Annual Report • Jun 18, 2020
Annual Report
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DCC plc Annual Report and Accounts 2020
DCC is an ambitious and entrepreneurial business operating in 20 countries, supplying products and services used by millions of people every day. Building strong routes to market, driving for results, focusing on cash conversion and generating superior, sustainable returns on capital employed enable the Group to reinvest in its business, creating value for its stakeholders.
DCC plc is listed on the London Stock Exchange and is a constituent of the FTSE 100.
| ii | DCC at a Glance |
|---|---|
| 1 | Highlights of the Year |
| 2 | Strategy |
| 4 | Business Model |
| 6 | Chairman's Statement |
| 8 | Chief Executive's Review |
| 12 | Responding to Covid-19 |
| 14 | Key Performance Indicators |
| 18 | Risk Report |
| 27 | Financial Review |
| 38 | Strategy in Action |
| 48 | Operating Review |
| 48 | – DCC LPG |
| 54 | – DCC Retail & Oil |
| 60 | – DCC Technology |
| 66 | – DCC Healthcare |
| 74 | Sustainable Business Report |
| 85 | Chairman's Introduction |
|---|---|
| 86 | Board of Directors |
| 88 | Group Management Team |
| 90 | Corporate Governance Statement |
| 99 | Nomination and Governance |
| Committee Report | |
| 103 | Audit Committee Report |
| 108 | Remuneration Report |
| 134 | Report of the Directors |
| 139 | Statement of Directors' |
|---|---|
| Responsibilities | |
| 140 | Independent Auditor's Report |
| 144 | Financial Statements |
| 224 | Principal Subsidiaries |
|---|---|
| and Associates | |
| 228 | Shareholder Information |
| 230 | Corporate Information |
| 231 | Independent Assurance Report |
| 232 | Alternative Performance Measures |
| 237 | 5 Year Review |
| 238 | Index |
DCC at a Glance
Enabling people and businesses to grow and progress.
Safety, Integrity, Partnership, Excellence.
Our objective is to continue 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
geographic footprint
Development of our people
Financial discipline
Read more: Strategy on page 2
The Group operates in 20 countries.
Profit by geography
Our divisions
The Group is organised and managed across four divisions and employs over 13,200 people.
Significant operating profit growth across all divisions.
Operating profit FY10 – FY20 (£'m) 10 year CAGR: 12.7%
Organic and acquisitive growth
Optionality in capital allocation
Maintaining returns discipline
Facilitates geographic expansion across the Group
Growing our opportunity set in attractive markets
Read more on page 48
The Group recorded a strong performance in the year ended 31 March 2020 with all divisions delivering growth, notwithstanding the challenging market conditions experienced during the year including Brexit uncertainty and the emergence of the Covid-19 pandemic. The results UHƮHFWWKHFRQWLQXHGVXFFHVVIXOH[HFXWLRQRIRXUVWUDWHJ\DQGLQSDUWLFXODU
| Revenue | -3.1% | Adjusted operating profit 1 | +7.3% | Adjusted EPS 1 | +1.3% |
|---|---|---|---|---|---|
| £14.8bn | £494.3m | 362.64p | |||
| Dividend per share | +5.0% | Free cash flow | Return on capital employed2 | ||
| 145.27p | £492.3m | 16.5% | |||
Read more: KPIs on page 14
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 six strategic priorities as illustrated.
| Strategic Priorities | What this means for DCC | Examples of Progress in 2020 |
|---|---|---|
| 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 share 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. |
The Group maintained or increased market share in the primary markets in which it operates. This was achieved through good organic growth and contributions from acquisitions in the current and prior year. The acquisitions by DCC Healthcare of Ion Labs and Amerilab represent a material step into the US market which is highly innovative, fragmented and growing strongly and, we believe, presents an exciting opportunity for the Group to develop, both organically and through acquisition, a leading market position in this attractive market. |
| Operational excellence |
'&&VWULYHVWREHWKHPRVWHƯFLHQW business in each of the sectors in which it operates. We continuously benchmark our EXVLQHVVHVDJDLQVWWKRVHVSHFLƬF.3,VZH judge are important indicators in our drive for superior returns on capital in the short, medium and longer term. |
'&&/3KDVEHFRPHWKHƬUVWJDVVXSSOLHULQWKH8.WRXVHELR/1WUXFNV ZLWKLQLWVRZQƮHHWGHPRQVWUDWLQJOHDGHUVKLSLQDOWHUQDWLYHIXHOVDQG GULYLQJLQFUHDVHGHƯFLHQF\LQWKHƮHHW'&&5HWDLO 2LOKDVGULYHQGLJLWDO improvements in the traditional home heating oil ordering process in the UK which now includes the ability to track orders online. DCC Technology FRQWLQXHGWRGULYHZDUHKRXVHHƯFLHQFLHVLQYHVWLQJLQDXWRPDWLRQDFURVV RXUEXVLQHVVHVLQ1RUWK\$PHULFDWRGULYHHƯFLHQF\DQGHQKDQFHFXVWRPHU service. Leveraging investments in automation, DCC Healthcare's Health & Beauty Solutions business enhanced its customer mix towards premium, complex products for leading international brands. |
| Innovation | Fostering and supporting a culture of innovation within the Group's businesses is fundamental to winning in our chosen markets in a rapidly changing, digitally enabled environment. We challenge each Group business to be innovative in FRQWLQXRXVO\HYROYLQJRXURƪHULQJWRH[LVWLQJ and new customers, enhancing the value of our partnerships with key suppliers and DGYDQFLQJWKHHƯFLHQF\UHVSRQVLYHQHVV and excellence of operations. |
'&&/3KDVLQWURGXFHGELR/3LQWRLWVSURGXFWRƪHULQJDFURVVVHYHUDO geographies including France, Britain and Ireland. While still an emerging fuel, this product enables customers to immediately replace their consumption of traditional fuel with a renewable product without the need to change their existing infrastructure. DCC Retail & Oil has launched a new digital, VXEVFULSWLRQEDVHGFDUZDVKRƪHULQ'HQPDUNDQGWKHJURZLQJ&OXE&HUWDV loyalty programme in France was extended to the car wash business. In developing its 'As A Service' propositions, DCC Technology is supporting a leading video on demand service with variable capacity for video storage. DCC Healthcare, through DCC Vital's internal innovation process, developed a new product to protect the patient's eyes during surgery and worked with a specialist manufacturer to help bring the product to market. This product enhances patient care by helping clinicians reduce the risk of eye injury, while also being gentle to the patient's skin. |
| Extend our geographic footprint |
In recent years we have been expanding a number of the Group's businesses into new geographic markets which 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. |
DCC Healthcare's acquisitions during the year in the US of Ion Labs and Amerilab were material steps in the division's strategy to build a business of scale in the world's largest health supplements and nutritional products PDUNHW7KHFRPSOHWLRQRIWKHDFTXLVLWLRQRI3DFLƬF&RDVW(QHUJ\UHSUHVHQWV '&&/3pVƬUVWPDWHULDOEROWRQLQWKH86/3PDUNHWDQGVWUHQJWKHQV our position in the north-west of the US. |
| Development of our people |
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 RXUSHRSOHDUHDNH\GLƪHUHQWLDWRUIRUXV :HFRPPLWVLJQLƬFDQWUHVRXUFHVWRHQVXUH we attract, develop and retain our people, ensuring a pipeline of talent to deliver the Group's strategy over the longer term. |
We continued to build on and evolve our suite of leadership development programmes during the year including: • the development of a new customised business leadership programme in partnership with Ashridge Hult Business School; • the introduction of a new Management Essentials programme, which can be delivered in multiple languages across our businesses to support ongoing professional development at manager level; and • increasing the number of DCC executive skills programmes undertaken LQFRDFKLQJIRUKLJKSHUIRUPDQFHDQGƬQDQFH 7KHVHSURJUDPPHVDUHDWWHQGHGE\DUDQJHRIKLJKSHUIRUPHUVIURPGLƪHUHQW parts of our business and support our ambition to continue to develop our leadership bench strength with a pipeline of talented, entrepreneurial leaders. |
| Financial discipline |
In pursuing our strategic objectives, we will only do so in the context of maintaining UHODWLYHO\ORZOHYHOVRIƬQDQFLDOULVNLQWKH 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. |
An integral part of the Group's strategy is the maintenance of a strong and OLTXLGEDODQFHVKHHW\$W0DUFK'&&KDGQHWGHEWH[FOXGLQJOHDVH FUHGLWRUV RIPLOOLRQDSSUR[LPDWHO\WLPHV1HW'HEWWR(%,7'\$ YHUVXVDGHEWFRYHQDQWRIWLPHV DQGKDGFDVKRQWKHEDODQFHVKHHW of £1.7 billion and undrawn, committed debt facilities of c.£350 million. '&&pVH[WUHPHO\VWURQJƬQDQFLDOSRVLWLRQOHDYHVWKH*URXSYHU\ZHOO positioned to navigate the uncertainty created by the Covid-19 pandemic and to continue its growth and development in the coming years. |
The Group will continue to pursue growth organically and through value enhancing acquisitions.
'&&/3*ZLOOFRQWLQXHWRGULYHIXUWKHUHƯFLHQFLHVDFURVVLWVWDQNHUƮHHWV alongside continued IT investment and the development of its strategic sourcing site in the UK. DCC Retail & Oil will focus on improving operational HƯFLHQFLHVHQKDQFLQJWKHFXVWRPHUH[SHULHQFHDQGIXUWKHUVWUHDPOLQLQJLWV SRUWIROLRDQGRSHUDWLRQV,Q'&&7HFKQRORJ\IXUWKHULQYHVWPHQWZLOOEHPDGH LQZDUHKRXVHDXWRPDWLRQDQGOD\RXWRSWLPLVDWLRQWRGULYHHƯFLHQFLHV'&& +HDOWKFDUHFRQWLQXHVWRSURJUHVVDQXPEHURILQYHVWPHQWSURMHFWVDFURVVLWV ZDUHKRXVHRSHUDWLRQVLQ%ULWDLQLQFOXGLQJDUHFRQƬJXUDWLRQRILWVZDUHKRXVH SLFNLQJDQGSDFNLQJRSHUDWLRQLQLWVSULPDU\FDUHEXVLQHVVLQVRXWK:DOHV ZKLFKZLOOGHOLYHULPSURYHGHƯFLHQF\DQGWKURXJKSXWDVZHOODVFDSDFLW\IRU further growth.
'&&/3*pVIRFXVZLOOEHRQIXUWKHULQFRUSRUDWLQJLQQRYDWLYHQHZIXHOVIRU FXVWRPHUVLQWRWKHSURGXFWPL[DQGZRUNLQJZLWKFXVWRPHUVWRKHOSWKHP UHGXFHWKHLUFDUERQIRRWSULQW'&&5HWDLO 2LOZLOOFRQWLQXHWRIRFXVRQ LPSURYLQJWKHFXVWRPHUH[SHULHQFHWKURXJKDXWRPDWLRQDQGGLJLWDOLVDWLRQ initiatives include further advancements to our loyalty programme and FRQWLQXLQJWRGHYHORSWKHUHWDLOH[SHULHQFH'&&5HWDLO 2LODOVRUHPDLQV focused on the premium fuel agenda across the product portfolio. DCC 7HFKQRORJ\ZLOOFRQWLQXHWRGHYHORSLWVUDQJHRIVHUYLFHRƪHULQJVKHOSLQJ customers with 'As A Service' models and supporting longer technology OLIHF\FOHV'&&+HDOWKFDUHWKURXJK+HDOWK %HDXW\6ROXWLRQVRƪHUVLWV customers innovative nutritional formats; further development of new SURGXFWIRUPDWVLVRQJRLQJDQGLVEHLQJRƪHUHGWRFXVWRPHUV
The acquisitions completed during the year will provide further opportunities IRUERWKRUJDQLFDQGDFTXLVLWLYHJURZWKIRUWKH*URXS7KH*URXSUHPDLQV GLVFLSOLQHGLQLWVDPELWLRQWRHQWHUQHZJHRJUDSKLFPDUNHWVDQGWKHGHYHORSPHQW strategy remains unchanged.
2XUSHRSOHDUHWKHNH\GULYLQJIRUFHEHKLQGRXUEXVLQHVVHVDQGZHZLOO continue to support and foster a culture of growth and opportunity through our ongoing talent development activities. We recognise the impact of an LQFOXVLYHDQGGLYHUVHZRUNIRUFHDQGKDYHDFOHDUURDGPDSWRHPEHGDIRFXV RQLQFOXVLRQDQGGLYHUVLW\ZLWKLQRXUEXVLQHVVHVIRUDQGEH\RQG
7KHPDLQWHQDQFHRIDVWURQJDQGOLTXLGEDODQFHVKHHWWRWDNHDGYDQWDJHRI opportunities as they arise will remain an integral part of the Group's strategy.
Tamnavulin distillery were keen to investigate how they could save on their fuel costs and reduce their carbon emissions by switching to gas.
Read more on page 38
During the year, DCC Technology has made extensive progress in both the 'clicks' and 'mortar' space accelerating the digital retail revolution, enabling our customers and vendors to thrive in both traditional bricksand-mortar and eCommerce platforms.
Read more on page 42
Our purpose is to enable people and businesses to grow and progress. We are inspired to help others achieve more and we strive to be an integral part in helping and supporting the success of others – our employees, our customers, our business partners and our stakeholders.
Achieved through applying our strategic framework
Market leading positions Operational excellence Innovation Extend our geographic footprint Development of our people Financial discipline Read more: Strategy on page 2 And underpinned by our core values
Safety For us, safety
Partnership We are stronger together
Excellence We are driven to excel in everything we do
DCC at its core is a people business; it is a multinational and multicultural Group, employing over 13,200 people in 20 countries. The Group's continued success depends on a skilled, engaged and inclusive workforce to deliver the right products and services, safely and on time, to our customers every day.
We have a broad spectrum of customers, supporting everyone from major corporations and governments to sole traders and individual consumers. We are a trusted partner to over 1.5 million customers.
We partner with thousands of the world's leading energy, technology and healthcare companies, giving us access to a diverse and broad range of quality products. Our suppliers are carefully selected, and our aim is to create long-term sustainable relationships.
The Group has a strong and liquid balance sheet which enables us to react quickly to commercial opportunities. At 31 March 2020, WKH*URXSKDGQHWGHEWH[FOXGLQJOHDVHFUHGLWRUV RIPLOOLRQ total equity of £2.5 billion and cash resources of £1.7 billion.
We are well positioned to execute our strategy, having robust, well-invested operating platforms, a diverse geographical footprint across 20 countries and the capacity and appetite to invest further in these facilities.
The quality of our own brands, third-party brands, licences and processes provide significant competitive advantage. We foster and support a culture of innovation across the Group and constantly challenge each business to identify and implement innovative and effective solutions in a rapidly changing, digitally enabled environment.
Our Group operates across four separate divisions. Although we are a diverse mix of businesses, we all have a common purpose of providing the essential products and services that our customers require to keep moving and improving.
We combine our strengths to better connect people and businesses with essential energy, technology and healthcare products and services across the following divisions:
Read more: Operating Reviews on pages 48 to 73
We operate a devolved management structure which allows our businesses to drive innovation in their chosen markets and to be agile and responsive to changes in customer needs. Our businesses are supported by centralised functions which provide vital growth enablers across best practice, talent development, risk management and capital allocation, together with setting a consistent strategic direction.
Since the very beginning of our business we have always had an absolute focus on doing more, reaching more, and unlocking potential to deliver long-term sustainable growth.
We are structured for growth. We drive organic growth within our businesses by fostering a culture of high performance and entrepreneurship in our teams. This organic growth, together with the cash generative nature of our businesses, facilitates ongoing investment in our people and in our operations. This is supported by disciplined and selective capital redeployment for expansion and new acquisitions, allowing us to sustain our growth model.
Since we floated as a public company in 1994, the Group has generated operating cash flows of £5.7 billion which has been used to invest further in organic growth of £1.4 billion and to complete c.280 acquisitions at a cost of £3.3 billion. We currently have operations in 20 countries and have the platforms, opportunities and capability for further development across each of our divisions.
We are committed to delivering long-term value to our shareholders and sharing in our success through our progressive dividend policy. We have DQXQEURNHQUHFRUGRIGLYLGHQGJURZWK and a compound average dividend JURZWKUDWHRIRYHU\HDUV
Dividend to shareholders
We invest in our people throughout their careers to ensure they are engaged and fully equipped to perform WKHLUUROHV2XUZRUNLQJHQYLURQPHQWV DUHVDIHDQGLQFOXVLYHDQGSHRSOHDUH HPSRZHUHGDQGHQDEOHGWRGHYHORS personally and professionally. We provide competitive rewards and EHQHILWVWKDWDUHFOHDUO\OLQNHGWR performance and offer opportunities for further career development.
Employee payments
£598m (2019: £573m)
7KHWD[HVDQGOHYLHVSDLGE\WKH*URXS LQWKHMXULVGLFWLRQVLQZKLFKZHRSHUDWH HQDEOHORFDOJRYHUQPHQWVWRGHYHORS DQGPDLQWDLQSXEOLFZRUNVVHUYLFHV and institutions.
Corporate taxes
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Goods, services and interest
2XUSURGXFWVDQGVHUYLFHVHQDEOH and promote economic activity in our FRPPXQLWLHV2XUEXVLQHVVHVDUH required to manage their activities to support long-term environmental VXVWDLQDELOLW\DQGZHDUHFRPPLWWHG to continually improving our environmental performance through careful management of our RSHUDWLRQV:HSDUWQHUZLWKDQXPEHU of charities and encourage our people WRHQJDJHLQYROXQWHHUZRUNWKHUHE\ EHQHILWLQJORFDOFRPPXQLWLHV
Disciplined and selective capital redeployment allows us to sustain our growth model. The highly cash JHQHUDWLYHQDWXUHRIRXUEXVLQHVV PRGHOHQDEOHVRQJRLQJLQYHVWPHQW LQRXUSHRSOHDQGH[LVWLQJEXVLQHVVHV WRJHWKHUZLWKIXUWKHUDFTXLVLWLRQV driving efficiencies and further VXVWDLQDEOHJURZWK
Retained for reinvestment
" Our purpose, coupled with our guiding values, will sustain and underpin the Group in the years ahead."
John Moloney Chairman
The Board is recommending a final dividend of 95.79 pence per share. This brings the total dividend per share for the year ended 31 March 2020 to 145.27 pence per share, up 5.0% on the previous year, so continuing our record of 26 years of uninterrupted dividend growth.
The total return to shareholders in the last 10 years has been 274%, taking account of growth in our share price and dividends paid.
Our core strategy continues to be to build a growing, sustainable, cash generative business which consistently provides our shareholders with returns on capital employed significantly ahead of our cost of capital.
Our enhanced balance sheet strength and financial resources allow for a continuation of our targeted acquisition strategy. We committed a further c.£170 million of acquisition capital across our four divisions in the year.
The Strategy in Action section on pages 38 to 47 demonstrates how elements of our strategy were executed during the year with a particular focus on innovation and the end user.
The Covid-19 pandemic emerged through our year end as a major global challenge. Civil society and business has been compelled to change and adapt at great speed to a new reality. At DCC, our primary concern has been two-fold L WKHVDIHW\KHDOWKDQGZHOOEHLQJRIRXU HPSOR\HHVDQGLL FRQWLQXLQJWRPHHWWKH needs of our customers, particularly in regard to essential supplies across areas such as energy, healthcare and technology/connectivity. With our devolved and empowered business model across four divisions, I believe that the Group has demonstrated great reserves of agility and resilience to adapt at pace to a changing environment. More will be required as we progress through 2020 but I believe that the business is as well positioned as it can be to sustain itself in challenging times.
A main area of focus continues to be Board composition and renewal. On 24 February 2020, we announced that Fergal O'Dwyer, who has been Chief Financial Officer since 1994, is retiring from the Group after 31 years of service at the conclusion of the Annual General Meeting on 17 July 2020.
Fergal will be succeeded by Kevin Lucey, Head of Capital Markets, who will be appointed to the Board of DCC as Chief Financial Officer and an Executive Director on 17 July 2020. I want to sincerely acknowledge Fergal's outstanding track record in the financial leadership of the Group. His exceptional commitment and dedication over many years has contributed greatly to the successful growth and development of DCC. Further details on this change is set out in the Nomination and Governance Committee Report on page 101.
We were delighted to welcome Caroline Dowling as a non-executive Director in May 2019. Caroline's extensive experience in the technology industry across the supply chain, in particular in the electronic, technical and logistics service sectors, is particularly relevant to DCC.
In April 2020, we welcomed Tufan Erginbilgic to the Board as a non-executive Director and his leadership experience and expertise in the downstream global fuels, lubricants and
I am pleased to report to you that in a year that saw continuing uncertainty surrounding Brexit and the impact of the Covid-19 pandemic in the final quarter, DCC achieved a strong trading performance, with adjusted operating profit up 7.3% and adjusted earnings per share up by 1.3%.
Return on capital employed, a key metric for the Group, was 16.5%. The strong conversion of adjusted operating profits to free cash flow continued, at 100%.
At year end, the Group had net debt of PLOOLRQH[FOXGLQJOHDVHFUHGLWRUV FDVK resources of £1.7 billion and total equity of £2.5 billion. The maintenance of a strong and liquid balance sheet has always been a hallmark of the Group and is particularly important as we continue to deal with both the immediate impact and the likely recessionary aftermath of the Covid-19 pandemic.
petrochemicals businesses will deepen Board knowledge and insight in regard to key sectors in which DCC operates.
Leslie Van de Walle will not be seeking re-election at the 2020 AGM and will retire from the Board as a non-executive Director, Senior Independent Director and Chairman of the Remuneration Committee on 17 July 2020. I would like to thank Leslie, who has contributed greatly to our Board over almost 10 years, and wish him every success in the future.
Leslie will be succeeded as Senior Independent Director by Mark Breuer and as Chairman of the Remuneration Committee by David Jukes.
I am cognisant that I have been a Director of the Company since February 2009 and have been Chairman since September 2014. In February 2018, the Board approved a further term for me of up to three years to ensure continuity at a time when Donal Murphy was in his first year as Chief Executive.
The Nomination and Governance Committee has taken account of the provisions in respect of Board tenure in the UK Corporate *RYHUQDQFH&RGHoWKH&RGHp DQG/HVOLH Van de Walle, Senior Independent Director, is leading the Committee in progressing a comprehensive Chairman succession process, which Mark Breuer will continue when Leslie retires in July.
Total Shareholder Return ('TSR')
The chart above shows the growth of a hypothetical £100 holding in DCC plc shares since 1 April 2010.
2XUPDLQSULRULW\LVWKHVDIHW\RIRXUHPSOR\HHV FRQWUDFWRUVFXVWRPHUVDQGRWKHUSHUVRQVZKRPD\ EHDIIHFWHGE\RXUEXVLQHVVDFWLYLWLHV6DIHW\LVDNH\ focus for Board and management across all of our operations and in particular with regard to our HPSOR\HHV
Our business is built on trust %HLQJKRQHVWRSHQDFFRXQWDEOHDQGIDLULVLQRXU nature. These traits are the pillars on which our EXVLQHVVKDVEHHQEXLOW,QWHJULW\LVDWWKHKHDUW RIRXULQWHUDFWLRQZLWKVWDNHKROGHUV
A detailed review of DCC's organisational purpose was conducted during the year. As a Group with core involvements in sales, marketing and distribution across a number of sectors, we, in so many ways, connect the 'few' manufacturers/ suppliers to the 'many' customers/consumers in our chosen geographies.
We facilitate range and choice across products for heating, cooking and transportation as well as nutrition and healthcare and enabling access to wide-ranging technology products delivering communications, security and connectivity.
Our purpose of 'enabling people and businesses to grow and progress', coupled with our guiding values of safety, integrity, partnership and excellence, will sustain and underpin the Group in the years ahead.
DCC's core values of safety, integrity, partnership and excellence are embedded in the Group's DNA and they define how DCC's businesses operate. These values are continually communicated Group-wide and promoted by the Group's management teams to guide our employees in the way we do business, particularly as we expand into new geographies and embed new cultures.
Our core values underpin our wider societal responsibilities and strongly support our effectiveness as a business.
The Board, with assistance from the Nomination and Governance Committee and the Remuneration Committee, has committed considerable time during the year to corporate governance, in particular the implementation of the changes contained in the 2018 Code. The enhancements made to our governance policies and practices are detailed in the Governance Section of this Annual Report.
We are stronger together 2XUEXVLQHVVLVDOODERXWFUHDWLQJVXVWDLQDEOH partnerships with customers and suppliers.
:HDUHGULYHQWRH[FHOLQHYHU\WKLQJZH|GR :HEHOLHYHJUHDWSHUIRUPDQFHFRPHVIURP SUHSDUDWLRQIRFXVRQWKHGHWDLOUHOHQWOHVV GHWHUPLQDWLRQDVHQVHRIXUJHQF\DQGDJHQXLQH KXQJHUIRUVXFFHVV([FHOOHQFHLVZKDWGULYHVIRFXV on continuous improvement in all that we do.
Taking account of the provisions in the Code relating to culture, the Board has been assessing culture during the programme of non-executive Director visits to sites and operations across the Group and as part of a a number of Board meetings which took place at Group companies in Canada and the UK.
DCC's success is principally due to the dedication and hard work of the people throughout the Group, led by Donal Murphy, Chief Executive and his executive team, and I would like to thank them all for their commitment and contribution.
Our people are the key driving force behind our businesses. We recognise the impact of an inclusive and diverse workforce and have a clear roadmap to focus on this in the coming year and beyond.
DCC has created a strategy and business model that has delivered for shareholders over 26 years. Our diverse business model is flexible and adaptable over time and we believe that we can continue to deliver satisfactory returns in our chosen sectors. We have increased our global reach in 2020, particularly in the US. These developments further our potential to expand in the future.
The maintenance of a strong and liquid balance sheet will remain an integral part of the Group's strategy.
Finally, on behalf of the Board, I would like to thank you, our shareholders, for your continued support.
John Moloney Chairman 18 May 2020
Donal Murphy reflects on the year and answers some key questions about DCC.
Donal Murphy Chief Executive
In terms of acquisition activity, the highlight of the year was the material expansion of our nutritional business in the US market. DCC acquired Ion Labs in November 2019 and Amerilab Technologies in March 2020, adding important new customer relationships and enhancing our product format capability. DCC now has a substantial presence in the US, the world's largest health supplements and nutritional products market, and we are well positioned to continue our expansion in this fast growing, innovative and highly fragmented market.
Our people are always a highlight for me and this year was no different. We continued to build on our core values of Safety, Integrity, Partnership and Excellence and we made good progress during the year in enhancing our safety culture across the organisation and ensuring that we protect the health, safety and well-being of all 13,200 colleagues across the Group. This was particularly evident with the advent of the Covid-19 crisis and I am particularly proud of how all our people adapted as we successfully implemented our business continuity plans across all businesses and countries that DCC operates in and continued to supply the essential healthcare, energy and technology products and services that our FXVWRPHUVUHTXLUHPRUHDERXWWKLVODWHU
Finally, one low light is the upcoming retirement from DCC of my good friend and colleague, our CFO, Fergal O'Dwyer. Fergal joined DCC 31 years ago and has been the only CFO in DCC during its 26 years as a public company. Fergal has played an integral part in the exceptional growth of the Group over this time. During his tenure as CFO, the Group has grown from strength to strength; revenue has grown from £200 million to £14.8 billion, operating profit from £17 million to £494 million and Total Shareholder Returns have been 6,163%, while always maintaining a very strong and liquid balance sheet. This long and successful track record of exceptional financial performance is testament to his leadership and his commitment to the growth and development of the Group. Fergal's relentless focus on leadership and team development ensured that we had an excellent internal successor, Kevin Lucey, within the strong team and I look forward to partnering with Kevin in the years to come.
We will all miss Fergal greatly and wish him every success in all his future endeavours.
Let me start with the trading performance; despite the very challenging environment, uncertainty surrounding Brexit and the onset of Covid-19 in our final quarter, it has been another year of strong growth and development for DCC. Group adjusted operating profit increased by 7.3% to £494.3 million, demonstrating the resilience of DCC's business model. Pleasingly, all four divisions achieved operating profit growth over the prior year. While our adjusted earnings per share only increased by 1.3%, this reflects the strong earnings growth offset by the dilutive effect of the equity placing in the prior year and the impact of the adoption of IFRS 16. We continued our trend of generating very strong free cash flow with an excellent 100% conversion of operating profit to cash during the year, a really stellar performance as many of our markets were in lockdown during the run up to the year end. Finally, our return on capital employed, DCC's key operating metric, remained strong at 16.5%.
Strategic Report Governance Financial Statements Supplementary Info
Diversity in all aspects is very important to DCC and the diversity in our business model is one of the keys to our success. Diversity enables us to generate opportunities for growth across a range of sectors and geographies, while continuing to leverage a core set of capabilities in sales, marketing and support services. This diversity also drives resilience for the Group by creating greater optionality and the ability to flex in line with different market trends. The importance of diversity and the resilience it gives us was again evident this year in the very challenging macro-economic environment we operated in.
When I joined the Group in 1998, DCC's largest division was the Technology division. At that time, some investors were encouraging us to concentrate on the fast-growing technology sector and reduce our focus on our smaller energy sector. We were committed to diversity then, as we remain committed now, and this proved to be crucial to our success.
DCC is a very disciplined group, with a long history of generating excellent returns and deploying capital in value-enhancing acquisitions. We ensure that our businesses have clear strategies and avoid short-term reactions or active portfolio management which could lead to missing out on bigger trends and opportunities. We focus instead on consistently growing each of our four divisions, in line with our divisional strategies, over the long-term. In 2011, it would have been hard to predict that the LPG division would become the largest profit contributor in the Group. At that point, for 35 years we had been building our business in Britain and Ireland only, but in the last six years we have grown that business to 10 countries in three continents and 46% of Group profits.
Diversity really works for us. Over the last 26 years we've grown our adjusted operating profits at a compound rate of 14.5% per annum but the growth rates have varied across the different divisions, principally driven by the opportunities to deploy capital. Today, DCC has the platforms, the opportunities and the capabilities to build the Group into a global leader in its chosen sectors and our diversity will help us accelerate that growth.
Purpose reinforces who we are and what we stand for. It is a way of capturing in a few words the elements that are fundamental to us as an organisation. In a large, diversified group, this helps as a simple guide to our strategic priorities and it creates a connection across the diverse activities that we do as a Group. It helps external stakeholders to better understand what drives and motivates us, since it reflects real beliefs that we hold about the essence of our Group. All stakeholders – from employees to investors to customers to regulators – now demand that a modern business can reflect on the key elements it stands for and embed those in how it operates. There should be nothing surprising in our statement because it is a simple reflection of the nature of our business as an enabler of others.
Our purpose statement has three main elements. First, that we truly exist to enable the success of others. Second, that much of what we do is in the essential, everyday things that people, and businesses, need. And finally, that we are always looking for the new and the innovative ways that progress and improve. This is important because as a Group operating across a number of sectors, these three elements consistently describe why we do what we do. As we went through the process of defining this statement, these themes were regularly emphasised by colleagues at all levels across DCC.
While our businesses will continue to have their own local identities and cultures, the DCC purpose is a unifying statement that simplifies what is important to us as a Group. It is consistent with our values and with the principles of how we have grown the organisation. As we continue to grow, it is important to retain these principles and our purpose communicates these messages simply for our colleagues across the Group, customers of our businesses, our partners and other key stakeholders: "We are enabling people and businesses to grow and progress".
Energy transition is crucially important in combating climate change. It will require all aspects of society to make changes to how energy is consumed. DCC has a unique and important role to play in progressing energy transition. Calculating and then changing energy consumption can be complex; we help to make this simple. Understanding true alternative energy products and their costs can be confusing; we help by providing real and clear choices.
We are doing this today. Our LPG division has for several years been a market leader in oil to LPG conversions which enables customers to drive an immediate reduction in their carbon footprint of up to 25% and significant reductions in other emissions which contribute to air pollution. This type of solution has a significant impact, particularly for commercial customers who have higher energy intensity.
For many customers, particularly in home heating, changing your energy source outright is no small feat. Recognising this, our Austrian business, Energie Direct, has developed a popular home heating oil solution that uses additives in the fuel to enable more efficient consumption and is packaged with full carbon offsets to help the customer mitigate their carbon footprint. The business is also in the process of launching an enhanced remote monitoring and re-ordering technology solution which will provide customers with greater transparency and understanding of their energy consumption.
Transport energies are also evolving. In certain markets, such as Norway, electric passenger cars are becoming commonplace on the roads. Our retail network is evolving with these trends both by beginning to offer high capacity charging in key markets and by broadening the range of services that a customer can avail of on our forecourts. For heavy duty vehicles and marine customers, we have partnered closely with Shell to bring their GTL fuel to market in the UK and Denmark. This drop-in replacement for diesel engines is cleaner burning and reduces many of the emissions that cause local air pollution.
While we are absolutely focused on helping others drive progress in energy transition, we are also committed to leading by example.
In Scandinavia, our QStar business is already UXQQLQJVHYHUDOWUXFNVRQ+92K\GURWUHDWHG YHJHWDEOHRLODORZFDUERQDOWHUQDWLYHWRGLHVHO and, in Britain, Flogas has introduced tankers UXQQLQJRQELR/1*ELRPHWKDQHOLTXHILHG QDWXUDOJDV WRWKHLUIOHHW7KHVHDUHJRRGILUVW steps and there is much more that we will be doing. In addition, our consolidation strategy across the energy markets results in us selling more energy products to more customers with less total capital employed and importantly less total carbon emissions. Our internal business planning is now incorporating bottom-up detailed planning for emissions reductions with ambitious goals for each business as we strive to play our part in tackling climate change.
Read more on pages 38, 52, 53 and 76
DCC's strategy has been very consistent over its 26 years as a public company. Our objective is to build a growing, sustainable and cash generative business, which consistently provides return on capital well in excess of our cost of capital. We execute this strategy by:
Building leadership positions, we then seek to extend our business into new geographies.
