44,182
81,777
110,768
236,727
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 2018, £84.771 million (2017: £47.684 million) was recognised as an expense on continuing operations 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
Minimum
payments
£’000
2018
Present value
of payments
£’000
2017
Minimum
payments
£’000
Present value
of payments
£’000
362
722
1,084
(29)
1,055
356
699
1,055
–
1,055
194
169
363
(8)
355
190
165
355
–
355
5.5 Contingencies
Contingent liabilities include guarantees given in respect of borrowings and other obligations arising in the ordinary
course of business.
Guarantees
The Company has given guarantees of £1,927.972 million (2017: £1,682.015 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 357 of the Companies Act, 2014, the Company has guaranteed the liabilities of the following subsidiaries;
Alvabay Limited, DCC Corporate Funding Unlimited Company, DCC Corporate Partners Unlimited Company, DCC Corporate Services dac, DCC
Energy Limited, DCC Euro 2010 Limited, DCC Facilities Limited, DCC Finance Limited, DCC Finance & Treasury dac, DCC Financial Services Unlimited
Company, DCC Financial Services Ireland Limited, DCC Funding 2007 dac, DCC Healthcare Limited, DCC Management Services Limited, DCC
Nominees Unlimited Company, DCC Technology Limited, DCC Technology (Holdings) Limited, DCC Treasury 2010 dac, DCC Treasury Ireland 2013
dac, DCC Treasury Management Unlimited Company, DCC Treasury Solutions Limited, Emo Oil Limited, Energy Procurement Limited, Energy
Procurement Ireland 2013 Limited, Exertis Ireland Limited, Fannin Limited, Flogas Ireland Limited, Flogas Natural Gas Limited, Heleconia Limited,
Medisource Ireland Limited, SerCom (Holdings) Limited and Starata Limited. As a result, these companies will be exempted from the filing provisions
of Sections 347 and 348 of the Companies Act, 2014.
182
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 512346Notes to the Financial Statements (continued)
5.6 Related Party Transactions
The Group’s principal related parties are the Group’s subsidiaries, joint ventures, associates and key management
personnel of the Group.
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.
Subsidiaries, joint ventures and associates
The consolidated financial statements include the financial statements of the Parent Company and its subsidiaries, joint ventures and associates
as documented in the accounting policies in note 5.9 and the basis of consolidation in note 1.3. A listing of the principal subsidiaries, joint ventures
and associates is provided in the Group Directory on pages 207 to 210 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 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 2.5)
2018
£’000
4,189
485
1,468
6,142
2017
£’000
4,780
1,201
1,012
6,993
5.7 Financial Risk and Capital Management
This note details the Group’s treasury management and financial risk management objectives and policies.
Information is also provided regarding the Group’s exposure and sensitivity to capital risk, credit risk, liquidity risk,
foreign exchange risk, interest rate risk and commodity price risk, and the policies in place to monitor and manage
these risks.
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.
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/cash is to ensure a structure of longer term debt funding and cash balances with deposit maturities up to three months.
The capital structure of the Group, which comprises capital and reserves attributable to the owners of the Parent Company, net debt and acquisition
related liabilities, may be summarised as follows:
Capital and reserves attributable to the owners of the Parent Company
Net debt (note 3.11)
Acquisition related liabilities (note 3.14)
At 31 March
2018
£’000
2017
£’000
1,642,658
1,478,134
542,662
97,853
121,949
118,121
2,283,173
1,718,204
DCC plc Annual Report and Accounts 2018
183
Supplementary InfoFinancial StatementsGovernanceStrategic Report
5.7 Financial Risk and Capital Management continued
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 2017. 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, in conjunction with Group Commodity Risk Management, manage commodity price exposures, within approved policies and guidelines.
Monitoring of compliance with the policies and guidelines is managed by the Group Risk Management function.
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.
The Group’s trade receivables are generally unsecured and non-interest bearing and 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.
As detailed in note 3.5, the Group’s trade receivables at 31 March 2018 amount to £1,264.019 million (2017: £1,084.215 million). Customer credit risk
arising in the context of the Group’s operations is not significant and the total provision for impairment of trade receivables amounts to 1.7% of the
Group’s gross trade receivables (2017: 2.0%). The vast majority of the provision for impairment relates to trade and other receivables balances which
are over 6 months overdue.
Receivable balances classified as neither past due nor impaired represent 87% of the total trade receivables balance at 31 March 2018 (2017: 87%).
These balances are expected to be fully recoverable. Included in the Group’s trade receivables at 31 March 2018 are balances of £144.672 million
(2017: £121.330 million) which are past due at the reporting date but not impaired.
Where appropriate, certain of the Group’s operations selectively utilise supply chain financing solutions to sell, on a non-recourse basis, a portion
of their receivables relating to certain larger supply chain/sales and marketing activities. The level of supply chain financing at 31 March 2018 was
£202.168 million (2017: £165.609 million).
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. Deposits are also placed with AAA credit rated
money market funds. 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 2018 of £1,038.827 million, 7.7% (£80.0 million) was with
money market funds, 57.5% (£597.121 million) was with money market funds or financial institutions with a minimum rating in the A-1 (short-term)
category of Standard and Poor’s and 98.1% (£1,019.379 million) was with money market funds or financial institutions with a minimum rating in the
A-2 (short-term) category of Standard and Poor’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 2018, derivative transactions were with counterparties with ratings ranging from AA- to BBB- (long-term) with
Standard and Poor’s or Aa2 to Ba1 (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.
(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, 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 management accounts. Sensitivity analysis using various scenarios are applied to forecasts to assess their impact
on covenants and net debt/cash. During the year to 31 March 2018, 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.
184
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 512346Notes to the Financial Statements (continued) 5.7 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.
As at 31 March 2018
Financial liabilities – cash outflows
Trade and other payables
Interest bearing loans and borrowings
Interest payments on interest bearing loans and borrowings
Acquisition related liabilities
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
As at 31 March 2017
Financial liabilities – cash outflows
Trade and other payables
Interest bearing loans and borrowings
Interest payments on interest bearing loans and borrowings
Acquisition related liabilities
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
1 year
£’000
Between
1 and 2 years
£’000
Between
2 and 5 years
£’000
Over
5 years
£’000
Total
£’000
(2,063,260)
–
–
–
(2,063,260)
(74,897)
(56,180)
(26,399)
(21,339)
(424)
(223,986)
(202,983)
(1,165,311)
(1,667,177)
(56,137)
(27,228)
(128,072)
(83,493)
(323,882)
(44,226)
–
(97,853)
(202,204)
(199,888)
(594,969)
(1,018,400)
(548)
–
–
(972)
(2,242,499)
(510,103)
(575,169)
(1,843,773)
(5,171,544)
5,728
40,788
46,516
5,702
265,784
271,486
15,805
251,079
266,884
15,613
42,848
657,115
1,214,766
672,728
1,257,614
Less than
1 year
£’000
Between
1 and 2 years
£’000
Between
2 and 5 years
£’000
Over
5 years
£’000
Total
£’000
(1,820,517)
(147,639)
(61,204)
(28,300)
(39,154)
(994)
–
(140)
(58,551)
(20,147)
(17,340)
(382)
–
(474,549)
(132,261)
(46,470)
–
(1,820,517)
(800,465)
(1,422,793)
(82,900)
(334,916)
–
(94,917)
(367,028)
(591,043)
(1,014,565)
–
–
(1,376)
(2,097,808)
(96,560)
(1,020,308)
(1,474,408)
(4,689,084)
3,913
88,068
91,981
3,534
53,075
56,609
9,999
552,190
562,189
6,053
23,499
770,777
1,464,110
776,830
1,487,609
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.
DCC plc Annual Report and Accounts 2018
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Supplementary InfoFinancial StatementsGovernanceStrategic Report 5.7 Financial Risk and Capital Management continued
(iii) Market risk management
Foreign exchange risk management
DCC’s presentation 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 there is no
commitment or intention to remit earnings.
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 cross currency interest rate swaps into) the relevant currency or
through currency swaps related to intercompany funding, although these hedges are 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 2.2% weakening in the value of sterling against the
euro during the year ended 31 March 2018 was the main element of the translation gain of £0.7 million arising on the translation of DCC’s non-
sterling denominated net asset position at 31 March 2018 as set out in the Group Statement of Comprehensive Income.
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 currencies 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. The Group also
hedges a proportion of anticipated transactions in certain subsidiaries for periods ranging up to eighteen months with such transactions qualifying
as ‘highly probable’ forecast transactions for IAS 39 hedge accounting purposes.
Sensitivity to currency movements
A change in the value of other currencies by 10% against sterling would have a £13.1 million (2017: £12.7 million) impact on the Group’s profit before
tax and exceptional items, would change the Group’s equity by £74.6 million and change the Group’s net debt by £46.4 million (2017: £53.0 million
and £11.5 million respectively). These amounts include an insignificant amount of transactional currency exposure.
Interest rate risk management
On a net debt/cash 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
Based on the composition of net debt at 31 March 2018 a one percentage point (100 basis points) change in average floating interest rates would
have a £7.0 million (2017: £2.5 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 3.9 and 3.10.
Commodity price risk management
DCC, through its LPG and Retail & Oil divisions, procures, markets and sells LPG, natural gas, electricity and oil, and, as such, is exposed to changes in
commodity cost prices. In general, market dynamics are such that commodity cost price movements are promptly reflected in sales prices. In certain
markets, and in particular in the LPG division, short-term or seasonal price stability is preferred by certain customer segments which requires hedging a
proportion of forecasted transactions, with such transactions qualifying as ‘highly probable’ for IAS 39 hedge accounting purposes. DCC uses both forward
purchase contracts and derivative commodity instruments to support its pricing strategy for a portion of expected future sales, typically for periods of less
than 12 months.