Accelerating growth by attracting and empowering entrepreneurial leadership teams and incentivising those teams on the performance of their business.
This strategy has delivered a consistent track record of growth over the last 26 years with operating profit growing at 14.5% CAGR, dividends increasing at 14.0% CAGR, free cash flow conversion of 101%, total shareholder return of 5,238% and consistently high returns on capital employed, significantly ahead of our cost of capital.
We regularly review our key strategic choices and remain confident in our strategy. There are strong fundamentals in the sectors, geographies and areas of the value chain that we choose to play in. By executing our strategy as we have, we have built market leading businesses with efficient operations, great colleagues and innovative customer-oriented solutions that are right for each local market.
Considering the pace of change and disruption in the world today, agility and the ability to flex to new opportunities is a critical feature of our strategy; this has been evident in the way the Group has been able to react to the Covid-19 crisis. This agility is greatly enabled by our devolved model. Our empowered management teams can quickly make the right decisions for their businesses in their markets as circumstances change. And, they can just as quickly call on support from across the Group or adapt ideas from elsewhere in the Group. This balance allows us to respond swiftly to macro or local disruption, while also leveraging the scale of the Group and its consistency of approach when needed.
Read more on page 2
Our first priority is to drive organic growth. Over the past 26 years, organic growth has been approximately one-third of our total growth. We always strive to generate organic growth well ahead of the underlying growth in the sectors that we operate in. This highlights the drive, ambition and commercial agility of our colleagues and management teams across the Group.
We complement this organic growth through our significant M&A capability. We have spent approximately £3.3 billion on over 280 acquisitions over our 26 years as a public company. We are highly disciplined in our allocation of capital and as a result have maintained strong ROCE for shareholders while deploying capital into those acquisitions.
Our local teams leverage our M&A capability to drive bolt-on acquisitions in their home markets. Our divisional teams are constantly focused on generating opportunities for geographic expansion and for new capability through M&A. They are all backed up by a highly experienced central team who help facilitate all stages of the M&A process.
Of course, it is one thing to acquire the businesses, but quite another to integrate, successfully onboard and extract synergies from those acquisitions. Whether it is a £1 million, a £10 million or a half a billion acquisition, the processes are broadly similar. While we treat every acquisition differently, recognising the unique circumstances, we have systematic common steps and look to integrate businesses quickly and smoothly. M&A is a core competency and a real differentiator for DCC.
Read more on page 32
26 year CAGR1 14.5%
The Covid-19 pandemic is primarily a humanitarian challenge and the safety, health and well-being of our people was our immediate priority. Business continuity plans were invoked in all DCC operations. The vast majority of our sales, marketing and operations people across the Group quickly adapted to home working. Appropriate social distancing and other safety measures were introduced in our facilities where an on-site presence was required to ensure the continued supply of essential products and services to our customers. While the level of infection of colleagues throughout the Group has been very modest, we did tragically lose one of our UK colleagues who had contracted the virus.
The pandemic has highlighted the vital nature of the Group's energy, technology and healthcare products, and the importance of roles played by our frontline colleagues who have been committed to serving our customers during this difficult period. Each of our businesses has played a critical role in enabling societies respond to Covid-19. Our Healthcare businesses have been instrumental in supporting our customers in the health services access critical products including PPE. Our Technology businesses responded rapidly for customers who were establishing working from home arrangements at scale for the first time. Our Energy businesses have been keeping critical industry and services moving, from ensuring agricultural processes can continue to maintaining services for critical haulage networks to keeping customers warm in their homes as they became their new workplaces.
The Covid-19 situation remains extremely fast-moving, volatile and difficult to predict. We are acutely aware that sustained periods of uncertainty lie ahead. As a result, we have been and will continue to actively manage our cost base and resources.
The continued reduction in daily reported cases and easing of restrictions in key markets is encouraging. However, our management teams remain vigilant and ready to do all they can to protect our employees and to continue to service our customers and suppliers. I am so proud of the way the 13,200 people across the DCC organisation have adapted to the new ways of working and how we did not skip a beat in providing our customers with the essential products and services that they require.
Read more on pages 12 and 71
The Group engaged in a comprehensive succession process over time to identify Fergal O'Dwyer's successor as Chief Financial Officer. I am delighted that after the very detailed process, which included an extensive external benchmarking review, we are making an internal appointment to this role and look forward to the valuable contribution that Kevin Lucey will make as our new CFO with effect from 17 July 2020. Kevin has held various senior finance roles in DCC since joining us in 2010 and has been part of our Group Management Team since 2017. Building and developing talent internally is a key part of our leadership development programme and having an internal successor to Fergal demonstrates that the programme is delivering.
We also continued to build on and evolve our suite of leadership development programmes, including a new customised business leadership programme developed in partnership with Ashridge Hult business school. Over the eight month programme, accelerated learning was enabled through a blended learning approach
using real life case studies and senior Group management tutorials, as well as the latest business management and leadership thinking from the Ashridge faculty. We also launched a new 'Management Essentials' programme, which can be delivered in multiple languages across our businesses to support ongoing professional development at manager level. These programmes are attended by a range of high performers from different parts of the Group and support our ambition to continue to develop our leadership bench strength with a pipeline of talented, entrepreneurial leaders.
Our people are the key driving force behind our business and I believe that to reap the benefits of our diverse and talented workforce we need inclusive work environments where all of our colleagues have the freedom to achieve their ambitions and a culture that cultivates the energy and passion our colleagues bring to work. We refreshed our approach to inclusion and diversity this year with the launch of our new policy, 'You Belong Here' which outlines the core principles and expectations we have for ourselves, our colleagues and our businesses to foster positive workplace environments. We have a clear roadmap to embed a focus on inclusion and diversity within our businesses for 2021 and beyond, and I am personally committed to leading a thriving, ambitious and diverse business where everyone is given equal opportunities and is supported in reaching their potential.
Read more on pages 46 and 79
Donal Murphy &KLHI([HFXWLYH 18 May 2020
"DCC continues to deliver by enabling people and businesses to grow and progress."
In his Chief Executive's Review, Donal Murphy has highlighted how the Group's Energy, Technology and Healthcare businesses have played a critical role in enabling societies respond to Covid-19 during the pandemic. Our Healthcare businesses have been instrumental in supporting our customers in the health services and ensuring access to critical products including PPE. Our Technology businesses responded rapidly, assisting customers who were establishing working from home arrangements at scale for the first time. Our Energy businesses have been keeping critical industry and services moving, from ensuring agricultural processes can continue, to maintaining services for critical haulage networks, to keeping customers warm in their homes as they became their new workplaces.
In addition, many of the Group's businesses have taken initiatives at a local level to assist frontline healthcare workers engaged in the battle against Covid-19 and other vulnerable persons impacted by the pandemic. We have included a number of examples here:
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Williams Medical Supplies were proud to VXSSRUWWKLVE\GRQDWLQJUDVSEHUU\FRORXUHG VFUXEVDQGIDFHYLVRUVWREHXVHGRQWKH &RYLGSRVLWLYHZDUGV\$OVRDIWHUOHDUQLQJ from a nurse in the hospital that the constant hand washing and use of hand gel left their KDQGVGU\DQGFUDFNHGZHDGGHGVRPH complimentary hand lotion to our parcels.
Financial
7KH*URXSHPSOR\VILQDQFLDONH\SHUIRUPDQFHLQGLFDWRUVo.3,Vp ZKLFKVLJQLI\SURJUHVVWRZDUGVWKH 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 48 to 73.
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16.5%
| 2019 | 17.0% |
|---|---|
| 2018 | 17.5% |
52&(LVGHƬQHGDVDGMXVWHGRSHUDWLQJSURƬW expressed as a percentage of the average capital employed. To assist comparability with prior years, the impact of IFRS 16 Leases has been excluded from the ROCE calculation in the current year as detailed in the Group's 'Alternative Performance Measures' on page 235.
52&(LVWKHNH\ƬQDQFLDOEHQFKPDUNZHXVHZKHQ 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.
The Group continued to generate very strong returns on capital employed with the modest decrease in the return on capital employed versus WKHSULRU\HDUSULQFLSDOO\UHƮHFWLQJWKHGLƯFXOW market conditions experienced by the DCC Technology business in the UK, acquisition spend in the current and prior year including the acquisition of Amerilab Technologies in March 2020, and organic investments made in the Group's manufacturing facilities, warehousing and operating infrastructure.
The achievement of returns on capital employed in excess of the Group's cost of capital will continue WREHDNH\IRFXVLQRUGHUWRHQVXUHWKHHƯFLHQW generation of cash to fund organic growth, acquisitions and dividend growth.
FY20 Performance +7.3%
| 2020 | £494 |
|---|---|
| 2019 | £460.5m |
| 2018 | £383.4m |
7KHFKDQJHLQDGMXVWHGRSHUDWLQJSURƬWDFKLHYHG in the current year compared to the prior year.
\$GMXVWHGRSHUDWLQJSURƬWPHDVXUHVWKHXQGHUO\LQJ operating performance of the Group's businesses and is an indicator of our revenue generation, margin management, cost control and SHUIRUPDQFHHƯFLHQF\
\$OOIRXUGLYLVLRQVUHFRUGHGSURƬWJURZWKYHUVXVWKH SULRU\HDUUHƮHFWLQJWKHFRQWULEXWLRQIURPDFTXLVLWLRQV completed in the current and prior year and good RUJDQLFSURƬWJURZWK*RRGRUJDQLFSHUIRUPDQFHV from DCC LPG, DCC Retail & Oil and DCC Healthcare ZHUHVRPHZKDWRƪVHWE\WKHRUJDQLFSURƬWGHFOLQH in DCC Technology's UK business and the sale of DCC Healthcare's UK generic pharma activities. DCC LPG delivered very strong growth, with operating SURƬWLQFUHDVLQJE\WRPLOOLRQDQGPRUH
than three-quarters of the growth was organic. This H[FHOOHQWRUJDQLFSHUIRUPDQFHUHƮHFWVJRRGYROXPH growth and strong procurement and cost control.
2SHUDWLQJSURƬWLQ'&&5HWDLO 2LOLQFUHDVHGWR PLOOLRQDKHDGRIWKHSULRU\HDU RQDFRQVWDQWFXUUHQF\EDVLV DQGDSSUR[LPDWHO\KDOI of the constant currency growth was organic. This VWURQJSHUIRUPDQFHUHƮHFWVLQFUHDVHGSHQHWUDWLRQ of value-added products and services and strong cost control.
DCC Technology recorded modest operating SURƬWJURZWKRIZLWKWKHFRQWULEXWLRQIURP acquisitions and a good trading performance in 1RUWK\$PHULFDDQG&RQWLQHQWDO(XURSHEHLQJRƪVHW E\PRUHGLƯFXOWWUDGLQJFRQGLWLRQVLQWKH8.
,WZDVD\HDURIVLJQLƬFDQWSURJUHVVIRU'&& +HDOWKFDUHDVLWJHQHUDWHGVWURQJSURƬWJURZWKRQ its continuing activities. DCC Healthcare's underlying SURƬWJURZWKRILHH[FOXGLQJWKH8.JHQHULF SKDUPDDFWLYLWLHVGLVSRVHGRILQ6HSWHPEHU DSSUR[LPDWHO\RQHWKLUGRIZKLFKZDVRUJDQLFUHƮHFWV WKHEHQHƬWRIDFTXLVLWLRQVDQGVWURQJRUJDQLFJURZWK in DCC Vital. DCC Health & Beauty Solutions grew its SURƬWVLQWKHQXWULWLRQVHFWRUKRZHYHURYHUDOOSURƬW growth was held back by investment in onboarding new business in the beauty sector.
The very uncertain environment created by the Covid-19 pandemic is impacting all businesses. Whilst DCC will be impacted in the near-term by the necessary restrictions placed on society to curtail the spread of the disease, DCC has a very resilient business model, leading market positions and an extremely strong balance sheet and is well positioned to continue its growth and development into the future.
FY20 Performance +1.3%
Adjusted EPS is a widely accepted metric used LQGHWHUPLQLQJFRUSRUDWHSURƬWDELOLW\,WDOVR 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 increase in adjusted EPS of 1.3% comprises an 6.2% increase in adjusted earnings, driven by the factors mentioned under the adjusted operating SURƬW.3,RƪVHWE\DLQFUHDVHLQWKHDYHUDJH number of shares in issue during the year, primarily as a result of the equity placing completed in the prior year.
The main driver of growth in EPS is the Group's RSHUDWLQJSURƬWSHUIRUPDQFHZKLFKDVQRWHG above, will be impacted in the near-term by Covid-19 related restrictions.
FY20 Performance
| 2020 | £492.3n | |
|---|---|---|
| 2019 | £434.0m | |
| 2018 | £328.1m | |
Cash generated from operations before exceptional items and after net capital expenditure.
)UHHFDVKƮRZUHSUHVHQWVWKHIXQGVDYDLODEOH for reinvestment, acquisitions and dividends, VRPDLQWDLQLQJDKLJKOHYHORIIUHHFDVKƮRZLV key to maintaining a strong, liquid balance sheet.
7KH*URXSJHQHUDWHGVWURQJIUHHFDVKƮRZ of £492.3 million during the year, driven by the DGMXVWHGRSHUDWLQJSURƬWRIPLOOLRQ Notwithstanding the negative impact of a VLJQLƬFDQWO\ORZHURLOSULFHZRUNLQJFDSLWDO decreased by £49.2 million, primarily as a result of excellent working capital management across the Group and lower like-for-like activity levels in DCC Technology. Net capital expenditure amounted to PLOOLRQIRUWKH\HDUUHƮHFWLQJWKHLQFUHDVHG scale of the Group and a number of investments being undertaken to support continued organic growth and development.
Cash generation and working capital management will remain a key focus of the Group.
Cash spent and acquisition related consideration for acquisitions committed to during the year.
The Group constantly seeks to add valueenhancing acquisitions in order to provide shareholders with returns on capital in excess of our cost of capital.
The Group committed to acquisition expenditure of £168.6m during the period which principally comprised the acquisitions of Ion Labs and Amerilab Technologies in DCC Healthcare.
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.
Non-financial
7KH*URXSHPSOR\VQRQILQDQFLDONH\SHUIRUPDQFHLQGLFDWRUVo.3,Vp WRDVVHVVWKHDFWLYLWLHVWKDWZHVHH as important in conducting our operations responsibly and achieving our strategic objective of building a sustainable business which delivers long-term value to shareholders.
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FY20 Performance LTIFR LTISR
/RVW7LPH,QMXU)UHTXHQF\5DWHo/7,)5p measures the number of lost time injuries per 200,000 hours worked.
/RVW7LPH,QMXU\6HYHULW\5DWHo/7,65p PHDVXUHV 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.
The decrease in LTIFR represents a continuation of the overall positive trend in this metric over the past number of years despite growth in the scale RIWKH*URXSDQGUHƮHFWVWKH*URXSpVRQJRLQJ commitment to performance improvements through robust risk controls, a proactive safety culture and learning from events.
7KHUHGXFWLRQLQWKH/7,65UHƮHFWVVKRUWHU UHFRYHU\WLPHVIURPPRVWLQMXULHVDQGHƪHFWLYH case management.
The Group will continue to focus on promoting a strong safety and learning culture across our businesses and ensure appropriate risk control PHDVXUHVDUHLQSODFHDQGRSHUDWLQJHƪHFWLYHO\ Further improvements in LTI rates are targeted.
| 2020 | Male: 65% | Female: 35% |
|---|---|---|
| 2019 | Male: 65% | Female: 35% |
| 2018 | Male: 66% | Female: 34% |
The percentage split of the overall workforce between female and male employees.
7KH*URXSEHQHƬWVIURPDWWUDFWLQJDQG developing a workforce with diverse skills, qualities and experiences.
At 31 March 2020, female employees accounted for 35% of the overall workforce, 22% of senior management and 25% 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.
FY20 Performance
| 2020 | 94kts |
|---|---|
| 2019 | $95$ kts |
| 2018 | 89kts |
Total Scope 1 and 2 greenhouse gas emissions H[SUHVVHGLQNLORWRQQHVNWV RI&22 e.
The Group relies on the availability of raw materials and natural resources and is committed to running our businesses in an environmentally responsible manner.
Overall, there was a slight decrease in carbon emissions in absolute terms. This was primarily due WRLQFUHDVLQJRSHUDWLRQDOHƯFLHQF\LQGLVWULEXWLRQ and manufacturing in addition to the continuing decarbonisation of national electricity grids, particularly in Ireland and the UK.
The Group will continue to identify energy saving opportunities and monitor greenhouse gas emissions from its operations.
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 and internal control processes.
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.
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 management framework has been designed using a 'three lines of defence' model, as shown in the diagram above.
The detailed roles and responsibilities assigned under the risk management framework, which is embedded within the Group's organisational structure, are summarised opposite, along with the reporting structures.
Strategic Report Governance Financial Statements Supplementary Info
| Roles, responsibilities and reporting under the risk management framework | |
|---|---|
| Oversight | |
| Board | • Approves the Group's Risk Appetite Statement and the Risk Management Policy. • Monitors the Group's risk management and internal control activities through the receipt of a risk report which focuses on the principal risks, as set out in the Group Risk Register, on emerging risks, including those on the emerging risk watchlist, on current risk mitigation activities and on developments in risk management practice. • Receives a briefing from the Chairman of the Audit Committee at each Board meeting on its activities, both in regard to audit matters and risk management. • 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 specific responsibility for this area through direct quarterly reporting to it by the Head of Group Sustainability, who is responsible for the Group HSE function. |
| Audit Committee |
• Assists 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. • Oversees the Group Risk Register, including principal risks, emerging risks and risk mitigation activities. • Reviews the emerging risk watchlist. • Reviews regular reports from Group Internal Audit and from second line assurance providers, including Group Legal & Compliance. • Oversees 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 reports on this to the Board. • Further detail on the activities of the Audit Committee is set out in its Report on page 105. |
| Executive Risk Committee |
• The Executive Risk Committee is chaired by the Chief Executive and comprises senior Group and divisional management. • Maintains the Group Risk Register, the Integrated Assurance Report and the emerging risk watchlist. • Analyses on a continuous basis the principal risks facing the Group, including emerging risks, the controls in place to manage those risks and the related monitoring procedures. • Evaluates all audit reports prepared by the second and third line assurance providers and ensures prompt action is taken to address control weaknesses. |
| First line | |
| Subsidiary and Divisional Management |
• Responsible for day-to-day risk management activity including maintaining risk registers, identifying emerging risks and designing, implementing and maintaining effective internal controls to address the risks on those registers. • Subsidiary risk registers are reviewed and updated at monthly meetings attended by both subsidiary and divisional management. • Divisional management consider the subsidiary risk registers and emerging risks in preparing and updating divisional risk registers. |
| Second line | |
| Group Sustainability (incorporating HSE) |
• Operates a risk-based HSE audit programme which provides independent assurance on key HSE management processes and controls, focused on process safety, occupational safety and environmental management. • )DFLOLWDWHVWKHH[FKDQJHRIEHVWSUDFWLFHDQGVXSSRUWVWKH+6(ZRUNLQJJURXSVRUJDQLVHGDURXQGNH\DUHDVLQFOXGLQJ WUDQVSRUWVDIHW\DQGSURFHVVVDIHW\ LQVHWWLQJREMHFWLYHVDQGGHYHORSLQJDSSURSULDWH+6(VWDQGDUGV • Further detail on these activities is set out in the Sustainable Business Report on page 74. |
| Group Legal & Compliance |
• Maintains a structured compliance programme which is designed to provide reasonable assurance that all of the Group's 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 through the identification of relevant requirements and the development and implementation of suitable controls, such as policies and training. More detail on the compliance programme is contained in the Corporate Governance Statement on page 98 and in the Sustainable Business Report on page 82. • Carries out compliance audits in Group subsidiaries and reports on these to the Audit Committee. |
| Group IT | • Responsible for setting the Group's IT strategy for major IT projects and for managing IT security risks. • The Group's IT Security Manager provides ongoing technical support, including managing cybersecurity and Payment &DUG,QGXVWU\'DWD6HFXULW\6WDQGDUGVo3&,'66p UHTXLUHPHQWVDQGLVDOVRUHVSRQVLEOHIRUXVHUVHFXULW\WUDLQLQJDQG network penetration testing. • The Group Infrastructure & Technical Manager supports the Group's strategic agenda and the deployment of relevant cross-business platforms. • 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 HR | • Responsible for the Group Talent Strategy and Roadmap. • Reports to the Board on leadership development and succession planning. |
| Third line | |
| Group Internal Audit |
• Reviews the risk management and internal control processes and identifies areas for improvement and provides independent and objective assurance on risk matters to senior management and the Audit Committee. • 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. |
DCC'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, as set out below, 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.
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 22 to 26.
Each subsidiary is required to maintain a risk register, including details of key controls and mitigation activities. The registers are reviewed and updated to UHƮHFWFKDQJLQJFLUFXPVWDQFHV and emerging risks at monthly meetings attended by both subsidiary and divisional management.
Each subsidiary completes a half-yearly online risk survey as an additional review of current and emerging risk trends.
Divisional management is responsible for regularly reviewing the subsidiary risk registers and risk survey results and updating the divisional risk registers, which are submitted to the Executive Risk Committee.
Maintained by the Executive Risk Committee, the Group Risk Register is updated regularly WRUHƮHFWDQ\VLJQLƬFDQWFKDQJHV in the divisional risk registers or in Group level risks.
Emerging risks are identified, analysed and managed as part of the same process as the Group's other principal risks. Reports on emerging risks from various external sources are reviewed and the risks are assessed for relevance to DCC. Where emerging risks are significant enough to be considered principal risks, they are added to the Group Risk Register and reported on and reviewed as part of the risk register process.
The Group also recognises that there are emerging threats and uncertainties that have the potential to become principal risks in the future, but where the impact, scale or likelihood cannot yet be fully understood. This may limit management's ability to define a strategy for mitigation of such emerging risks. A watchlist of emerging risks that may become Group principal risks in the future is maintained, regularly reviewed and updated and reported on. Changes to the impact, scale or likelihood of these risks are monitored and where appropriate, risks are added to the Group Risk Register.
\$Q,QWHJUDWHG\$VVXUDQFH5HSRUWo,\$5p LV 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.
The Group's risk appetite statement is reviewed on an annual basis. During the year, the risk appetite and related risk tolerances and key risk indicators were refreshed, taking recent growth and geographic expansion into account, and were approved by the Board.
The existing processes for identifying, managing and mitigating emerging risks were refreshed during the year. Emerging risks continue to be reviewed at subsidiary, divisional and Group level.
An emerging risk watchlist was created to track those emerging risks that are not currently considered principal risks, but that have the potential to impact significantly on the Group in the future.
As the risk environment continues to evolve, the relative importance of the risks facing the Group can change. A Tier II risk register was created to allow risks that are no longer considered principal risks, following a change in their magnitude or relevance, to continue to be monitored by the Risk Committee. Any significant change in impact or likelihood prompts a re-assessment.
In accordance with the relevant provisions set out in the UK Corporate Governance &RGHWKH%RDUGKDVWDNHQDFFRXQWRIWKH SULQFLSDOULVNVDQGXQFHUWDLQWLHVDVVHWRXW LQWKHWDEOHRQSDJHVWRLQFRQVLGHULQJ WKHVWDWHPHQWVWREHPDGHLQUHJDUGWRWKH JRLQJFRQFHUQEDVLVRIDFFRXQWLQJDQGWKH YLDELOLW\VWDWHPHQW7KHVHVWDWHPHQWVDUH VHWRXWEHORZ
7KH&RPSDQ\pVEXVLQHVVDFWLYLWLHV WRJHWKHUZLWKWKHIDFWRUVOLNHO\WRDIIHFW LWVIXWXUHGHYHORSPHQWSHUIRUPDQFHDQG SRVLWLRQDUHVHWRXWLQWKH6WUDWHJLF5HSRUW
7KHILQDQFLDOSRVLWLRQRIWKH&RPSDQ\LWV FDVKIORZVOLTXLGLW\SRVLWLRQDQGERUURZLQJ IDFLOLWLHVDUHGHVFULEHGLQWKH)LQDQFLDO 5HYLHZRQSDJH,QDGGLWLRQQRWH to the financial statements includes the &RPSDQ\pVREMHFWLYHVSROLFLHVDQG SURFHVVHVIRUPDQDJLQJLWVFDSLWDOLWV ILQDQFLDOULVNPDQDJHPHQWREMHFWLYHV details of its financial instruments and KHGJLQJDFWLYLWLHVDQGLWVH[SRVXUHVWR FUHGLWULVNDQGOLTXLGLW\ULVN
7KH&RPSDQ\KDVYHU\FRQVLGHUDEOH ILQDQFLDOUHVRXUFHVDQGDEURDGVSUHDG RIEXVLQHVVHVZLWKDODUJHQXPEHURI customers and suppliers across different geographic areas and industries. Having DVVHVVHGWKHUHOHYDQWEXVLQHVVULVNV WKH'LUHFWRUVEHOLHYHWKDWWKH&RPSDQ\ LVZHOOSODFHGWRPDQDJHLWVEXVLQHVV ULVNVVXFFHVVIXOO\
7KH'LUHFWRUVKDYHDUHDVRQDEOH H[SHFWDWLRQWKDWWKH&RPSDQ\DQGWKH *URXSDVDZKROHKDYHDGHTXDWHUHVRXUFHV WRFRQWLQXHLQRSHUDWLRQDOH[LVWHQFHIRUWKH IRUHVHHDEOHIXWXUH)RUWKLVUHDVRQWKH\ FRQWLQXHWRDGRSWWKHJRLQJFRQFHUQEDVLV in preparing the financial statements.
The Directors confirm that they have a UHDVRQDEOHH[SHFWDWLRQWKDWWKH*URXSZLOO FRQWLQXHWRRSHUDWHDQGPHHWLWVOLDELOLWLHV DVWKH\IDOOGXHIRUWKHQH[WWKUHH\HDUVWR 0DUFK7KH'LUHFWRUVpDVVHVVPHQW KDVEHHQPDGHZLWKUHIHUHQFHWRWKH
resilience of the Group and its strong ILQDQFLDOSRVLWLRQWKH*URXSpVFXUUHQW VWUDWHJ\WKH%RDUGpVULVNDSSHWLWHDQGWKH *URXSpVSULQFLSDOULVNVDQGKRZWKHVHDUH PDQDJHGLQFOXGLQJWKHHPHUJHQFHRIWKH &RYLGSDQGHPLFDVGHVFULEHGLQWKH Strategic Report.
,QDFFRUGDQFHZLWK3URYLVLRQRIWKH 8.&RUSRUDWH*RYHUQDQFH&RGHWKH Directors have considered the length RIWLPHWREHUHYLHZHGLQWKHFRQWH[W RIWKH9LDELOLW\6WDWHPHQW
7KH'LUHFWRUVEHOLHYHWKDWWKHWKUHH\HDU SHULRGWR0DUFKUHSUHVHQWVDQ appropriate period. The length of this period aligns with the Group's annual VWUDWHJLFUHYLHZSHULRGZKLFKLVDERWWRP XSUHYLHZSUHSDUHGEXVLQHVVE\EXVLQHVV ZKLFKFRQVLGHUVWKHULVNVRSSRUWXQLWLHV DQGGHYHORSPHQWSODQVIRUHDFKEXVLQHVV DQGLVXOWLPDWHO\DSSURYHGE\WKH%RDUG The period also aligns with the period used IRUDQXPEHURIRWKHU*URXSPDWWHUV including the performance period for the *URXSpV/RQJ7HUP,QFHQWLYH3ODQ)LQDOO\ inherent uncertainty increases with regard to longer-term financial forecasting DVWLPHKRUL]RQVH[WHQG\$WKUHH\HDU period is deemed to provide an appropriate EDODQFHEHWZHHQQHDUWHUPDQGORQJHU term influences.
,QPDNLQJDYLDELOLW\VWDWHPHQWWKH Directors are required to consider DCC's DELOLW\WRPHHWLWVOLDELOLWLHVDVWKH\IDOOGXH WDNLQJLQWRDFFRXQWWKH*URXSpVFXUUHQW SRVLWLRQDQGSULQFLSDOULVNV
The Group operates a devolved operational VWUXFWXUHDQGKDVVDOHVPDUNHWLQJDQG support services operations across a diverse PL[RILQGXVWU\VHFWRUV7KH*URXSKDVDQ H[WUHPHO\EURDGVSUHDGRIFXVWRPHUVDQG VXSSOLHUVDFURVVFRXQWULHVWKUHH FRQWLQHQWVDQGGLVWLQFWPDUNHWVHFWRUV ,PSRUWDQWO\WKH*URXSLVVXSSRUWHGE\D YHU\ZHOOIXQGHGDQGOLTXLGEDODQFHVKHHW and strong operational cash flows.
\$UREXVWILQDQFLDOPRGHORIWKH*URXSLV EXLOWRQDEXVLQHVVE\EXVLQHVVEDVLV7KLV PRGHOLVVXEMHFWHGWRVHQVLWLYLW\DQDO\VLV and those sensitivities are reviewed on an RQJRLQJEDVLVWRHQVXUHWKH\UHPDLQ appropriate given changing circumstances LQWKHEXVLQHVVPDUNHWVDQGHFRQRPLHV This sensitivity review focuses on the *URXSpVOLTXLGLW\VROYHQF\DQGJHDULQJ PHWULFVZLWKSDUWLFXODUFRQVLGHUDWLRQJLYHQ WRWKH*URXSpVSULQFLSDOGHEWFRYHQDQWV LQFOXGLQJLWV1HW'HEW(%,7'\$DQG,QWHUHVW Cover covenants.
Given the diverse nature of the Group's DFWLYLWLHVWKHSULQFLSDOVHQVLWLYLWLHV considered in the review are those where negative economic and other impacts could EHH[SHULHQFHGDFURVVWKHHQWLUHUDQJHRI the Group's activities. These sensitivities consider situations from depressed activity OHYHOVJOREDOO\WRDPDWHULDODQGSHUVLVWHQW UHEDVLQJRIWKH*URXSpVSURILWDELOLW\GXH WRDUDQJHRIIDFWRUV,QWKHFXUUHQW\HDU the Group reviewed an additional sensitivity to consider the potential impact of the &RYLGSDQGHPLFDQGWKHUDQJHRI outcomes that the pandemic could have on WKHSURVSHFWVRIWKH*URXS,QDGGLWLRQ the review considered a 'reverse' stress test to determine what level of disruption ZRXOGQHHGWREHH[SHULHQFHGEHIRUH DEUHDFKRIWKH*URXSpVGHEWFRYHQDQWV ZDVXQDYRLGDEOH
This review and analysis also considers WKHSULQFLSDOULVNVIDFLQJWKH*URXSDV GHVFULEHGRQSDJHVWRDQGWKH SRWHQWLDOLPSDFWVWKHVHULVNVZRXOGKDYH RQWKH*URXSpVEXVLQHVVPRGHOIXWXUH SHUIRUPDQFHVROYHQF\RUOLTXLGLW\RYHU the assessment period.
The Board considers that the diverse nature of the sectors and geographies in which the Group operates acts significantly to PLWLJDWHWKHLPSDFWDQ\RIWKHVHULVNVPLJKW have on the Group.
The principal risks and uncertainties, including emerging risks, 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, developments in 2020 and areas of focus for 2021.
This represents the Board's view of the principal risks at this point in time and does not represent an exhaustive list of all the risks that may impact the Group. There may be other matters that are not currently known to the Board or are currently considered of low likelihood or low potential impact which could emerge or evolve and give rise to material consequences.
The mitigation measures that are in place in relation to these risks are designed to provide a reasonable and proportionate and not an absolute level of protection against the impact of the events in question, in line with the Group's agreed risk appetite.
The Board has reviewed the principal risks and the risk environment, taking account of emerging risks and external and internal factors such as the continued growth in the scale of the Group, geographic expansion, the devolved structure of the Group and market conditions. Key changes in the year are set out below.
| Key changes to the Group's principal risks | |
|---|---|
| Global pandemic | The impacts of the Covid-19 global pandemic have been assessed and are included as a new risk. |
| Data security | The risk associated with data security is now included as a separate risk, having previously formed part of the 'Compliance with legal & ethical standards' and cybersecurity risks. |
| Product integrity | Following review by the Board, the Audit Committee and the Risk Committee, these risks have been downgraded to Tier II risks and are no longer included as principal risks. They will continue |
| Loss of significant customer or supplier | WREHPRQLWRUHGE\WKH5LVN&RPPLWWHHDQGDQ\VLJQLƬFDQWFKDQJHLQLPSDFWRUOLNHOLKRRGZLOO prompt a re-assessment. The changes are explained below: |
| Extreme weather | • The scale of the product integrity risk has reduced following the disposal of DCC Vital's UK generic pharma activities and related manufacturing facility in Ireland. • The potential impact of the loss of significant customers or suppliers has decreased in recent years in line with the continued growth and diversification of the Group. • Geographic expansion and diversification into the non-heating segments of the markets has reduced the impact of uncertain weather conditions on profits. The risk associated with extreme weather events is now considered to be part of the 'relevant implications of climate change' principal risk. |
In line with the guidance issued by the )LQDQFLDO5HSRUWLQJ&RXQFLOo)5&p WKH%RDUG continues to assess, on an ongoing basis, the consequential risks and uncertainties in the political and economic environment arising from the referendum vote in favour RIWKH8.OHDYLQJWKH(8o%UH[LWp DQGWKH impacts of those risks and uncertainties on the DCC Group.
Regular updates from management on the potential impacts of Brexit on DCC have continued to be presented to the Board on a range of issues, including operational and supply chain issues, currency implications, taxation, capital markets and regulatory matters.
The Board, having considered these regular updates, has concurred with management's 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, management and the Board continue to believe that DCC is not likely to be materially directly impacted by Brexit in the short or medium term and that appropriate plans are in place to manage any trading or other impacts.