Fixed price supply contracts are occasionally provided to certain customers for periods typically less than 12 months in duration. DCC fixes its cost of sales
on contracted future volumes where the customer contract contains a take-or-pay arrangement that permits the customer to purchase a fixed amount
of product for a fixed price during a specified period, and requires payment even if the customer does not take delivery of the product. Where a take-or-
pay clause is not included in the customer contract, DCC hedges a portion of forecasted sales volume recognising that certain sales, such as in natural gas
and electricity in particular, are exposed to volumetric risk in the form of an uncertain consumption profile arising from a range of factors, including supply
dynamics and the weather.
The LPG and Retail & Oil divisions do not hold significant amounts of commodity inventory relative to purchases and sales; however, for certain inventory,
such as marine gasoil and natural gas, DCC may enter hedge contracts to manage price exposures. The LPG and Retail & Oil divisions both enter into
commodity hedges to fix a portion of own fuel costs. Certain activities of individual businesses have been centralised under the supervision of the DCC
Group Commodity Risk Management function. Divisional and subsidiary management, in conjunction with the Group’s Commodity Risk Management
function, manage commodity price exposures within approved policies and guidelines.
All commodity hedging counterparties are approved by the Chief Executive and the Chief Financial Officer and are reviewed by the Board.
186
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 512346Notes to the Financial Statements (continued) 5.7 Financial Risk and Capital Management continued
Sensitivity to commodity price movements
Due to pricing dynamics in the oil distribution market, an increase or decrease of 10% in the commodity cost price of oil would have an immaterial
impact on the Group’s profit before tax (2017: immaterial) and an immaterial impact on the Group’s equity (2017: immaterial).
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.
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 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, financial liabilities and cash and cash equivalents approximates their fair values, largely due
to their short-term maturities. The nominal value less impairment provision of trade receivables and payables approximate to 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 financial assets and
financial liabilities:
Financial assets
Derivative financial instruments
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Borrowings
Derivative financial instruments
Acquisition related liabilities
Trade and other payables
2018
2017
Book value
£’000
Fair value
£’000
Book value
£’000
Fair value
£’000
111,135
111,135
292,000
292,000
1,426,217
1,426,217
1,222,597
1,222,597
1,038,827
1,038,827
1,048,064
1,048,064
2,576,179
2,576,179
2,562,661
2,562,661
1,673,418
1,699,140
1,468,412
1,485,574
19,206
97,583
19,206
97,853
6,400
94,917
6,400
94,917
2,063,260
2,063,260
1,820,517
1,820,517
3,853,467
3,879,459
3,390,246
3,407,408
DCC plc Annual Report and Accounts 2018
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Supplementary InfoFinancial StatementsGovernanceStrategic Report 5.7 Financial Risk and Capital Management continued
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).
Fair value measurement as at 31 March 2018
Financial assets
Derivative financial instruments (note 3.9)
Financial liabilities
Acquisition related liabilities (note 3.14)
Derivative financial instruments (note 3.9)
Fair value measurement as at 31 March 2017
Financial assets
Derivative financial instruments (note 3.9)
Financial liabilities
Acquisition related liabilities (note 3.14)
Derivative financial instruments (note 3.9)
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
–
–
–
–
–
111,135
111,135
–
–
111,135
111,135
–
97,853
97,853
19,206
–
97,853
117,059
19,206
19,206
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
–
–
–
–
–
292,000
292,000
–
6,400
6,400
–
–
292,000
292,000
94,917
–
94,917
6,400
94,917
101,317
Level 2 fair value measurement:
The specific valuation techniques used to value financial instruments that are carried at fair value using level 2 valuation techniques are:
• 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 based on observable yield curves.
• The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the reporting date with the resulting
value discounted back to present value.
• The fair value of forward commodity contracts is determined using quoted forward commodity prices at the reporting date with the resulting
value discounted back to present value.
Level 3 fair value measurement:
Acquisition related liabilities are included in Level 3 of the fair value hierarchy. Details of the movement in the year are included in note 3.14.
The specific valuation techniques used to value contingent consideration that is carried at fair value using level 3 valuation techniques are:
• The expected future payments are determined by forecasting the acquiree’s relevant basis for the contingent consideration (i.e. valuations based
on EBITDA or EBIT multiples) as appropriate to the specific contractual earn out arrangement.
• The present value of the estimated future expected payments are discounted using a risk-adjusted discount rate where the time value of money
is material.
The significant unobservable inputs are as follows:
•
•
•
forecasted average adjusted operating profit growth rate 2.5%-9.0%;
forecasted average outflow on Butagaz acquisition related liabilities £6m per annum; and
risk adjusted discount rate 1.0%-1.4%.
188
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 512346Notes to the Financial Statements (continued) 5.7 Financial Risk and Capital Management continued
The estimated fair value of contingent consideration would increase/(decrease) if EBITDA/EBIT growth was higher/(lower), if the forecasted outflow
on Butagaz acquisition related liabilities was higher/(lower) or if the risk-adjusted discount rate was lower/(higher). For the fair value of contingent
consideration, a reasonably possible change to one of the significant unobservable inputs at 31 March 2018, holding the other inputs constant,
would have the following effects:
Impact on the carrying value of contingent consideration
Forecasted average adjusted operating profit growth rate (1% movement)
Forecasted outflow on Butagaz acquisition related liabilities (5% movement)
Risk adjusted discount rate (0.5% movement)
Offsetting financial assets and financial liabilities
(i) Financial assets
The following financial assets are subject to offsetting, enforceable master netting arrangements or similar agreements:
2018
£’000
302
2,275
1,077
As at 31 March 2018
Derivative financial instruments
Cash and cash equivalents
As at 31 March 2017
Derivative financial instruments
Cash and cash equivalents
Gross amounts
of recognised
financial
liabilities set
off in the
Balance Sheet
£’000
Net amounts
of financial
assets
presented in
the Balance
Sheet
£’000
Related amounts not set off in the
Balance Sheet
Financial
liabilities
£’000
Cash collateral
received
£’000
–
–
–
103,013
221,890
324,903
(10,027)
(59,538)
(69,565)
–
–
–
Gross amounts
of recognised
financial
liabilities set
off in the
Balance Sheet
£’000
Net amounts
of financial
assets
presented in
the Balance
Sheet
£’000
Related amounts not set off in the
Balance Sheet
Financial
liabilities
£’000
Cash collateral
received
£’000
–
–
–
286,976
243,873
530,849
–
(81,739)
(81,739)
–
–
–
Gross amounts
of recognised
financial assets
£’000
103,013
221,890
324,903
Gross amounts
of recognised
financial assets
£’000
286,976
243,873
530,849
Net amount
£’000
92,986
162,352
255,338
Net amount
£’000
286,976
162,134
449,110
(ii) Financial liabilities
The following financial liabilities are subject to offsetting, enforceable master netting arrangements or similar agreements:
As at 31 March 2018
Derivative financial instruments
Bank borrowings
As at 31 March 2017
Derivative financial instruments
Bank borrowings
Gross amounts
of recognised
financial
liabilities
£’000
Gross amounts
of recognised
financial
assets set
off in the
Balance Sheet
£’000
Net amounts
of financial
liabilities
presented in
the Balance
Sheet
£’000
Related amounts not set off in the
Balance Sheet
Financial
assets
£’000
Cash collateral
provided
£’000
Net amount
£’000
10,112
59,538
69,650
–
–
–
10,112
59,538
69,650
(10,027)
(59,538)
(69,565)
–
–
–
85
–
85
Gross amounts
of recognised
financial
liabilities
£’000
Gross amounts
of recognised
financial
assets set
off in the
Balance Sheet
£’000
Net amounts
of financial
liabilities
presented in
the Balance
Sheet
£’000
Related amounts not set off in the
Balance Sheet
Financial assets
£’000
Cash collateral
provided
£’000
Net amount
£’000
–
81,739
81,739
–
–
–
–
81,739
81,739
–
(81,739)
(81,739)
–
–
–
–
–
–
DCC plc Annual Report and Accounts 2018
189
Supplementary InfoFinancial StatementsGovernanceStrategic Report 5.7 Financial Risk and Capital Management continued
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.
5.8 Events after the Balance Sheet Date
This note provides details on material events which have occurred between the year end date of 31 March and the
date of approval of the financial statements.
There have been no material events subsequent to 31 March 2018 which would require disclosure in this report.
5.9 Summary of Significant Accounting Policies
This section sets out the Group’s accounting policies which are applied in recognising and measuring transactions
and balances arising in the year.
Revenue Recognition
Revenue comprises the fair value of the sale of goods and services to external customers net of value added tax, volume and promotional rebates,
allowances and discounts. Revenue is generally recognised on a duty inclusive basis where applicable. Revenue is recorded when the collection of the
amount is reasonably assured and when specific criteria have been met for each of the Group’s activities as detailed below.
Sales of goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods are transferred to the customer and
when the amount of revenue and costs incurred can be measured reliably. This generally arises on delivery or in accordance with specific terms and
conditions agreed with individual customers. In the case of consignment stock arrangements, revenue is recognised on the date that legal title
passes. Sales returns and discounts are recorded in the same period as the original revenue.
DCC LPG derives the majority of its revenue from the sale of LPG and natural gas. Revenue is recognised when the products are delivered to the
customer. Products can be sold under short or long-term agreements at prevailing market prices or at fixed prices for which DCC LPG will have fixed
supply prices.
DCC Retail & Oil derives most of its revenue from the sale of transport and commercial fuels, heating oils and related products. Revenue is
recognised when the products are delivered to the customer.
DCC Healthcare derives its revenue from the sale of a broad range of third party and own-branded pharmaceutical and medical devices. Revenue
is also generated from the manufacture of products for health and beauty brand owners. Revenue is recognised on delivery of the product to the
customer in the majority of cases.
DCC Technology derives the majority of its revenue from the sale of consumer and SME focused technology products. Revenue is generally
recognised on despatch. Should volume and promotional rebates be granted to customers they are recognised as a reduction in sales revenue
at the time of the sale based on managements’ estimate of the likely rebate to be awarded to customers. Estimates are based on historical results,
taking into consideration the type of customer, the type of transaction and the specific facts of each arrangement.