The Board has considered emerging risks that are currently impacting on the Group and that may impact on the Group in future. Some emerging uncertainties impacting on principal risks, including the full extent of the Covid-19 global pandemic, changing market dynamics and relevant implications of climate change, are explained below. The Board will continue to consider and monitor the items on the Group's emerging risk watchlist, which include topics relating to market dynamics, climate change, technology and social matters.
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7KHSULQFLSDOULVNVIDFHGUHODWHWRƬUH H[SORVLRQRUPXOWLSOHYHKLFOHDFFLGHQW DQLQFLGHQWUHVXOWLQJLQVLJQLƬFDQW environmental damage or compliance EUHDFKDQGD+6(RUVHFXULW\HYHQW requiring the activation of our crisis management plan.
6XFKULVNVPD\JLYHULVHWRLQMXULHVRU IDWDOLWLHVOHJDOOLDELOLW\VLJQLƬFDQWFRVWV and damage to the Group's reputation.
7KH&RYLGVLWXDWLRQZKLFKHPHUJHG HDUOLHUWKLV\HDULVKDYLQJDVLJQLƬFDQW LPSDFWRQWKH*URXSpVHPSOR\HHV FXVWRPHUVDQGEXVLQHVVRSHUDWLRQV 7KHLPSDFWLVFRPSRXQGHGE\WKHIDFW WKDWWKHGXUDWLRQDQGIXOOH[WHQWRIWKH SDQGHPLFLVGLƯFXOWWRSUHGLFW7KHUHLV DULVNRIDVXVWDLQHGHFRQRPLFUHFHVVLRQ ZKLFKFRXOGVLJQLƬFDQWO\LPSDFWRQ SHUIRUPDQFH\$FWLRQVWDNHQE\WKH FRXQWULHVLQZKLFKZHRSHUDWHLQFOXGLQJ PHDVXUHVWRFRQWUROWKHRXWEUHDNDQG plans to resume economic and social DFWLYLW\FRQWLQXHWRHYROYHUHVXOWLQJLQ DULVNRIFRQWLQXHGRUIXUWKHUGLVUXSWLRQ WREXVLQHVVDFWLYLWLHVVXSSO\FKDLQV and employees.
Risk and Impact Principal Mitigation Measures Developments and Areas of Focus
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 RIDQ\VLJQLƬFDQWLQFLGHQWV,QVSHFWLRQDQG auditing processes in relation to HSE management systems are conducted by subsidiary management, by the Group Sustainability/HSE function and by external assurance providers, as appropriate.
Insurance cover is maintained at Group level IRUVLJQLƬFDQWLQVXUDEOHULVNV
Group, divisional and local management are continuing to actively review and respond to the risks and uncertainties arising from the rapidly evolving Covid-19 crisis. A broad range of preventative measures have been implemented and are being regularly re-assessed to help ensure the safety of our employees, customers, vendors and other stakeholders. Business continuity response plans have been implemented as required to ensure essential business activities are maintained. There is a focus on communications with employees to ensure WKHLUFRQWLQXHGZHOOEHLQJ:HHNO\ƮDVK reporting is in place to facilitate tracking of key metrics by Group management.
Due to the fast-moving and uncertain nature of the Covid-19 crisis, the Board and management will continue to monitor the situation and will ensure that the Group's response and mitigation measures evolve as required. The Group's businesses will continue to focus on the health and well-being of employees and on maintaining essential business activities, particularly during periods of heightened restrictions.
Changes to the environment in which our businesses operate will continue to be addressed as they arise and the Group will adapt as required to new ways of working and doing business, while protecting the safety of our employees, customers, vendors and other stakeholders.
:KLOHWKHUHKDYHEHHQQRVLJQLƬFDQW changes to the assessment of these risks, management continued to evolve HSE practices during 2020, including the adoption of a Group Environment Policy, the roll out of a Learning from Events process, and process safety standards. HSE integration of recent acquisitions, for example Ion Laboratories, continued during the year.
Further development of HSE controls and management systems will continue in 2021, with particular focus on the onboarding of recent acquisitions in HSE best practice and increased focus on the use of leading performance indicators to drive continuous improvement.
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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 RIFDSLWDODQGRIWKHLUVWUDWHJLFƬWZLWKLQ 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 DQGDSSURSULDWHO\TXDOLƬHGLQWHUQDOSHUVRQQHO supported by external expertise, and VLJQLƬFDQWSURMHFWVRUSURJUDPPHVDUHVXEMHFW to oversight by the Group Chief Information 2ƯFHUWKH*URXS3URMHFW0DQDJHPHQW 2ƯFHE\GLYLVLRQDODQG*URXSPDQDJHPHQW and by the Board.
The Group promotes a culture of compliance and 'Doing the Right Thing' in all activities, consistent with our value of Integrity.
An assessment of our compliance culture LVLQFOXGHGLQVWDƪVXUYH\VDQGTXHVWLRQV in online training.
A Code of Conduct is in place and is supported by more detailed policies where needed, including a Supply Chain Integrity Policy, which covers human rights, an Anti-Bribery and Corruption Policy and a Data Protection 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.
The Group continues to be active from a development perspective including the recent acquisitions by DCC Healthcare of Ion Labs and Amerilab.
Acquisition activity in 2021 will continue to be subject to robust internal evaluation processes and external due diligence.
The large-scale project in Exertis UK to replace the core ERP system has progressed with SAP now live in an element of the UK business. The remaining components of the business will transition on a phased basis during the upcoming summer months. This will continue to be a key focus area and is subject to internal and external oversight and review.
Relevant changes in the law as a result of Brexit and Covid-19 are being actively monitored. There have been no other VLJQLƬFDQWFKDQJHVWROHJDODQGHWKLFDO standards or regulations impacting on the Group during the year.
We recently reviewed our Data Protection Policy and related data protection controls to HQVXUHWKDWWKH\UHƮHFWGHYHORSPHQWVLQWKH law and good practice since the introduction of the EU General Data Protection Regulation *'35 LQZKHQWKH\ZHUHODVWXSGDWHG Detail on our data security controls is contained below.
The Group Legal & Compliance function will ensure any new regulatory requirements are appropriately considered, will apply the standards set out in the Group Compliance Programme in new acquisitions and will continue its compliance audit programme.
A material failure to comply with DSSOLFDEOHOHJDODQGHWKLFDOVWDQGDUGV FRXOGUHVXOWLQSHQDOWLHVFRVWV reputational harm and damage to relationships with suppliers or customers.
7KHULVNWKDWRXU,7V\VWHPVDQG LQIUDVWUXFWXUHPD\EHDƪHFWHGE\ORVV RIVHUYLFHRUV\VWHPDYDLODELOLW\ VLJQLƬFDQWV\VWHPFKDQJHVRUXSJUDGHV RUF\EHUFULPHFRXOGUHVXOWLQƬQDQFLDO or reputational damage.
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Dedicated IT personnel in Group subsidiaries implement IT standards, oversee IT security and are provided with technical expertise and support from Group IT.
Cybersecurity reviews are performed by a dedicated internal IT Assurance team and external technical experts to provide independent assurance.
The Group's businesses have appropriate business continuity, IT disaster recovery and crisis management plans in place. DCC centrally maintains a level of cyber insurance.
Group guidelines and local policies require the Group's businesses to ensure appropriate processes and controls are in place over personal data.
The potential impact of IT system failure or cybercrime is limited by the devolved structure of the Group.
Mitigation measures continue to improve, including IT standards and policies which ZHUHXSGDWHGWRUHƮHFWUHFHQWFKDQJHVLQ the underlying best practice frameworks and were rolled out to recent acquisitions.
While global levels of cybercrime are increasing, the Group continues to strengthen its mitigation measures. Developments in mitigation measures during the year included the continuing roll out of a cyber incident response plan to new acquisitions, enhancements to the Group's vulnerability and penetration testing programmes, and the rollout of OKTA multifactor authentication.
Group IT and Group IT Assurance will continue to focus on raising awareness of cyber threats in 2021 and on ensuring that the Group's IT standards and policies, including in relation to the security of personal data, are consistently applied.
The Group's devolved management VWUXFWXUHKDVEHHQIXQGDPHQWDOWRWKH *URXSpVVXFFHVV7KHUHLVDULVNRIIDLOXUH WRDWWUDFWWDOHQWSDUWLFXODUO\LQQHZ PDUNHWVRUDIDLOXUHWRUHWDLQRUGHYHORS high-quality entrepreneurial management WKURXJKRXWWKH*URXSSDUWLFXODUO\LQ UHFHQWDFTXLVLWLRQVZKLFKFRXOGLPSDFW RQWKHDWWDLQPHQWRIVWUDWHJLFREMHFWLYHV
7KH*URXSLVH[SRVHGWRIRUHLJQH[FKDQJH FRPPRGLW\DQGLQWHUHVWUDWHULVN)DLOXUH WRDFFXUDWHO\UHSRUWRUIRUHFDVWƬQDQFLDO results through error or fraud could damage the Group's reputation.
The Group maintains a constant focus on this area with structured succession planning, international mobility practices, 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.
*URXSƬQDQFLDOULVNPDQDJHPHQWLVJRYHUQHG by policies and guidelines which are reviewed and approved annually by the Board.
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.
A comprehensive process to identify a successor to the CFO concluded during the year, senior management changes were successfully completed in a number of larger subsidiaries and talent requirements in recent acquisitions have been assessed.
Separately, talent has been deployed to a number of new acquisitions to support integration.
The Group will continue to focus on developing and embedding its HR programmes in 2021, particularly in the more recently acquired businesses.
The Group continued its programme of replacing legacy systems with appropriate HQKDQFHGƬQDQFLDOUHSRUWLQJV\VWHPV in 2020.
The Group adopted IFRS 16 Leases which EHFDPHHƪHFWLYHGXULQJWKHƬQDQFLDO\HDU
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&HUWDLQLPSOLFDWLRQVRIFOLPDWHFKDQJH VXFKDVFKDQJHVLQSROLF\UHJXODWLRQ WHFKQRORJLHVFKDQJLQJVRFLHWDOYLHZV HQHUJ\WUDQVLWLRQDQGH[WUHPHZHDWKHU DUHGHYHORSLQJULVNVZKLFKKDYHWKH potential to impact on demand for the Group's products.
The impact of these external factors is PLWLJDWHGWKURXJKDIRFXVRQVWURQJƬQDQFLDO management, a broad spread of products and customers across the divisions and careful geographical expansion.
The Group maintains a close focus on policy, regulatory, technological and societal developments in the sectors in which it operates.
Market dynamics have continued to evolve with challenges in certain markets; however, FRQWLQXHGGLYHUVLƬFDWLRQSDUWLFXODUO\ geographically, reduces exposure to individual markets. The impact of the Covid-19 pandemic on the global economy and on LQGLYLGXDOPDUNHWVDQGVSHFLƬFDOO\WKH potential for a sustained economic recession, is being monitored as an emerging risk.
7KH*URXSFRQWLQXHVWRPRQLWRUWKHVSHFLƬF implications of climate change which may impact on its businesses, which are considered to be emerging risks and are increasing in likelihood due to evolving stakeholder expectations. Management will continue to monitor changes in external factors in 2021 and consider their impact on the Group.
Fergal O'Dwyer &KLHI)LQDQFLDO2ƯFHU
Firstly, I would like to say thank you to all our 13,200 colleagues in the 20 countries where we have operations for their huge efforts and commitment to ensuring that we have remained operational during the Covid-19 pandemic and allowing us to continue to supply and deliver the many essential products and services that are needed by our customers.
The emergence of Covid-19 earlier this year has led to a global pandemic, the likes of which we have not seen in our lifetimes. Previous risks around Brexit and global economic uncertainties pale into insignificance when compared to the dramatic impact that Covid-19 is having on people's health and lives, businesses and global economies.
The Covid-19 pandemic and the global measures being taken to mitigate its impact have resulted in unprecedented change for DCC's employees, customers and business operations. All DCC operations, deemed essential operations by local governments, have successfully invoked their business
continuity plans and are operating effectively, albeit in a much-changed environment. The commitment of DCC's employees during such a difficult and uncertain period has been extremely evident and has ensured that our customers continue to receive our essential products and services. Protecting the health, safety and well-being of employees, ensuring the continued supply of these essential products and services to customers, whilst maintaining DCC's very strong financial position, are the Group's key priorities at this time.
This review looks back on the financial performance of the Group for the year ended 31 March 2020. The impact of Covid-19 on our businesses and how the Group has responded are set out in the Chief Executive's Review on page 11.
In the year just ended, DCC has continued to deliver on its overall sustainable growth and development objectives whilst maintaining a strong, liquid and conservatively financed balance sheet as follows:
The Group transitioned to the new leasing standard, IFRS 16, with effect from 1 April 2019. In common with most companies, DCC elected to adopt the modified retrospective approach, meaning that comparatives are not restated. In adopting IFRS 16 under the transitional guidelines at 1 April 2019, the Group capitalised approximately 2,000 leases. These 2,000 leases were with approximately 700 lessors, with no one lease or lessor relationship being individually significant. The applicable average lease term is approximately four years. The capitalisation of the right to use assets underlying these leases has resulted in a 'right-of-use leased asset' of £304.1 million at 31 March 2020, with a related lease creditor of £306.9 million at the same date.
As anticipated, the transition to IFRS 16 resulted in a favourable impact on adjusted operating profit of £5.0 million in the financial year, reflecting the replacement of operating lease charges with depreciation of a discounted right-of-use leased asset. It also resulted in an increase in net interest of £8.6 million in the year reflecting the unwinding of the lease liability. Consequently, the net impact on earnings for the financial year was a charge of approximately £3.6 million, or 3.7 pence per share.
The Group's financial statements are presented in sterling. Results and cash flows of operations based in non-sterling jurisdictions have been translated into sterling at average rates for the year. The principal exchange rates used for the translation of results into sterling were as follows:
| Average rate | ||
|---|---|---|
| 2020 Stg£1= |
2019 Stg£1= |
|
| Euro | 1.1460 | 1.1319 |
| Danish krone | 8.5639 | 8.4407 |
| Swedish krona | 12.1816 | 11.7467 |
| Norwegian krone | 11.4062 | 10.9172 |
| US dollar | 1.2754 | 1.3184 |
| Hong Kong dollar | 9.9760 | 10.3392 |
Approximately 50% of the Group's revenue and approximately 60% of the Group's adjusted operating profits are generated outside of the UK. The impact of currency translation versus the prior year had a modest negative impact on Group adjusted operating profit, with average sterling exchange rates marginally strengthening against the euro and other relevant European currencies and weakening against the US dollar.
Overall, Group revenue decreased by 3.1% to £14.8 billion primarily driven by the lower oil price that prevailed during the year.
9ROXPHVLQ'&&/3*LQFUHDVHGE\XS RUJDQLFDOO\ WRPLOOLRQWRQQHVSULQFLSDOO\ reflecting continued success in oil to gas conversions in Britain and market share gains, particularly in Scandinavia and in the French B2B natural gas and power sector. Volumes also benefited from a slightly cooler winter versus the prior year, although weather conditions were milder than longer term averages.
DCC Retail & Oil volumes of 11.6 billion litres were 4.3% behind the prior year. Organically total volumes declined by 4.9%. The reduction primarily reflected lower volumes in Britain, particularly in the marine, aviation and commercial sectors as the business actively exited some high-volume, low-margin business, but also reflected lower commercial activity generally, given the more difficult economic backdrop in Britain as a result of Brexit. Volumes across Continental Europe, Scandinavia and Ireland were in line with expectations.
Combined revenues in DCC LPG and DCC Retail & Oil declined by 6.9%, primarily reflecting the lower oil price during the year. Revenue excluding DCC LPG and DCC Retail & Oil was £4.5 billion, an increase of 6.7%, primarily driven by acquisitions.
Group adjusted operating profit increased by RQDFRQVWDQWFXUUHQF\EDVLV WR £494.3 million, driven by the contribution from acquisitions completed in the current and prior year and good organic profit growth. Good organic performances from DCC LPG, DCC Retail & Oil and DCC Healthcare were somewhat offset by the organic profit decline in DCC Technology's UK business and the sale of DCC Healthcare's UK generic pharma activities. The positive effect of the adoption of IFRS 16 Leases on Group adjusted operating profit was £5.0 million and approximately half of the remaining constant currency growth was organic.
DCC LPG delivered very strong growth, with RSHUDWLQJSURILWLQFUHDVLQJE\RQ DFRQVWDQWFXUUHQF\EDVLV WRPLOOLRQDQG more than three-quarters of the growth was organic. This excellent organic performance reflects good volume growth and strong procurement and cost control.
Operating profit in DCC Retail & Oil increased to £140.3 million, 4.9% ahead of the prior year RQDFRQVWDQWFXUUHQF\EDVLV DQG approximately half of the constant currency growth was organic. This strong performance reflects increased penetration of value-added products and services and strong cost control.
DCC Technology recorded modest operating profit growth of 1.0%, with the contribution from acquisitions and a good trading performance in North America and Continental Europe being offset by more difficult market conditions in the UK through the year which saw revenues and profits decline as a result of uncertainty associated with Brexit and the impact of Covid-19 emerging in February and March 2020.
It was a year of significant progress for DCC Healthcare, as it generated strong profit growth RQLWVFRQWLQXLQJDFWLYLWLHVLHH[FOXGLQJWKH UK generic pharma activities disposed of in 6HSWHPEHU '&&+HDOWKFDUHpVSURILW growth on its continuing activities of 8.6%, approximately one-third of which was organic, reflects the benefit of acquisitions and strong organic growth in DCC Vital. DCC Health & Beauty Solutions grew its profits in the nutrition sector, however overall profit growth was held back by investment in onboarding new business in the beauty sector.
An analysis of the revenue and adjusted operating profit performance for the first half, the second half and the full year ended 31 March 2020 is set out in Tables 2 and 3.
| 2020 £'m |
2019 £'m |
Change on prior year % |
|
|---|---|---|---|
| Revenue | 14,755.4 | 15,226.9 | -3.1% |
| Adjusted operating profit | |||
| DCC LPG | 228.2 | 201.8 | +13.1% |
| DCC Retail & Oil | 140.3 | 133.7 | +4.9% |
| DCC Technology | 65.3 | 64.7 | +1.0% |
| DCC Healthcare | 60.5 | 60.3 | +0.3% |
| Group adjusted operating profit | 494.3 | 460.5 | +7.3% |
| Share of equity accounted investments' profit after tax | 1.0 | 0.7 | |
| )LQDQFHFRVWVQHW | (55.3) | ||
| Profit before net exceptionals, amortisation of intangible assets and tax | 440.0 | 414.6 | +6.1% |
| Net exceptional items before tax and non-controlling interests | (66.4) | ||
| Amortisation of intangible assets | (62.1) | ||
| Profit before tax | 311.5 | 327.4 | -4.9% |
| Taxation | (57.3) | ||
| Profit after tax | 254.2 | 271.7 | -6.3% |
| Non-controlling interests | (8.7) | ||
| Net earnings | 245.5 | 262.6 | -6.5% |
| Adjusted earnings per share (pence) | 362.64p | 358.16p | +1.3% |
| 2020 | 2019 | Growth | |||||||
|---|---|---|---|---|---|---|---|---|---|
| H1 £'m |
H2 £'m |
FY £'m |
H1 £'m |
H2 £'m |
FY £'m |
H1 % |
H2 % |
FY % |
|
| DCC LPG | 685.9 | 971.4 | 1,657.3 | 721.4 | 1,056.9 | 1,778.3 | -4.9% | -8.1% | -6.8% |
| DCC Retail & Oil | 4,543.0 | 4,064.3 | 8,607.3 | 4,832.6 | 4,408.7 | 9,241.3 | -6.0% | -7.8% | -6.9% |
| DCC Technology | 1,795.5 | 2,117.2 | 3,912.7 | 1,588.1 | 2,042.8 | 3,630.9 | +13.1% | +3.6% | +7.8% |
| DCC Healthcare | 287.3 | 290.8 | 578.1 | 275.9 | 300.5 | 576.4 | +4.1% | -3.2% | +0.3% |
| Total | 7,311.7 | 7,443.7 | 14,755.4 | 7,418.0 | 7,808.9 | 15,226.9 | -1.4% | -4.7% | -3.1% |
| Weighting % | 49.6% | 50.4% | 100.0% | 48.7% | 51.3% | 100.0% |
| 2020 | 2019 | Growth | |||||||
|---|---|---|---|---|---|---|---|---|---|
| H1 £'m |
H2 £'m |
FY £'m |
H1 £'m |
H2 £'m |
FY £'m |
H1 % |
H2 % |
FY % |
|
| DCC LPG | 49.0 | 179.2 | 228.2 | 40.9 | 160.9 | 201.8 | +19.8% | +11.4% | +13.1% |
| DCC Retail & Oil | 59.7 | 80.6 | 140.3 | 56.3 | 77.4 | 133.7 | +6.0% | +4.0% | +4.9% |
| DCC Technology | 25.4 | 39.9 | 65.3 | 17.8 | 46.9 | 64.7 | +42.6% | -14.8% | +1.0% |
| DCC Healthcare | 28.5 | 32.0 | 60.5 | 26.9 | 33.4 | 60.3 | +5.8% | -4.1% | +0.3% |
| Total | 162.6 | 331.7 | 494.3 | 141.9 | 318.6 | 460.5 | +14.5% | +4.1% | +7.3% |
| Weighting % | 32.9% | 67.1% | 100.0% | 30.8% | 69.2% | 100.0% |
A detailed review of the operating performance of each of DCC's divisions is set out on pages 48 to 73.
7KHFRPSRXQGDQQXDOJURZWKUDWHo&\$*5p in DCC's adjusted operating profits, from continuing operations, over the last 26 years VLQFHWKH&RPSDQ\EHFDPHDSXEOLFFRPSDQ\ is 14.5%.
Net finance costs and other increased to PLOOLRQPLOOLRQ 7KHLQFUHDVH reflects the impact of the adoption of IFRS 16 in the current period, which increased finance costs by £8.6 million. The average net debt, excluding lease creditors, in the year was £342 million, compared to an average net debt of £670 million in the prior year. The decrease in average net debt excluding lease creditors reflects the benefit of the equity issuance completed in October 2018. The Group's private placement debt, which is the primary driver of finance costs, increased modestly versus the prior year as the Group drew down additional private placement debt in April 2019 to pre-fund maturities that the Group has in the current and forthcoming years.
Using the definitions contained in the Group's lending agreements, interest was covered 13.0 times by Group adjusted operating profit before depreciation and amortisation RILQWDQJLEOHDVVHWVWLPHV
Profit before net exceptional items, amortisation of intangible assets and tax increased by 6.1% to £440.0 million.
The Group incurred a net exceptional charge after tax and non-controlling interests of PLOOLRQQHWH[FHSWLRQDOFKDUJH RIP DVIROORZV
| 2020 £'m |
|
|---|---|
| Loss on disposal | (34.7) |
| Restructuring and integration costs and other |
(22.5) |
| Acquisition and related costs | (8.3) |
| IAS 39 mark-to-market charge | (0.9) |
| (66.4) | |
| Tax and non-controlling interest | 3.4 |
| Net exceptional charge | (63.0) |
There was a net cash inflow of £5.8 million relating to exceptional items.
In September 2019, DCC Healthcare completed the disposal of DCC Vital's UK generic pharma activities and related PDQXIDFWXULQJIDFLOLW\LQ,UHODQG.HQW3KDUPD DQG\$WKORQH/DERUDWRULHV 7KHGLVSRVDO sharpens the strategic focus of DCC Vital, allowing it to concentrate on those areas where it has market-leading positions and sustainable competitive advantage, in particular in the sales, marketing and distribution of medical products in Britain and Ireland. Whilst part of the DCC Group, the cash flows generated by the disposed business more than recovered its acquisition cost, however, the transaction resulted in a loss on disposal of £34.7 million, principally representing a non-cash impairment of the goodwill recognised on the initial acquisition of the business.
Restructuring and integration costs and other of £22.5 million principally relate to restructuring of operations related to the integration of completed acquisitions across a number of businesses, including within the LPG business in Britain and Ireland and the Technology business in the UK, and smaller restructuring costs in other businesses. The other significant contributor is ongoing dual running costs relating to the UK SAP implementation which is live in an element of the UK business and to which the remaining components of the business will transition on a phased basis during the upcoming summer months.
Acquisition costs include the professional fees and tax costs relating to the evaluation and completion of acquisition opportunities and amounted to £8.3 million.
Most of the Group's debt has been raised in the US private placement market, denominated in US dollars, euro and sterling. Long-term interest and cross currency interest rate derivatives have been utilised to achieve an appropriate mix of fixed and floating rate debt across the three currencies. The level of ineffectiveness calculated under IAS 39 on the fair value and cash flow hedge relationships relating to this debt is charged or credited as an exceptional item. In the year ended 31 March 2020, this amounted to an exceptional non-cash charge of £0.9 million. Following this charge, the cumulative net exceptional charge taken in respect of the Group's outstanding US Private Placement debt and related hedging instruments is £2.1 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.
Dividend per share (pence) +5.0%
145.27p (2019: 138.35p)
Return on total capital employed
16.5% (2019: 17.0%)
Operating cash flow1
+9.6%
Free cash flow2 +13.4%
£492.3m (2019: £434.0m)
Free cash flow conversion
100% (2019: 94%)
The charge for the amortisation of acquisitionrelated intangible assets decreased to £62.1 million from £63.3 million in the prior year.
Profit before tax decreased by 4.9% to £311.5 million.
The effective tax rate for the Group remained consistent with the prior year at 17.0%. The Group's tax rate is influenced by the geographical mix of profits arising in any year and the tax rates attributable to the individual territories.
The Group's tax strategy is to:
The non-controlled element of the Group's consolidated profit after tax amounted to PLOOLRQPLOOLRQ DQGSULPDULO\ relates to the profit share of the Group's partners in its Danish Retail & Oil activities.
Adjusted earnings per share increased by 1.3% to 362.64 pence, with the strong growth in profit before exceptional items and goodwill amortisation of 6.1% being offset by the increased number of shares in issue following the equity placing successfully completed in the prior year.
Adjusted earnings in the current year were negatively impacted by the adoption of IFRS 16 and the prior year comparatives including a full year's contribution from DCC Healthcare's generic pharmaceutical business, which was disposed of in the current year. Adjusting for both of these items would result in like-for-like adjusted earnings per share growth of 3.5%.
The CAGR in DCC's total adjusted earnings per share over the last 26 years as a public company is 12.1%.
Notwithstanding the uncertainty created by the Covid-19 pandemic, DCC has a very resilient business model and an extremely strong and liquid balance sheet. Accordingly, and having regard for all other relevant considerations, the Board is recommending the payment of a final dividend. The Board is proposing a 2.6% increase in the final dividend to 95.79 pence per share, which, when added to the interim dividend of 49.48 pence per share, gives a total dividend for the year of 145.27 pence per share. This represents a 5.0% increase over the total prior year dividend of 138.35 pence per share. The dividend is covered 2.5 times by adjusted HDUQLQJVSHUVKDUHWLPHV ,WLV proposed to pay the final dividend on 23 July 2020 to shareholders on the register at the close of business on 29 May 2020.
Over its 26 years as a listed company, DCC has an unbroken record of dividend growth at a compound annual rate of 14.0%.
At 31 March 2020, the total capital invested by the Group was £3.4 billion. This figure compares with £2.9 billion at 31 March 2019 with the increase being primarily driven by the capitalisation of £304.1 million of right-of-use assets under IFRS 16 and acquisitions completed during the year. The split of the Group's capital employed by division and by geography was as follows:
| 2020 £'m |
2019 £'m |
Change on prior year % |
|
|---|---|---|---|
| Adjusted earnings | 356.6 | 335.8 | +6.2% |
| \$PRUWLVDWLRQRILQWDQJLEOHDVVHWVQHWRIWD[ | (48.1) | ||
| ([FHSWLRQDOLWHPVQHWRIWD[ | (63.0) | ||
| Profit attributable to shareholders | 245.5 | 262.6 | -6.5% |
| \$YHUDJHQXPEHURIVKDUHVLQLVVXHoP | 98.3 | 93.7 | +4.9% |
| 2020 pence |
2019 pence |
Change on prior year % |
|
| Adjusted EPS | 362.64 | 358.16 | +1.3% |
| \$PRUWLVDWLRQRILQWDQJLEOHDVVHWVQHWRIWD[ | (48.95) | ||
| ([FHSWLRQDOLWHPVQHWRIWD[ | (64.05) | ||
| Basic EPS | 249.64 | 280.14 | -10.9% |
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:
| 2020 | 2019 | 2020 | |
|---|---|---|---|
| Excl. IFRS 16 | Excl. IFRS 16 | Incl. IFRS 16 | |
| DCC LPG | 18.4% | 17.1% | 17.5% |
| DCC Retail & Oil | 18.5% | 18.6% | 16.0% |
| DCC Technology | 11.0% | 14.3% | 10.0% |
| DCC Healthcare | 14.7% | 16.6% | 13.7% |
| Group | 16.5% | 17.0% | 15.1% |
In 2020, the Group continued to generate very strong returns on capital employed with the modest decrease in the return on capital employed versus the prior year, excluding the impact of IFRS 16, principally reflecting the difficult market conditions experienced by the DCC Technology business in the UK, acquisition spend in the current and prior year, including the acquisition of Amerilab Technologies in March 2020, and organic investments made in the Group's manufacturing facilities, warehousing and operating infrastructure.
As set out in note 1.2 to the financial statements on page 149, IFRS 16 Leases replaced IAS 17 Leases in the current financial year and so the Group's current year results reflect the impact of its adoption. Consistent with the approach taken by most issuers, DCC has not restated the prior year comparatives, in accordance with transitional guidelines.
The adoption of IFRS 16 has a material impact on the Group's financial statements, creating a significant new right-of-use asset and corresponding lease creditor. The net impact on the Group's current year return on capital employed was a reduction of 1.4%, as anticipated. This reduction reflects an increase in average capital employed of £300 million EHLQJWKHQHZULJKWRIXVHOHDVHGDVVHWV and an increase in adjusted operating profit of £5.0 million.
7KH*URXSpVRSHUDWLQJFDVKIORZEHIRUH add-back for depreciation on right-of-use OHDVHGDVVHWV DPRXQWHGWRPLOOLRQ compared to £607.5 million in the prior year, an increase of 9.6%. Notwithstanding the negative impact of a significantly lower oil price, working capital decreased by £49.2 million, primarily as a result of excellent working capital management across the Group and lower like-for-like activity levels in DCC Technology. Given that DCC's year end fell during a period of lockdown across every country that the Group operates in, cash collection remained robust in the closing weeks of the year. Overall working capital days were negative 0.6 days sales, compared to negative 0.4 days sales in the prior year.
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 2020 was in line with the prior year and had a positive impact on Group working FDSLWDOGD\VRIGD\V0DUFK GD\V RUPLOOLRQPLOOLRQ
Net capital expenditure amounted to £167.8 PLOOLRQIRUWKH\HDUPLOOLRQ DQG was net of disposal proceeds of £13.2 million PLOOLRQ 7KHOHYHORIQHWFDSLWDO expenditure reflects continued investment in organic initiatives across the Group, supporting the Group's continued growth and development. In the current year, investments in DCC LPG primarily comprised investment in relation to the Avonmouth LPG storage facility in the UK and further development expenditure to support the continued growth of the business, including conversion of oil customers to LPG. In the Retail & Oil division, there was continued investment in new retail sites and site upgrades, including capital expenditure in relation to the project to optimise the depot network in the UK to bring greater network and capital efficiency over time. The majority of the capital expenditure in DCC Technology relates to the SAP implementation which is ongoing in the UK business. In DCC Healthcare, the capital expenditure primarily relates to the previously announced investment in the expansion of the soft gel facility in south Wales. Net capital expenditure for the Group exceeded the GHSUHFLDWLRQFKDUJHH[FOXGLQJGHSUHFLDWLRQ RQULJKWRIXVHOHDVHGDVVHWV LQWKH\HDUE\ £49.3 million.
The Group's free cash flow amounted to £492.3 million, representing an excellent 100% conversion of operating profit into free cash flow.
This performance continues a record of significant cash conversion in the Group since its flotation in 1994. A summary of cash flows for the current year, the prior year and cumulatively for the 26 years since the Group's flotation in 1994 is also presented in Table 5. The conversion rate of the Group's profits into cash cumulatively over that 26-year period is 101%.
After interest and tax payments of £116.2 million PLOOLRQ WKH*URXSJHQHUDWHGFDVK IORZRIPLOOLRQPLOOLRQ The net cash outflow on acquisitions less disposals/exceptionals was £221.7 million PLOOLRQ \$IWHUGLYLGHQGSD\PHQWV RIPLOOLRQPLOOLRQ WKHUHZDV a net cash inflow of £15.5 million.
IFRS 16 lease creditors at 31 March 2020 amounted to £306.9 million, broadly similar to the opening transition adjustment of £294.1 million at 1 April 2019.
7KHQHWGHEWH[FOXGLQJOHDVHFUHGLWRUV RI £60.2 million is net of translation and other adverse movements of £70.1 million, with most of this movement driven by a mark-to-market liability of the Group's LPG and Retail & Oil hedging derivatives. Reflecting the recent fall in oil and related commodity products, the majority of this mark-to-market liability relates to commodity hedges put in place to facilitate back-to-back fixed pricing requests from customers, with the balance related to the Group's normal rolling hedging programmes.
Committed acquisition spend since the prior year preliminary results statement and net capital expenditure in the current year amounted to £336.4 million. An analysis by division is shown below.
| Acquisitions £'m |
Capex £'m |
Total £'m |
|
|---|---|---|---|
| DCC LPG | 22.9 | 71.2 | 94.1 |
| DCC Retail & Oil | 10.2 | 55.8 | 66.0 |
| DCC Technology | 7.4 | 17.9 | 25.3 |
| DCC Healthcare | 128.1 | 22.9 | 151.0 |
| Total | 168.6 | 167.8 | 336.4 |
Committed acquisitions amounted to £168.6 million and include:
In March 2020, DCC Healthcare acquired \$PHULODE7HFKQRORJLHV,QFo\$PHULODEp D specialist provider of contract manufacturing and related services in effervescent nutritional products, based near Minneapolis, in Plymouth, Minnesota. The acquisition of Amerilab is DCC Health & Beauty Solutions' third acquisition in the US market, following the acquisition of Ion Labs in November 2019 and Elite One Source in February 2018. It is a further significant step in the execution of the strategy to build a business of scale in the world's largest health supplements and nutritional products market.