Sales of services
Revenue from the rendering of services is recognised in the period in which the services are rendered. Where services are performed rateably over
a period of time revenue is recognised on a straight-line basis over the period of the contract.
Service revenue in DCC LPG and Retail & Oil is generated from a variety of value added services provided to customers. Revenue is recognised as the
service is provided.
DCC Healthcare generates service revenue from a variety of sources such as logistics services including stock management, distribution services
to hospitals and healthcare manufacturers as well as engineering and preventative maintenance services. Revenue is recognised as the service is
rendered and completed.
DCC Technology generates service revenue from providing a range of value-added services to both its customers and suppliers including third party
logistics, web site development and management, outsourced managed services, training and certain supply chain management services such as
quality assurance and compliance. Revenue relating to these services is recognised as the service is provided.
190
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Financial StatementsSection 512346Notes to the Financial Statements (continued)
5.9 Summary of Significant Accounting Policies continued
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income
Dividend income from investments is recognised when shareholders’ right to receive payment have been established.
Rental income
Rental income from operating leases is recognised on a straight line basis over the term of the lease. The related assets are recorded as plant
and machinery within property, plant and equipment and are depreciated on a straight-line basis over the useful lives of the assets.
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 four reportable
operating segments: DCC LPG, DCC Retail & Oil, DCC Healthcare and DCC Technology.
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 as a significant portion of the Group’s revenue and operating profit is generated in sterling. 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 reporting 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 reporting 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.
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/income on defined benefit
pension scheme assets or obligations are 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.
DCC plc Annual Report and Accounts 2018
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Supplementary InfoFinancial StatementsGovernanceStrategic Report 5.9 Summary of Significant Accounting Policies continued
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 contingent consideration (arising on business combinations from 1 April 2010), the impact on deferred tax balances
as a result of changes to enacted corporation tax rates 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.
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 reporting 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 reporting 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:
• 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
• 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:
• 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
• 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 reporting 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.
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%
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 reporting date.
In accordance with IAS 36 Impairment of Assets, the carrying amounts of items of property, plant and equipment are reviewed at each reporting 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.
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Financial StatementsSection 512346Notes to the Financial Statements (continued) 5.9 Summary of Significant Accounting Policies continued
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.
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 fair value 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 non-controlling shareholder’s option to put its shareholding back to the Group, being the fair value
of the estimate of amounts payable to acquire the non-controlling interest. The financial liability is included in contingent consideration. The discount
component is unwound as an interest charge in the Income Statement over the life of the obligation. 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 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 contingent consideration were recognised as part of goodwill.
A financial liability was recognised in relation to the non-controlling shareholder’s option to put its shareholding back to the Group, being the fair value
of the estimate of amounts payable to acquire the non-controlling interest. The financial liability was included in 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 as the excess of the fair value of consideration paid for the business combination plus any non-
controlling interest, over 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 and joint ventures, net of any impairment, is included in investments in associates and joint
ventures under the equity method in the Group Balance Sheet.
DCC plc Annual Report and Accounts 2018
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Supplementary InfoFinancial StatementsGovernanceStrategic Report 5.9 Summary of Significant Accounting Policies continued
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.
Intangible Assets
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 forty 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.
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 current or
non-current 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 the 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.
194
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 512346Notes to the Financial Statements (continued) 5.9 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’.
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’.
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 3.9 and the movements on the cash flow hedge reserve in equity are shown
in note 4.2. 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 plc Annual Report and Accounts 2018
195
Supplementary InfoFinancial StatementsGovernanceStrategic Report Notes to the Financial Statements (continued)
5.9 Summary of Significant Accounting Policies 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 Cost 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 reporting 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 has certain site remediation obligations to be incurred in compliance with local or national environmental regulations together with
constructive obligations stemming from established best practice. The measurement of these provisions is based on the evaluation of currently
available facts with respect to each individual site and is adjusted periodically as remediation efforts progress or as additional information becomes
available. Inherent uncertainties exist in such measurements primarily due to unknown timing, site conditions and changing regulations. Full provision
is made for the net present value of the estimated costs in relation to the Group’s environmental liabilities. The net present value of the estimated
costs is capitalised as property, plant and equipment and the unwinding of the discount element on the environmental provision is reflected in the
Income Statement.
Cylinder and Tank Deposits Provisions
This provision relates to DCC LPG’s operations where an obligation arises from the receipt of deposit fees paid by customers for LPG cylinders and
tanks. On receipt of a deposit the Group recognises a liability equal to the deposit received. This deposit will subsequently be refunded at an amount
equal to the original deposit on return of the cylinder or tank together with the original deposit receipt. Cylinder and tank deposits acquired through
business combinations are measured initially at their fair value at the acquisition date (i.e. net present value) and the unwinding of the discount
element is reflected in the Income Statement.
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
qualified actuaries and are arrived at using actuarial assumptions based on market expectations at the reporting 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 fair values.
The discount rate employed in determining the present value of the schemes’ liabilities is determined by reference to market yields at the
reporting 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.
196
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 512346 5.9 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.
At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market
vesting conditions and service conditions. It recognises the impact of the revision to original estimates, if any, in the Income Statement, with a
corresponding adjustment to 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.
DCC plc Annual Report and Accounts 2018
197
Supplementary InfoFinancial StatementsGovernanceStrategic Report 5.9 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 share premium.
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 reporting date are not recognised as a liability at that reporting 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 Company. 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.
5.10 Approval of Financial Statements
The financial statements were approved by the Board of Directors on 14 May 2018.
198
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 512346Notes to the Financial Statements (continued) Company Balance Sheet
As at 31 March 2018
ASSETS
Non-current assets
Note
2018
£’000
2017
£’000
Investments in subsidiary undertakings
6.4
266,408
94,715
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY
Capital and reserves
Share capital
Share premium
Other reserves
Retained earnings
Total equity
LIABILITIES
Current liabilities
Trade and other payables
Total equity and liabilities
John Moloney, Donal Murphy, Directors
6.5
6.8
4.1
4.1
6.9
6.10
623,257
57,622
680,879
947,287
15,455
280,533
123,889
413,352
833,229
600,842
65,517
666,359
761,074
15,455
277,211
110,156
244,918
647,740
6.6
114,058
947,287
113,334
761,074
DCC plc Annual Report and Accounts 2018
199
Supplementary InfoFinancial StatementsGovernanceStrategic Report Company Statement of Changes in Equity
For the year ended 31 March 2018
Share capital
(note 4.1)
£’000
Share
premium
(note 4.1)
£’000
Retained
earnings
(note 6.10)
£’000
Other
reserves
(note 6.9)
£’000
Total
equity
£’000
At 1 April 2017
15,455
277,211
244,918
110,156
647,740
Profit for the financial year
Other comprehensive income:
Currency translation
Total comprehensive income
Re-issue of treasury shares
Dividends
At 31 March 2018
For the year ended 31 March 2017
–
–
–
–
–
–
–
–
271,305
–
271,305
–
271,305
13,733
13,733
13,733
285,038
3,322
–
–
(102,871)
–
–
3,322
(102,871)
15,455
280,533
413,352
123,889
833,229
Share capital
(note 4.1)
£’000
Share
premium
(note 4.1)
£’000
Retained
earnings
(note 6.10)
£’000
Other
reserves
(note 6.9)
£’000
Total
equity
£’000
At 1 April 2016
15,455
277,211
84,333
70,374
447,373
Profit for the financial year
Other comprehensive income:
Currency translation
Total comprehensive income
Re-issue of treasury shares
Dividends
At 31 March 2017
–
–
–
–
–
–
–
–
–
–
248,021
–
248,021
–
248,021
2,600
(90,036)
39,782
39,782
–
–
39,782
287,803
2,600
(90,036)
15,455
277,211
244,918
110,156
647,740
200
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 512346 Company Cash Flow Statement
For the year ended 31 March 2018
Operating activities
Cash generated from operations
Interest paid
Income tax paid
Net cash flow from operating activities
Investing activities
Inflows:
Interest received
Proceeds on disposal
Dividends received from subsidiaries
Outflows:
Acquisition of subsidiaries
Net cash flow from investing activities
Financing activities
Inflows:
Proceeds from issue of shares
Outflows:
Dividends paid
Net cash flow 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
Note
2018
£’000
2017
£’000
6.11
(5,464)
(79,170)
(7)
(120)
(4)
(2)
(5,591)
(79,176)
6,758
136,102
161,220
304,080
6,088
90,011
111,107
207,206
(208,374)
(7,522)
95,706
199,684
3,322
2,600
2.11
(102,871)
(99,549)
(9,434)
1,539
65,517
57,622
6.8
(90,036)
(87,436)
33,072
3,124
29,321
65,517
DCC plc Annual Report and Accounts 2018
201
Supplementary InfoFinancial StatementsGovernanceStrategic Report Notes to the Company Financial Statements
Section 6 Notes to the Company Financial Statements
In accordance with the Companies Act 2014, information regarding the ultimate parent Company, DCC plc,
is presented below.
6.1 Basis of Preparation
The financial statements which are presented in sterling, rounded to the nearest thousand, have been prepared in accordance with International
Financial Reporting Standards (‘IFRS’) as adopted by the European Union.
The Company applies consistent accounting policies to those applied by the Group. To the extent that an accounting policy is relevant to both Group
and Parent Company financial statements, please refer to the Group financial statements for disclosure of the relevant accounting policy.
6.2 Auditor Statutory Disclosure
The audit fee for the Parent Company is £13,000 and is payable to KPMG, Ireland, the statutory auditor (2017: £13,000).
6.3 Profit Attributable to DCC plc
Profit after taxation for the year attributable to owners of the Parent Company amounting to £271.305 million (2017: £248.021 million) has been
accounted for in the financial statements of the Company. In accordance with Section 304(2) of the Companies Act, 2014, 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 304(2) of the Companies Act, 2014.