Amerilab specialises in the manufacture of effervescent nutritional products in powder and tablet formats, which are packed in stickpacks, sachets and tubes. Its service offering includes product development, formulation, manufacturing, packaging and regulatory services. Amerilab operates from a large, well-invested facility, which complies with FDA F*03FXUUHQW*RRG0DQXIDFWXULQJ3UDFWLFHV and is certified by leading international UHJXODWRU\ERGLHV16)DQGWKH7*\$\$XVWUDOLDpV 7KHUDSHXWLF*RRGV\$VVRFLDWLRQ ,QUHFHQW years Amerilab has invested in high-speed, automated equipment, enhancing its operational efficiency and increasing manufacturing capacity. Amerilab's customer base consists of high-quality consumer healthcare companies, specialty brand owners and direct sales organisations. Effervescents are a higher growth product segment within the US nutritional market, with attractive demographic characteristics and environmental credentials. Amerilab's complementary effervescent capability will create opportunities for cross-selling and other synergies within DCC Health & Beauty Solutions.
The business, which employs 125 people and has revenues of approximately \$68 million, continues to be led by its experienced management team. DCC Healthcare acquired Amerilab based on an enterprise value of DSSUR[LPDWHO\PLOOLRQPLOOLRQ DQG the business is expected to generate returns consistent with the existing DCC Health & Beauty businesses within two years.
In November 2019, DCC Healthcare acquired ,RQ/DEV,QFo,RQp D)ORULGDEDVHGFRQWUDFW manufacturer of nutritional products for an enterprise value of approximately \$60 million PLOOLRQ 7KLVDFTXLVLWLRQUHSUHVHQWHG a significant step in DCC Health & Beauty Solutions' strategy to build a material presence in the attractive US health supplements and nutritional products market. It followed the acquisition of Elite One Source in February 2018, and significantly enhanced DCC Health & Beauty Solution's service offering to customers in the US market, the world's largest health supplement and nutritional products market. Ion has a broad product format capability encompassing tablets, capsules, powders and liquids across a variety of product categories including herbal and botanical products, probiotics and liquid nutritionals. In addition, Ion is currently commissioning a new nutritional gummies manufacturing line which will provide DCC Health & Beauty Solutions with capability in this fast growth category. Ion operates from well invested facilities which comply with FDA F*03FXUUHQW*RRG0DQXIDFWXULQJ3UDFWLFHV and Health Canada standards. The business is led by an experienced management team, employs 360 people and has annual revenues of approximately \$80 million.
In addition, DCC Vital completed a number of complementary bolt-on acquisitions in Britain which have expanded its product portfolio and strengthened its market presence. SP Services is a leading supplier of medical consumables and equipment for first aid, ambulance, paramedic and rescue professionals in the 'blue light' and occupational health sectors. VacSax is a small British manufacturer and supplier of disposable suction devices used in operating theatres and hospitals.
In May 2020, DCC LPG completed the acquisition of Budget Energy, an independent electricity supplier operating throughout Ireland, supplying approximately 90,000 residential electricity customers. Budget Energy has a strong history of sourcing renewable energy, with agreements in place for the purchase of electricity generated from solar, wind and anaerobic digestion sources. The acquisition of Budget Energy enhances DCC LPG's presence in the Irish electricity market and represents an important step in its strategy to develop its natural gas and power offerings across the island of Ireland.
In addition, DCC LPG also recently completed a small bolt-on acquisition in the US.
DCC Retail & Oil completed a number of small, complementary bolt-on acquisitions in Britain and Ireland during the year. These acquisitions have been successfully integrated into the existing business.
DCC Technology acquired two small businesses during the year, a managed service business in Ireland and a Pro AV specialist in the Benelux region. Although small, both acquisitions support DCC Technology's strategy to continuously enhance its service offering to its customers and suppliers.
In September 2019, DCC Vital completed the disposal of its UK generic pharma activities and UHODWHGPDQXIDFWXULQJIDFLOLW\LQ,UHODQG.HQW 3KDUPDDQG\$WKORQH/DERUDWRULHV 7KH disposal sharpens the strategic focus of DCC Vital, allowing it to concentrate on those areas where it has market-leading positions and sustainable competitive advantage, in particular in the sales, marketing and distribution of medical products in Britain and Ireland. DCC Vital will also continue to develop its pharma activities in Ireland which encompass a market leadership position in the procurement and sales of exempt medicinal products and agency distribution into the hospital and retail pharmacy segments.
| 2020 £'m |
2019 £'m |
26 years since flotation cumulatively £'m |
|
|---|---|---|---|
| Adjusted operating profit | 494.3 | 460.5 | 4,198.6 |
| Decrease in working capital | 49.2 | 37.5 | 408.7 |
| 'HSUHFLDWLRQH[FOXGLQJULJKWRIXVHOHDVHGDVVHWV DQGRWKHU | 122.3 | 109.5 | 1,070.5 |
| Operating cash flow (before add-back for depreciation on right-of-use leased assets) | 665.8 | 607.5 | 5,677.8 |
| &DSLWDOH[SHQGLWXUHQHW | (167.8) | (1,438.7) | |
| 498.0 | 434.0 | 4,239.1 | |
| Depreciation of right-of-use leased assets | 58.2 | – | 58.2 |
| Repayment of lease creditors | (63.9) | – | (63.9) |
| Free cash flow | 492.3 | 434.0 | 4,233.4 |
| Interest and tax paid | (116.2) | (917.9) | |
| Free cash flow (after interest and tax payments) | 376.1 | 356.7 | 3,315.5 |
| Acquisitions | (227.5) | (3,253.5) | |
| Dividends | (139.2) | (1,120.7) | |
| Disposals/exceptional items | 5.8 | 319.8 | |
| 6KDUHLVVXHVQHWRIEX\EDFNV | 0.3 | 593.2 | 767.6 |
| Net inflow | 15.5 | 510.0 | 28.7 |
| Opening net debt | (18.4) | (1.6) | |
| Translation and other | (70.1) | 14.3 | (100.1) |
| IFRS 16 transition adjustment at 1 April 2019 | (294.1) | – | (294.1) |
| Closing net debt (including lease creditors) | (367.1) | (367.1) | |
| Free cash flow conversion | 100% | 94% | 101% |
| EBITDA | 612.8 | 570.1 | 5,296.4 |
| Analysis of closing net debt (including lease creditors): | |||
| Cash less overdrafts | 1,684.8 | 1,466.0 | |
| *URVVGHEWH[FOXGLQJOHDVHFUHGLWRUV | (1,745.0) | ||
| Net debt (before lease creditors) | (60.2) | ||
| Lease creditors | (306.9) | ||
| Net debt (including lease creditors) | (367.1) |
Committed acquisition spend
Cash balances
£1,684.8m (2019: £1,466.0m)
EBITDA:net interest
13.0 times (2019: 12.2 times)
The total cash spend on acquisitions completed in the year was £227.5 million and included the payment of deferred and contingent acquisition consideration previously provided of £35.3 million.
The total cash spend on acquisitions completed in the year included the acquisitions of Amacom, Comm-Tec and Pacific Coast Energy which were announced in the prior year preliminary results statement and completed during the current year.
An integral part of the Group's strategy is the maintenance of a strong and liquid balance sheet which, amongst other benefits, enables it to take advantage of development opportunities as they arise. At 31 March 2020, WKH*URXSKDGQHWGHEWH[FOXGLQJOHDVH FUHGLWRUV RIPLOOLRQWRWDOHTXLW\RI £2.5 billion, cash resources, net of overdrafts, of £1.7 billion and undrawn, committed debt facilities of approximately £350 million.
The Group's outstanding term debt had an average maturity of 6.1 years. Substantially all of the Group's debt has been raised in the US Private Placement market with an average credit margin of 1.66% over floating EURIBOR/ LIBOR. In April 2019, DCC successfully drew down a private placement issuance of approximately £350 million, the proceeds of which will be used to repay maturing private placement debt. Using the ratios set out in the Group's lending agreements, at 31 March 2020, the Group's net debt:EBITDA ratio was 0.1 times WLPHV
Further analysis of the Group's cash, debt and financial instrument balances at 31 March 2020 is set out in notes 3.9 to 3.13 in the financial statements.
Key financial ratios as at 31 March 2020, and the principal financial covenants included in the Group's various lending agreements, are as presented below.
This extremely strong financial position leaves DCC very well placed to navigate the uncertainty created by the Covid-19 pandemic and to continue its growth and development into the future.
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 2019. 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.
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.
| Key financial ratios | 2020 Actual |
Lender covenants |
2019 Actual |
|---|---|---|---|
| 1HWGHEW(%,7'\$WLPHV | 0.1x | 3.5x | [ |
| (%,7'\$QHWLQWHUHVWWLPHV | 13.0x | 3.0x | 12.2x |
| 7RWDOHTXLW\pP | 2,541.5 | 425.0 | 2,433.5 |
DCC's presentation currency is sterling. Exposures to other currencies, principally euro and US dollar, arise in the course of ordinary trading.
A significant proportion of the Group's profits is denominated in currencies other than sterling. \$SSUR[LPDWHO\ RIWKH*URXSpV adjusted operating profit for the year ended 31 March 2020 was denominated in currencies other than sterling, primarily euro, US dollar and Scandinavian currencies. DCC does not hedge the translation exposure on the profits of non-sterling subsidiaries. The modest weakening of the average translation rate of sterling versus the US dollar was offset by a modest strengthening against the euro and Scandinavian currencies resulting in a minimal impact on the Group's adjusted operating profit in the year ended 31 March 2020.
DCC has investments in non-sterling, primarily euro and US dollar 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 GHQRPLQDWHGLQRUVZDSSHGXWLOLVLQJFURVV FXUUHQF\LQWHUHVWUDWHVZDSVLQWR WKHUHOHYDQW 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 weakening in the value of sterling against the euro and the US dollar was partly offset by a strengthening in the value of sterling against certain Scandinavian currencies resulting in a modest translation gain of £5.8 million on DCC's non-sterling denominated net asset position at 31 March 2020, as set out in the Group Statement of Comprehensive Income in the financial statements.
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.
DCC transacts with a variety of high creditrated 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.
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 2020, 66% of the Group's 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.
| Table 6: Performance Metrics | 2020 | 2019 |
|---|---|---|
| Growth: | ||
| \$GMXVWHGRSHUDWLQJSURILWJURZWK | +7.3% | +20.1% |
| 9ROXPHJURZWK'&&/3* | +4.7% | +10.8% |
| 9ROXPHJURZWK'&&5HWDLO 2LO | -4.3% | -1.3% |
| 5HYHQXHJURZWKtH[FOXGLQJ'&&/3*DQG'&&5HWDLO 2LO | +6.7% | +19.5% |
| \$GMXVWHGRSHUDWLQJSURILWPDUJLQtH[FOXGLQJ'&&/3*DQG'&&5HWDLO 2LO | 2.8% | 3.0% |
| \$GMXVWHGHDUQLQJVSHUVKDUHJURZWK | +1.3% | +12.8% |
| Return: | ||
| 5HWXUQRQFDSLWDOHPSOR\HGtH[FOXGLQJ,)56 | 16.5% | 17.0% |
| 5HWXUQRQFDSLWDOHPSOR\HGtLQFOXGLQJ,)56 | 15.1% | n/a |
| 2SHUDWLQJFDVKIORZEHIRUHDGGEDFNIRUGHSUHFLDWLRQRQULJKWRIXVHOHDVHGDVVHWV pP | 665.8 | 607.5 |
| )UHHFDVKIORZDIWHU,)56 pP | 492.3 | 434.0 |
| &RQYHUVLRQRIDGMXVWHGRSHUDWLQJSURILWVWRIUHHFDVKIORZ | 100% | 94% |
| :RUNLQJFDSLWDOGD\VGD\V | (0.6) | |
| 'HEWRUGD\VGD\V | 39.9 | 35.5 |
| Financial Strength/Liquidity/Financial Capacity for Development: | ||
| (%,7'\$QHWLQWHUHVWWLPHV | 13.0x | 12.2x |
| &DVKEDODQFHVQHWRIRYHUGUDIWVDQGVKRUWWHUPGHEW pP | 1,684.8 | 1,466.0 |
| 1HWGHEWtH[FOXGLQJOHDVHFUHGLWRUVpP | (60.2) | |
| 1HWGHEWtLQFOXGLQJOHDVHFUHGLWRUVpP | (367.1) | |
| 1HWGHEWH[FOXGLQJOHDVHFUHGLWRUV DVDRIWRWDOHTXLW\ | 2.4% | 0.8% |
| 1HWGHEW(%,7'\$WLPHV | 0.1x | [ |
DCC, through its LPG and Retail & Oil divisions, procures, markets and sells LPG, natural gas, electricity and oil products 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 may be 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.
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 fuel oil 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.
The net debt balance at 31 March 2020 includes a mark-to-market liability relating to the fair value of the derivative financial instruments used by the Group to hedge these commodity price risk exposures. The sharp decline in commodity prices up to 31 March 2020, triggered by wider market factors, has resulted in an increase in this mark-to-market liability versus the prior year.
Certain activities of individual businesses are 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.
DCC transacts with a variety of high creditrated 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.
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 2020, 66% of the Group's term debt was at floating rates of interest, including the effect of 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.
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 299 institutional investor one-onone and group meetings and presented to 17 broking firms.
The Company's shares traded in the range £38.78 to £74.96 during the year. The share price at 31 March 2020 was £51.00 (31 March 2019: £66.35) giving a market capitalisation of £5.0 billion (31 March 2019: £6.5 billion).
Chief Financial Officer 18 May 2020
DCC LPG has been proactively bringing solutions to market for a number of years to help customers reduce their energy costs, whilst also tackling their carbon emissions to align with ongoing regulatory changes.
DCC LPG has been working with commercial customers to reduce their energy costs and CO2 output and improve air quality by moving to LPG. Switching from an oil boiler to an LPG boiler can reduce energy costs through improved operational efficiency and lower CO2 emissions by up to 25%. Furthermore, an LPG boiler produces 60% less particulate PDWWHUo30p WKDQRLOERLOHUVFRQWULEXWLQJWRLPSURYHGDLUTXDOLW\
Tamnavulin distillery, owned by Whyte & Mackay, has been operational since 1966, producing over four million litres of malt whisky per year in the heart of Speyside, Scotland. With a desire to reduce CO2 output and comply with new UK legislation, the Medium Combustion Plant 'LUHFWLYHo0&3'p 7DPQDYXOLQZHUHNHHQWRUHYLHZWKHLUXVHRI+HDY\ )XHO2LOo+)2p
The MCPD states that combustion plants with a thermal rated input of between 1 – 50 MWth must limit emissions – specifically sulphur dioxide o622 p QLWURJHQR[LGHVo12x p DQG30
Working closely with the distillery team at Tamnavulin during 2019, Flogas technical services conducted a review of their production processes and energy efficiency and set out a detailed proposal for a move to an LPG boiler system. They also designed a bespoke gas storage facility, installing a 30 tonne mounded gas storage tank, along with associated pipework and civil work. This has ensured that the distillery is fully compliant with the MCPD legislation, with the following improvements:
At the same time, Tamnavulin have reduced their carbon output by 19.7% and lowered their overall energy costs.
The Garda College in Templemore, Tipperary is the national centre for police training, development and learning in Ireland. A modern campus structure on eight acres, the college is a world leading police training facility and vibrant third level institution and is rapidly expanding to meet the needs of modern-day policing in Ireland.
The college had been using oil to provide heating and cooking facilities IRUPDQ\HDUVEXWZDVVHHNLQJPRUHFRVWHƪHFWLYHDQGHQHUJ\ HƯFLHQWDOWHUQDWLYHV
Flogas worked with the college to evaluate its options, conducting site visits to examine the existing boiler house and review energy consumption and cost data. Flogas presented a formal proposal, including an analysis of potential cost savings, to Finance and Procurement executives at the Garda Headquarters in Dublin for a switch to an LPG boiler.
Once approved, Flogas worked with the college to transition the existing boiler house infrastructure from oil to LPG and build the required LPG storage, with eight 4 tonne LPG tanks installed in two separate compounds in the college grounds. The changeover process went according to plan, and the college, by using LPG for its heating and cooking requirements, is delivering annual energy cost savings of 20%. They are also securing a 19% reduction in carbon emissions equivalent to 272 tonnes of carbon per annum.
DCC LPG has taken a market leading position in the promotion of oil to gas conversions as it looks to assist customers with their energy transition requirements by providing cost effective solutions that deliver reductions in energy running costs and carbon emissions.
Innovation Market leading positions
Read more: Strategy on pages 2 and3
DCC Retail & Oil has grown its retail businesses by both strengthening existing partnerships and developing new partnerships with best-in-class retailers.
In France, we signed a new partnership agreement with Areas France to operate the shop and restaurant facilities on 45 Esso-branded motorway sites. In parallel, to strengthen our retail offering on the motorway sites an agreement was signed with the Casino Group to deploy the Franprix branded convenience store concept and a new direct agreement was also made with Daltys Coffee to deploy their automatic coffee dispenser solution on the entire motorway network.
In Ireland, we formed a new partnership with Tesco Ireland to operate their network of 22 petrol stations. The petrol stations are being converted to unmanned stations and they will be integrated into the pricing, supply and back office hub.
DCC Retail & Oil has been participating in transport energy transition with several e-car fast charging facilities installed on our petrol stations.
Our Esso-branded petrol station network in Norway entered a partnership with electric charging market leader Fortum Recharge in order to develop a customer friendly electric charging offer at a selection of our petrol station locations throughout Norway. The partnership includes access to the Fortum Charge & Drive App, which is a fully digital customer experience making route planning, EV charging and payment easy for customers. High speed chargers are operating on three petrol stations and further chargers will be added, located at key transient locations, as well as in and around the larger cities where EV density is high.
In France, we agreed a partnership with Ionity for the deployment of fast e-car charging installations on the Esso-branded motorway network. Two motorway petrol stations now have fast charging facilities in operation with several more locations planned to be upgraded.
We continue to grow complementary additional on-site services such as car washes to support our core retail fuels business.
On the Shell-branded network in Denmark, a new car wash concept was introduced at 100 petrol stations, making it the most advanced and customer friendly offer amongst the petrol stations in Denmark. The concept offers customers a flawless car wash experience, using a smartphone app, license plate recognition cameras and online surveillance of the car wash. Customers can choose between pay-per-car wash and monthly subscription models, which offer the customers unlimited car washes for a fixed monthly price.
On the Esso Express unmanned network in France, the car wash business has grown to 63 locations in the past 18 months and the Club Certas Energy loyalty programme has been leveraged, to promote the new car wash facilities. The loyalty programme utilises the Cardivation tokenisation technology that was developed by DCC Retail & Oil. Car wash offers have been promoted to the 170,000 members of Club Certas Energy to help build facility awareness and to drive usage of the new car washes.
Partnering with best-in-class retailers to sustain leading positions in each of the markets we operate in and developing innovative technology solutions for our customers to access on-site services such as e-car charging and car washes.
Innovation Market leading positions
Read more: Strategy on pages 2 and3
DCC Technology is a leading global retail go-to-market provider, with a significant presence in the UK, Ireland, France, Benelux, the Nordics, US, Canada and the Middle East. Partnering with the world's foremost technology brands, DCC Technology markets and sells products and services to a broad customer base of retailers, e-tailers and resellers.
During the year, DCC Technology has made extensive progress in both the 'clicks' and 'mortar' space, accelerating the digital retail revolution and enabling our customers and vendors to thrive in both traditional bricks-and-mortar and e-commerce platforms. Our drop ship services and deliveries direct to the door of end-users are helping to support existing retailers in their omnichannel journey and are of particular importance to our customers and suppliers in the current climate. Our UK drop shipments alone experienced an 81% month-on-month increase in March 2020.
In June 2019, DCC Technology acquired Amacom, headquartered in Den Bosch, the Netherlands. Amacom is a market leading distributor of consumer electronics and IT products, primarily to the retail and e-tail sectors in the Netherlands and Belgium. With approximately 90 staff, the business has an extensive combined sales and warehousing infrastructure throughout the Benelux region, allowing DCC significant reach into resellers, integrators, e-tailers and retailers across Continental Europe.
Exertis UK, the largest retail ICT distributor in the UK and Ireland, offers an unrivalled range of consumer products from leading brands, focused on entertainment and the home. With dedicated sales, account management, business development and commercial teams, plus an unrivalled range of specialist retail services that include category management, drop shipment and digital distribution, Exertis UK adds real value to any size and any type of retail outlet or e-commerce store.
Exertis Ztorm, a leading digital distributor in the video games industry, manages a global network of API-connected online and physical retailers and game publishers. Ztorm offers solutions and services to retailers with and without a digital offering, enabling connectivity for both online stores and physical retailers.
Exertis Middle East has developed a network of merchandisers that enables them to enhance the physical shopping experience, allowing customers to interact and engage with our people and our products/brands, increasing our touchpoints with both our customers and vendors.
The acquisition of Amacom, with its highly efficient distribution footprint, attractive portfolio of product categories and vendors, and sophisticated online portal, provides an excellent blueprint for further growth and expansion in the Benelux region and across Continental Europe. Amacom's online portal allows customers to manage procurement, inventory, online sales and logistics for same day or next day delivery in the Netherlands and Belgium. The Amacom service model for retail and e-commerce, with end-user delivery supported by the online portal, enables access to an extended product range and eliminates the need for extensive stockholdings in stores.
DCC Technology has the tools and the geographic footprint to provide the right solutions to all our partners through our various offerings across the business, including drop ship arrangements, developing online portals/websites, digital distribution of gaming and software products and enhancements to the physical shopping experience. Our omnichannel solutions have helped to safely and quickly supply home offices and provide home entertainment for families around the world.
Read more: Strategy on pages 2 and3
DCC Healthcare's contract manufacturing business, DCC Health & Beauty Solutions o'&&+ %6p KDVDVWURQJWUDFNUHFRUG of organic growth and bolt-on acquisitions in the European market.
Over the last three years DCC has been steadily building its profile in the US health & beauty contract manufacturing o&02p VHFWRUFRPSOHWLQJWKUHHDFTXLVLWLRQVWRGDWHDQG investing c.\$200 million. The US nutritional market has been a consistent high growth market over many years with a current retail value of c.\$50 billion, accounting for approximately one-third of the value of the global market. The US market is characterised by high levels of consumer penetration and an active innovative culture. Consumers are focused on products
that support their everyday lifestyle and help them maintain good health. It is a dynamic market where new brands are emerging and old brands are evolving, as they adapt to the changing retail landscape. The exponential growth of the e-commerce channel means innovation and responsiveness has never been more important.
These favourable market dynamics led us to invest time and resources conducting an in-depth evaluation of the nutritional CMO sector. We found a fragmented manufacturing base, predominantly populated by privatelyowned small and medium-sized enterprises. We came to the view that there was an exciting opportunity to build a group of health & beauty CMO businesses in the US, operating in a similar manner to our existing European business. DCC's is a decentralised business model where the LQGLYLGXDOIDFLOLWLHVHDFKKDYHWKHLURZQVSHFLDOLVWIRFXVDUHDVSURGXFWRU WHFKQRORJ\ DQGWKHLURZQVWURQJORFDOPDQDJHPHQWWHDPVHPSRZHUHG to drive the performance and growth of their business. These businesses are then supported by a small central team focused on oversight, governance, best practice and driving cross selling and synergies.
Over the last two and half years, DCC has executed this strategy to build a group of businesses in the US, starting in 2018 with the acquisition of (OLWH2QH6RXUFH1XWULWLRQDO6HUYLFHVo(OLWHp DVSHFLDOLVWPDQXIDFWXUHU of complex formulation nutritional products in tablet and capsule formats. The acquisition of Elite put DCC on the map, it allowed us to develop a deeper understanding of the marketplace, build customer relationships and identify opportunities for further expansion.
DCC was able to use its expanded market knowledge to narrow the potential pool of targets to those with complementary product formats, strong innovation capability and high-quality customers and in the last year DCC has completed two further US acquisitions.
In November 2019, DCC acquired Ion Labs, an innovative contract manufacturer with capability across a range of nutritional product formats – powders, tablets, capsules, capsule-in-capsule, liquid-caps, probiotics and liquids, as well as developing capability in nutritional gummies. These attractive formats are complementary to Elite's capability. Ion Labs' development into gummies is particularly attractive given the growth opportunity in this product segment in both the US and European markets.
In March 2020, DCC took another step forward in the US, with the acquisition of Amerilab Technologies, a specialist manufacturer of effervescent nutritional products in powder and tablet formats, which are packed in stickpacks, sachets and tubes. The acquisition of Amerilab Technologies provides DCC with a business with innovative technologies, a strong customer base and a specialist service offering in a higher growth niche of the nutritional markets.
The integration of these recent acquisitions into DCC Health & Beauty Solutions will allow us to develop and share a common culture across our US and European businesses, share best practice and importantly cross-sell the breadth of technology and innovation across the expanded group. DCC now has scale across two significant geographic markets, working with a range of local and international partners whose brands are in the top tier of this dynamic and growing marketplace.
DCC has made excellent progress in executing on its strategy to EXLOGDEXVLQHVVRIVFDOHLQWKH86WKHZRUOGpVODUJHVWQXWULWLRQDO SURGXFWVPDUNHW KDYLQJGHSOR\HGFPLOOLRQDQGFRPSOHWHG three complementary acquisitions in the last two and a half years. The acquisition of Ion Labs and Amerilab Technologies this year has added important new customer relationships, technical expertise and new product format capabilities. The US businesses are working closely together and with the European businesses to cross-sell the full breadth of DCC's contract manufacturing businesses comprehensive service offering.
Extend our geographic footprint Innovation Market leading positions
Read more: Strategy on pages 2 and3
People Development
We are committed to developing strong leaders at all levels of our organisation. Our core leadership philosophy is that everyone has the capability and the responsibility to lead and make a valuable contribution; whether that is leading self, leading a team or leading one of our businesses. During the year, we broadened our development offer with a new executive development programme – the 'DCC Business Leadership Programme'.
This new programme, developed with Ashridge Executive Education, is designed to equip future DCC business leaders with the insights, tools, relationships and behavioural agility needed to lead in an increasingly competitive and changing marketplace. Based on a comprehensive learning needs analysis, we embedded four core themes in the programme to provide a powerful end to end experience for participants:
Strategic Report Governance Financial Statements Supplementary Info
" It was clear to see the common characteristics RI'&&OHDGHUVLQWKHVHSDUWLFLSDQWVtLQWHOOLJHQFH DFXULRVLW\WRVROYHEXVLQHVVFKDOOHQJHVDQGWKH energy to drive forward to results. Having talent OLNHWKLVDVWKHIXWXUHOHDGHUVRIWKH*URXSJLYHV great confidence!"
Project Sponsor, Hugh Hamer Managing Director, Williams Medical Supplies
" The programme provided a great opportunity to OHDUQDQGJURZIURPNH\*URXSH[HFXWLYHV7KH\ were active throughout the programme – delivering NH\QRWHVHVVLRQVVKDULQJWKHLUOHDGHUVKLSMRXUQH\V DQGLQSXWWLQJGLUHFWO\WRRXUFKDOOHQJHSURMHFWV 7KLVWLPHDQGWKHVWUDWHJLFEXVLQHVVLQVLJKWVJDLQHG helped to advance my own leadership mindset and successfully achieve my promotion to Commercial Director while on the programme."
Participant, Caroline Hope Commercial Director, Consumer, Exertis UK
" q:HVDZJUHDWYDOXHEHLQJJHQHUDWHGIURP WKHFURVVIHUWLOLVDWLRQRIWKLQNLQJDQGLGHDV of participants from different divisions across the Group focused together on DVLQJOHEXVLQHVVFKDOOHQJHr
Project Sponsor, John Rooney Managing Director, Flogas Ireland
'&&/3*LVDOHDGLQJ8.SHWUROHXPJDVp/3*p VDOHVDQG marketing business with a developing business in the retailing of natural gas and electricity as well as the sales and distribution of industrial gases including refrigerants.
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DCC LPG delivered very strong growth, with RSHUDWLQJSURILWLQFUHDVLQJE\RQ DFRQVWDQWFXUUHQF\EDVLV WRPLOOLRQDQG over three-quarters of the constant currency growth was organic. This excellent organic performance was driven by good volume growth and strong procurement and cost control. The performance benefited modestly from the cooler weather relative to the prior year, although weather conditions were milder than long-term averages.
2YHUDOOYROXPHVLQFUHDVHGE\ RUJDQLFDOO\ GULYHQE\FRQWLQXHGVXFFHVVLQRLO to gas conversions in Britain and market share gains, particularly in Scandinavia and in the French B2B natural gas and power sector. The operating profit per tonne increased versus the prior year, reflecting the good procurement and cost performance and the more favourable cost of product environment.
The business in France again performed well and delivered good operating profit growth, with new business development driving growth in the B2B natural gas and power sector and good procurement and cost control contributing to a strong performance in LPG. The business continues to focus on diversifying its offering to complement its very strong position in the retail and domestic LPG segments and is increasing its presence in the commercial LPG market. In addition, consistent with its ambition to constantly improve the service offering to customers, it has expanded its market-leading cylinder offering to now include both bio-LPG and home delivery.
DCC LPG delivered very strong organic profit growth in Britain and Ireland. In Britain, the business recorded strong growth across all segments and continued its track record of success in growing its sales to industrial and commercial customers. Both the British and Irish businesses also benefited from operational improvement projects implemented in both the prior and current years. In Britain, improvements made in supply-chain and procurement were effective in the seasonally important winter period, following supply disruption experienced in the British market in the prior year. The British business continues to invest in its operational infrastructure and is progressing with the conversion of an existing LNG facility in Avonmouth into a large LPG storage terminal. In Ireland, the business continues to invest in its natural gas and electricity offering and post-year end further expanded its natural gas and power proposition offering in Ireland following the acquisition of Budget Energy, an independent electricity supplier operating throughout Ireland, supplying approximately 90,000 residential electricity customers. Budget Energy has a strong history of sourcing renewable energy, with agreements in place for the purchase of electricity generated from solar, wind and anaerobic digestion sources.
The US business performed very strongly during the year, with good organic profit growth and the benefit from the integration of Pacific Coast Energy, which has performed well since acquisition in April 2019. The organic growth was driven by an excellent operational, supply chain and procurement performance during a period of market supply disruption and cooler weather.
| 2020 | 2.2 m |
|---|---|
| 2019 | 2.1m |
| 2018 | 1.9 m |
Deliver superior shareholder returns
| 2020 | 18.4% |
|---|---|
| 2019 | 17.1% |
| 2018 | 17.4% |
Drive for enhanced operational performance
*HQHUDWHFDVKƮRZVWRIXQGRUJDQLF and acquisition growth and dividends
| 2020 | ||
|---|---|---|
| 2019 | £242.7m | |
| 2018 | £227.6m | |
*URZDGMXVWHGRSHUDWLQJSURƬWSHUWRQQH
| 2020 | £104.87 |
|---|---|
| 2019 | £97.11 |
| 2018 | £89.27 |
Deliver superior shareholder returns
| 2020 | 21.7% |
|---|---|
| 2019 | 19.8% |
| 2018 | 23.0% |
The US business continues to target further expansion in the highly fragmented US market and post-year end completed a small bolt-on acquisition. The business in Hong Kong and Macau also performed well during a difficult year for the region with a series of protests and, post-Christmas, the disruption caused by Covid-19. The business remained operational throughout these periods of disruption, continuing to provide excellent service to customers and growing its presence in the domestic sector in particular.
DCC LPG has substantial operations in 10 countries and is very well placed to continue its development both in existing and new territories, as well as continuing to develop its position in adjacencies, which broadens the service offering of the division.
'&&/3*VXSSOLHV/3*SURSDQHDQG EXWDQH LQERWKF\OLQGHUDQGEXONIRUPDWV to commercial, domestic, agricultural and industrial customers across eight countries in Europe, the US, and Hong Kong and Macau in Asia.
LPG is used where there is no natural gas grid for space heating, hot water and cooking and for agricultural and industrial processes. ,WLVDOVRXVHGDVDURDGIXHODXWRJDV DQGIRU powering forklift 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.
DCC LPG supplies natural gas to industrial, commercial, agricultural and domestic customers in France and Ireland and has developing electricity supply businesses in France and Ireland.
DCC LPG supplies refrigerant gases throughout Europe through its TEGA business based in Germany. Benegas, based in the Netherlands, supplies LPG as an aerosol propellant to industrial businesses throughout Europe, and Flogas Britain supplies medical gases throughout the UK.
Butagaz is the second largest LPG distribution business in France where the market size is approximately 1.6 million tonnes. Butagaz has a market share of approximately 22% and operates from 43 depots nationally, distributing to 200,000 customers, 16,000 points of sale
F\OLQGHUUHVHOOHUV DQG%%F\OLQGHU customers. We estimate that Butagaz cylinders are used by approximately 4 million end user customers annually. Butagaz has a strong supply base and sources LPG from several supply points across France and from Belgium, Spain and Germany. The business has an experienced management team and a high-quality sales, marketing and operating infrastructure.
Gaz Européen is a specialist retailer of natural gas and electricity, focused on supplying energy management companies, apartment blocks ZLWKFROOHFWLYHKHDWLQJV\VWHPV SXEOLF authorities and the service sector in France. 'Butagaz Natural Gas and Electricity' is a natural gas and electricity offering for domestic consumers which leverages the strength of the Butagaz brand and the combined Gaz Européen and Butagaz experienced management teams. Gaz Européen supplies approximately 7.3 TwH of natural gas to c.15,000 B2B gas sites across France.