6.4
Investments in Subsidiary Undertakings
At 1 April
Additions
Disposals
Impairment
Exchange and other
At 31 March
2018
£’000
2017
£’000
94,715
245,367
(37,879)
(36,993)
1,198
266,408
99,683
9,324
(16,820)
(5,228)
7,756
94,715
Details of the Group’s principal operating subsidiaries are included in the Group Directory on pages 207 to 210. Non-wholly owned subsidiaries
principally comprise DCC Holding Denmark A/S (60%) (which owns 100% of DCC Energi Danmark A/S and Dansk Fuels A/S), Gaz Européen Holding
SAS (97%) where put and call options exist to acquire the remaining 3% and Medisource Ireland Limited (87%) where put and call options exist to
acquire the remaining 13%.
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 Atrium Building,
8th Floor, Strawinskylaan 3127, 1077 ZX Amsterdam, The Netherlands.
6.5 Trade and Other Receivables
Amounts owed by subsidiary undertakings
2018
£’000
2017
£’000
623,257
623,257
600,842
600,842
All amounts owed by subsidiary undertakings are interest-free and repayable on demand. There were no past due or impaired trade receivables in the
Company at 31 March 2018 (31 March 2017: nil).
202
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 612345
6.6 Trade and Other Payables
Amounts due to subsidiary undertakings
Other creditors and accruals
6.7 Movement in Working Capital
Year ended 31 March 2018
At 1 April 2017
Translation adjustment
Increase in working capital (note 6.11)
At 31 March 2018
Year ended 31 March 2017
At 1 April 2016
Translation adjustment
Exceptional items and other
Increase/(decrease) in working capital (note 6.11)
At 31 March 2017
6.8 Cash and Cash Equivalents
Cash at bank and in hand
6.9 Other Reserves
At 1 April 2016
Currency translation
At 31 March 2017
Currency translation
At 31 March 2018
2018
£’000
2017
£’000
113,523
112,813
535
521
114,058
113,334
Trade and
other
receivables
£’000
Trade and
other
payables
£’000
Total
£’000
600,842
13,577
8,838
(113,334)
487,508
(2,580)
1,856
10,997
10,694
623,257
(114,058)
509,199
421,566
(103,197)
318,369
36,664
61,060
81,552
(8,370)
–
(1,767)
28,294
61,060
79,785
600,842
(113,334)
487,508
2018
£’000
57,622
57,622
2017
£’000
65,517
65,517
Foreign
currency
translation
reserve1
£’000
70,145
39,782
109,927
13,733
123,660
Other
reserves2
£’000
229
–
229
–
229
Total
£’000
70,374
39,782
110,156
13,733
123,889
1. 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.
2. The Company’s other reserves is a capital conversion reserve fund.
DCC plc Annual Report and Accounts 2018
203
Supplementary InfoFinancial StatementsGovernanceStrategic Report
6.10 Retained Earnings
At 1 April
Total comprehensive income for the financial year
Re-issue of treasury shares (net of expenses)
Dividends
At 31 March
6.11 Cash Generated from Operations
Profit for the financial year
Add back non-operating income:
– tax
– net operating exceptionals
– net finance income
– dividend income
Operating profit
Changes in working capital:
– trade and other receivables (note 6.7)
– trade and other payables (note 6.7)
Cash generated from operations
2018
£’000
2017
£’000
244,918
271,305
–
84,333
248,021
2,600
(102,871)
(90,036)
413,352
244,918
2018
£’000
2017
£’000
271,305
248,021
120
(61,231)
(6,751)
2
(94,602)
(6,084)
(198,213)
(146,722)
5,230
615
(8,838)
(1,856)
(5,464)
(81,552)
1,767
(79,170)
6.12 Related Party Transactions
Subsidiaries, joint ventures and associates
The Company’s Income Statement includes dividends from its subsidiary companies DCC International Holdings B.V. of £93.500 million, DCC
Financial Services Holdings Unlimited Company of £36.993 million, DCC Treasury Management Unlimited Company of £36.993 million and DCC
Business Expansion Fund Limited of £30.727 million. Details of loan balances to/from subsidiaries are provided in the Company Balance Sheet on
page 199, in note 6.5 ‘Trade and Other Receivables’ and in note 6.6 ‘Trade and Other Payables’.
6.13 Financial Risk Management
A description of the Group’s financial risk management objectives and policies is provided in note 5.7 to the Group financial statements. These
financial risk management objectives and policies also apply to the Parent Company.
(i) Credit risk management
Credit risk arises from credit exposure to intercompany receivables and cash and cash equivalents including deposits with banks and
financial institutions.
As detailed in note 6.5, the Group’s intercompany receivables at 31 March 2018 amount to £623.257 million (2017: £600.842 million). None of these
balances include a provision for impairment and all amounts are expected to be recoverable in full.
Risk of counterparty default arising on cash and cash equivalents 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 plc transacts with a variety of high credit quality financial
institutions for the purpose of placing deposits. The Group actively monitors its credit exposure to each counterparty to ensure compliance with
the counterparty risk limits of the Board approved treasury policy. The cash and cash equivalents balance at 31 March 2018 of £57.622 million was
held with financial institutions with a minimum rating in the A-2 (short-term) category of Standard and Poor’s.
204
DCC plc Annual Report and Accounts 2018
Financial StatementsSection 612345Notes to the Company Financial Statements (continued) 6.13 Financial Risk Management continued
(ii) Liquidity risk management
The tables below show the projected contractual undiscounted total cash outflows (principal and interest) arising from the Company’s trade and
other payables. These projections are based on the interest and foreign exchange rates applying at the end of the relevant financial year.
As at 31 March 2018
Financial liabilities – cash outflows
Trade and other payables
As at 31 March 2017
Financial liabilities – cash outflows
Trade and other payables
Less than
1 year
£’000
Between
1 and 2 years
£’000
Between
2 and 5 years
£’000
Over
5 years
£’000
Total
£’000
114,058
114,058
–
–
–
–
–
–
114,058
114,058
Less than
1 year
£’000
Between
1 and 2 years
£’000
Between
2 and 5 years
£’000
Over
5 years
£’000
Total
£’000
113,334
113,334
–
–
–
–
–
–
113,334
113,334
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
The Company does not have any material assets or liabilities denominated in any currency other than euro at 31 March 2018 or at 31 March 2017
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 an £24.7 million (2017:
£22.5 million) impact on the Company’s profit before tax, would change the Company’s equity by £75.7 million and change the Company’s net cash
by £5.8 million (2017: £58.9 million and £6.6 million respectively).
Interest rate risk management
Based on the composition of net cash at 31 March 2018 a one percentage point (100 basis points) change in average floating interest rates would
have a £0.6 million (2017: £0.7 million) impact on the Company’s profit before tax. 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 Company has no exposure to commodity price risk.
Fair values of financial assets and financial liabilities
The following is a comparison by category of book values and fair values of the Company’s financial assets and financial liabilities:
Financial assets
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Trade and other payables
2018
2017
Book value
£’000
Fair value
£’000
Book value
£’000
Fair value
£’000
623,257
623,257
57,622
57,622
680,879
680,879
114,058
114,058
114,058
114,058
600,842
65,517
666,359
113,334
113,334
600,842
65,517
666,359
113,334
113,334
As at 31 March 2018 and 31 March 2017 the Company had no financial assets or financial liabilities which were carried at fair value.
6.14 Contingencies
Guarantees given in respect of borrowings and other obligations are detailed in note 5.5 to the Group financial statements.
DCC plc Annual Report and Accounts 2018
205
Supplementary InfoFinancial StatementsGovernanceStrategic Report Supplementary
Information
In this section
207 Principal Subsidiaries, Joint Ventures and Associates
211 Shareholder Information
213 Corporate Information
214
Independent Limited Assurance Report
215 Alternative Performance Measures
221 5 Year Review
222
Index
206
DCC plc Annual Report and Accounts 2018
Supplementary Information Principal Subsidiaries, Joint Ventures and Associates 1
DCC LPG
Company name
DCC LPG Limited
Butagaz SAS
GAZ Européen Holding SAS
Company address
Principal activity
DCC House, Leopardstown Road,
Foxrock, Dublin 18, Ireland
Holding and divisional
management company
47-53 Rue Raspail,
92300 Levallois – Perret,
Paris, France
47-53 Rue Raspail,
92300 Levallois – Perret,
Paris, France
Procurement, sales, marketing
and distribution of liquefied
petroleum gas
Procurement, sales, marketing
and distribution of natural gas
Procurement, sales, marketing
and distribution of liquefied
petroleum gas
Procurement, sales, marketing
and distribution of liquefied
petroleum gas and natural gas
Procurement, sales, marketing
and distribution of liquefied
petroleum gas
Procurement, sales, marketing
and distribution of liquefied
petroleum gas
Procurement, sales, marketing
and distribution of liquefied
petroleum gas and refrigerant gases
Procurement, sales, marketing
and distribution of liquefied
petroleum gas
Procurement, sales, marketing
and distribution of liquefied
petroleum gas
Procurement, sales, marketing
and distribution of liquefied
petroleum gas
Flogas Britain Limited
81 Rayns Way, Syston, Leicester
LE7 1PF, England
Flogas Ireland Limited
DSG Energy Limited
Hicksgas LLC
Knockbrack House,
Matthews Lane,
Donore Road,
Drogheda, Co. Louth, Ireland
Suites 2201-2, 22nd Floor,
AIA Kowloon Tower, Landmark East,
100 How Ming Street, Kwun Tong,
Kowloon, Hong Kong
204 North State Route 54, Roberts,
IL 60962, USA
TEGA – Technische Gase
und Gasetechnik GmbH
Werner-von-Siemens-Straße 18,
97076 Würzburg, Germany
Flogas Sverige AB
Flogas Norge AS
Benegas BV
DCC Retail & Oil
Brännkyrkagatan 63,
11822 Stockholm, Sweden
Nydalsveien 153, 3 etg,
0484 Oslo, Norway
Zuiderzeestraatweg 1, 3882NC,
Putten, The Netherlands
Incorporated
and operating in
Group
shareholding %
Ireland
France
100
100
France
97
Britain
100
Ireland
100
Hong Kong
100
USA
100
Germany
100
Sweden
100
Norway
100
The Netherlands 100
Incorporated
and operating in
Group
shareholding %
Ireland
Britain
100
100
Company name
Company address
Principal activity
DCC Retail & Oil Limited
Certas Energy UK Limited
Fuel Card Services Limited
DCC House, Leopardstown Road,
Foxrock, Dublin 18, Ireland
Holding and divisional management
company
302 Bridgewater Place,
Birchwood Park,
Warrington WA3 6XG, England
Procurement, sales, marketing
and distribution of petroleum and
lubricant products
Alexandra House,
Lawnswood Business Park,
Redvers Close, Leeds LS16 6QY,
England
Sale and administration of petroleum
products through the use of
fuel cards
Britain
100
Certas Energy Norway AS
Elias Smiths vei 24, 1337 Sandvika,
Norway
Procurement, sales and marketing
of petroleum products
Certas Energy France
9 Avenue Edouard Belin,
92500 Rueil Malmaison,
Paris, France
Procurement, sales and marketing
of petroleum products
Norway
France
100
100
Energy Procurement Ireland
2013 Limited
DCC House, Leopardstown Road,
Foxrock, Dublin 18, Ireland
Procurement, sales and marketing
of petroleum products
Ireland
100
1. The information in this section relates only to the Group’s principal subsidiaries, joint ventures and associates. A full list of subsidiaries,
joint ventures and associates will be annexed to the Annual Return of the Company to be filed with the Irish Registrar of Companies.