Flogas Britain is the clear number two LPG distributor in Britain with a market share of c.34% of the addressable market of approximately 915,000 tonnes, served through a nationwide infrastructure of 57 operating locations. Flogas Britain 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 bio methane 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
Strategic Report Governance Financial Statements Supplementary Info
o/1*p DVDQHQHUJ\VROXWLRQSULPDULO\WRODUJH industrial businesses. 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.
Flogas Ireland, which operates 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 200,000 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 has organically developed a utility business for both domestic and commercial customers and following the recent acquisitions of Budget Energy, an independent electricity supplier with a strong history of sourcing renewable energy and the previous acquisition of Just Energy, it now has a platform for a dual fuel offering to both customer segments throughout Ireland. In the year to 31 March 2020 the business supplied 1.5 TwH of natural gas and electricity to approximately 46,000 customers across Ireland. The business is a leading supplier of natural gas to SME customers as well as having a modest position in the domestic supply sector.
TEGA is an LPG and refrigerant gas distribution business with five operating sites based largely in southern Germany delivering c.37,000 tonnes of LPG and c.3,400 tonnes of refrigerants annually. The refrigerants business is focused on wholesalers and end-users for use in airconditioning, commercial cooling systems and refrigerators, whereas the LPG business services c.15,000 domestic and commercial customers.
In Sweden and Norway, Flogas operates from five locations which include two key importation facilities. Flogas is the market leader in both these markets, distributing LPG predominantly to large steel and industrial customers, and has 43% and 48% market shares in Sweden and Norway respectively. The addressable market is estimated to be approximately 330,000 tonnes in Sweden and 200,000 tonnes in Norway.
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 several 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.
DCC Propane is headquartered in Illinois with annual sales of 150,000 tonnes of LPG to over 73,000 customers. The business has established market-leading positions in three states with further operations in seven other states across the mid-west and north-west regions and is actively looking to extend its footprint further in what is a relatively unconsolidated market.
The business trades under four key regional brands, Hicksgas, Pacer Propane, Propane Central and Pacific Coast Energy and has a well-invested asset base supporting the business through a fleet of 179 company-owned LPG delivery vehicles operating from 46 customer service locations and 57 satellite facilities.
DSG Energy Limited is the market leader in Hong Kong supplying piped LPG under long-term supply agreements to over 100,000 households based in very large apartment complexes and has a number one position in the cylinder market as well as supplying autogas through Shell's retail network. It also has a market leader position in the smaller Macau market.
The business is supplied via the Shell terminal and filling plant on Tsing Yi Island and distributes c.60,000 tonnes of Shell-branded LPG annually under a long-term Shell brand licence agreement.
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. DCC LPG's strategy is to:
DCC LPG will 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 commercial and residential energy consumers looking to switch to more environmentally friendly and competitively priced energy sources. We will continue to seek to expand through acquisition and consolidation
in fragmented markets as well as adjacencies as demonstrated by our recent Budget Energy and Just Energy acquisitions in Ireland which will include the supply of electricity from renewable sources and a platform for a dual fuel offering throughout Ireland. We will continue to look at opportunities to expand other related products such as refrigerants into new geographic markets.
Operationally, the division will continue to look to develop innovative solutions to drive efficiencies and growth such as the Butagaz expanded cylinder offering which now includes bio-LPG and home delivery in addition to 'Click and Collect'. We will also look to further expand into adjacencies such as natural gas and power to add to our operations in France and Ireland and refrigerants to leverage the expertise in TEGA.
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 supplying cylinders to over 4 million consumers annually. Customers are primarily spread over the commercial, industrial, domestic, retail and agricultural markets. DCC LPG has no material customer dependencies.
As with its customer base, DCC LPG's supplier portfolio is broadly based. The top five suppliers represent less than 40% of total volumes supplied with no one individual supplier accounting for more than 15% of volumes supplied in the current year. The major suppliers to the division are BP, Equinor, Esso, Gunvor, Philips66, Shell, Sinopec, Total and Valero Energy. We have built long-term strategic partnerships over many years with our suppliers and we have undertaken a strategic review of our procurement practices during the year as we look to strengthen these relationships for the future.
Operating Review continued DCC LPG continued
Flogas Ireland has partnered up with Glanbia to bring a more efficient solution for dairy farms in Ireland using the Flogas LPG Instant Hot Water system.
0RYLQJWRFKORULQHIUHHLQVWDQWKRW water is now critical in all wash routines for dairy farmers.
'DUUHQ+HDO\SLFWXUHGDERYH DQGKLVIDPLO\ RSHUDWHDVSULQJFDOYLQJGDLU\IDUPLQ:LFNORZ ,UHODQG/LNHPRVWGDLU\IDUPHUVKRWZDWHU DFFRXQWVIRUDERXWRIWKHLUHQHUJ\ELOOV \$UHOLDEOHKRWZDWHUVXSSO\LVYLWDOIRUWKH HIIHFWLYHFOHDQLQJRIPLONOLQHVDQGVWRUDJH WDQNVDVZHOODVFRQWUROOLQJWKH7RWDO%DFWHULD &RXQWo7%&p RIWKHPLONSURGXFHG
The farm used night rate electricity for heating and storing hot water which was WKHQUHKHDWHGGXULQJWKHGD\DWGD\UDWHV KRZHYHUWKLVZDVQRWVXIILFLHQWWRPHHW the farm's daily hot water requirements. They were searching for an efficient and convenient system to meet their demand IRUDFRQVWDQWVXSSO\RIKRWZDWHU\$OVRZLWK the move towards chlorine-free detergents EHFRPLQJPRUHFUXFLDOWKHDYDLODELOLW\RIKRW ZDWHUWKURXJKRXWWKHGD\ZDVEHFRPLQJ more and more of a necessity.
The farm selected the Flogas LPG Instant Hot Water system which provides hot ZDWHUXSWR&DWDQ\WLPHQLJKWRUGD\ so farmers only pay for the water they use DQGFDQHOLPLQDWHH[SHQVLYHKHDWLQJDQG storage costs and also reduce the associated FDUERQHPLVVLRQV
DCC LPG currently employs 2,908 people and operates through a devolved structure where our highly motivated local management teams are responsible for developing their respective businesses.
Overall, these teams are focused on promoting processes and practices that support the well-being, development and engagement of our people to ensure we deliver the service levels expected by our customers in a safe way, every day.
Developing and investing in our people is a critical enabler of DCC LPG's strategy. We continue to invest in further developing our management resource, by providing exposure to other markets through a number of divisional best practice groups, and by creating increased career opportunities through our expanding geographic footprint. Our businesses operate a wide variety of employee training programmes that promote the ongoing development of our colleagues 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. All of our businesses are also actively focused on building longer term leadership capability and participate in DCC's talent planning processes as well as the Group's leadership development programmes including DCC's Graduate Programme which supports the development of a high potential and mobile talent pool at graduate level.
DCC LPG is committed to conducting its business in a sustainable manner and this is reflected in how we interact with our employees. In common with the rest of the DCC Group, the business has processes to assess and control material health and safety risks and aims to provide an attractive working environment for all our employees.
The continuous improvement of our safety performance is a key priority for all directors and line managers 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 Divisional Board and by 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, process safety leadership and the promotion of a 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 large storage facilities to domestic deliveries, a range of controls are in place to minimise the risk. 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, both LPG and refrigerants, 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.
DCC LPG sold 2.2 million tonnes of product during the year ended 31 March 2020 and the businesses operate with inherent risks to people and the environment. 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 driving improvement through robust training, audit and review processes, quarterly communications campaigns and enhanced reporting structures.
DCC LPG's expansion into new territories, which now includes a presence in 10 countries across three continents, ensures a broad customer base and reduces the concentration on any single geographical location. The expanded geographical spread brings 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.
DCC Group management resources have been deployed to assist with the integration of acquired businesses particularly when expanding into new geographical territories EXWDOVRZKHUHWKHUHDUHNH\SURMHFWVIRU H[DPSOHWKH\$YRQPRXWKIDFLOLW\LQWKH8. WKDW require enhanced support and expertise. Local management resources continue to be further developed and expanded and are augmented by external specialist expertise where appropriate.
Whilst localised weather events can result in disruption to supply as well as cost of product and volume volatility particularly for heating dependent products, the increased geographical spread mitigates the risk at a divisional level. The expansion of the non-heating product offering through TEGA's refrigerants business provides management expertise for further industrial gas growth through additional non-heating product offerings.
Our businesses have remained operational throughout the period of disruption caused by the Covid-19 pandemic and have continued to provide excellent service to our customers.
DCC LPG recognises the reality of climate change and the challenges arising from changing weather patterns and the transition to low carbon economies. 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 to quantify carbon emissions with LPG providing 20% lower CO2 impact than heating oil and over 96% less NOX than diesel.
TEGA continues to work with key refrigerant suppliers to deliver lower Global Warming 3RWHQWLDOo*:3p UHIULJHUDQWVLQOLQHZLWKWKH (8)OXRULQDWHG*DVo)*DVp GLUHFWLYHDQGKDV completed a significant project during the year to ensure it is future-proofed for the storage and supply of the newly emerging lower GWP refrigerants.
DCC LPG's businesses have a local footprint in all the markets in which we have a presence. It is therefore crucial to our long-term strategy that we have a high degree of trust within each local community. 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.
Bio gases are made from a variety of biological materials and can reduce carbon emissions by up to 90% depending on production methods.
\$VELR/3*LVFKHPLFDOO\LGHQWLFDOWRWKH RULJLQDOJDVHVWKH\FDQVLPSO\EHoGURSSHGLQp WRH[LVWLQJVXSSO\FKDLQVDQGDSSOLDQFHV without any need for infrastructure changes RUIXUWKHULQYHVWPHQW7KHPDLQEHQHILWV RIELRJDVHVDUHDVIROORZV
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• The Flogas Britain fleet of vehicles already includes a range of dual fuel and electric K\EULGDOWHUQDWLYHV)ORJDV%ULWDLQKDVDOVR EHFRPHWKHILUVW8.JDVVXSSOLHUWR RSHUDWHELR/1*SRZHUHG9ROYRWUXFNV
7KHQHZWUXFNVDUHSDUWRIWKHFRPSDQ\pV YLVLRQWREXLOGDORZHUFDUERQIXWXUH LQWKH8.RIIHULQJUHQHZDEOHHQHUJ\ VROXWLRQV DQGZLOOVHHDUHGXFWLRQLQFDUERQ HPLVVLRQVE\PRUHWKDQZKLOVW significantly reducing costs.
GLVWULEXWLRQQHWZRUNLWQHHGVWREH enriched with a higher energy content gas. )ORJDV%ULWDLQKDVEHHQDWWKHIRUHIURQW of the propane enrichment industry VLQFHWKH8.pVILUVWELRJDVSODQWVODXQFKHG LQZLWK%XWDJD]DOVRSDUWQHULQJLQ VLPLODUSURMHFWV
,WZLOOWDNHWLPHWRHVWDEOLVKVLJQLILFDQWVRXUFHV RIELRJDVVRZHDUHFRQWLQXLQJWRWDNHVWHSV to reduce our impact on the environment WKURXJKFDUERQRIIVHWWLQJLQRUGHUWR counteract the greenhouse gas emissions from the fuel we supply to our customers.
Strategic Report
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.
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54 DCC plc Annual Report and Accounts 2020
DCC Retail & Oil delivered good growth, with operating profit increasing to £140.3 million, 4.9% ahead of the prior year, up 6.0% on a constant currency basis and approximately half of the constant currency growth was organic. The performance reflects the continuing focus on providing customers with essential liquid fuel products, increasing penetration of valueadded products and services and strong cost control, which drove good organic profit growth in the year.
DCC Retail & Oil sold 11.6 billion litres of product, a decline of 4.3% on the prior year GHFOLQHRUJDQLFDOO\ 7KHUHGXFWLRQ primarily reflects lower volumes in Britain, particularly in the marine, aviation and commercial sectors as the business actively exited some high volume, low margin relationships. It also reflects lower commercial activity in Britain generally, given the more difficult economic backdrop during the year as a result of Brexit. Volumes across Continental Europe, Scandinavia and Ireland were in line with expectations, with annual volumes modestly adversely impacted in the retail sector as a result of the Covid-19-related restrictions on mobility introduced in March.
In Britain and Ireland, the business delivered very strong organic profit growth. The reduced marine, aviation and commercial volumes and an increased penetration of premium fuels, including premium heating oil, benefited the margin mix and a good cost performance drove the strong performance. The business continued to make good progress in expanding
| Volume (litres) | -4.3% |
|---|---|
| Strategic objective: |
Drive increase in sales volumes
| 2020 | 11.6bn |
|---|---|
| 2019 | |
| 2018 | 7.7 |
Strategic objective: Deliver superior shareholder returns
| 18.6% |
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its retail network in Britain with 10 new site additions and also announced a partnership with Tesco in Ireland to operate its nationwide network of 22 sites which will commence in the current year. In Britain, the business has continued to develop its HGV truck stop network and now has 20 well-located sites, including three new sites completed in the past year, and continues to enhance its offering with additional services to HGVs, such as secure parking and truck washes. The business also continues to develop into adjacent areas, such as lubricants, and has acquired three small bolt-on lubricants and lubricant blending businesses in the last two years.
The Scandinavian business delivered a good performance, primarily driven by strong organic operating profit growth in Denmark, as the business continued to both develop its offering in differentiated fuels and benefit from improvements made to the retail and commercial operations acquired in 2017. In July 2019, the business entered into a new branded marketing and distribution agreement with Shell Aviation, which involved Shell taking a stake in the existing Danish aviation operations, giving the business access to Shell's global network and settlements platform. Although small in the context of the division, this development further strengthens DCC Retail & Oil's presence in the aviation fuels market. The businesses in both Norway and Sweden performed in line with expectations.
The French business delivered very strong organic profit growth, reflecting a continued focus on business development and customer engagement following the successful implementation of customer-centred initiatives
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| 2020 | 1.21p |
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Deliver superior shareholder returns
7.5%
in the prior year including a loyalty programme, fuel differentiation through Esso's Synergy Fuels and an improved carwash offering. The business in Austria also performed well and has been particularly successful in bringing new offerings to customers, including premium fuel and lower-carbon initiatives.
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.
The Retail business operates 1,085 retail petrol stations in France, Sweden, Norway, Denmark, Austria, Ireland and Britain and is one of the leading resellers of branded fuel cards in Britain.
The Esso Retail France business comprises a growing Esso unmanned retail petrol station QHWZRUNVWDWLRQV WKH(VVRPRWRUZD\ FRQFHVVLRQVQHWZRUNVWDWLRQV DQGDIXUWKHU 142 Esso-branded dealer-owned stations and sells approximately 1.6 billion litres of diesel and petrol to consumers across France annually. 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 23% 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.
Trading under the Qstar brand, DCC Retail & Oil sells approximately 380 million litres of product per annum. Qstar provides national coverage through a network of 329 unmanned forecourts which is complemented by an additional 27 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 12% of the total share of sites in the market. The IRXUODUJHVWSOD\HUV&LUFOH.3UHHP6WDQG 2.4 KROGDFRPELQHGPDUNHWVKDUHRI approximately 74% in terms of site numbers.
The Danish Shell-branded retail petrol network includes 57 unmanned sites operated under the Shell Express brand, eight truck sites, 56 company-operated sites under the 7-Eleven brand, 30 manned company-owned sites operated by franchisees and contracts to supply 79 dealer-owned sites. The business operates from its office in Naerum in Denmark, with pricing and back office support provided by the retail hub based in Ireland. The business sells approximately 450 million litres of diesel and petrol to consumers across Denmark annually.
No.1 No.1 in oil
distribution
Leading operator of unmanned retail petrol stations
Leading reseller of fuel cards
NORWAY No.3
No.3 operator of retail petrol stations
FRANCE No.1 No.1 operator of unmanned retail petrol stations
No.1 in oil distribution
Leading operator of unmanned retail petrol stations
Leading operator of retail petrol stations
DENMARK No.2 No.2 in oil distribution No.2 in aviation
fuels
No.2 in oil distribution
Leading player in oil distribution Circle K is the largest player in the Danish retail market with a market share of c.30%. DCC Retail & Oil is the fifth largest player in the Danish retail petrol station market with a market share of approximately 11%.
The Esso network in Norway comprises 120 company-operated stations with convenience stores operated in partnership with Norgesgruppen, the largest grocery retailer and wholesaler in Norway, and a growing unmanned network of 37 stations. The business has contracts to supply a further 87 Esso-branded dealer-owned stations.
The network is the third largest in the market selling approximately 480 million litres per annum, with four key players including Circle K, St1, Uno-X and Esso Retail Norway. DCC Retail & Oil has a market share of approximately 20% based on retail volume.
DCC Retail & Oil is one of the leading resellers of branded fuel cards in Britain. The business facilitates the sale of approximately 900 million 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. As well as selling fuel cards which are an essential tool for commercial organisations to manage their transport fuel costs, DCC also offers customers an innovative range of value-added services that complement the fuel card portfolio.
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, Norway, Austria and Germany. DCC Retail & Oil sells oil under a large portfolio of leading brands in Europe.
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 41 businesses including the oil GLVWULEXWLRQEXVLQHVVHVRI6KHOO &KHYURQ 7H[DFR DQG7RWDO '&&5HWDLO 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 32 billion litres. In the year ended 31 March 2020, DCC Retail & Oil's oil distribution business in Britain sold 4.8 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 approximately 45% of volumes sold through supermarket sites, 17% 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 430 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 10% of the dealer network. In addition, DCC Retail & Oil operates 47 company-owned manned forecourts and is the leading player in the automated unmanned model with a further 41 stations.
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 27% making it the number two oil distributor. DCC Energi Danmark is also the second largest operator in the Danish aviation market, operating in seven of the eight largest Danish airports. In July 2019, the Danish business completed the formation of its partnership with Shell Aviation, which involved Shell taking a stake in the Group's existing Danish aviation operations, giving the business access to Shell's global network and settlements platform, further establishing DCC Retail & Oil's presence in the aviation fuels market.
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.
DCC Retail & Oil's vision is to be a global leader in the sales, marketing and distribution of fuels and related products and in the provision of services to energy consumers:
DCC Retail & Oil's strategy for the retail sector is to grow via:
unmanned: key pillar for growth;
retail company-owned: in partnership with retailer;
The Retail business has been significantly strengthened by acquisitions over the last five 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 in Ireland provides a platform to integrate future acquisitions in new territories, further enhancing the ability to grow its business.
In the Fuel Card business, 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 continued to expand its customer offering by providing innovative non-fuel products to customers, increasing its focus on customer engagement and loyalty.
DCC Retail & Oil's strategy for oil distribution is to become the leading oil distribution business in Europe by:
DCC Retail & Oil's strategy for oil distribution in Britain is to continue to grow its market share FXUUHQWO\ WRLQH[FHVVRIRILWV addressable market. Key to achieving this target is growth in transport fuels with a particular focus RQUHWDLOSHWUROVWDWLRQVZKHUHWKHEXVLQHVVKDV been actively rolling out the Gulf brand in both the dealer and unmanned networks and now KDV*XOIEUDQGHGVLWHVVXSSOLHG DQGWKH marine sectors.
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. Within retail, the Club Certas loyalty programme in France has continued to grow, providing customers with e-receipts and promotions with over 900 partner brands. DCC Retail & Oil has no material customer dependencies.
As with its customer base, DCC Retail & Oil's supplier portfolio is broadly based. The top five suppliers represent approximately 60% of total volumes supplied with no one individual supplier accounting for more than 23% of volumes supplied in the current year. The major suppliers to the division are BP, Equinor, Essar, Esso, Ineos, Greenergy, Mabanaft, OMV, Philips66, Shell, St1, Prax, 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.
DCC Retail & Oil employs 3,452 people, predominantly based in Britain, led by strong, entrepreneurial management teams. DCC Retail & Oil's business is a people business at its core and we are therefore 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.
Developing and investing in our people is a critical enabler of DCC Retail & Oil's strategy. We have highly experienced and ambitious management teams with deep knowledge of the markets in which their businesses operate. As our businesses have grown, we have augmented the existing management teams with experienced talent in senior roles, and continue to develop from within. We operate a wide variety of training programmes to promote an ongoing focus on development as well as specific formal training in areas such as health and safety, risk and compliance. We are focused on building longer term leadership capability and actively participate in DCC's talent planning processes as well as the Group's leadership development programmes including DCC's Graduate Programme which supports the development of a high-potential and mobile talent pool at graduate level.
DCC Retail & Oil is committed to conducting its business in a sustainable manner and this is reflected in how we interact with our employees. In common with the rest of the DCC Group, the business has processes to assess and control material health and safety risks and aims to provide an attractive working environment for all our employees. During the year, DCC Retail & Oil rolled out a number of new initiatives aimed at improving employee well-being and supporting employee's mental health, including regular group discussions, providing confidential support services, employee engagement initiatives and continued involvement in tackling some of the problems associated with mental health issues.
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 through regular health & safety interventions, campaigns and communications.
DCC Retail & Oil sold 11.6 billion litres of product during the year ended 31 March 2020 and the businesses operate with inherent risks to people and the environment. Ensuring that our businesses maintain rigorous health, safety and environmental standards is one of our core business principles.
DCC Retail & Oil has a broad customer base across a number of economies in Europe. A deterioration in these economies and its impact on consumer spending and confidence is a key risk faced by the business, including the impact on these economies from restrictions on mobility and physical distancing as a result of the Covid-19 global pandemic.
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 and by regulatory developments. The strategic focus has been to reduce the heating dependence of the division through the development of the non-heating segments of the business. Over recent years, the acquisitions of retail businesses in Europe have been key building blocks in this strategy.
Demand for transport fuels is likely to be impacted by levels of international and national mobility, vehicle efficiencies, technological and regulatory developments over the medium to long-term. DCC Retail & Oil's businesses, which are characterised by:
• 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.
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 likelihood of a loss of containment. 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 harm to the environment so in the event of any spill, immediate action is taken to contain and recover the product to minimise the impact on the surroundings and to identify the root causes. No significant spills occurred in the year.
DCC Retail & Oil is committed to assisting our customers in reducing their environmental impact and this is being supported through offering our customers cleaner, more efficient fuels and innovative solutions, enabling customers to monitor their own energy use and quantify carbon emissions.
Strategic Report Governance Financial Statements Supplementary Info
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DCC Technology, which trades as Exertis, is a leading routeto-market and supply chain partner for global technology brands and customers. Exertis provides a broad range of consumer, business and enterprise technology products and services to retailers, resellers and integrators.
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Product lifecycle solutions
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Strategic Report Governance Financial Statements Supplementary Info
DCC Technology experienced a difficult year with the challenges of a UK market impacted by Brexit and related uncertainty throughout the year and the impact of Covid-19 beginning to emerge through February and March 2020. Notwithstanding these significant challenges, the business recorded modest operating profit growth of 1.0%, benefiting from acquisitions completed in the current and prior year and good growth in North America and Continental Europe, being offset by a substantial organic operating profit decline in the UK. DCC Technology delivered strong free cash flow, with the reduction in ROCE reflecting the profit decline in the UK and also the impact of recent strategic investments made in the warehousing and operating infrastructure of the division which will facilitate growth and enhanced returns in future years.
As reported through the year, the UK technology market experienced weak demand which impacted the B2B and enterprise channels and had an increasing impact in the retail sector into the important Christmas trading period. Consequently, the UK business saw a decline both in revenue and operating profit. DCC Technology continues to have leading shares of the UK technology market across its key product categories and customer channels and the business delivered growth in key product categories including smarthome, computing, security and wireless.
The upgrade of the enterprise management system is nearing completion, with the system now live and operating effectively in a portion of
| Revenue | +7.8% |
|---|---|
| Strategic objective: | |
| Drive for enhanced | |
| operational performance |
| 2020 | £3.9bn |
|---|---|
| 2019 | £3.6bn |
| 2018 | £3.1bn |
Deliver superior shareholder returns
the business. The remaining components are scheduled to go live in the coming months and the upgrade is expected to significantly enhance the capability of the business to service its customers and suppliers. The Irish business performed in line with expectations, with strong growth in retail and continued expansion of its services business, including in enterprise mobile management.
In Continental Europe, operating profit growth was primarily driven by the previously announced acquisitions of Amacom and Comm-Tec. Amacom in particular has performed very strongly since acquisition, with its technology-enabled services and customer integration capability enabling e-tailers and retailers to expand their customer base and product breadth. In France, while the consumer businesses continued to be challenging, performance was ahead of the prior year as the business benefited from revenue growth with key vendors. The French reseller business performed satisfactorily and is continuing to invest in its audio visual proposition. The business in the Middle East continued to generate organic revenue growth, despite the impact of Covid-19 restrictions towards the end of the year, which impacted high street sales in a market with a relatively immature online presence.
The North American business performed very well, benefiting from good market conditions and some new vendor additions during the year. The business saw strong growth in the Pro AV, Pro Audio & Lighting and Consumer Electronics segments in both the US and Canada. In Pro AV, the business generated growth in the hospitality market
Strategic objective: Drive for enhanced operational performance
| 2020 | £65.3 |
|---|---|
| 2019 | £64.7n |
| 2018 | £47.8m |
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Strategic objective: Grow operating margin
| 2020 | 7.2% | |
|---|---|---|
| 2019 | 8.4% | |
| 2018 | 6.4% |
as well as in sales of Direct View LED, in particular into corporate and retail customers. In Pro Audio, the business generated strong sales in recording, post-production and mixing products and with a new vendor in the Canadian market, as well as strong sales of multi-media and consumer audio products. DCC Technology has a very strong platform to develop and expand its business in North America, particularly in the Pro AV, Pro Audio and Consumer Electronics markets.
In both expanding its geographic presence and increasing its focus on value-added services in recent years, DCC Technology has built an excellent platform to drive further growth and support its vendors and customers with market-leading services across its chosen markets.
Exertis partners with many of the world's leading technology brands to market and sell a range of consumer, business and enterprise products and services to a broad geographically spread customer base. Our strong relationships with suppliers and customers, together with recent investment in commercial expertise outside of Exertis' core geographic markets, allow us to win business on a global basis.
Exertis provides a broad range of consumer, business and enterprise technology products and services to retailers, resellers and integrators. The primary categories of consumer technology products include FRQVXPHUHOHFWURQLFVLQFOXGLQJVPDUWKRPH SURGXFWV JDPLQJFRQVROHVSHULSKHUDOV software, wearable technology and accessories. Business and enterprise technology products LQFOXGHFRPSXWLQJLQFOXGLQJWDEOHWV QRWHERRNVDQG3&V QHWZRUNLQJ VHFXULW\ SURGXFWVFRPPXQLFDWLRQVLQFOXGLQJ smartphones, feature phones, accessories DQGXQLILHGFRPPXQLFDWLRQV VHUYHUV storage, audio visual, printers, peripherals, cables & connectors and consumables.
Exertis 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, in addition to, 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.
Reflecting the global nature of the technology supply chain, Exertis provides global supply chain services through its dedicated supply chain operations in Ireland, Poland and China. These services include product sourcing and procurement, supplier hubbing, consignment stock programmes, supplier identification and qualification, quality assurance and compliance, and supplier and customer fulfilment, and are designed to minimise cost, capital and complexity for its global partners.
Exertis' principal addressable markets are the retail and reseller channels for consumer and business technology products in Europe and North America. The value of the technology distribution market in these territories is estimated to be £190 billion.
During the year, DCC Technology acquired two businesses in Continental Europe, Comm-Tec and Amacom. Comm-Tec is a leading valueadded distributor of Pro AV and IT products to system integrators and resellers across Germany, Austria, Switzerland, Italy and Spain. Amacom is a leading distributor of consumer electronics, AV, and IT products, primarily to the retail and e-tail sectors in the Benelux region.
Exertis is the fourth largest distributor of technology products in Europe with leading positions in the UK and Ireland, France and the Nordic region and is a leading specialist player in Pro Audio, Pro AV and musical instruments in North America.
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products CHINA Divisional sourcing operations
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Expanding share of the technology distribution market. Leading specialist distributor of Pro AV products
62 DCC plc Annual Report and Accounts 2020
Exertis' vision is to become the leading specialist integrated technology distribution and supply chain services business, delivering an industryleading service offering, whilst realising consistent long-term profit growth and an industry-leading return on capital employed.
Our strategic objectives are focused on:
Exertis 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 global organisation focused on a range of specific product sectors with services tailored to 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 future growth in these areas.
The business has an extensive customer base, selling to approximately 50,000 customers globally. In the year ended 31 March 2020, Exertis' largest customer accounted for approximately 9% of revenues and the 10 largest customers together accounted for 31% 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-tomarket 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 with the introduction of a significantly enhanced web offering.
Our supply chain services customers include IT equipment manufacturers, outsourced equipment manufacturers, consumer electronics companies and telecommunications equipment manufacturers. The business has also 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 10 years.
Exertis has a diverse supplier base and partners with thousands of suppliers including many of the world's leading technology brands such as Acer, Apple, Asus, Dell, Epson, Focusrite, Google, HP, Huawei, Intel, Lenovo, LG, Logitech, Microsoft, Oculus, Poly, Samsung, Seagate, Sonos and Toshiba. The largest supplier represented 10% of total revenue in the year ended 31 March 2020 and the top 10 suppliers represented 40% of total revenue.
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.
When providing supply chain services to technology manufacturers and brand owners, a core element of the service 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'.
Exertis employs 4,203 people in Europe, North America and Asia and recognises that they are fundamental to the continued success of the business. At all levels, employees are encouraged to continue to adopt an innovative, serviceoriented 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 management teams in the industry. DCC 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 our employees. In common with the rest of the DCC Group, the business has processes to assess and control material health and safety risks and aims to provide an attractive working environment for all our employees. The business also undertakes regular employee surveys in order to hear the employee voice and embed a culture of continuous listening and improvement.
Exertis operates a wide variety of employee training programmes within individual businesses to promote the ongoing development of our colleagues 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. Exertis continues to place specific focus on the development of leadership skills for its management team; at senior levels this is focused on building longer term leadership capability. Our businesses actively participate in DCC's talent planning processes as well as the Group's leadership development programmes, including DCC's Graduate Programme, which supports the development of a high-potential and mobile talent pool at graduate level.
Exertis faces several strategic, operational, compliance and financial risks. The business partners with a broad range of suppliers and customers with whom we have built excellent commercial relationships. However, the business would be negatively impacted by the loss of a small number of key suppliers or customers, a decline in demand for particular technology products or ineffective stock management processes.
Further risks include the widespread commoditisation of products, lagging digitalisation, changing market dynamics, concentration of supply chain to a particular region/country and failure to realise anticipated benefits from acquisitions.
The risks associated with Brexit, and more recently, Covid-19, continue to be addressed as part of the ongoing strategic plans.
In the UK, the ERP system upgrade is progressing with a full business simulation phase plan in progress to demonstrate readiness before migrating to the new system.
Given the strength of Exertis' 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 this risk.
Exertis' market leading position in geographic and product areas is strengthened by ongoing acquisition activity and helps to mitigate margin erosion in what is a competitive environment. Acquisition activity remains a key driver of growth for Exertis. 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.
At Exertis, our technology services are quickly becoming a key enabler in creating new sources of recurring revenues.
Exertis is committed to minimising the impact of our business operations on the environment. As a global technology distributor, we produce zero industrial waste and our energy consumption is low. Nevertheless, where we do have an environmental impact, our policy ensures that we are continually monitoring and reducing carbon emissions, transportation, energy consumption, and complying with regulations for the disposal of waste.
Our MTR business partners with retailers, mobile handset manufacturers and insurance companies to provide a second-life to used and unwanted phones, reducing the number of technology units that may otherwise end up in landfills around the UK.
Strategic Report Governance Financial Statements Supplementary Info
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DCC Healthcare is a leading healthcare business, providing products and services to healthcare providers and health & beauty brand owners.
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DCC plc Annual Report and Accounts 2020
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The reported growth in revenue and operating profit in DCC Healthcare was impacted by the disposal of its UK generic pharmaceutical activities and related manufacturing facility in ,UHODQG.HQW3KDUPDDQG\$WKORQH/DERUDWRULHV in September 2019. Accordingly, the analysis and commentary below relate to the activities of DCC Healthcare which continue to be part of the Group.
DCC Healthcare made considerable strategic progress during the year in generating very good profit growth, significantly expanding its presence in the US nutrition market with two substantial acquisitions and strengthening its position in the primary and secondary healthcare sectors in Britain with a number of small bolt-on acquisitions. In addition, DCC Healthcare sharpened its strategic focus in disposing of its activities in the highly competitive generic pharmaceutical sector in Britain in September 2019. DCC Healthcare's profit growth of 8.6% reflects the benefit of acquisitions and good organic profit growth, with the ROCE for the year reflecting the timing of the acquisition of Amerilab in March 2020.
DCC Vital generated strong organic profit growth and benefited from small bolt-on acquisitions completed during the first half of the year. In Britain, the business performed robustly against a market background which was impacted for much of the year by Brexit-related stock movements and funding constraints. In Ireland, the business generated good growth in the pharma sector, particularly in sales of blood plasma products and exempt
| Revenue | +0.3% | |
|---|---|---|
Drive for enhanced operational performance
| 2020 | £578.1m |
|---|---|
| 2019 | £576.4m |
| 2018 | £514.6m |
Deliver superior shareholder returns
Performance for the Year How we create value medicinal products. Following the disposal of Kent Pharma, DCC Vital streamlined its operations, increasing efficiency and reducing costs during the second half of the year. In March 2020, DCC Vital responded quickly and effectively to meet urgent Covid-19 demand from the healthcare systems in Britain and Ireland for PPE, ICU-related medical devices and other healthcare products. The business' ability to respond quickly demonstrated the dedication of its people and the robustness of its operations and supply chain.
DCC Health & Beauty Solutions grew its profits in the nutrition sector and significantly expanded its US presence. The two acquisitions completed during the year, Ion Labs in November 2019 and Amerilab Technologies in March 2020, have both added important new customer relationships and enhanced product format capability in the US market. DCC Health & Beauty Solutions has now made three acquisitions in the US nutrition market in just over two years and is making good progress in executing on its strategy to build a business of scale in the world's largest nutritional products market. In the European nutrition sector, growth was held back due to destocking by a small number of customers which impacted demand for soft gels. In the final weeks of the year, the nutritional order book strengthened significantly across all facilities in the UK and US, as customers benefited from increased consumer interest in preventative healthcare as a result of the Covid-19 pandemic. In the beauty sector, DCC Health & Beauty Solutions made good progress during the year in enhancing its customer mix, moving the weighting further towards premium products for leading international brands and exiting
Drive for enhanced operational performance
| 2020 | £60.5m | |
|---|---|---|
| 2019 | £60.3m | |
| 2018 | £54.3m | |
Generate cash flows to fund organic and acquisition growth and dividends
Strategic objective: Grow operating margin
| 2020 | 10.5% |
|---|---|
| 2019 | 10.5% |
| 2018 | 10.6% |
Deliver superior shareholder returns
certain mass-market product lines. This activity resulted in certain cost increases with the onboarding of more complex products, but, as anticipated, in the second half of the year these costs normalised following the implementation of increased automation. The business exited the year well positioned for growth.
With both the sharpened strategic focus of DCC Vital and increased geographic reach and product capability in DCC Health & Beauty Solutions, DCC Healthcare has excellent platforms to continue its long-term growth and development in existing and new markets.
DCC Vital is involved in the manufacturing, sales, marketing and distribution of medical products and pharmaceuticals in the British and Irish markets with a growing international business through a network of distributors. DCC Vital markets and sells a broad range of own and third-party products and has comprehensive market coverage in Britain and Ireland across hospitals, community and primary care providers. The products sold are typically single use in nature across a range of categories including critical care, diagnostics, wound care, electro surgical, GP supplies and speciality pharmaceuticals with its own brand portfolio focused mainly on surgical products, including laparoscopic, theatre consumables, ECG, wound care and urology products and on GP
supplies. In addition, DCC Vital has longstanding relationships with a range of leading international medical device companies and provides them with a tailored service through specialist and highly trained clinical sales teams. 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 SURGXFWVo(03Vp DQGKRVSLWDOVXSSOLHVJHQHUDOO\ in Ireland.
DCC Vital has the most comprehensive sales channel coverage in the Irish healthcare market 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 Ireland. The portfolio of medical devices and pharmaceuticals extends across both own brand and third-party brands. DCC Vital has approximately 100 highly trained customer-facing sales, marketing, engineering and customer support professionals who have strong relationships with senior management, clinicians and procurement professionals LQWKH,ULVKKHDOWKFDUHVHFWRU+6(DQGSULYDWH KRVSLWDOV PDMRUDQGUHJLRQDOSKDUPDF\ wholesale/retail groups and private healthcare providers. DCC Vital represents leading medical, surgical and diagnostics brands including BioRad, Diagnostica Stago, ICU Medical,
DCC Healthcare revenue by geography
IRELAND No.1
No. 1 supplier of devices and pharma to hospitals
Three facilities in Montana, Florida and Minnesota
No. 1 supplier to GPs and leading supplier to broader primary care market
No.1 in health and beauty contract manufacturing
Mölnlycke, Oxoid, Roche, Smiths Medical and Smith & Nephew. In addition, DCC Vital has a strong franchise in the supply of specialist pharmaceuticals. In the pharmaceutical sector, it represents manufacturers such as Bowmed, CSL Behring, Demo, Helsinn Birex, Martindale Pharma, Medac and Rosemount. In addition, DCC Vital has a leadership position in the specialist procurement and sale of exempt medicinal products in Ireland, through its Medisource business. EMPs are pharmaceutical products which are imported into a market with the authorisation of the relevant regulatory DXWKRULW\WKH+HDOWK3URGXFWV5HJXODWRU\ \$XWKRULW\LQ,UHODQG LQRUGHUWRPHHW requirements of specific patients where no suitable licensed product is available in that market. The products are typically licensed in another jurisdiction. Medisource's leadership position in Ireland is based on its excellent customer service and strong network of international suppliers.
DCC Vital is also the market leader in the supply of medical consumables, equipment and services to GPs in Britain and has a growing presence in other fragmented healthcare settings. DCC Vital services a customer base of some 9,000 GP surgeries in Britain, through an omni channel approach encompassing e-commerce and physical product catalogues in tandem with a highly effective telesales customer contact centre based in Wales, and supported by a team of field based engineers and key account managers. Over the last number of years, DCC Vital has further strengthened its positions as the leading supplier of products to GPs in Britain through a number of complementary bolt-on acquisitions including e-Medical Supplies, OnCall Medical and Surgery Express. These acquisitions have expanded the customer base and allowed DCC Vital to enhance its product offering. In October 2019, DCC Vital further strengthened its position in the primary care sector by extending its product offering and reach into the 'blue light' and emergency services sector through the acquisition of SP Services. SP Services is a leading British supplier of emergency, medical, first aid, paramedic, rescue and occupational health equipment and its product portfolio ranges from first aid kits and defibrillators to crisis response kits and ambulance equipment.
DCC Vital is focused on driving growth in the sales of its range of own brand products, though its own sales force in Britain and a range of international distributors in other geographies. Over recent years, DCC Vital has been investing in product development and value-added sourcing to strengthen its portfolio of own branded products and related services, which in the last financial year accounted for approximately 40% of DCC Vital's aggregate
gross profit. In addition to the investment in new product development, DCC Vital has further strengthened its portfolio through complementary product-based acquisitions, including VacSax, in the year under review. These acquisitions have strengthened the portfolio through the addition of complementary products and added further capability in new product development. VacSax manufacture and supply a range of disposable suction devices used in operating theatres and hospital wards. The VacSax range is highly complementary to DCC Vital's existing endoscopy/operating theatre product range, ZKLFKLQFOXGHV(VSLQHUWLVVXHUHWULHYDOEDJV IRUPLQLPDOO\LQYDVLYHVXUJHU\ 6NLQWDFW HOHFWURGHVDQGHOHFWURVXUJLFDOHTXLSPHQW IV sets and a range of equipment used to support anaesthetics. DCC Vital is also progressing with US FDA approvals in order to expand the range of Espiner products available for sale in the US market.
DCC Vital principally operates in sectors of the healthcare market that are government funded. Fiscal budgets in Britain and Ireland have been FRQVWUDLQHGIRUPDQ\HDUVDVLVWKHFDVHLQ WKHPDMRULW\RIGHYHORSHGHFRQRPLHV DVWKH burden of care, particularly to support ageing populations, continues to grow. Healthcare providers are constantly seeking cost-effective solutions from their commercial partners. Public healthcare policy makers have actively sought to shift 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 and framework agreements. They are switching to equivalent quality, lower cost medical devices as well as outsourcing activities deemed to be non-core. DCC Vital is very well placed to benefit from these trends given the scale and positioning of its portfolio and the depth of its relationships with international suppliers and manufacturers.
Competitors in this market sector include global healthcare companies as well as the large number of smaller medical, surgical and pharma brand owners and distributors in Britain and Ireland.
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DCC Health & Beauty Solutions is a leading outsourced contract manufacturing service provider to the health and beauty sector in Europe and North America. 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 YLWDPLQVDQGKHDOWKVXSSOHPHQWV DQGEHDXW\ SURGXFWVVNLQFDUHKDLUFDUHEDWKDQGERG\ ,WV comprehensive service offering encompasses product development, formulation, stability and other testing and regulatory compliance, as well as manufacturing and packing.
DCC Health & Beauty Solutions has capability across a wide variety of product formats WDEOHWVHIIHUYHVFHQWVVRIWJHOVJXPPLHV liquid capsules, capsules, powders, creams, OLTXLGVVSUD\VDQGJHOV DQGSDFNDJLQJIRUPDWV SRWVEOLVWHUVVWLFNSDFNVPXOWLSDFNVVDFKHWV ERWWOHVWXEHVDQGSXPSV 7KHEXVLQHVV operates five Good Manufacturing Practice o*03p FHUWLILHGIDFLOLWLHVLQ%ULWDLQIRXURIZKLFK are licensed by the Medicines and Healthcare SURGXFWV5HJXODWRU\$JHQF\o0+5\$p DQG WKUHHIDFLOLWLHVLQWKH860LVVRXODLQ0RQWDQD /DUJRLQ)ORULGDDQG0LQQHDSROLVLQ0LQQHVRWD The US facilities comply with FDA current *RRG0DQXIDFWXULQJ3UDFWLFHVoF*03p standards and are also certified by leading third-party regulatory bodies including NSF and USDA Organic.
The US continues to be a key strategic development focus for DCC Health & Beauty Solutions over the last three years. The US is the world's largest dietary supplements market and has enjoyed consistently strong growth for many years with continued growth forecast. The market is significantly larger than the European market and has a greater level of fragmentation within the contract manufacturing base; both of these characteristics are attractive to a growth focused, acquisitive business like DCC Health & Beauty Solutions. We believe that the US market continues to offer DCC Health & Beauty Solutions significant opportunities for growth both through acquisition and organic growth. DCC entered the US market through the acquisition of Elite One Source Nutritional 6HUYLFHV,QFo(OLWHp LQHDUO\'XULQJWKH year, DCC Health & Beauty Solution further strengthened its position in the US contract manufacturing market through two acquisitions.
In November 2019, DCC Health & Beauty 6ROXWLRQVDFTXLUHG,RQ/DEV,QFo,RQp EDVHG in Florida. Ion has a broad product format capability encompassing tablets, capsules, powders and liquids across a variety of product categories including herbal and botanical products, probiotics and liquid nutritionals. Ion is developing capability in nutritional gummies, a fast growing category. Ion's customer base largely consists of specialty brand owners and its service offering includes product development, formulation, manufacturing, packaging and regulatory services.
In March 2020, DCC Health & Beauty Solutions DFTXLUHG\$PHULODE7HFKQRORJLHV,QFo\$PHULODEp based in Plymouth, Minnesota. Amerilab is a specialist manufacturer of effervescent nutritional products in powder and tablet formats, which are packed in stickpacks, sachets and tubes. Amerilab's customer base consists of high-quality consumer healthcare companies, specialty brand owners and direct sales organisations. Effervescents are a higher growth product segment within the US nutritional market, with attractive demographic characteristics and environmental credentials. Amerilab's complementary effervescent capability will create opportunities for crossselling and other synergies within DCC Health & Beauty Solutions.
DCC continually invests in its manufacturing facilities to expand capacity, add flexibility and enhance its service offering to customers. In addition to a strong programme of capital investment to enhance capability and improve operational efficiencies across all our facilities, DCC has made significant progress in the project to almost double its soft gel encapsulation capacity at its facility in south Wales. This investment will provide capacity to support organic growth such as leveraging developments in new soft gel encapsulation technologies
including organic vegetarian soft gels, cosmetic twist off soft gels and Algigel capsules, which offers an alternative to enteric coating.
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 products. The business has strong market shares in Britain, Scandinavia and Benelux and is building market VKDUHLQ&RQWLQHQWDO(XURSHHVSHFLDOO\LQ *HUPDQ)UDQFHDQG3RODQG DQGQRZLQWKH86
Our competitors in nutrition include Aenova, \$\DQGDSDUWRI6LULR*URXS &DWDOHQW,9&DQG numerous US operators in a very fragmented market and LF Beauty and numerous smaller manufacturers in cosmetic creams and liquids in Britain.
DCC Healthcare's vision is to build a substantial international healthcare business focused on the sales, marketing and distribution of medical products 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 in excess of the DCC Group's cost of capital.
DCC Vital has a good track record of growth, operating margin improvement and increasing returns on capital employed. This has been achieved through the streamlining of its DFWLYLWLHVLPSURYLQJVDOHVPL[LQFUHDVLQJWKH proportion of higher value-added products and FRPSDQ\RZQHGEUDQGV H[LWLQJORZHUPDUJLQ activities, consolidating back office activities and relentlessly driving efficiency in its operations. 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.
Targeted acquisition activity coupled with strong valuation discipline and integration execution has resulted in:
• a leading position in the supply of healthcare products in Ireland;
DCC Vital aims to continue this track record of growth through:
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 has an excellent track record of growth through a combination of organic and acquisitive growth. The scale of the business has increased significantly over the last number of years with operating profits growing strongly through product development for existing customers, new customer acquisitions and a focus on higher value, more complex products.
DCC Health & Beauty Solutions aims to continue this track record of growth through:
By the middle of February 2020, the Covid-19 pandemic had begun to spread across Europe and DCC Vital responded quickly to meet demand from the KHDOWKFDUHV\VWHPVLQ%ULWDLQDQG,UHODQGIRUSHUVRQDOSURWHFWLYHHTXLSPHQWo33(p ,QWHQVLYH&DUH8QLWo,&8p UHODWHGPHGLFDOGHYLFHVDQGRWKHUKHDOWKFDUHSURGXFWV
'&&9LWDODOHDGLQJVXSSOLHURIKHDOWKFDUH SURGXFWVWRWKHKRVSLWDOFRPPXQLW\DQG SULPDU\FDUHVHFWRUVLQ%ULWDLQDQG,UHODQG H[SHULHQFHGDVLJQLILFDQWLQFUHDVHLQFXVWRPHU GHPDQGDULVLQJIURPWKH&RYLGFULVLV 7KHEXVLQHVVpDELOLW\WRUHVSRQGTXLFNO\WR this surge in demand demonstrated the GHGLFDWLRQRILWVSHRSOHDQGWKHUREXVWQHVV of its operations and supply chain. Its SURFXUHPHQWDQGORJLVWLFVWHDPVZRUNHG ZLWKVXSSO\SDUWQHUVWRHQVXUHWKDW'&&9LWDO could supply the PPE and other healthcare products that have played an essential role in the fight to slow the spread of the virus.
'&&9LWDOpVORQJWHUPVWUDWHJLFUHODWLRQVKLSV with its suppliers mitigated the impact the pandemic had on its supply chain. The increased demand worldwide put enormous pressure on all healthcare manufacturers and ZKHUH'&&9LWDOZDVXQDEOHWRPHHWGHPDQG WKURXJKH[LVWLQJVXSSOLHUVLWVVRXUFLQJWHDPV ZRUNHGTXLFNO\WRLGHQWLI\TXDOLI\DQGHQJDJH ZLWKDOWHUQDWLYHVXSSOLHUV,QWKDWUHJDUGWKH support of colleagues from DCC Technology's &KLQDEDVHGVRXUFLQJWHDPZDVFULWLFDOWR ensuring new suppliers were vetted promptly IRUUHTXLUHGUHJXODWRU\TXDOLW\DQGVXSSO\ chain integrity standards.
\$VDGHVLJQDWHGoHVVHQWLDOEXVLQHVVpLQERWK WKH8.DQG,UHODQGDQGZLWKWKHGHGLFDWLRQ RI'&&9LWDOpVVWDIIDOOORFDWLRQVUHPDLQHG RSHUDWLRQDO&XVWRPHUVHUYLFHILHOGEDVHG VDOHVHQJLQHHULQJDQGORJLVWLFVWHDPV continued to ensure that orders were processed and life-saving equipment was GHOLYHUHGLQVWDOOHGDQGDQ\QHFHVVDU\ end-user training completed. Every part of WKHEXVLQHVVZRUNHGWRPHHWWKHLQFUHDVLQJ GHPDQGVRIWKHPDUNHWDVWKHFULVLVJUHZ Williams Medical Supplies was appointed E\WKH8.JRYHUQPHQWWRDVVLVWLQWKH GLVWULEXWLRQRILWVFHQWUDOO\KHOGSDQGHPLF VWRFNZKLOVWDOVRPHHWLQJGUDPDWLFDOO\ increased demand for its products from GPs DQGRWKHUSULPDU\FDUHVHWWLQJV7KHEXVLQHVV provided PPE to the NHS Nightingale Hospital LQ/RQGRQtWKLVRUGHUZDVSURFHVVHGSLFNHG SDFNHGDQGGHOLYHUHGWRWKHKRVSLWDOZLWKLQ KRXUV
'&&9LWDOpVWZRPRVWUHFHQWEROWRQ DFTXLVLWLRQVERWKFRPSOHWHGLQ6HSWHPEHU KDYHDOVRSOD\HGDNH\UROHLQWKH%ULWLVK PDUNHW636HUYLFHVZDVDNH\VXSSOLHURIIDFH PDVNVDQGJORYHVWRWKHHPHUJHQF\VHUYLFHV ZKLOH9DF6D[SOD\HGDVLJQLILFDQWUROHLQWKH installation of critical medical suction
equipment across all of the NHS Nightingale KRVSLWDOV,Q,UHODQG)DQQLQWKHPDUNHWOHDGHU LQKRVSLWDOVXSSOLHVZDVDNH\SURYLGHURI 33(DQG,&8HTXLSPHQWWRKRVSLWDOVZKLOH Medisource sourced and supplied hospitals and pharmacies with alternative unlicensed SKDUPDFHXWLFDOVZKHUHWKHOLFHQVHGSURGXFWV were in short supply.
'&&9LWDOpVORQJHVWDEOLVKHGFXOWXUHRIJRLQJ WKHH[WUDPLOHWRHQVXUHSDWLHQWQHHGVDUHPHW KDVEHHQYHU\PXFKLQHYLGHQFHWKURXJKWKLV H[WUDRUGLQDU\FULVLV7KHFULVLVSXWLPPHQVH SUHVVXUHRQVRPHSDUWVRIWKHEXVLQHVVZLWK customer interaction and order volumes increasing dramatically overnight. Team PHPEHUVIURPDOOSDUWVRIWKHEXVLQHVV UHVSRQGHGE\YROXQWHHULQJWRKHOSRXWLQWKH warehouses thus ensuring that customer service levels were maintained despite the LQFUHDVHLQYROXPH'&&9LWDOLVSURXGWRKDYH played a critical role in supporting the Irish and British healthcare systems response to one of the greatest challenges they have ever had to face.
DCC Vital services in excess of 30,000 customers across all channels to market SXEOLFDQGSULYDWHKRVSLWDOVSURFXUHPHQW groups, community healthcare providers, GPs, retail pharmacies, emergency services including ambulance, police and fire services DQGRFFXSDWLRQDOKHDOWKFDUHVHWWLQJV LQ%ULWDLQ and Ireland as well as over 50 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.
DCC Health & Beauty Solutions principally focuses on providing services to a broad customer base of UK, Continental European, 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 VXFKDV(OHPLV(VWÂH/DXGHU(YH/RP1HVWOÂ Health Science, Nuun, Omega Pharma, P&G, PZ %HDXW\5HQ:LQGPLOO2UJDQLFVDQG9LWDELRWLFV GLUHFWVHOOLQJFRPSDQLHVVXFKDV\$UERQQH 2ULIODPH1DWXUHpV%HVWDQG+HDOWKVSDQ VSHFLDOLVWKHDOWKDQGEHDXW\UHWDLOHUVVXFKDV Apoteket, The Body Shop, Holland & Barrett and :DOJUHHQ%RRWV DQGFRQVXPHUKHDOWKFDUH SKDUPDFRPSDQLHVVXFKDV\$OOLDQFH3KDUPD \$VWHOODV3KDUPD*6.DQG6WDGD
DCC Healthcare has a broad customer base and its 10 largest customers account for approximately 25% of revenue in the year ended 31 March 2020.
DCC Vital represents leading medical, surgical and diagnostics device brands including BioRad, Carefusion, Diagnostica Stago, ICU Medical, Mölnlycke, Omron, Oxoid, Roche, Siemens, Smiths Medical and Smith & Nephew. In Ireland DCC Vital works with leading innovative and generic pharma companies such as CSL Berhring, Demo, Martindale Pharma and Rosemont.
DCC Health & Beauty Solutions sources from high-quality raw materials and ingredients suppliers across the globe in order to provide customers with high-quality, innovative and cost-effective solutions with an increasing focus on sourcing sustainably certified and ethically sourced raw materials.
DCC Healthcare's supplier portfolio is broadly based with the top 10 suppliers representing approximately 19% of cost of sales in the year ended 31 March 2020.
DCC Healthcare employs 2,588 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 provides ongoing training and development which 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. Our businesses are focused on building longer term leadership capability and actively participate in DCC's talent planning processes, as well as the Group's leadership development programmes including DCC's Graduate Programme, which supports the development of a high-potential and mobile talent pool at graduate level.
Safety is a key priority within DCC Healthcare. It is embedded into everything we do within our operations. Driving a culture of 'safety first' is a key objective for all of our businesses. There is ongoing employee engagement on safety within each business including regular safety conversations and reviews across each of the sites, a regular programme of safety DXGLWVERWKIRUPDODQGLQIRUPDO SURFHVVHV to identify and minimise risks and near miss UHSRUWLQJE\HPSOR\HHV6DIHW)UVWWKHEUDQG used across our businesses to support safety FRPPXQLFDWLRQ KDVFOHDUOHDGHUVKLSVXSSRUW from the top and buy-in across the businesses. 6DIHW\SHUIRUPDQFHERWKTXDOLWDWLYHDQG TXDQWLWDWLYH LVPRQLWRUHGLQPRQWKO\UHSRUWV Senior managers are actively involved in safety programmes including participating in regular management safety walk-arounds in their businesses.
During the year we rolled out a number of new initiatives aimed at improving employee well-being and supporting employee's mental health, including regular group discussions, providing confidential support services, employee engagement initiatives and continued involvement in tackling some of the problems associated with mental health issues.
*RYHUQPHQWVGLUHFWO\RULQGLUHFWO\ IXQGD significant element of healthcare spending of the markets in which DCC Vital operates. Our competitive product portfolio and growing range of own brand products is providing new growth opportunities and is mitigating the impact on the business of fiscal pressures on governments' healthcare budgets. We work 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 continued to invest 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 WKLUGSDUWLHVUHJXODWRU\ERGLHVFRQWUDFW PDQXIDFWXUHUVDQGRWKHUV
We continually invest in technical resources, quality systems, staff training and our 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 continues to be highly acquisitive and ensuring the smooth integration of these acquisitions is critical to the success of the division. This will be achieved through close monitoring of the acquired businesses and ongoing management development.
In addition, 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. 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 actively monitored the risks associated with Brexit, and more recently, Covid-19 and their potential impact on its various businesses and will continue to implement appropriate plans and changes as required.
DCC Healthcare is focused on improving the environmental sustainability of its businesses and its range of products and services. Our Health & Beauty Solutions' customers remain very focused on 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, sustainable sourcing, sustainable packaging and reduced waste to landfill. DCC Healthcare has continued to build on its progress in recent years with the further roll out of energy management initiatives across our contract manufacturing sites, including the introduction of high efficiency compressors, installation of new
high efficiency driers which reduce the amount of air used, high efficiency steam boilers and installation of LED lights in offices and facilities.
We believe that our soft gel manufacturing facility is now one of the most environmentally friendly soft gel producers in the world following a number of investments over the last few years that have reduced our carbon footprint and delivered on-site electricity generation. Throughout the expansion project at the soft gel facility, we have focused on ensuring that it is as energy efficient as possible including selecting the most appropriate building fabrics, 100% LED lighting, high efficiency chiller units WKHXQLWVVXSSO\WKHQHZIDFLOLW\ZLWKWKH
required cooling capacity at a lower like-for-like SRZHUFRQVXPSWLRQ DQGWKHDGGLWLRQRIVRODU panels on the roof.
DCC Health & Beauty Solutions continues to enhance its procurement capability of sustainable ingredients and we continue to work with the Roundtable for Sustainable Palm Oil, the Marine Stewardship Council, the Soil Association and Friends of the Sea to ensure the use of sustainable raw materials in our processes. In addition, we have worked with cardboard suppliers to source their raw materials from sustainable sources and utilise recycled material where possible.
DCC is committed to creating sustainable value. We will only be able to deliver on our long-term strategic goals and meet the expectations of our stakeholders if we operate our business sustainably. We will continue to evolve our business model and practices in line with societal expectations and best practice in sustainability.
DCC operates across four divisions, each focused on different business sectors over multiple geographies. In our devolved business model, it is important that we concentrate our core sustainability effort on those aspects most material to the Group as a whole, supplemented by additional elements that are material to individual divisions and businesses.
We have structured this report to align with the requirements of the EU Non-Financial Reporting Directive and also to take account of developing best practice in sustainability frameworks. This has led us to focus on issues that are material at a Group level, being: safety, people, environment, respect for human rights, preventing bribery and community involvement.
In the period under review we carried out a detailed assessment of the current range of sustainability reporting frameworks, using external expert advice. This year's report has been informed by current good practice in sustainability reporting, including GRI and 7&)'7DVN)RUFHRQ&OLPDWH5HODWHG )LQDQFLDO'LVFORVXUHV IUDPHZRUNV:HZLOO continue to closely monitor legal and policy developments in this area and will adjust our reporting accordingly.
We have also reviewed the governance of sustainability within DCC. The sustainability agenda is set by the Board and by senior Group management. There is now a cross functional Sustainability Working Group in place, chaired by the Head of Group Sustainability with representatives from all relevant Group functions as well as divisional representation and its brief is to drive all aspects of the sustainability agenda and to provide regular updates to the Group Management Team and the Board.
The Annual Report this year also reflects the priority we are giving to energy transition, i.e. the need to move to a decarbonised energy system. We summarise on page 76 our approach to this issue.
Other sections of the Annual Report are also relevant to sustainability in DCC, including the operating reviews.
Safety is a core value of DCC. We believe that a successful approach to safety must be grounded in a widespread and empowering culture of openness that is built on trust and encourages every DCC employee and contractor to identify and raise concerns, whether it is about safety or any other aspect of operating responsibly.
The Group Health & Safety Policy, which is available on our website, sets out clear expectations in key areas including leadership, risk management, asset integrity, training and emergency preparedness. It aligns with HSE management system good practice, such as ISO standards. Group wide tools, such as our Safety F1rst programme, Learning from Events processes and performance metrics support the development of a positive and proactive safety culture across all our businesses.
Every business has in place a health & safety management system reflecting the specific risks from their operations. These are aligned with the high-level expectations set out in the DCC Group Health & Safety Policy. The Certas Energy, Exertis Supply Chain Services and Laleham businesses are certified to the OHSAS18001/ISO45001 standards. Our Group Health & Safety Policy expectations extend to contractor organisations working on our behalf or at our facilities, and specific standards are defined for activities in hazardous process areas.
As a result of the challenges presented by the Covid-19 pandemic in early 2020, our teams took steps to ensure our businesses were able to continue to meet our customers needs whilst maintaining a robust position on health & safety. Following risk assessment, this included changes to ways of working, enhanced infection prevention measures, and revalidation of process safety arrangements.
Cross-Group collaboration and communication on key safety issues is supported by five Working Groups, including Transport Safety and Process Safety, which focus on specific areas of significance for our operations. Membership of these working groups is drawn from all four divisions and includes input from operational, logistics and HR functions, as well as health & safety professionals. The Health and Well-being sub-group of the Occupational Health and Safety Working Group is a good example of cross-functional collaboration that is driving the development of a focal point for resources to support mental health and employee well-being. Sharing good practice, learning from events and setting Group standards are key objectives for the working groups.
7KH/HDUQLQJIURP(YHQWVo/)(p RSHUDWLQJ principle took a step forward in April 2019 with the launch of a formal Group-wide LFE reporting process and e-tool. This aims to capture the key learning points from incidents and significant near misses in a consistent way, identify relevant actions and communicate them across the Group businesses, with any identified actions being tracked to closure. To date, 20 LFEs have been shared, with average time to closure now at four weeks.
In addition to business-led audit programmes, health & safety audits are conducted at each business by the Group HSE function using the International Sustainability Rating System ,656 DXGLWSURWRFROXQGHUOLFHQFHIURP DNV-GL, a leading global provider of risk management and quality assurance services. Audits provide oversight and assurance of local businesses' policies and procedures and drive continuous improvement by identifying opportunities to strengthen existing practices. Further independent assurance is provided by the numerous external regulatory inspections of our sites and our management systems.
Process safety management is a disciplined framework for managing the integrity of hazardous operating systems and processes by applying good design principles, engineering and operating practices. It deals with the prevention and control of incidents that have the potential to release hazardous materials or energy, such as those related to unloading, storage, transfer and loading. For the LPG and Retail & Oil divisions, these scenarios include fire or explosion during the movement of fuel, fire within fuel vapour recovery systems, loss of containment leading to the formation of a vapour cloud, or a hydrocarbon spill.
A dedicated DCC Process Safety Working Group develops internal standards and shares good practice and tools to continuously improve process safety management performance. During the year, the Working Group has completed consequence analyses RINH\SURFHVVKD]DUGVDOVRNQRZQDVoERZWLHp DQDO\VLV DVVRFLDWHGZLWKWDQNHUORDGLQJ activities, undertaken barrier reviews to generate common minimum standards and identify best practices, and created 'model' or 'parent' bowties for use by the LPG and Retail & Oil divisions. This work has also been reviewed externally and benchmarked against the approaches taken by the Energy Institute and the Centre for Chemical Process Safety.
Process safety risks are managed through detailed risk analysis, asset management, high reliability engineering controls and employee awareness training. The DCC Standard for the management of contractors in process areas, also a product of the Working Group, has been implemented during the year, and there will be a focus on standardising and enhancing our Permit to Work approach and process safety training programmes in the forthcoming year.
Our LFE process is a key tool for sharing knowledge and driving improvement in process safety management across the DCC Group, and in the year, 10 of the LFE reports had a process safety component associated with them. Approximately half involved loss of FRQWDLQPHQWLQFOXGLQJWKRVHDWFXVWRPHU ORFDWLRQVLGHQWLILHGE\RXUHPSOR\HHV WZR were related to contractors working at remote sites on our behalf, and another two were associated with emergency response arrangements at our facilities. As a result, our businesses have taken action in the areas of maintenance, emergency planning, contractor management, process hazard analysis, management of change and human performance factors.
Leading process safety performance metrics, such as on-time maintenance completion, reliability information, process alarm activations and safety inspections are used to monitor trends and take early action as necessary.
In the year, these trends indicate a stable or improving picture across all metrics. DCC is building up more detailed data on a wider set of process safety metrics and intends to report on them more fully in the coming years.
Senior management receive regular external training on process safety leadership to ensure understanding of the risks, controls and monitoring systems in place.
All incidents, including personal injuries, product spills and road traffic accidents, are systematically recorded and assessed to identify control weaknesses and learnings. Both qualitative and quantitative HSE information is included in reporting processes at all levels of the organisation, including to the Board. Our objective is to continually improve our performance towards a goal of zero harm to people or the environment.
Number of calendar days lost per 200,000 hours worked
Number of lost time injuries per 200,000 hours worked
We continue to monitor all Lost Time Injuries o/7,Vp DFFLGHQWVDQGXQVDIHFRQGLWLRQV and our emphasis remains on identification of underlying causal factors and sharing of broader learnings across the Group.
LTIs, defined as an accident resulting in at least one day lost after the date of the accident, remain an important lagging indicator for overall HSE performance. However, the reporting and analysis of near misses, 'good saves' and employee concerns provide us with the opportunity to take improvement action before an accident occurs. In addition, the systematic evaluation of potential consequences allows us to further strengthen our systems and processes.
During the year, the LTI frequency rate continued a long-term downward trend, against a background of continued growth. The LTI severity rate has again decreased slightly – a reflection on the short-term nature of many injuries. The majority of LTIs are relatively minor including slips, trips and manual handling related, with injured parties returning to work after a very short period of recovery. Support is provided to injured parties to facilitate recovery.
Total number of LTIs across the Group Number of lost time injuries per 200,000 hours worked
Our Austrian business has enhanced its asset management system through the use of advanced software, photo upload capability and the ability to generate, and subsequently scan, QR codes for safety critical assets, thus providing a high level of process control and assurance that equipment is being maintained to schedule.
This is especially powerful at our unmanned retail sites. This same software system is EHLQJH[WHQGHGWRPDQDJHWUDLQLQJIRURXU HPSOR\HHVDQGZLOODOVREHXVHGWRGHOLYHU content to complement the practical handson process safety training already received.
Assurance is also provided through a FURVVVLWHDXGLWLQJSURFHVVZKHUHE\DVVHWV and processes in one region are assessed E\SHUVRQQHOIURPDQRWKHU,QDGGLWLRQ to ensuring our high standards are PDLQWDLQHGWKLVSURYLGHVDQRSSRUWXQLW\ for organisational learning and people development.
All businesses are required to manage their activities to support long-term environmental sustainability. Protecting the environment is integral to our success, and we are committed to continually improving our environmental performance through careful management of our operations.
All DCC businesses are covered by the Group Environment Policy. DCC businesses minimise the environmental impact of their operations with appropriate business specific systems and processes and ensure compliance with regulatory requirements. Local management systems are certified to ISO 14001 standard where appropriate.
We recognise climate change as a global challenge with significant social and economic implications. Energy transition is one of the major opportunities for the world to tackle climate change. We are cognisant of our role in energy transition, both in reducing the carbon intensity of our operations and supporting our customers in providing lower carbon and non-carbon solutions in our LPG and Retail & Oil divisions.
Climate change risks, both physical and transitional, are assessed as part of the internal risk management process to identify and manage both threats and opportunities over the medium to long term.
DCC makes an annual response to the CDP climate questionnaire, which is now aligned with the framework for the Financial Stability Board's Task Force on Climate Related 'LVFORVXUHVo7&)'p \$VFOLPDWHFKDQJHLVVXHV have become of greater interest to a range of stakeholders and as it is becoming clear that the TCFD methodology is predominant, we will increasingly align with TCFD methodology.
DCC LPG and DCC Retail & Oil primarily sell energy-related products to end consumers, so bridging the gap between energy producers and millions of customers. As a result, DCC can play an active role in energy transition, assisting customers to transition over time from carbon based fuels to alternative, cleaner sources of energy as they become available. In the short term this means helping to support cleaner carbon-based fuels and energy efficiency measures.
The implications of energy transition are assessed by Group divisional and subsidiary management, with support from the Group Strategy function, and are considered as part of the risk and opportunity assessment processes carried out by the Group. Energy transition risks and opportunities are acted on by individual businesses as they arise and are presented regularly to the Board. Energy transition matters are therefore embedded within DCC's operating and strategic processes.