DCC plc Annual Report and Accounts 2018
207
Supplementary InfoFinancial StatementsGovernanceStrategic Report Principal Subsidiaries, Joint Ventures and Associates (continued)
DCC Retail & Oil continued
Company name
Company address
Principal activity
DCC Energi Danmark A/S
Naerum Hovedgade 8,
2850 Naerum, Denmark
Procurement, sales, marketing and
distribution of petroleum and
lubricant products and natural gas
Incorporated
and operating in
Group
shareholding %
Denmark
60
Qstar Försäljning AB
Energie Direct
Swea Energi AB
Emo Oil Limited
DCC Energy Limited
DCC Healthcare
Spårgatan 5, Box 633,
601 14 Norrköping, Sweden
Procurement, sales and marketing
of petroleum products
MineralölhandelsgesmbH
Alte Poststraße 400,
A-8055 Graz, Austria
Procurement, sales, marketing and
distribution of petroleum and
lubricant products and natural gas
Storgatan 35,
434 32 Kungsbacka, Sweden
Procurement, sales, marketing and
distribution of petroleum products
Clonminam Industrial Estate,
Portlaoise, Co. Laois, Ireland
Airport Road West,
Sydenham, Belfast BT3 9ED,
Northern Ireland
Procurement, sales, marketing and
distribution of petroleum and
lubricant products
Procurement, sales, marketing and
distribution of petroleum products
Northern
Ireland
Sweden
Austria
Sweden
Ireland
100
100
100
100
100
Company name
Company address
Principal activity
DCC Healthcare Limited
DCC House, Leopardstown Road,
Foxrock, Dublin 18, Ireland
Holding and divisional
management company
Incorporated
and operating in
Group
shareholding %
Ireland
100
DCC Vital
DCC Vital Limited
Fannin Limited
Medisource Ireland Limited
Athlone Laboratories Limited
Fannin (UK) Limited
Williams Medical Services Ltd
Kent Pharmaceuticals Limited
Fannin House,
South County Business Park,
Leopardstown, Dublin 18, Ireland
Holding company for the operations
of the DCC Vital group of companies
Ireland
100
Fannin House,
South County Business Park,
Leopardstown, Dublin 18, Ireland
Sales, marketing and distribution
of medical and pharmaceutical
products to healthcare providers
Ireland
100
Unit 24-26 Bullford Business
Campus, Kilcoole, Co. Wicklow,
Ireland
Ballymurray,
Co. Roscommon, Ireland
Westminster Industrial Estate,
Repton Road, Measham,
Swadlincote, Derbyshire
DE12 7DT, England
Craiglas House,
The Maerdy Industrial Estate,
Rhymney, Gwent NP22 5PY,
Wales
Joshna House,
Crowbridge Road,
Orbital Park, Ashford,
Kent TN24 0GR, England
A leading provider of Exempt
Medicinal Products (‘EMP’) in Ireland
Ireland
100
Manufacture and supply of oral beta
lactam antibiotics for the British, Irish
and international markets
Sales, marketing and distribution
of medical devices to healthcare
providers
Sales, marketing and distribution of
medical supplies and services to UK
healthcare market, primarily GPs and
primary care organisations
Sales, marketing and distribution
of pharmaceuticals to hospital and
community pharmacies in Britain
Ireland
100
Britain
100
Britain
100
Britain
100
Squadron Medical Limited
The TPS Healthcare
Group Limited
Greaves Close,
Markham Vale, Chesterfield,
Derbyshire, S44 5FB, England
Provision of value-added distribution
services to healthcare providers and
brand owners/manufacturers
27-35 Napier Place,
Wardpark, North Cumbernauld,
Glasgow G68 0LL, Scotland
Provision of value-added distribution
services to healthcare providers and
brand owners/manufacturers
Britain
100
Britain
100
208
DCC plc Annual Report and Accounts 2018
Supplementary Information DCC Healthcare continued
Company name
Company address
Principal activity
Incorporated
and operating in
Group
shareholding %
Health & Beauty Solutions
DCC Health & Beauty Solutions
9-12 Hardwick Road,
Astmoor Industrial Estate, Runcorn,
Cheshire WA7 1PH, England
Outsourced solutions for the health
and beauty industry
Britain
100
Elite One Source Nutritional
Services, Inc.
1001 South 3rd Street West,
Missoula, MT 59801, USA
EuroCaps Limited
Crown Business Park,
Dukestown, Tredegar,
Gwent NP22 4EF, Wales
Development, contract manufacture
and packing of nutritional products in
tablet and hard shell capsule format
Development and contract
manufacture of nutritional products
in soft gel capsule format
USA
100
Britain
100
Thompson & Capper Limited
9-12 Hardwick Road,
Astmoor Industrial Estate, Runcorn,
Cheshire WA7 1PH, England
Development, contract manufacture
and packing of nutritional products in
tablet and hard shell capsule format
Britain
100
Vitamex Manufacturing AB
Laleham Health
and Beauty Limited
Design Plus Holdings Limited
Box 715,
SE-601 16 Norrköping, Sweden
Sycamore Park,
Mill Lane, Alton,
Hampshire GU34 2PR, England
Rowan House, 3 Stevant Way,
White Lund, Morecambe,
Lancashire LA3 3PU, England
DCC Technology
Sales and technical support office
Sweden
100
100
Britain
Development, contract manufacture
and packing of liquids and creams
for the beauty and consumer
healthcare sectors
Development, contract manufacture
and packing of liquids and creams
for the beauty and consumer
healthcare sectors
Company name
Company address
Principal activity
DCC Technology (Holdings)
Limited
DCC House, Leopardstown Road,
Foxrock, Dublin 18, Ireland
Holding and divisional management
company
Britain
100
Incorporated
and operating in
Group
shareholding %
Ireland
Britain
100
100
Exertis (UK) Ltd
Hammer plc
MTR Group Limited
Exertis Ireland Limited
Exertis Supply Chain
Services Limited
Exertis France
Exertis Connect
Sales, marketing and distribution
of technology products
Sales, marketing and distribution
of technology products
Britain
100
Sales and refurbishment
of mobile handsets
Britain
100
Sales, marketing and distribution
of technology products
Ireland
100
Technology House,
Magnesium Way, Hapton, Burnley
BB12 7BF, England
Intec 1, Intec Business Park, Wade
Road, Basingstoke, Hampshire
RG24 8NE, England
Unit 10, Spire Green Centre,
The Pinnacles, Harlow, Essex,
CM19 5TR, England
M50 Business Park,
Ballymount Road Upper,
Dublin 12, Ireland
M50 Business Park,
Ballymount Road Upper,
Dublin 12, Ireland
Provision of supply chain
management and outsourced
procurement services
Paris Nord 2, Parc des Reflets,
99 Avenue de la Pyramide,
95700 Roissy, France
Sales, marketing and distribution
of technology peripherals and
accessories
Zone Industriel Buchelay 3000,
BP 1126, 78204 Mantes en Yvelines
Cedex, France
Sales, marketing and distribution
of technology products and
connecting solutions
Ireland
100
France
100
France
100
DCC plc Annual Report and Accounts 2018
209
Supplementary InfoFinancial StatementsGovernanceStrategic Report Principal Subsidiaries, Joint Ventures and Associates (continued)
DCC Technology continued
Company name
Exertis CapTech AB
Exertis Go Connect
Exertis Arc Telecom
Joint Venture
Company name
KSG Dining Limited
Associates
Company name
Geogaz Lavera SA
Norgal (GIE)
Company address
Principal activity
Ekonomivagen 11,
436 33 Askim, Sweden
Laan Van Kopenhagen 100,
3317 DM Dordrecht,
The Netherlands
Sales, marketing and distribution
of technology products
Sales, marketing and distribution
of unified communications and
audio visual products
Incorporated
and operating in
Group
shareholding %
Sweden
100
The Netherlands 100
Unit No. 702, X3 Building, Jumeirah
Lake Towers, Dubai, UAE
Sales, marketing and distribution
of technology products
Ireland
100
Company address
Principal activity
McKee Avenue,
Finglas, Dublin 11, Ireland
Restaurant and hospitality
service provider
Company address
Principal activity
2 Rue des Martinets, 92500 Rueil
Malmaison, Paris, France
Owns and operates an
LPG storage facility
Route de la Chimie, 76700
Gonfreville L’Orcher, France
Receiving, storage and
distribution site for LPG product
Incorporated
and operating in
Group
shareholding %
Ireland
50
Incorporated
and operating in
Group
shareholding %
France
France
25
18
210
DCC plc Annual Report and Accounts 2018
Supplementary Information 2018
£
72.20
6,442m
65.60
5,853m
2017
£
73.65
6,541m
70.25
6,239m
77.55
64.75
72.20
58.60
Number of
shares 2
%
of shares
32,821,010
28,381,326
13,128,620
9,431,665
3,807,354
1,651,928
89,221,903
36.79
31.81
14.71
10.57
4.27
1.85
100
Shareholder Information
Share Listing
DCC’s shares have a Premium Listing on the Official List of the United Kingdom Listing Authority (‘UKLA Official List’) and are traded solely on the
London Stock Exchange in sterling.
Share Price Data
Share price at 14 May
Market capitalisation at 14 May
Share price at 31 March
Market capitalisation at 31 March
Share price movement during the year
– High
– Low
DCC plc’s ordinary share price information can be accessed on the company website under the ‘Investors’ tab.
Shareholdings as at 31 March 2018
By location
North America 36.79%
UK 31.81%
Continental Europe
14.71%
Ireland 10.57%
Asia/Rest of World 4.27%
Retail 1.85%
By size of holding
Over 250,000 72.31%
100,001-250,000 11.24%
10,000-100,000 12.48%
Less than 10,000 3.97%
Geographic division 1
North America
UK
Continental Europe
Ireland
Asia/Rest of World
Retail 3
Total
Range of shares held
Over 250,000
100,001-250,000
10,000-100,000
Less than 10,000
Total
Number of
accounts
% of
accounts
Number of
shares 2
%
of shares
61
66
314
3,178
3,619
1.68
1.82
8.68
87.82
64,514,259
10,034,413
11,133,749
3,539,482
100
89,221,903
72.31
11.24
12.48
3.97
100
Notes:
1. This represents the best estimate of the number of shares controlled by fund managers resident in the relevant
geographic regions.
2. Excludes 3,207,501 shares held as Treasury Shares.
3. Retail includes shareholdings of less than 5,000 shares.
Details of shareholdings in excess of 3% in the Company are set out on page 118.
Dividends
DCC normally pays dividends twice yearly, in July and in December to shareholders on the register of members on the record date for the dividend.
An interim dividend of 40.89 pence per share was paid on 11 December 2017.
Subject to shareholders’ approval at the Annual General Meeting, a final dividend of 82.09 pence per share will be paid on 19 July 2018, to
shareholders on the register of members at the close of business on 25 May 2018.
Dividends are declared in sterling and shareholders have the option to elect to receive dividends in either sterling or 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. Declaration forms for claiming an exemption are also available from the Company’s Registrar.
DCC plc Annual Report and Accounts 2018
211
Supplementary InfoFinancial StatementsGovernanceStrategic Report Shareholder Information (continued)
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.
Where shares are held in CREST, dividends are automatically paid in sterling unless a currency election is made. CREST members should use the
facility in CREST to make currency elections. Such elections must be made in respect of entire holdings as partial elections are not permissible.
Financial Calendar
15 May 2018
24 May 2018
25 May 2018
13 July 2018
13 July 2018
19 July 2018
13 November 2018
December 2018
February 2019
Final results announcement for 2018
Ex-dividend date – final dividend
Record date – final dividend
Interim Management Statement
Annual General Meeting
Proposed payment date – final dividend
Interim results announcement
Proposed payment date – interim dividend
Interim Management Statement
Annual General Meeting, Electronic Proxy Voting and CREST Voting
The 2018 Annual General Meeting will be held at The InterContinental Hotel, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland on Friday 13 July
2018 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 2018 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 www.eproxyappointment.com, and following the instructions which are set
out on the Form of Proxy or in the email broadcast that you will 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.
DCC Website
Our corporate website, www.dcc.ie, provides access to share price information through downloadable reports and interactive share price tools.
The site also provides access to information on the Group’s activities, results, 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.
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 Kevin Lucey, Head of Capital Markets, DCC plc, DCC House, Leopardstown Road, Foxrock, Dublin 18, Ireland.
Tel: + 353 1 2799 400
email: investorrelations@dcc.ie
212
DCC plc Annual Report and Accounts 2018
Supplementary Information Stockbrokers
Davy
49 Dawson Street
Dublin 2
Ireland
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
England
Corporate Information
Registered and Head Office
DCC House
Leopardstown Road
Foxrock
Dublin 18
Ireland
Auditors
KPMG
1 Stokes Place
St. Stephen’s Green
Dublin 2
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
Bank of China
Barclays
BNP Paribas
Danske Bank
Deutsche Bank
HSBC
ING Bank
J.P. Morgan
KBC Bank
MUFG Bank
Nordea
PNC Bank
Rabobank
Royal Bank of Scotland Group
Société Générale
Standard Chartered Bank
Solicitors
William Fry
2 Grand Canal Square
Dublin 2
Ireland
Pinsent Masons
1 Park Row
Leeds LS1 5AB
England
DCC plc Annual Report and Accounts 2018
213
Supplementary InfoFinancial StatementsGovernanceStrategic Report Independent Limited Assurance Report to DCC plc
KPMG (‘we’) were engaged by DCC plc (‘DCC’) to provide limited assurance
over the Selected Information described below for the year ended
31 March 2018.
International Standard on Assurance Engagements 3410 – ‘Assurance
Engagements on Greenhouse Gas Statements’ (‘ISAE 3410’), issued
by the International Auditing and Assurance Standards Board.
Our conclusion
Based on the work we have performed and the evidence we have obtained,
nothing has come to our attention that causes us to believe that the
Selected Information has not been properly prepared, in all material
respects, in accordance with the Reporting Criteria.
The work performed in a limited assurance engagement varies in nature
and timing from, and is less in extent than for, a reasonable assurance
engagement. Consequently, the level of assurance obtained in a limited
assurance engagement is substantially lower than the assurance that
would have been obtained had a reasonable assurance engagement
been performed.
This conclusion is to be read in the context of the remainder of this report,
in particular the inherent limitations explained below and this report’s
intended use.
Selected Information
The scope of our work includes only the information included within the
Responsible Business Report (‘the Report’) of the DCC Annual Report and
Accounts for the year ended 31 March 2018 marked with the symbol Δ
(‘the Selected Information’).
We have not performed any work, and do not express any conclusion, over
any other information that may be included in the Report or displayed on
DCC’s website for the current year or for previous periods unless
otherwise indicated.
Independence, professional standards and quality control
We comply with the Code of Ethics for Professional Accountants issued
by the International Ethics Standards Board for Accountants and we
apply International Standard on Quality Control (Ireland) 1, ‘Quality
Control for Firms that Perform Audits and Reviews of Historical Financial
Information, and Other Assurance and Related Services Engagements’.
Accordingly, we maintain a comprehensive system of quality control
including documented policies and procedures regarding compliance
with ethical requirements and professional standards (including
independence, and other requirements founded on fundamental
principles of integrity, objectivity, professional competence and due
care, confidentiality and professional behaviour) as well as applicable
legal and regulatory requirements.
Reporting Criteria
The carbon emissions data has been evaluated against DCC’s Carbon
Reporting Criteria as set out at https://www.dcc.ie/~/media/Files/D/
DCC-v2/documents/pdfs/ghg-reporting-criteria.pdf . The Selected
Information needs to be read together with the Reporting Criteria.
Summary of work performed
Considering the level of assurance and our assessment of the risk of
material misstatement of the Selected Information, whether due to fraud
or error, our work included, but was not restricted to:
• assessing the appropriateness of the Reporting Criteria for the
We have not performed any work, and do not express any conclusion, over
any other information that may be displayed in the DCC Annual Report and
Accounts or on the Company’s website for the current year or for previous
periods unless otherwise indicated.
Inherent limitations
The nature of non-financial information; the absence of a significant body
of established practice on which to draw; and the methods and precision
used to determine non-financial information, allow for different, but
acceptable evaluation and measurement techniques and can result in
materially different measurements, affecting comparability between
entities and over time.
Directors’ responsibilities
The Directors of DCC are responsible for:
• designing, implementing and maintaining internal controls relevant to
the preparation and presentation of the Selected Information that is
free from material misstatement, whether due to fraud or error;
• selecting and/or developing objective Reporting Criteria;
• measuring and reporting the Selected Information in accordance with
•
the Reporting Criteria; and,
the contents and statements contained within the Report and the
Reporting Criteria.
Our responsibilities
Our responsibility is to plan and perform our work to obtain limited
assurance about whether the Selected Information has been prepared in
accordance with the Reporting Criteria and to report to DCC in the form of
an independent limited assurance conclusion based on the work performed
and the evidence obtained.
Selected Information;
• conducting interviews with DCC management to obtain an
understanding of the key processes, systems and controls in place over
the preparation of the Selected Information;
• carrying out four site visits to businesses in United Kingdom and Ireland.
These sites contributed to over 60% of the selected information;
• agreeing a selection of the Selected Information to the corresponding
source documentation;
• considering the appropriateness of the carbon conversion factor
calculations and other unit conversion factor calculations used by
reference to widely recognised and established conversion factors;
re-performing a selection of the carbon conversion factor calculations
and other unit conversion factor calculations;
•
• performing analytical review procedures over the aggregated Selected
•
Information, including a comparison to the prior periods amounts having
due regard to changes in business volume and the business portfolio; and
reading the Report and narrative accompanying the Selected
Information in the Report with regard to the Reporting Criteria, and for
consistency with our findings.
This report’s intended use
This assurance report is made solely to DCC in accordance with the terms
of the engagement contract between us. Those terms permit disclosure to
other parties, solely for the purpose of DCC showing that it has obtained an
independent assurance report in connection with the Selected Information.
We have not considered the interest of any other party in the Selected
Information. To the fullest extent permitted by law, we accept no
responsibility and deny any liability to any party other than DCC for our work,
for this assurance report or for the conclusions we have reached.