There are many examples of our businesses already selling sustainably produced fuels. Our Scandinavian businesses sell fully UHQHZDEOH+92+\GURJHQDWHG9HJHWDEOH2LO as a replacement for heating oil. In LPG, we are this year taking a first delivery of bio propane into the UK after a successful launch in France last year. We are also assessing the viability of electric charging units on many of our forecourts across Europe after initial pilots in Norway. Whilst as a proportion of energy sold today these examples are modest, they do demonstrate that DCC is well positioned to be an active agent in the move to renewably sourced energy.
In addition, we are active in helping to assess and to increase awareness of the opportunities that exist to develop sustainable sources of energy further. We participate in industry and trade association initiatives to promote the options for renewable fuels, both at a European level and in individual countries, which are highlighting the role decarbonised liquid fuels can play in a future energy mix. We are also working to commercialise new production methods for renewable fuels by partnering with producers to bring such fuels to market.
Absolute Energy Used in 000's Gigajoules
| 2020 | 1,420 |
|---|---|
| 2019 | 1,422 |
| 2018 | 1,352 |
| 2017 | 1,687 |
| 2016 | 1,680 |
DCC used 1.4 million gigajoules of energy during the year, in line with the prior year. Three-quarters of this energy is used by our LPG and Retail & Oil divisions in making deliveries to customers using our transport fleet and the split by source is shown to the right. Our transport fleet efficiency is a key part of our energy saving initiatives, looking for savings through more efficient driving, more efficient vehicles and more efficient routing. As an example, our UK and Ireland businesses made 'Energy Savings Opportunity Scheme' submissions in 2019 detailing the size and nature of the energy savings opportunities and the actions required to achieve them.
All DCC businesses record their usage of HQHUJ\WUDQVSRUWIXHOVKHDWLQJIXHOVDQG HOHFWULFLW\ 7KLVGDWDLVWKHQFRQYHUWHGLQWR JUHHQKRXVHJDVo*+*p HPLVVLRQVE\&'3 accredited software.
The data collated is subject to a limited assurance audit, conducted by EY, whose assurance opinion is set out on page 231.
2YHUDOOWKHUHZDVDVOLJKWGHFUHDVH in carbon emissions in absolute terms, as shown in the chart overleaf. This was achieved by increasing operational efficiency in distribution and manufacturing, in addition to the continuing decarbonisation of national electricity grids, particularly in Ireland and the UK.
)ORJDV6YHULJH\$%o)ORJDVp LVWKHPDUNHW leading LPG supplier in Sweden and Norway supplying 260,000 tonnes of LPG per year mainly for heating and industrial process use.
)ORJDVKDVZRUNHGWRGHYHORSDUDQJHRI UHQHZDEOHHQHUJ\RSWLRQVDOOZLWKSURYHQ VXVWDLQDELOLW\FUHGHQWLDOVZKLFKHQDEOHV WKHEXVLQHVVWRKHOSQHZDQGH[LVWLQJ customers in cutting their CO2 emissions. 7KDWZRUNKDVDOVRVHHQWKHFRPSDQ\ GHOLYHUWULDOTXDQWLWLHVRIDELREDVHG/3* UHSODFHPHQWNQRZDVELR'0()ORJDV FRQWLQXRXVO\VHHNVWRH[SDQGLWVDELOLW\ WRVXSSO\VXVWDLQDEOHHQHUJ\VROXWLRQV for industrial and heating purposes.
)ORJDVKDVZRUNHGLQSDUWQHUVKLSRQUHQHZDEOH fuels with one of its long-standing industrial FXVWRPHUV6DLQW*REDLQ6ZHGHQ\$%ZLWK whom it had already converted two sites in Sweden from oil to LPG for the provision of heat IRUXVHLQLQGXVWULDOSURFHVVLQJ:KHQORRNLQJDW the option to upgrade the heating requirements DWDWKLUGVLWH)ORJDVZDVDEOHWRZRUNZLWKWKH
FXVWRPHUWRRIIHUDVXVWDLQDEOHHQHUJ\ solution. Flogas assisted in providing the FXVWRPHUZLWKWKHQHFHVVDU\ERLOHUEXUQHU DQGWDQNPRGLILFDWLRQVZKLFKIDFLOLWDWHG this change in energy source. The first EXUQHUZDVFRQYHUWHGLQODWHDQG a second in early 2020.
Absolute CO2 e Emissions (000's tonnes) by Scope
DCC measures its carbon intensity by using Group revenue figures as the common denominator between all of the divisions. In 2020 there was an increase in the carbon intensity measure, to 6.4 tonnes of CO2 per million pounds sterling of revenue, an increase from 6.2 tonnes in 2019. This was due to a decrease in headline revenue, itself a mix of volume and price changes across the divisions which outweighs the modest drop in absolute emissions, leading to an intensity increase.
We are currently reviewing the relative importance of absolute and intensity measures and the optimum method of intensity calculations.
During the year, compliance with the national legislation implementing the requirements of Article 8 of the EU Energy Efficiency Directive was achieved though energy efficiency audits and accreditation to the ISO50001 energy management standard. Findings from these audits are considered by company management and shared between businesses to ensure opportunities for further improvements in energy efficiency are identified and implemented.
DCC continues to respond to the annual CDP &OLPDWH&KDQJHTXHVWLRQQDLUHZZZFGSQHW providing investors and other stakeholders with publicly available details on our carbon emissions, energy consumption and management approach to climate risks and opportunities.
Scope 3 emissions are broadly defined as various indirect emissions made as a result of business activities but not directly generated by them. As two of our four divisions primarily sell energy to end consumers, our scope 3 emission profile is dominated by the 'use of product sold' category. We actively work with customers across the Group to help them reduce the carbon intensity of their energy use by educating on energy solutions, using technology to find efficiency and by providing customers with a choice of products, including alternative fuels, such as biofuels. Unlike scope 1 and 2 emissions, the scope 3 calculation is not formally audited, but it is calculated from the volume and mix of energy we sell. We are also working to provide more detail on scope 3 emissions beyond the 'use of products sold' category and intend to report these emissions in our 2020 CDP disclosure. As the world transitions to cleaner, more efficient energy consumption, we will continue to work with our customers to offer new technologies and new fuels and to drive progress towards a more sustainable energy future.
A spill is defined as any unplanned release to ground or the environment. All spills, and near misses, for which DCC is responsible are recorded regardless of quantity in order that we can learn the lessons from such events. Spills are categorised using a risk matrix, with low level spills classified as 'events' and any other more significant spills classified according to severity. The nature and materiality of a spill also varies across the four divisions, spills in the Healthcare or Technology divisions being different in nature to those in the two Energy divisions.
The data opposite is spill data from the two Energy divisions, which are the most material divisions from an environmental perspective. In the year ended March 2020, there were
Exertis UK is a leading supply chain partner for established and emerging technology brands across consumer, business and enterprise. Exertis is committed to minimising the impact of business operations on the environment, and sustainability is integral to the overall VWUDWHJ\WREXLOGDORQJWHUPSURƬWDEOHEXVLQHVV
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Analysis of the stretch wrap and pallet top sheets used revealed opportunities to UHGXFHWKHDPRXQWRIPDWHULDOXVHGE\ tDWRWDORIWRQQHVRISODVWLF material across the three sites – through innovative solutions that ensured load
containment and material performance was not FRPSURPLVHG7KLVHTXDWHVWRWRQQHVRI CO2 e emission reduction in the plastic material manufacturing process* – equivalent to the JUHHQKRXVHJDVHPLVVLRQVIURPPLOHV GULYHQE\DQDYHUDJHSDVVHQJHUYHKLFOH
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in total 948 spills of any significance, or 4.5 spills per 10,000 deliveries. Of those, 195 were categorised above the minimum reporting level, being 20.6% of total spills. All the spills metrics showed an improvement over the prior year, as illustrated in the charts below.
Any spills of significance are reported to the relevant environmental authorities and are cleared to their standards resulting in no long-term environmental impact.
| 20.6% | |
|---|---|
| 24.7% | |
| 35.9 | |
DCC's continued success is due to our people, who together support the achievement of the performance and growth plans of the Group.
As a result of the challenges presented by Covid-19, we have taken significant steps to ensure the health, safety and well-being of our people. One such step is the introduction of a knowledge sharing platform for our business network around employee communications, policies and practices as we work together to prioritise our people's well-being during this time. Our response to Covid-19 is covered more broadly in our Chairman and Chief Executive statements.
At 31 March 2020, we employed 13,232 people, which is a 5% increase since last year. We aim to attract and develop a workforce that is as diverse as our customers and communities, recognising that people are critical to sustaining competitive advantage and long-term success.
Our employee turnover rate over this financial year was 24.9% and the new joiners amounted to 30.1%. Both of these figures include our seasonal workforce, who support our businesses in peak periods of trading, many of whom return year after year to work for us. We work to limit the impacts of seasonality and provide assistance to employees and managers when it is necessary. Fair and flexible hiring and lay-off practices apply, particularly in our seasonal businesses. For major operational changes, appropriate notice periods and change management procedures are implemented.
We have been focused on further developing our talent management practices in a number of key areas over the past three years and are beginning to see the benefits of that investment.
We introduced a common succession planning process across our businesses in 2016. Each of our businesses actively engages in the annual process and we use a consistent talent scorecard to measure leadership bench strength.
We have well established management teams in our businesses, bringing a balance of knowledge and experience to their leadership. The purpose of the annual process is to ensure we continue to identify and develop talent to meet the future needs of our businesses and offer our people the opportunity to grow and progress their careers in the Group.
Over the period 2016 to 2019, the number of roles in scope for succession planning has increased by 70%. The growth in the management population over that period is largely attributable to our acquisitive growth over the same period. We strive to make talent visible and identify career paths for people within their own business and across the Group. As of today, c.78% of our management team positions have internally identified successors from within and/or across our businesses. Of those, all critical positions in our subsidiaries have succession coverage and we have worked hard over the past three years to create visibility of our internal talent options.
In 2018, we invested in a common talent management platform to help us identify internal talent and ensure talent management processes are embedded consistently across the Group. The platform currently supports the automation of succession planning and performance management processes across 13 geographies. As more of our businesses have recognised the value of the system, we have had an increase of 43% of users in the last 12-month period and at 31 March 2020, 35% of all employees have a presence on the platform.
Our people are driven to achieve and have an unwavering focus on results. We are open and transparent on performance and constantly measure our progress. Every member of our business management teams actively engages in our annual performance review process. In the year ended 31 March 2019, 95% of our business management population completed the annual performance cycle.
Our performance management process includes financial and personal objectives and, where relevant, embeds key metrics related to HSE and compliance. The core competencies required for leadership in DCC are also fully integrated into our performance management cycle.
To support and drive our high performance culture, we offer regular coaching skills based training to our business management teams at key points during the performance cycle.
We strive to foster a culture of continuous development for our employees, ensuring we have the talent and capabilities we need, now and in the future. We continue to develop our Executive Development programmes and during the financial year made a number of significant investments to evolve our leadership development offering, including:
• We successfully delivered a new professional development programme, in partnership with Ashridge Hult business school. That programme was designed to bring acute focus to individual development as well as deepening and broadening strategic
perspective to stimulate growth and innovation. It targets experienced leaders who are identified during our annual talent processes. See Strategy in Action, pages 46 and 47.
• We also launched a new Management Essentials programme, which can be delivered in multiple languages across our businesses to support ongoing professional development DWPDQDJHUOHYHOZKHUH(QJOLVKLVQRWWKHILUVW ODQJXDJHRIWKHEXVLQHVV
These programmes are attended by a range of talent from different parts of our business, ensuring there is a diverse, capable and expanding leadership pool across all levels and key geographies within the organisation, to help us deliver our business strategy into the future.
The DCC Graduate Programme is an integral part of the Group's Talent Development practices, designed to create a pipeline of high potential, internationally mobile, early career talent for the Group.
Thompson & Capper, part of DCC Health & Beauty Solutions, is a full-service partner for the nutritional and pharmaceutical industry who tailor-make vitamins, minerals, health supplements and speciality tablets.
%DVHGLQ5XQFRUQ&KHVKLUHWKHEXVLQHVV PDNHVDURXQGELOOLRQWDEOHWVDQGFDSVXOHV SHUDQQXPDQGHPSOR\VRYHUSHRSOH LQDYDULHW\RIRIILFHEDVHGORJLVWLFVDQG manufacturing roles.
Thompson & Capper have put in place a VHULHVRILQLWLDWLYHVDOODLPHGDWLPSURYLQJ employee awareness of health and ZHOOEHLQJLVVXHVDVZHOODVHQFRXUDJLQJ them to stay healthy. The company SURYLGHGEULHILQJVWRVWDIIRQDUDQJHRI health-related issues. A session on physical KHDOWKZDVIROORZHGE\DVHVVLRQ emphasising the role and importance of SK\VLFDODFWLYLW\DQGDVHVVLRQZDVDOVR dedicated to mental health awareness and coping strategies.
The company provides support to its HPSOR\HHVE\SURYLGLQJIUHHKHDOWKFKHFNVRQ VLWHWRDQ\RQHUHJDUGOHVVRIDJH,QDGGLWLRQ WKHFRPSDQ\LVWUDLQLQJDoKHDOWKFKDPSLRQp sponsoring training to Royal Society for 3XEOLF+HDOWK/HYHOLQo8QGHUVWDQGLQJ Health Improvement' in order to provide ongoing training and awareness support to all employees.
These initiatives will now form part of an ongoing programme for supporting Thompson & Capper employees across DUDQJHRIKHDOWKDQGZHOOEHLQJWRSLFV
q,QWKHILUVW\HDURIWKLVLQLWLDWLYHWKHXSWDNH KDVEHHQH[FHOOHQWDQGWKHIHHGEDFNIURP RXUSHRSOHKDVEHHQH[WUHPHO\SRVLWLYH \$VWLPHJRHVRQZHZLOOEHRIIHULQJPRUH sessions on more specific areas such as VPRNLQJFHVVDWLRQZHLJKWPDQDJHPHQW DQGH[HUFLVHEXWZHZLOOWDLORUWKHVHEDVHG RQWKHIHHGEDFNIURPRXUVWDIIr
Matthew Dyal, 0DQDJLQJ'LUHFWRU7KRPSVRQ &DSSHU DCC is a fast-paced environment, and graduates on our two-year programme are exposed to the 70-20-10 model for learning and development. Graduates get unrivalled on-the-job experience through placements in our international operations where they learn about the diversity of the markets in which we operate. The remaining development is through formal training focused on targeted learning modules and ongoing mentoring and coaching.
DCC encourages and supports talent development at all levels in the organisation. Each business within DCC has the autonomy to develop and roll out local development programmes with an emphasis on driving performance improvement at an individual business level.
To ensure we share knowledge and develop programmes for everyone in a way that leverages best practice, we have created a Leadership Development community which is a key enabler for sharing resources and developing talent more consistently across the Group.
With 13,232 colleagues across 20 countries, DCC is a multinational and multicultural organisation. We believe that to reap the benefits of our diverse and talented workforce we need inclusive work environments where all of our colleagues have the freedom to achieve their ambitions and a culture that cultivates the energy and passion our colleagues bring to work.
We refreshed our approach to inclusion and diversity this year with the launch of a new Policy, 'You Belong Here' which outlines the core principles and expectations we have for ourselves, our colleagues and our businesses to foster positive workplace environments. Our ambition is to be an organisation where everyone feels welcome, respected and valued; that they belong in DCC and have the same opportunity for success as anyone else.
Our Inclusion and Diversity strategy is enabled by focus on a number of key areas, including communication, education and awareness, people practices and measuring trends.
It is particularly pleasing that the percentage of female talent in our senior management population has increased to 22% from 17% in the prior year.
We actively support the 30% Club which consists of Chairs and CEOs committed to better gender balance at all levels of their organisations. A number of our colleagues participate in development programmes that we believe will be helpful in building a pipeline of future female leadership talent for DCC. These include the 30% Club Board Ready Programme and the Mentoring Foundations FTSE 100 cross-company mentoring programme for next generation women leaders. 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 to equality and human rights in the workplace.
DCC offers fair and competitive rates of pay to attract and retain our employee base while offering benefits in line with industry, local or national practice. 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 policies to ensure we reward employees fairly and comply with any minimum wage requirements. We believe in performancerelated rewards for our colleagues, dependent upon their contribution to the success of the business and the extent they demonstrate company values.
We welcome increased focus on transparency on pay practices. A number of countries in which we operate have mandatory reporting requirements in relation to remuneration practices with which we fully comply:
DCC is focused on ensuring that human rights are respected in every area of our own activities and in our supply chains.
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. The section of this report on Rewarding our Employees deals with our approach to standards of pay.
DCC has a Supply Chain Integrity Policy in place which sets out specific steps that businesses in the Group must take to assess the risk of human rights abuses, including forced or compulsory labour, taking place 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:
DCC has issued a statement under section 54 of the Modern Slavery Act 2015 covering the year ended 31 March 2020. A number of DCC Group businesses are subject to that reporting provision in their own right and have issued statements on their own websites. Those statements note where the activities of Group businesses or their suppliers present particular risks and the measures being taken to reduce those risks.
7KH2OLYHU.LQJ)RXQGDWLRQo2.)p ZDVVHWXSLQ-DQXDU\IROORZLQJWKHWUDJLFGHDWKRI 12-year-old Oliver King. Oliver died from Sudden Arrhythmic Death Syndrome, a hidden heart condition which kills 12 young people every week.
Oliver attended King David High School in Liverpool and suffered a cardiac arrest ZKLOVWWDNLQJSDUWLQDVZLPPLQJUDFH 7KHPLVVLRQRIWKH2.)LVWRVDYHOLYHVE\ PDNLQJGHILEULOODWRUVDFFHVVLEOHWKURXJKRXW the UK.
7KH2.)KDVSODFHGGHILEULOODWRUVLQ schools and organisations across the UK DQGKDVWUDLQHGVWDIILQGHILEULOODWRU awareness along the way. The OKF is aware RIOLYHVEHLQJVDYHGE\WKHGHILEULOODWRUV SODFHG7KH2.)LVDOVRZRUNLQJZLWK 3DUOLDPHQWDULDQVWRHQVXUHGHILEULOODWRUV
DUHPRUHZLGHO\DYDLODEOHDQGUHFHQWO\WKH8. Government issued guidance to all schools in England and Wales recommending they have DFFHVVWRDOLIHVDYLQJGHILEULOODWRUQDPLQJWKH 2.)DVDVWDNHKROGHULQWKDWGRFXPHQW
&HUWDV(QHUJ\8.KDVZRUNHGZLWKWKH2.) VLQFH&HUWDVLVDFRPPXQLW\EDVHG EXVLQHVVSURYLGLQJIXHOVIRUWUDQVSRUW KHDWLQJDQGRWKHUXVHVLQERWKGRPHVWLFDQG FRPPHUFLDODSSOLFDWLRQVWDNLQJWKRVHIXHOV directly into local communities and homes DQGERWKPLUURUVWKHUHDFKRIWKH2.)
as well as supporting its aims. Certas has FRQWULEXWHGWRWKHZRUNRIWKH2.)E\ SURYLGLQJDQDQQXDOGRQDWLRQE\HQVXULQJ GHILEULOODWRUVDUHDYDLODEOHLQLWVRZQRIILFHV E\SODFLQJGHILEULOODWRUVGLUHFWO\LQWRORFDO FRPPXQLWLHVDQGE\ZRUNLQJFORVHO\ZLWK ORFDOVFKRROVFRPPXQLW\FHQWUHVDQG service stations which give the community access to and training in the use of DGHILEULOODWRUVKRXOGWKH\QHHGLW
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:
Businesses in the Group report twice a year on their controls in this area, including on their primary risk – the use of representatives in countries where corruption is a significant problem – and on completion rates for online training among their employees. A report on these performance indicators is then provided to the Executive Risk Committee and Audit Committee. During the period under review, no Group business was involved in any public legal case regarding corruption.
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.
As an international Group we believe in the importance of 'making a contribution' and having a positive influence in the communities where we have businesses. At a Group level, we provide financial and other support to Social Entrepreneurs Ireland, which is involved in supporting high potential entrepreneurs in tackling social problems, and to Laura Lynn, Ireland's only children's hospice. Our operations span across thousands of communities around the world and due to the devolved nature of our business model, each business in the DCC Group have the autonomy at a local level to partner with bodies that they feel make the most impact in their community. Many of our efforts in the last financial year went into improving the health, education and safety of our many neighbours and the community engagement case study from Certas Energy UK, highlighting its support of the Oliver King Foundation, is one such example.
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Strategic Report Governance Financial Statements Supplementary Info
The Board of DCC remains committed to high standards of governance across the Group, in line with our core values of excellence and integrity.
On behalf of the Board, I am pleased to report full compliance with the 2018 version of the 8.&RUSRUDWH*RYHUQDQFH&RGHoWKH&RGHp which applied to DCC for the first time for the year ended 31 March 2020.
I have set out below some of the key governance activities undertaken during the year and our priorities for the year ahead.
In the prior year, the Nomination and Governance Committee, on behalf of the Board, had completed a detailed review of the impact on DCC of the updated principles and provisions as set out in the revised 2018 Code and had identified a number of enhancements to our governance processes. The focus during the current year has been on the full implementation of these enhancements.
During the year, the Remuneration Committee conducted a thorough review of the current Remuneration Policy to ensure it remains appropriate to support the business, is aligned with shareholders' interests and takes into account evolving best practice and regulatory developments. We have concluded that while the current Policy remains overall fit for purpose, we are proposing a number of minor changes to the Policy and are also seeking to clarify the wording in the Policy in respect of a number of matters.
Further details on these changes are set out in the Remuneration Report on page 109.
I remain focused on ensuring that we have the right balance of skills, knowledge and experience on the Board, taking account of our business model, the specific sectors in which the Group operates and developments in terms of scale, geographic expansion and external factors.
Caroline Dowling joined the Board on 13 May 2019 bringing experience in the technology
sector and Tufan Erginbilgic joined the Board on 6 April 2020 bringing expertise in the downstream global fuels, lubricants and petrochemicals businesses.
I am conscious of the fact that following Tufan's appointment, the percentage of female Directors on the Board is now 25%, which is below the level of over 30%, which we had attained for a number of years and which remains our firm objective.
Leslie Van de Walle will not be seeking re-election DWWKH\$QQXDO*HQHUDO0HHWLQJo\$*0p DQGZLOO retire from the Board as a non-executive Director, Senior Independent Director and Chairman of the Remuneration Committee on 17 July 2020. I would like to thank Leslie, who has contributed greatly to our Board and Committees over almost 10 years by bringing significant international business experience and insights to bear in his Board roles. We wish him every success in the future.
On 24 February 2020, we announced that Fergal O'Dwyer, who has been Chief Financial Officer since 1994, has decided to retire from the Group after 31 years of service. He will stand down from his executive position and from the Board at the conclusion of the AGM on 17 July 2020.
Fergal will be succeeded as Chief Financial Officer by Kevin Lucey, Head of Capital Markets, who will be appointed to the Board of DCC as an Executive Director, following the conclusion of the AGM. I want to sincerely acknowledge Fergal's outstanding track record in the financial leadership of the Group. His exceptional commitment and dedication over many years has contributed greatly to the successful growth and development of DCC.
Further details on the above Board changes are set out on page 101 of the Nomination and Governance Committee Report.
I have been a Director of the Company since February 2009 and Chairman since September 2014. Taking account of the provisions in respect of Board tenure in the Code, the
Nomination and Governance Committee, led in this case by the Senior Independent Director, is advancing a comprehensive Chairman succession process.
In 2020, the performance evaluation of the Board, its Committees and individual Directors was internally facilitated, having been externally facilitated in 2018 by Independent Audit.
I am pleased to report that the results of the 2020 evaluation process were positive and that a number of actions were agreed which will be implemented during the current year. These are designed to drive Board effectiveness as the Group continues to grow and develop.
More information on the 2020 process can be found on page 97 of the Corporate Governance Statement.
Our Board Committees have continued to perform very effectively. You will find, on pages 99 to 133, individual reports, introduced by the Chairman of each Committee, giving details of their activities during the year.
I continue to encourage non-executive Directors to undertake visits to Group subsidiaries in order to familiarise themselves with the Group's operations and meet with subsidiary management.
Stakeholder engagement is important for the Board to help us in understanding their views and taking them into account when making business decisions. Further details on Board stakeholder engagement is set out on page 95.
The governance priorities for the coming year include Chairman succession and a focus on increasing diversity, both at Board and management levels.
Chairman 18 May 2020
John joined the Board in February 2009 and was appointed non-executive Chairman in September 2014.
John has extensive top management and board level experience, having held the position of Group Managing Director of Glanbia plc until November 2013. He previously held a number of roles within that organisation including CEO Agribusiness and CEO Food Ingredients. John was previously a non-executive director of Greencore Group plc.
John's experience as a CEO, chairman and nonexecutive director on a number of listed companies brings a detailed understanding of operational, strategic and governance requirements.
1RQH[HFXWLYHGLUHFWRURI6PXUƬW.DSSDSOF
Chief Executive
December 2008
Donal joined DCC in 1998 and has a detailed knowledge of the operations of the Group, having held a number of senior leadership roles, including Managing Director of DCC Technology from 2004 to 2006 and Managing Director of DCC Energy from 2006 to 2017. +HOHGWKHYHU\VLJQLƬFDQWJURZWKRIWKH(QHUJ\GLYLVLRQ and its transition from a small UK and Irish business to a substantial international business operating in 10 countries.
Donal was appointed Chief Executive in July 2017.
Key external appointments
None
Date of appointment
)HUJDOLVD&KDUWHUHG\$FFRXQWDQWZLWKVLJQLƬFDQW H[SHULHQFHLQƬQDQFLDOPDQDJHPHQWWUHDVXU\VWUDWHJLF capital deployment and development matters within the Company. He joined DCC in 1989, and was appointed &KLHI)LQDQFLDO2ƯFHULQLQWKH\HDURI'&&pV ƮRWDWLRQ3ULRUWRMRLQLQJ'&&KHZRUNHGZLWK.30* and PricewaterhouseCoopers in audit and corporate ƬQDQFH)HUJDOKDVFRPSUHKHQVLYHNQRZOHGJHDQG understanding of the various divisions DCC operates in.
Key external appointments None
Senior Independent Director R N
Leslie has a very wide range of international senior management experience in the oil and gas, food and drinks, manufacturing, building materials and insurance VHFWRUV+HLVDIRUPHU&KLHI([HFXWLYH2ƯFHURI Rexam plc and has held a number of senior executive roles in Royal Dutch Shell plc, Cadbury Schweppes plc and United Biscuits plc.
Leslie was previously non-executive chairman of SIG plc and Robert Walters plc and non-executive director of Cape plc, Aviva plc and Crest Nicholson Holdings plc.
Chairman of Euromoney Institutional Investor PLC and non-executive director of HSBC UK Bank plc.
Mark Breuer Non-executive Director A N
Date of appointment November 2018 Expertise
DCC's acquisition focus. Key external appointments Non-executive director of Arix Bioscience plc.
Non-executive Director A R
Date of appointment May 2019
Caroline is a highly experienced business leader with extensive global knowledge in the technology sector, VSHFLƬFDOO\HOHFWURQLFWHFKQLFDODQGORJLVWLFVHUYLFHV Caroline was, until her retirement in February 2018, the Business Group President of Flex, an industry-leading, Fortune Global 500 company with operations in 30 countries. In this role, she led the Telecommunications, Enterprise Compute, Networking and Cloud Data Centre and was also responsible for managing the Global Services Division, supporting complex supply chains. Caroline was previously a non-executive director of the Irish Industrial Development Agency.
Caroline's leadership experience and areas of expertise are particularly relevant to key sectors in which DCC operates.
Non-executive director of IMI plc.
0DUNLVDKLJKO\H[SHULHQFHGFRUSRUDWHƬQDQFLHUDQG has operated at senior levels in the UK and abroad. He worked in investment banking for 30 years, the last 20 of which were for J. P. Morgan, where he served in numerous client facing and management roles, delivering mergers and acquisitions and broader FRUSRUDWHƬQDQFHDGYLFHWRERWKGRPHVWLFDQG international clients. Mark's wide-ranging corporate ƬQDQFHH[SHULHQFHLVSDUWLFXODUO\UHOHYDQWJLYHQ
Strategic Report Governance Financial Statements Supplementary Info
Date of appointment
April 2020
Tufan was BP's Downstream Chief Executive, and a member of its executive team, from 2014 to March 2020, with responsibility for BP's global fuels, lubricants and petrochemicals businesses. Prior to that Tufan ZDV&KLHI2SHUDWLQJ2ƯFHURI%3pV'RZQVWUHDP VHJPHQW&KLHIRI6WDƪWRWKH*URXS&KLHI([HFXWLYH Chief Executive, Castrol Lubricants and held several other management and executive roles within BP. Tufan previously held various management roles in Mobil Oil. Tufan is a former non-executive director of GKN plc.
Tufan's detailed knowledge and leadership experience in global fuels businesses and new energy technologies are of particular relevance to DCC.
Non-executive director of CNH Industrial N.V. and member of the advisory board of the University of Surrey.
Non-executive Director R
March 2015
David has almost 40 years of international chemical distribution experience. In May 2018, he was appointed President and CEO and a director of Univar Solutions Inc. Prior to this appointment, he held a number of senior positions with Univar across global locations LQFOXGLQJ3UHVLGHQWDQG&KLHI2SHUDWLQJ2ƯFHU2WKHU previous roles include Senior Vice President of Global Sales, Marketing and Industry Relations for Omnexus and VP Business Development for Ellis & Everard Plc. David's distribution experience brings valuable
perspective to the Board.
3UHVLGHQWDQG&KLHI([HFXWLYH2ƯFHURI8QLYDU Solutions Inc.
September 2013
Pamela has more than 30 years' experience in the international healthcare sector. She was the CEO of Quintiles Transnational Corporation and previously held senior executive positions at AstraZeneca plc DQG)+RƪPDQ/D5RFKH
Pamela was chairman of Scynexis Inc and Oxford Immunotec Ltd and she has held a number of non-executive director roles at companies including Novo Nordisk A/S and Smith and Nephew plc and was senior independent director at Informa plc and Victrex plc.
Through her executive and non-executive roles, Pamela brings a wealth of international experience to the Board of DCC.
Non-executive director of Hikma Pharmaceuticals plc and Reckitt Benckiser Group plc and member of the supervisory board of Akzo Nobel N.V.
Date of appointment October 2012
Jane 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 an international business perspective. She was a member of the CBI Manufacturing Council until 2011. Other previous roles include non-executive director of Sirius Minerals plc and Devro plc.
Jane brings substantial audit, risk and audit committee experience to the Board.
Non-executive director of Costain Group PLC and Bakkavor Group plc.
Date of appointment May 2016
&RUPDFZDV&KLHI)LQDQFLDO2ƯFHUo&)2p RI3DGG\ 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. Cormac was previously Chief Executive of Ulster %DQNDVXEVLGLDU\RI5R\DO%DQNRI6FRWODQG DQGDOVR served in various roles within Royal Bank of Scotland in Europe and the Middle East.
&RUPDFEULQJVFRQVLGHUDEOHSOFƬQDQFLDOH[SHUWLVH to the Board.
Chairman of University College Dublin Foundation Limited and chairman of H&K International Limited.
Mark Ryan Non-executive Director A
Date of appointment
Mark is a highly experienced board director and business leader who has successfully operated at senior management levels in Ireland and internationally. Mark was Country Managing Director of Accenture in Ireland between 2005 and 2014. During his career with Accenture, he spent extended periods working in the US and UK. Mark served in numerous management and executive roles in delivering major strategy, IT and business change programmes both locally and internationally. Mark was previously a non-executive director of Immedis.
Mark brings a strong understanding of commercial leadership and business perspective to the Board.
Non-executive director of Wells Fargo Bank International, Econiq and Publicis and chairman of Blueface.
Donal Murphy Chief Executive
See Donal's biography on page 86.
Fergal O'Dwyer Chief Financial Officer
See Fergal's biography on page 86.
Kevin Lucey Chief Financial Officer Designate
.HYLQZDVDSSRLQWHG&KLHI)LQDQFLDO2ƯFHU'HVLJQDWH in February 2020 and will succeed Fergal O'Dwyer as '&&pV&KLHI)LQDQFLDO2ƯFHULQ-XO.HYLQMRLQHG DCC in 2010 as Finance & Development Director of the Technology division and since then has held a number RIVHQLRU*URXSƬQDQFHUROHVLQFOXGLQJPRVWUHFHQWO\ as Head of Capital Markets. Prior to joining DCC, Kevin was CFO and a principal of a leading Irish private HTXLW\ƬUP
Henry has been Managing Director of DCC's LPG division since 2018, having joined DCC in 2008 as Managing Director of Flogas Britain. Prior to joining DCC, he was Managing Director of Antalis from 2000 to 2008, overseeing its paper distribution business in the UK, Ireland and South Africa. Previously he held a strategic planning role at paper manufacturer Arjo Wiggins Appleton and was a senior manager at Barclays Bank, Paris, having started his career on their graduate programme.
DCC Retail & Oil
Eddie has been the Managing Director of DCC Retail & Oil since 2018. Eddie joined DCC in 2012 as the Managing Director of Oil and was subsequently Managing Director of Retail & Fuel Cards. Prior to joining DCC, Eddie was CEO at Topaz Energy, Ireland's largest fuel and convenience brand. Before this he spent \HDUVDW6WDWRLODFURVVDQXPEHURIƬQDQFHSULFLQJ commercial and leadership roles, including Vice President Finance and Vice President Retail Operations at Statoil Fuel and Retail in Oslo.
Tim Griffin Managing Director, DCC Technology
Tim has been the Managing Director of DCC Technology since he joined DCC in 2018. Having spent over a decade of his 30 year career in roles based in Australia and Singapore for NCR and Dell, Tim has extensive experience in performing regional and global functional, operational and general management roles. At Dell he led Global Services & Solutions for Consumer & Small Business and was GM of Displays & Client Peripherals, before being appointed CEO & Senior Vice President of Dell's business in the UK.