Assurance standards applied
We performed our work in accordance with International Standard on
Assurance Engagements 3000 – ‘Assurance Engagements other than
Audits or Reviews of Historical Financial Information’ (‘ISAE 3000’) and
KPMG
Dublin
14 May 2018
214
DCC plc Annual Report and Accounts 2018
Supplementary Information Alternative Performance Measures
The Group reports certain alternative performance measures (‘APMs’) 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 APMs 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 APMs 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 APMs should be considered as an alternative to financial measures derived in accordance with GAAP. The APMs 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. These performance
measures may not be calculated uniformly by all companies and therefore may not be directly comparable with similarly titled measures and
disclosures of other companies.
The principal APMs used by the Group, together with reconciliations where the non-GAAP measures are not readily identifiable from the financial
statements, are as follows:
Adjusted operating profit (‘EBITA’)
Definition
This comprises operating profit as reported in the Group Income Statement before net operating exceptional items and amortisation of intangible
assets. Net operating exceptional items and amortisation of intangible assets are excluded in order to assess the underlying performance of our
operations. In addition, neither metric forms part of Director or management remuneration targets.
Calculation
Operating profit
Net operating exceptional items
Amortisation of intangible assets
Adjusted operating profit – continuing
Adjusted operating profit – discontinued
Adjusted operating profit (EBITA)
Reference in Financial Statements
Income Statement
Income Statement
Income Statement
Income Statement
Note 2.10
2018
£’000
2017
£’000
295,228
269,578
45,113
43,059
383,400
981
384,381
36,297
39,130
345,005
18,546
363,551
Adjusted operating profit before depreciation (‘EBITDA’)
Definition
EBITDA represents earnings before net interest, tax, depreciation, amortisation of intangible assets, share of equity accounted investments’ profit
after tax and net exceptional items. This metric is used to compare profitability between companies by eliminating the effects of financing, tax
environments, asset bases and business combinations history. It is also utilised as a proxy for a company's cash flow.
Calculation
Adjusted operating profit (EBITA)
Depreciation
Adjusted operating profit before depreciation (EBITDA)
Reference in Financial Statements
Per above
Note 2.3
2018
£’000
384,381
93,722
478,103
2017
£’000
363,551
92,015
455,566
Net interest
Definition
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.
Calculation
Finance costs before exceptional items
Finance income before exceptional items
Net interest – continuing
Net interest – discontinued
Net interest
Reference in Financial Statements
Income Statement
Income Statement
Note 2.10
2018
£’000
(73,156)
37,421
(35,735)
(16)
2017
£’000
(72,910)
40,973
(31,937)
(163)
(35,751)
(32,100)
DCC plc Annual Report and Accounts 2018
215
Supplementary InfoFinancial StatementsGovernanceStrategic Report Alternative Performance Measures continued
Interest cover – EBITA Interest Cover
Definition
The EBITA interest cover ratio measures the Group’s ability to pay interest charges on debt from operating profits.
Calculation
EBITA – continuing
Net interest – continuing
EBITA interest cover (times)
Reference in Financial Statements
Per above
Per above
2018
£’000
2017
£’000
383,400
345,005
(35,735)
(31,937)
10.7x
10.8x
Interest cover – EBITDA Interest Cover
Definition
The EBITDA interest cover ratio measures the Group’s ability to pay interest charges on debt from cash flows.
Calculation
EBITDA
Net interest
EBITDA interest cover (times)
Reference in Financial Statements
Per above
Per above
2018
£’000
2017
£’000
478,103
455,566
(35,751)
(32,100)
13.4x
14.2x
Effective tax rate
Definition
The Group’s effective tax rate expresses the income tax expense before exceptionals and deferred tax attaching to the amortisation of intangible
assets as a percentage of EBITA less net interest.
Calculation
Adjusted operating profit
Net interest
Earnings before taxation
Income tax expense
Exceptional deferred tax
Deferred tax attaching to amortisation of intangible assets
Income tax expense before exceptionals and deferred tax attaching to
amortisation of intangible assets – continuing
Income tax expense before exceptionals and deferred tax attaching to
amortisation of intangible assets – discontinued
Total Income tax expense before exceptionals and deferred tax attaching to
amortisation of intangible assets
Effective tax rate (%)
Reference in Financial Statements
Per above
Per above
Note 2.9
Note 2.9
2018
£’000
2017
£’000
384,381
363,551
(35,751)
(32,100)
348,630
331,451
23,882
25,407
9,814
45,869
(1,756)
10,674
59,103
54,787
164
3,217
59,267
17.0%
58,004
17.5%
Adjusted earnings per share
Definition
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.
Calculation
Adjusted earnings per share – continuing
Adjusted earnings per share – discontinued
Adjusted earnings per share
Reference in Financial Statements
Note 2.12
Note 2.12
2018
pence
317.45
0.90
318.35
2017
pence
286.59
17.09
303.68
216
DCC plc Annual Report and Accounts 2018
Supplementary Information
Constant currency
Definition
The translation of foreign denominated earnings can be impacted by movements in foreign exchange rates versus sterling, the Group’s presentation
currency. In order to present a better reflection of underlying performance in the period, the Group retranslates foreign denominated current year
earnings at prior year exchange rates.
Calculation: Revenue – continuing, constant currency
Reference in Financial Statements
2018
£’000
2017
£’000
Income Statement
14,264,639
12,269,802
Revenue – continuing
Currency impact
Revenue – continuing, constant currency
(296,654)
–
13,967,985
12,269,802
2018
£’000
2017
£’000
Calculation: Adjusted operating profit – continuing, constant currency
Reference in Financial Statements
Adjusted operating profit – continuing
Income Statement
383,400
345,005
Currency impact
Adjusted operating profit – continuing, constant currency
Calculation: Adjusted earnings per share (pence) – continuing, constant currency
Reference in Financial Statements
Adjusted earnings – continuing
Currency impact
Adjusted earnings – continuing, constant currency
Note 2.12
Weighted average number of ordinary shares (‘000)
Note 2.12
Adjusted earnings per share (pence) – continuing, constant currency
Dividend cover
Definition
The dividend cover ratio measures the Group’s ability to pay dividends from earnings.
(8,890)
–
374,510
345,005
2018
£’000
2017
£’000
282,864
254,307
(6,280)
276,584
89,106
310.40p
–
254,307
88,735
286.59p
Calculation
Adjusted earnings per share – continuing
Dividend
Dividend cover (times)
Reference in Financial Statements
Note 2.12
Note 2.11
2018
pence
317.45
122.98
2.6x
2017
pence
286.59
111.80
2.6x
Net capital expenditure
Definition
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.
Calculation
Purchase of property, plant and equipment
Reference in Financial Statements
2018
£’000
2017
£’000
Group Cash Flow Statement
152,997
143,698
Proceeds from disposal of property, plant and equipment
Group Cash Flow Statement
(7,617)
(12,315)
Net capital expenditure
145,380
131,383
Free cash flow
Definition
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.
Calculation
Reference in Financial Statements
2018
£’000
2017
£’000
Cash generated from operations before exceptionals
Group Cash Flow Statement
473,434
546,870
Net capital expenditure
Free cash flow
Per above
(145,380)
(131,383)
328,054
415,487
DCC plc Annual Report and Accounts 2018
217
Supplementary InfoFinancial StatementsGovernanceStrategic Report Alternative Performance Measures continued
Free cash flow (after interest and tax payments)
Definition
Free cash flow (after interest and tax payments) is defined by the Group as free cash flow after interest paid, income tax paid, dividends received from
equity accounted investments and interest received.
Calculation
Free cash flow
Interest paid
Income tax paid
Dividends received from equity accounted investments
Interest received
Free cash flow (after interest and tax payments)
Reference in Financial Statements
Per above
Group Cash Flow Statement
Group Cash Flow Statement
Group Cash Flow Statement
Group Cash Flow Statement
2018
£’000
2017
£’000
328,054
415,487
(69,900)
(65,437)
1,980
37,399
232,096
(70,108)
(62,180)
125
40,966
324,290
Cash conversion ratio
Definition
The cash conversion ratio expresses free cash flow as a percentage of adjusted operating profit.
Calculation
Free cash flow
Adjusted operating profit
Cash conversion ratio (%)
Reference in Financial Statements
Per above
Per above
2018
£’000
328,054
384,381
85%
2017
£’000
415,487
363,551
114%
Net debt/EBITDA
Definition
The net debt to earnings before net interest, tax, depreciation, amortisation of intangible assets, share of equity accounted investments’ profit after
tax and net exceptional items (‘EBITDA’) ratio is a measurement of leverage, and shows how many years it would take for a company to pay back its
debt if net debt and EBITDA are held constant.
Calculation
Net debt
EBITDA
Net debt/EBITDA (times)
Reference in Financial Statements
Note 3.11
Per above
2018
£’000
542,662
478,103
1.1x
2017
£’000
121,949
455,566
0.3x
Net debt/total equity
Definition
The net debt/total equity percentage is a measure of financial leverage and illustrates the relative proportion of debt that has been used to finance
the Group’s assets.
Calculation
Net debt
Total equity
Net debt/total equity (%)
Reference in Financial Statements
Note 3.11
2018
£’000
2017
£’000
542,662
121,949
Group Balance Sheet
1,677,917
1,507,721
32.3%
8.1%
218
DCC plc Annual Report and Accounts 2018
Supplementary Information Return on capital employed (‘ROCE’) – continuing
Definition
ROCE represents adjusted operating profit (continuing) expressed as a percentage of the average total continuing capital employed. Total continuing
capital employed represents total equity adjusted for net debt/cash, goodwill and intangibles written off, acquisition related liabilities and equity
accounted investments. Net operating exceptional items and amortisation of intangible assets are excluded in order to assess the underlying
performance of our operations. In addition, neither metric forms part of Director or management remuneration targets.
Calculation
Total equity
Net debt (continuing)
Goodwill and intangibles written off (continuing)
Equity accounted investments (continuing)
Acquisition related liabilities (continuing, current and non-current)
Note 3.14
Net assets of the disposal group
Average total capital employed
Adjusted operating profit – continuing
Return on capital employed (%) – continuing
Per above
Reference in Financial Statements
2018
£’000
2017
£’000
Group Balance Sheet
1,677,917
1,507,721
Note 3.11
Group Balance Sheet
542,662
271,399
(24,461)
97,853
134,748
228,340
(24,938)
94,917
–
(126,072)
2,565,370
1,814,716
2,190,043
1,698,240
383,400
345,005
17.5%
20.3%
Committed acquisition expenditure
Definition
The Group defines committed acquisition expenditure as the total acquisition cost of subsidiaries as presented in the Group Cash Flow Statement
(excluding amounts related to acquisitions which were committed to in previous years) and future acquisition related liabilities for acquisitions
committed to during the year.
Calculation
Net cash outflow on acquisitions during the year
Reference in Financial Statements
Group Cash Flow Statement
Cash outflow on acquisitions which were committed to in the previous year
Acquisition related liabilities arising on acquisitions during the year
Note 3.14
Acquisition related liabilities which were committed to in the previous year
Amounts committed in the current year
Committed acquisition expenditure
2018
£’000
664,109
(341,253)
27,840
(13,404)
18,000
355,292
2017
£’000
203,327
(34,372)
41,041
(14,082)
358,000
553,914
Net working capital
Definition
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).
Calculation
Inventories
Add: inventories of the disposal group
Trade and other receivables
Add: trade and other receivables of the disposal group
Less: interest receivable
Trade and other payables
Add: trade and other payables of the disposal group
Less: interest payable
Less: amounts due in respect of property, plant and equipment
Less: government grants
Net working capital
Reference in Financial Statements
Note 3.4
Note 3.5
Note 3.6
Note 3.6
Note 3.6
Note 3.6
2018
£’000
530,473
–
2017
£’000
456,395
1,922
1,426,217
1,222,597
–
(126)
33,264
(223)
(2,063,260)
(1,820,517)
–
(35,741)
4,775
10,671
9
4,534
6,349
9
(91,241)
(131,411)
DCC plc Annual Report and Accounts 2018
219
Supplementary InfoFinancial StatementsGovernanceStrategic Report Alternative Performance Measures continued
Working capital (days)
Definition
Working capital days measures how long it takes in days for the Group to convert working capital into revenue.
Calculation
Net working capital
March revenue
Working capital (days)
Reference in Financial Statements
Per above
2018
£’000
2017
£’000
(91,241)
(131,411)
1,418,988
1,223,575
(2.0 days)
(3.3 days)
220
DCC plc Annual Report and Accounts 2018
Supplementary Information 5 Year Review
Group Income Statement
Year ended 31 March
Revenue
Adjusted operating profit
Exceptional items
Amortisation of intangible assets
Operating profit
Finance costs (net)
Share of equity accounted investments
Profit before tax
Income tax expense
Non-controlling interests
Profit attributable to owners of the Parent Company
Earnings per share
– basic (pence)
– basic adjusted (pence)
Dividend per share (pence)
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
Equity accounted investments
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
Net (debt)/cash included above
Group Cash Flow
Year ended 31 March
Operating cash flow
Capital expenditure
Acquisitions
Other Information
Return on capital employed (%)
Working capital (days)
2014
£’m
2015
£’m
2016
£’m
2017
£’m
2018
£’m
11,210.8
10,749.4
10,601.1
12,445.0
14,294.3
207.3
(13.3)
(20.4)
173.6
(23.5)
0.9
151.0
(27.1)
(2.7)
121.2
144.70p
191.20p
76.85p
2.5
9.7
2014
£’m
464.9
742.5
6.1
1,019.5
1,470.6
3,703.6
228.2
(8.7)
(25.4)
194.1
(31.3)
0.5
163.3
(18.9)
–
144.4
171.97p
209.19p
84.54p
2.5
7.8
2015
£’m
464.7
759.2
5.0
1,499.4
1,189.5
3,917.8
300.5
(14.6)
(31.6)
254.3
(38.4)
0.5
216.4
(35.4)
(3.0)
178.0
202.64p
257.14p
97.22p
2.6
10.4
2016
£’m
739.5
1,297.1
22.1
1,407.5
1,331.3
4,797.5
363.6
(36.3)
(39.2)
288.1
(22.0)
0.7
266.8
(49.1)
(1.5)
216.2
243.64p
303.68p
111.80p
2.7
11.3
2017
£’m
750.0
1,422.6
24.9
1,340.1
1,894.8
5,432.4
384.4
(15.3)
(43.0)
326.1
(35.5)
0.4
291.0
(24.1)
(5.1)
261.8
297.99p
318.35p
122.98p
2.6
10.8
2018
£’m
933.0
1,937.0
24.5
1,150.0
1,982.8
6,027.3
946.3
987.0
1,350.5
1,507.7
1,677.9
1,106.8
1,471.8
1,462.0
1,474.8
1,692.7
16.0
1,634.5
2,757.3
3,703.6
(87.3)
2014
£’m
346.9
78.6
50.1
2014
16.3%
(0.6)
10.2
1,448.8
2,930.8
3,917.8
30.0
2015
£’m
377.8
79.4
123.5
2015
18.9%
(4.9)
0.3
1,984.7
3,447.0
4,797.5
–
2,449.9
3,924.7
5,432.4
(0.3)
2,657.0
4,349.4
6,027.3
(54.5)
(121.9)
(542.7)
2016
£’m
411.7
134.2
394.0
2016
21.0%
(3.9)
2017
£’m
546.9
131.4
262.4
2017
19.8%
(3.3)
2018
£’m
473.3
145.4
691.0
2018
17.5%
(2.0)
DCC plc Annual Report and Accounts 2018
221
Supplementary InfoFinancial StatementsGovernanceStrategic Report Index
Accounting Policies
Acquisition Related Liabilities
Alternative Performance Measures
Analysis of Net Debt
Annual General Meeting
Approval of Financial Statements
Audit Committee Report
Auditors
Basis of Consolidation
Basis of Preparation
Board Committees
Board of Directors
Board Performance Evaluation
Borrowings
Business Combinations
Business Model
Cash and Cash Equivalents
Cash Generated from Operations
Chairman’s Statement
Chief Executive’s Remuneration
Chief Executive’s Review
Clawback Policy
Commitments
Commodity Price Risk Management
Company Balance Sheet
Company Cash Flow Statement
Company Statement of Changes in Equity
Contingencies
Corporate Governance Statement
Corporate Information
Credit Risk Management
Critical Accounting Estimates and Judgements
Deferred Income Tax
Derivative Financial Instruments
Directors
Directors’ and Company Secretary’s Interests
Directors' Compliance Statement
Discontinued Operations
Diversity
Dividends
Earnings per Ordinary Share
Electronic Communications
Employee Share Options and Awards
Employment
Equity Accounted Investments
Ethics and Compliance
Events After the Balance Sheet Date
Exceptionals
Executive Directors’ Remuneration
Executive Risk Committee
Exit Payments Policy
222
DCC plc Annual Report and Accounts 2018
Finance Costs and Finance Income
Financial Calendar
Financial Review
Financial Risk and Capital Management
Five Year Review
Foreign Currency
Foreign Exchange Risk Management
General Meetings
Going Concern
Governance
Government Grants
Greenhouse Gas Emissions
Group Balance Sheet
Group Cash Flow Statement
Group Income Statement
Group Profit for the Year
Group Statement of Changes in Equity
Group Statement of Comprehensive Income
Health & Safety
Highlights of the Year
Income Tax Expense
Intangible Assets and Goodwill
Interest Rate Risk and Debt/Liquidity Management
Inventories
Investments In Subsidiary Undertakings
Investor Relations
Key Performance Indicators
Long Term Incentive Plan
Movement in Working Capital
Nomination and Governance Committee Report
Non-Controlling Interests
Non-Executive Directors’ Remuneration
Non-Financial Reporting
Notes to the Financial Statements
Operating Reviews
DCC LPG
DCC Retail & Oil
DCC Healthcare
DCC Technology
Other Operating Income/Expenses
Other Reserves
Outlook
146
212
23
30, 183, 204
221
177
30
117, 212
18
73
173
70
128
130
126
140
129
127
68
1
147
154
31
157
202
31
12
97, 105
159, 203
84
176
108
68
131
42
48
54
62
139
175, 203
11
190
171
215
163
212
198
87
91
133
131
84, 87, 92
74
83
161
177
4
159, 203
181, 204
6
106
8
99
181
31
199
201
200
182, 205
78
213
31
134
164
160
117
109
119
149
86
150, 211
151
212
142
141
156
82, 83
190
145
103
17, 82
100
Supplementary Information
Post Employment Benefit Obligations
Principal Risks and Uncertainties
Principal Subsidiaries
Profit Attributable to DCC plc
Property, Plant and Equipment
Provisions for Liabilities
Registrar
Related Party Transactions
Relations with Shareholders
Remuneration Policy Report
Remuneration Report
Report of the Directors
Report of the Independent Auditors
Responsible Business Report
Retained Earnings
Return on Capital Employed
Risk Management and Internal Control
Risk Report
Segment Information
Senior Management
Share Capital and Share Premium
Share of Equity Accounted Investments’ Profit after Tax
Shareholder Information
Share Listing
Share Ownership and Dealing
Share Price and Market Capitalisation
Statement of Compliance
Statement of Directors’ Responsibilities
Strategy
Strategy in Action
Substantial Holdings
Summary of Significant Accounting Policies
Takeover Regulations
Trade and Other Payables
Trade and Other Receivables
Transparency Rules
Values
Viability Statement
Website
165
19
207
202
153
172
212
183, 204
83
95
92
116
122
68
176, 204
58
88
16
135
76
174
147
211
211
82
31
131
121
2
32
118
190
118
158, 203
157, 202
118
4, 7, 11
18
212
DCC plc Annual Report and Accounts 2018
223
Supplementary InfoFinancial StatementsGovernanceStrategic Report
Notes
224
DCC plc Annual Report and Accounts 2018
Supplementary Information D
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DCC plc,
DCC House,
Leopardstown Road,
Foxrock, Dublin 18,
Ireland
Tel: + 353 1 279 9400
Email: info@dcc.ie
www.dcc.ie