Strategic Report Governance Financial Statements Supplementary Info
Conor has been the Managing Director of DCC Healthcare since 2006. Conor joined DCC in 1997 and has held a number of senior leadership roles within the Group, including in the Food & Beverage division and Investor Relations. Conor moved into the Healthcare division in 2003, initially as Finance & Development Director before being appointed Managing Director in 2006.
Clive was appointed Head of Group Strategy and Development in 2017. Clive joined DCC in 2009 as the Development Director responsible for delivering acquisitive growth for the Energy division and from 2014 to 2017 he held the position of Managing Director of Oil Europe. Prior to joining DCC, Clive spent 11 years working across a variety of banking and investment roles at AIB and in private equity.
Nicola has been the Head of Group Human Resources since she joined DCC in May 2016. Prior to joining DCC, Nicola was the HR Director responsible for Talent and Reward at CRH plc from 2007 to 2016. Prior to that, she enjoyed a consulting career with PricewaterhouseCoopers in Europe and North America where she helped global organisations from multiple industry sectors adapt their human capital strategies to improve business performance.
Conor was appointed Director of Group Finance in February 2020 and will assume this role in July 2020, from his current role, Head of Group Financial Planning & Control, which he has held since July 2017. Conor joined DCC in 1998 and has held a number of senior ƬQDQFLDOOHDGHUVKLSUROHVDFURVVWKH*URXSLQFOXGLQJ Finance Director of DCC Energy, Finance & Development Director DCC Technology and Investor Relations Manager. Prior to joining DCC, Conor trained as an accountant with KPMG.
Peter Quinn Chief Information Officer
3HWHUKDVEHHQ&KLHI,QIRUPDWLRQ2ƯFHUVLQFHKH joined DCC in 2004. He also spent three years as Chief 2SHUDWLQJ2ƯFHURI'&&pVODUJHVWRLOGLVWULEXWLRQ business, Certas Energy UK. Prior to joining DCC, Peter worked as an IT consultant with an international ƬUPZKHUHKHVSHFLDOLVHGLQWKHGHOLYHU\RIFRPSOH[ IT solutions across a range of business sectors. He had previously worked in the food and transport industries in a variety of IT leadership roles.
Ger Whyte Company Secretary & Head of Enterprise Risk Management
Ger has been the Head of Enterprise Risk Management and Company Secretary since 2000. Ger joined DCC in 1987 and has held a number of senior Group roles in investment management and compliance. Prior to joining DCC, Ger worked with KPMG in general practice DQGLQFRUSRUDWHƬQDQFH
* With effect from 11 May 2020, Clive Fitzharris was appointed as Managing Director Exertis International.
This statement describes DCC's governance principles and practices. For the year ended 31 March 2020, DCC's corporate governance practices ZHUHVXEMHFWWRWKH8.&RUSRUDWH*RYHUQDQFH&RGHZKLFKZDVLVVXHGE\WKH)5&LQ-XO\oWKH&RGHp 7KLVVWDWHPHQWGHWDLOVKRZ'&&KDV applied the principles and complied with the provisions set out in the Code. We can confirm full compliance with the Code.
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7KH&KDLUPDQLVWKHOLQNEHWZHHQWKH%RDUGDQGWKH&RPSDQ+HLVVSHFLILFDOO\UHVSRQVLEOHIRUHVWDEOLVKLQJDQGPDLQWDLQLQJDQHIIHFWLYH ZRUNLQJUHODWLRQVKLSZLWKWKH&KLHI([HFXWLYHIRUHQVXULQJHIIHFWLYHDQGDSSURSULDWHFRPPXQLFDWLRQVZLWKVKDUHKROGHUVDQGRWKHU VWDNHKROGHUVDQGIRUHQVXULQJWKDWPHPEHUVRIWKH%RDUGGHYHORSDQGPDLQWDLQDQXQGHUVWDQGLQJRIWKHYLHZVRIDOOVWDNHKROGHUV
%HIRUHWKHEHJLQQLQJRIHDFKILQDQFLDO\HDUKDYLQJFRQVXOWHGZLWKWKHRWKHU'LUHFWRUVDQGWKH&RPSDQ\6HFUHWDU\WKH&KDLUPDQVHWVD VFKHGXOHRI%RDUGDQG&RPPLWWHHPHHWLQJVWREHKHOGLQWKHIROORZLQJWZR\HDUVZKLFKLQFOXGHVWKHNH\DJHQGDLWHPVIRUHDFKPHHWLQJ )XUWKHUGHWDLOVRQWKHVHDJHQGDLWHPVDUHRXWOLQHGRQSDJH
7KH&KLHI([HFXWLYHLVUHVSRQVLEOHIRU
,QH[HFXWLQJKLVUHVSRQVLELOLWLHVWKH&KLHI([HFXWLYHLVVXSSRUWHGE\WKH&KLHI)LQDQFLDO2IILFHUDQGWKH&RPSDQ\6HFUHWDU\ZKRWRJHWKHUZLWK WKH&KLHI([HFXWLYHDUHUHVSRQVLEOHIRUHQVXULQJWKDWKLJKTXDOLW\LQIRUPDWLRQLVSURYLGHGWRWKH%RDUGRQWKH*URXSpVRSHUDWLRQDOILQDQFLDO and strategic performance.
7KHGXWLHVRIWKH6HQLRU,QGHSHQGHQW'LUHFWRUDUHVHWRXWLQZULWLQJDQGIRUPDOO\DSSURYHGE\WKH%RDUG
7KH6HQLRU,QGHSHQGHQW'LUHFWRUDFWVDVDQLQWHUPHGLDU\IRURWKHU'LUHFWRUVLIQHFHVVDU\DQGLVDYDLODEOHWRVKDUHKROGHUVZKRPD\KDYH FRQFHUQVWKDWFDQQRWEHDGGUHVVHGWKURXJKWKH&KDLUPDQRU&KLHI([HFXWLYH
7KH6HQLRU,QGHSHQGHQW'LUHFWRUOHDGVWKHDQQXDO%RDUGHYDOXDWLRQSURFHVVDVGHWDLOHGXQGHUo%RDUG3HUIRUPDQFH(YDOXDWLRQpRQSDJH and the succession planning process for the Chairman. The Senior Independent Director chairs meetings of the Board if the Chairman is XQDYDLODEOHRULVFRQIOLFWHGLQUHODWLRQWRDQ\DJHQGDLWHP
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7KHUHLVDFOHDUGLYLVLRQRIUHVSRQVLELOLWLHVEHWZHHQWKHOHDGHUVKLSRIWKH%RDUGDQGWKHH[HFXWLYHOHDGHUVKLSRIWKHEXVLQHVV
1RQH[HFXWLYH'LUHFWRUVKDYHDSULPHUROHLQDSSRLQWLQJDQGUHPRYLQJH[HFXWLYH'LUHFWRUV1RQH[HFXWLYH'LUHFWRUVVFUXWLQLVHDQGKROGWR DFFRXQWWKHSHUIRUPDQFHRIPDQDJHPHQWDQGLQGLYLGXDOH[HFXWLYH'LUHFWRUVDJDLQVWDJUHHGSHUIRUPDQFHREMHFWLYHV7KH&KDLUPDQKROGV PHHWLQJVZLWKWKHQRQH[HFXWLYH'LUHFWRUVZLWKRXWWKHH[HFXWLYH'LUHFWRUVSUHVHQW
7KH'LUHFWRUVKDYHDFFHVVWRWKHDGYLFHDQGVHUYLFHVRIWKH&RPSDQ\6HFUHWDU\ZKRVHUHVSRQVLELOLWLHVLQFOXGHHQVXULQJWKDW%RDUG SURFHGXUHVDUHIROORZHGDVVLVWLQJWKH&KDLUPDQLQUHODWLRQWRFRUSRUDWHJRYHUQDQFHPDWWHUVDQGHQVXULQJFRPSOLDQFHE\WKH&RPSDQ\ with legal and regulatory requirements.
The Schedule of Matters Reserved for Board Decision is regularly reviewed to ensure it meets with current best practice.
The Schedule includes responsibility for the matters set out below:
The Board's leadership responsibilities involve working with management to set corporate purpose and values and to develop strategy, including deciding which risks it is prepared to take in pursuing its strategic objectives.
The Board's oversight responsibilities involve it 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.
A detailed review of DCC's organisational purpose was conducted during the year by the Group Management Team, which was presented to the Board. DCC's purpose is 'enabling people and businesses to grow and progress'. The Board and management will focus on adopting purpose into key processes such as three-year planning to help align purpose and long-term strategy.
The Board continued to promote the Group's core values through ongoing site visits to Group companies by individual Directors throughout the year and the Board meetings at subsidiary locations.
DCC's strategy is set out on pages 2 and 3 and the Board's responsibilities in regard to strategy are summarised on page 93.
The Board monitors culture to ensure it is aligned with purpose, values and strategy. This is achieved through senior management briefings, review of employees surveys and direct observation, including interaction with local management teams and employees during Board and individual Director site visits and via the activities of the Workforce Engagement Director. Further details on purpose is set out in the Chief Executive's Review on page 9.
The Board's activities during the year are set out on pages 93 and 94.
| Board Scheduled |
Board Unscheduled |
Audit Committee |
Remuneration Committee |
Nomination and Governance Committee |
|
|---|---|---|---|---|---|
| Meetings held during the year ended 31 March 2020 | 8 | 3 | 5 | 5 | 7 |
| John Moloney | 8 | – | 7 | ||
| 0DUN%UHXHU | 8 | 2 | – | – | |
| Caroline Dowling | 7 | 2 | – | ||
| 'DYLG-XNHV | 8 | 2 | – | – | |
| 3DPHOD.LUE\ | 8 | 2 | – | 7 | |
| Jane Lodge | 8 | 2 | – | – | |
| Cormac McCarthy | 8 | – | – | ||
| Donal Murphy | 8 | – | – | – | |
| Fergal O'Dwyer | 8 | – | – | – | |
| 0DUN5\DQ | 8 | – | – | ||
| /HVOLH9DQGH:DOOH | 8 | – |
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During the year ended 31 March 2020, the Board held 11 meetings, one of which took place at Jam Industries in Canada and one at Thompson & Capper in the UK. The Board also visited a number of companies, including Stampede in the US.
The away Board meetings and visits provide an opportunity for the Directors to meet ORFDOWHDPVVHHWKHRSHUDWLRQVRQWKH ground and have presentations on current RSHUDWLRQVSURMHFWVDQGIXWXUHSODQV7KH %RDUGDOVRH[SHULHQFHVFXOWXUHDQGYDOXHV in action in the daily activities of colleagues on site.
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,Q)HEUXDU\WKH%RDUGDQG&RPPLWWHH meetings were held at Thompson & &DSSHU5XQFRUQ8.7KH'LUHFWRUV received presentations from the senior management team and from DCC Health %HDXW\6ROXWLRQVpVHQLRUH[HFXWLYHVWR H[SODLQWKHFXUUHQWDQGIXWXUHSODQVRIWKH EXVLQHVVDQGWKHVXEGLYLVLRQDQGDOVR XQGHUWRRNDIXOOWRXURIWKHIDFLOLWLHV
Stampede
The Board is kept informed of the views of shareholders through the executive Directors' attendance at investor presentations and results presentations. Relevant feedback from investor meetings, investor relations reports and brokers notes are provided to the entire Board on a regular basis.
7KH%RDUGDOVRUHFHLYHVEULHƬQJV from the Company's brokers, on topics such as fundraising, market perception and shareholder activism.
The Company Secretary engages annually with proxy advisors in advance of the Company's AGM which provides shareholders with the opportunity to question the Chairman, the Committee Chairmen and the Board.
The Chairman of the Remuneration Committee led a process whereby major shareholders, the Investment Association and various proxy advisory ƬUPVZHUHFRQVXOWHGLQUHVSHFW of the proposed changes to the 2020 Remuneration Policy.
Our businesses have undertaken a variety of methods to engage with our employees including local intranets, employee engagement surveys, town halls, listening/project groups,
The Board met with local management and employees at Group companies where Board meetings were held during the year.
employee polls/pulse surveys, hse forums and recognition programmes.
Non-executive Directors visited businesses as part of their ongoing Director induction, training and site visit schedule.
The designated non-executive Director, Cormac McCarthy, visited businesses as part of his role to engage with the workforce and report to the Board.
The Board received regular updates from the Head of Group HR on Talent Development, Succession Planning and on the launch of the new Groupwide Inclusion and Diversity Policy.
The Group as a whole trades with a very broad customer and supplier base.
Our businesses work to maintain HƪHFWLYHFRPPXQLFDWLRQVZLWK customers and suppliers to build strong and lasting relationships.
The Group has worked with customers and suppliers to plan and deal with various Brexit outcomes.
The Board receives regular reports from senior management regarding ongoing communication and collaboration with customers and suppliers across the Group.
DCC plc continues its long-term partnership with Social Entrepreneurs ,UHODQGo6(,p DQ,ULVKQRWIRUSURƬW organisation that supports people with new solutions to Ireland's biggest social problems. DCC is the lead sponsor of the annual awardee selection process and employees participate in the assessment of applicants' proposals.
DCC has a partnership with LauraLynn, Ireland's Children's Hospice, comprising corporate donations, sponsorship of the Annual Heroes Ball and 'In-kind' support through the donation of products and equipment.
DCC businesses support local communities and national RUJDQLVDWLRQVERWKƬQDQFLDOO\DQG practically with volunteer days, sponsorship, fund raising and hands-on education programmes.
Further details on these activities are set out in the Sustainable Business Report on page 82.
,Q\$SULO,ZDVDSSRLQWHGE\WKH%RDUG DVWKHGHVLJQDWHGQRQH[HFXWLYH'LUHFWRU for the purposes of engagement with WKHZRUNIRUFHLQDFFRUGDQFHZLWKWKH UHTXLUHPHQWVRI3URYLVLRQRIWKH8. &RUSRUDWH*RYHUQDQFH&RGHoWKH&RGHp
7KHSXUSRVHRIWKHUROHDVVHWRXWLQWKH&RGH is to assist the Board in understanding the views RIWKHZRUNIRUFHDQGLQWDNLQJDFFRXQWRI employees interests in its discussions and decisions.
A formal Terms of Reference for the role was DJUHHGE\WKH%RDUGZKLFKHQYLVDJHVWKHNH\ UHVSRQVLELOLWLHVRIWKHGHVLJQDWHGQRQH[HFXWLYH 'LUHFWRUDVEHLQJ
'XULQJWKH\HDU,KDYHFRPPLWWHGVLJQLILFDQW WLPHWRPHHWLQJWKHVHUHVSRQVLELOLWLHV
I meet regularly with the Head of Group HR to discuss developments in regard to employee engagement activity across the Group's VXEVLGLDULHVLQFOXGLQJVXUYH\VVXJJHVWLRQ mechanisms and townhalls.
I commenced a series of scheduled visits to FRPSDQLHVDFURVVWKH*URXSERWKRQP\RZQ DQGLQWKHFRPSDQ\RIRWKHUQRQH[HFXWLYH Directors. These visits involved engagement ZLWKVXEVLGLDU\PDQDJHPHQWZKRSURYLGHG a comprehensive overview of operations and LQWURGXFHGPHWRPHPEHUVRIWKHZRUNIRUFH DWDOOOHYHOVZKLFKHQDEOHGPHWRKDYHGLUHFW and open conversations.
,DOVRVRXJKWIHHGEDFNIURPRWKHUQRQH[HFXWLYH 'LUHFWRUVRQVXEVLGLDU\YLVLWVWKH\XQGHUWRRN either as part of their induction or ongoing development.
'XULQJWKH\HDUHQGHG0DUFKWZR%RDUG PHHWLQJVZHUHKHOGDWVXEVLGLDU\ORFDWLRQV LQWKH8.DQG&DQDGDZKLFKDOORZHGIRU interaction with management and employees LQWKRVHVXEVLGLDULHV
I report to the Board at every meeting on my activities and the Board also hears from H[HFXWLYHDQGQRQH[HFXWLYH'LUHFWRUVRQ VXEVLGLDU\YLVLWVZKLFKWKH\KDYHXQGHUWDNHQ
I am satisfied that the Board is well informed RIWKHYLHZVRIWKH*URXSpVZRUNIRUFHZKLFK assists it in assessing and monitoring the culture of the organisation.
Following the appointment of Tufan Erginbilgic as a Director on 6 April 2020, the Board of DCC currently comprises the non-executive Chairman, nine other non-executive Directors and two executive Directors, including the Chief Executive.
The Board has carried out its annual evaluation of the independence of each of its nonexecutive 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. The Nomination and Governance Committee is conscious of the provisions in the 2018 Code in respect of Chairman tenure and a formal succession process, is being led by the Senior Independent Director. Further details are set out in the Nomination and Governance Committee Report on page 101.
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.
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 101.
Following appointment by the Board, all Directors are, in accordance with the Articles of Association, subject to election at the following \$QQXDO*HQHUDO0HHWLQJo\$*0p
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 as at 31 March 2020 are set out in the table below.
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 Board encourages overseas Board meetings which are instrumental in gaining a better understanding of the Group's diverse businesses and the environments in which they operate.
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, 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.
There is an established procedure for Directors to take independent professional advice in the furtherance of their duties, if they consider this necessary.
The Board conducts an annual evaluation of its own performance, that of each of its principal Committees, the Audit, Remuneration and Nomination and Governance Committees, and that of the Chairman, Committee Chairmen and individual Directors.
In 2018, the entire performance evaluation was externally defined and conducted by Independent Audit, in accordance with the requirement under the Code to have it externally facilitated every three years. The next externally facilitated evaluation will take place in 2021.
In 2019 and 2020, the performance evaluation process was conducted internally.
The various phases of the 2020 internal performance evaluation process which commenced in early February and concluded in May were:
The Senior Independent Director conducted an evaluation of the performance of the Chairman.
The non-executive Directors also evaluated the performance of each executive Director.
The Board formally concluded that its own performance, the performance of Committees and the performance of individual Directors, including the Chairman was satisfactory.
Arising from the evaluation process, a number of actions were agreed by the Board which are set out below and will be implemented by the Chairman during the current year.
| Topic | Findings and agreed actions |
|---|---|
| Board Diversity | The Board noted the need to address as a priority the percentage of female Directors and also the gender split in senior Group management. |
| ,WZDVDOVRDJUHHGWKDW%RDUGDQGVHQLRUPDQDJHPHQWUHQHZDOVKRXOGEHLQIRUPHGE\WKHQHHGWREHWWHUUHIOHFW the Group's presence in Continental Europe and North America. |
|
| Agenda Items | 3URJUHVVZDVQRWHGLQUHJDUGWRDFKLHYLQJDQDSSURSULDWHEDODQFHEHWZHHQRSHUDWLRQDODQGVWUDWHJLF development items. |
| It was agreed to place increased focus and devote more time to acquisitions & capital deployment and to management resources and organisation. |
|
| Board Papers | ,WZDVDJUHHGWRFRQWLQXHWKHSUDFWLFHRISURYLGLQJGHWDLOHGSUHUHDGPDWHULDOLQDGYDQFHRI%RDUGPHHWLQJV ZLWKVKRUWHUSDSHUVEHLQJSUHVHQWHGDWPHHWLQJV |
| Senior Management Succession | ,WZDVDJUHHGWRSODFHDSDUWLFXODUIRFXVRQVXFFHVVLRQSODQQLQJIRUVHQLRU*URXSH[HFXWLYHV |
| Consideration of Strategy | ,WZDVDJUHHGWKDWGLYLVLRQDOVWUDWHJLHVVKRXOGEHIRUPDOO\UHYLHZHGE\WKH%RDUGLQWKHFRXUVHRIWKH\HDU |
| ,QDGGLWLRQLWZDVDJUHHGWRUHYLVHWKHIRUPDWRIWKHDQQXDOWZRGD\6WUDWHJ\%RDUGPHHWLQJWRSODFHDJUHDWHU focus on Group-wide issues. |
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.
Our current 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 in a range of areas, including anti-bribery and corruption, protection of human rights, data protection, 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 and its use is supported by training and related internal communications.
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, including human rights, competition law, data protection, information security, diversity and inclusion and share dealing. Depending on the nature of their role, employees of the Group receive more detailed training on those policies.
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. Our 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 our whistleblowing facilities and how they operate. This is referred to on page 105, as part of the Audit Committee Report.
Details of the Directors' interests in DCC shares are set out in the Remuneration Report on page 127.
7KH'&&6KDUH'HDOLQJ&RGHoWKH'HDOLQJ &RGHp DSSOLHVWRGHDOLQJVLQ'&&VKDUHVE\ 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 ,QWHULP0DQDJHPHQW6WDWHPHQWLQ-XO\DWWKH \$*0 WKHLQWHULPUHVXOWVDQQRXQFHPHQWLQ November and the Interim Management Statement in February.
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 105.
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 105.
There is an ongoing process for identifying, evaluating and managing any significant risks faced by the Group, which has been in place for the year under review and up to the date of approval of the financial statements. 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 18 and in the Audit Committee Report on page 103.
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.
DCC has complied, throughout the year ended 31 March 2020, with the provisions set out in the Code.
Directors 18 May 2020
Strategic Report Governance Financial Statements Supplementary Info
John Moloney &KDLUPDQ1RPLQDWLRQDQG Governance Committee
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 2020.
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 during the year ended 31 March 2020, as well as the Committee's priorities for the year ending 31 March 2021.
Succession planning was a key area of focus for the Committee in the past year, in particular across the Group Management Team and their direct reports. A highlight was the internal appointment of Kevin Lucey as the successor to our Chief Financial Officer, Fergal O'Dwyer, who will retire from that position at the conclusion of the Annual General Meeting on 17 July 2020.
Another key focus for the Committee was Board renewal and composition. Caroline Dowling joined the Board on 13 May 2019 and brings expertise in the technology sector, in particular electronic, technical and logistic services, which are particularly relevant to DCC.
Following a recommendation from the Committee, Tufan Erginbilgic was appointed as a new non-executive Director of the Company on 6 April 2020. Tufan's leadership experience and expertise in the downstream global fuels, lubricants and petrochemicals businesses will deepen Board knowledge and insight in regard to key sectors in which DCC operates.
The Committee has spent significant time reviewing the Directors' backgrounds, skills and experience in order to identify the criteria for future appointments. These criteria include knowledge of and experience in the sectors and geographies in which the Group operates and skills relevant to future development and expansion. The Committee sees value in all elements of diversity on the Board and has a particular focus on bringing the percentage of female Directors back to over 30%, which had been DCC's position for a number of years.
The Committee also recommended changes to the composition of the Board Committees to improve the position in terms of crosscommittee membership. These changes were approved by the Board and took effect on 18 May 2020.
On corporate governance, the Committee ensured that the governance enhancements required as a result of the 2018 UK Corporate *RYHUQDQFH&RGHoWKH&RGHp ZKLFKDSSOLHG to DCC for the first time for the financial year ended 31 March 2020, were fully implemented during the year.
In the current year, Board balance and diversity, my successor as Chairman and senior management succession planning will continue to be priorities for the Committee, taking into consideration the continued expansion of the Group.
On behalf of the Nomination and Governance Committee.
John Moloney
&KDLUPDQ1RPLQDWLRQDQG Governance Committee 18 May 2020
The responsibilities of the Nomination and Governance Committee are summarised in the table on page 100 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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The Company Secretary is the Secretary to the Nomination and Governance Committee.
Typically, the Chief Executive is invited to attend all meetings of the Committee and other Directors, 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.
The conclusion from the internally facilitated 2020 Board evaluation process was that the performance of the Nomination and Governance Committee and of the Chairman of the Committee was satisfactory. The Committee will focus on agreed actions arising from the 2020 evaluation process.
All agreed actions from the internally facilitated evaluation process in 2019 were implemented during the year.
The next externally facilitated Board evaluation will take place in 2021.
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.
Board Composition and Renewal The Nomination and Governance Committee considers, on an ongoing basis, the composition of the Board to ensure it has the appropriate balance of skills, knowledge, experience and diversity, taking account of the development of the Group, in terms of scale, activities and geographic locations, and of the length of tenure of existing Directors.
In 2019, the Committee identified a need for a new non-executive Director with experience in the energy sector given that Leslie Van de Walle was close to serving nine years as a Director. An external professional search firm, MWM Consulting, was employed to carry out a wide ranging international search. The search firm produced a long list of candidates which was reviewed by the Chairman, who undertook preliminary interviews with a number of candidates. A short list was then drawn up, reviewed with and approved by the Committee.
Those on the short list were interviewed by the Chairman and a number of the executive and non-executive Directors. When Tufan Erginbilgic emerged as the preferred candidate, he further met on an individual basis with the executive Directors and most of the non-executive Directors, before a formal proposal was made to the Board. It was agreed that Tufan had a balance of skills, knowledge and experience which matched the specific criteria which had been agreed, primarily relating to downstream global fuels, lubricants and petrochemicals businesses and knowledge of new energy technologies and applications. The Committee then recommended his appointment to the Board, following which Tufan was appointed as a non-executive Director and as a member of the Remuneration Committee and Nomination and Governance Committee.
As highlighted in my introduction, the Committee is particularly conscious that the current position of 25% female Directors is below DCC's objective of returning to at least 30% female Directors as soon as practicable, which had been our position for a number of years. This will be a key focus in the current year.
The Committee is also cognisant of the fact that John Moloney has served 11 years as a Director, including over five years as Chairman.
In proposing to the Board in February 2018 that John, having served nine years as a Director, be invited to serve a further term of up to three years, the Committee was influenced by the need for continuity in light of Donal Murphy's appointment to the position of Chief Executive in July 2017 and the need to plan for orderly succession to the position of Chairman.
The Committee is conscious of the provisions in the 2018 Code in respect of Chairman tenure and is undertaking a formal succession process, which is being led by Leslie Van de Walle, as Senior Independent Director, and will be continued by Mark Breuer when he assumes that role following Leslie's retirement at the 2020 AGM.
During the year, Pamela Kirby, Cormac McCarthy and Leslie Van de Walle 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 the non-executive Directors serve additional terms.
A number of recommendations in respect of renewed Committee membership were also made during the year.
The length of tenure of the Directors on the Board is set out on page 96. The length of tenure of members of Board Committees is dealt with in the individual Committee reports.
The Committee is heavily focused on the leadership needs of the organisation at Board and senior management level. The Committee gives full consideration to succession planning for Directors, in particular the Chairman, the Chief Executive and Chief Financial Officer, taking into account Group strategy, as well as the challenges and opportunities facing the Group and the skills, knowledge and experience required.
This was a key area of focus for the Committee in the past year, culminating with the appointment of Kevin Lucey as the successor as Chief Financial Officer to Fergal O'Dwyer, who will retire from that position at the conclusion of the Annual General Meeting on 17 July 2020.
The Group engaged in a comprehensive process over time to identify Fergal's successor. This was led by the Chief Executive, with detailed oversight by the Committee and external input from an international executive search firm in relation to benchmarking.
Following the process, the Committee unanimously supported the appointment of Kevin Lucey as Chief Financial Officer and recommended his appointment to the Board.
As a result of the Chief Financial Officer succession planning process, a number of internal senior management promotions were also made.
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. During the year, the Board received updates from the Head of Group HR on succession planning and talent development initiatives for the senior management teams at Group, divisional and subsidiary levels.
The Committee is conscious of other commitments and demands on Directors' time, including other external appointments, when making recommendations to the Board in respect of new non-executive Director appointments and the re-appointment of existing non-executive Directors.
Upon review of the attendance of the Board members during the year, the Committee is satisfied that all Directors are fully committed, dedicate appropriate time to their responsibilities as Directors and are also available at short notice for any unscheduled Board meetings.
The Committee has also concluded that the external commitments of the non-executive Directors can bring valuable perspective to the Board and do not detract from their ability to perform their role effectively. In accordance with the 2018 Code, all new external commitments now require Board approval in advance of a Director taking up an external role. This requirement has been included in all letters of appointment and in the Matters Reserved for Board Decision.
One of the regular agenda items at Committee meetings during the year is Board 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. The current Board comprises of 25% female Directors. As stated earlier, the Committee's key priority is to exceed the target of 30% female Directors.
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.
At senior management level, a number of our female colleagues participate in development programmes that we believe will be helpful in building a pipeline of future female leadership talent for DCC. These include the 30% Club Board Ready Programme and the Mentoring Foundations FTSE 100 cross-company mentoring programme for next generation women leaders. 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 to equality and human rights in the workplace.
The Group HR function has recently launched a new Group Inclusion and Diversity Policy entitled 'You belong here', which applies to all Group employees. The Policy expects every Group business to take active steps to foster diverse teams and inclusive practices in the workplace. This Policy clearly outlines the expectations we have of our businesses in this regard. As part of the launch of the new Policy, every employee will be invited to complete unconscious bias training. Further details in this regard are set out in the Sustainable Business Report on page 81. Inclusion and Diversity link very closely to our core values, in particular Integrity and Partnership.
In addition to tracking gender diversity at Board and senior management level, the Group HR team is in the process of making arrangements to facilitate increased levels of disclosure on diversity reporting and have determined the following metrics for the businesses to report on an annual basis:
Gender representation on high potential development programmes is also being tracked by Group HR.
Group HR require all companies, and their recruitment advisors, to establish clear and realistic guidelines on the level of diversity required in their candidate shortlists for roles, taking into account local legislation and the Group Inclusion and Diversity Policy.
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 has reviewed the Company's corporate governance practices against the 2018 Code, which applied to the financial year ended 31 March 2020, and advised the Board of full compliance with the Code following enhancements to governance practices.
As noted in last year's Annual Report, the Board has appointed Cormac McCarthy as a 'designated' non-executive Director for the purposes of engagement with the workforce. Cormac is responsible for keeping the Board informed of the views and interests of the Group's workforce, so that those views and interests are considered in the Board's discussions and decision making. Further details on Cormac's first year in this role are set out in the Corporate Governance Statement on page 95.
We have reported full compliance with the 2018 Code for the year ended 31 March 2020.
Strategic Report Governance Financial Statements Supplementary Info
Jane Lodge &KDLUPDQ\$XGLW&RPPLWWHH
As Chairman of DCC's Audit Committee, I am pleased to present the report of the Committee for the year ended 31 March 2020.
This report sets out the Audit Committee's principal activities and particular areas of focus during the year ended 31 March 2020, as well as the Committee's priorities for the year ending 31 March 2021.
The Committee supports the Board in assessing the principal risks facing the Company, reviewing the Group's risk management and internal control systems and overseeing the operation of the Group Internal Audit function.
The work done by the Committee in this regard, encompassing ongoing monitoring and the review of effectiveness, is detailed on page 105.
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 information necessary for shareholders to assess the Company's performance, business model and strategy. The work done in this regard and our engagement with the external auditor is detailed on page 107.
Other areas of particular focus to which the Committee devoted time during the year are set out at page 105.
The Audit Committee is conscious of the impact of the ongoing Covid-19 pandemic on the Group's employees and operations. Against that background, we have engaged with Group management to seek to ensure that robust internal controls and risk management systems continue to apply, and that the Group Internal Audit function operates effectively, while recognising the additional pressure and stress on the management and employees of the Group's businesses as a result of the pandemic.
We have also discussed with Group management the additional work done in respect of the Going Concern and Viability Statements to seek to assess the impact, in the short to medium term, of the Covid-19 pandemic on the Group's prospects. Further detail is set out on page 106.
Finally, we engaged with the external auditor .30*,UHODQGo.30*p RQSODQQLQJIRUWKH audit to be conducted remotely.
The Committee's key priorities for the coming year will include continued focus on the impact of the Covid-19 pandemic, cybersecurity, ensuring recommendations from Group Internal Audit reviews are implemented and the oversight of the external quality assessment o(4\$p RIWKH*URXS,QWHUQDO\$XGLWIXQFWLRQ
The Board, the Audit Committee and Group management are fully committed to continuous improvement of risk and financial management across the Group, in particular taking account of the Group's continuing growth and expanding geographical footprint.
I would like to thank Group management for the quality of the information presented to the Committee and compliment the members of the Committee, Group management and the external auditor, KPMG, for their contribution to the open and comprehensive discussion at our meetings.
On behalf of the Audit Committee
Jane Lodge &KDLUPDQ\$XGLW&RPPLWWHH 18 May 2020
The responsibilities of the Audit Committee are summarised in the table on page 104 and are set out in full in its Terms of Reference, which are available on the DCC website, www.dcc.ie.
The Audit Committee currently comprises ILYHLQGHSHQGHQWQRQH[HFXWLYH'LUHFWRUV -DQH/RGJH&KDLUPDQ 0DUN%UHXHU &DUROLQH'RZOLQJ&RUPDF0F&DUWK\ DQG0DUN5\DQ
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7KH%RDUGLVVDWLVILHGWKDWWKHPHPEHUV RIWKH\$XGLW&RPPLWWHHEULQJDZLGH UDQJHRIVNLOOVH[SHUWLVHDQGH[SHULHQFH LQFRPPHUFLDOILQDQFLDODQGDXGLWPDWWHUV arising from the senior positions they hold or held in other organisations and that -DQH/RGJH0DUN%UHXHUDQG&RUPDF McCarthy meet the specific requirements for recent and relevant financial H[SHULHQFHDVVHWRXWLQWKH8.&RUSRUDWH *RYHUQDQFH&RGHoWKH&RGHp 7KH%RDUG LVDOVRVDWLVILHGWKDWWKH&RPPLWWHHDVD ZKROHKDVFRPSHWHQFHUHOHYDQWWRWKH sectors in which DCC operates.
The Committee met five times during the \HDUHQGHG0DUFKDQGWKHUHZDV IXOODWWHQGDQFHE\DOOPHPEHUVRIWKH Committee.
The Company Secretary is the Secretary to the Audit Committee.
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.
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.
The conclusion from the internally facilitated 2020 Board evaluation process was that the performance of the Audit Committee and of the Chairman of the Committee were satisfactory. The Committee will focus on a small number of agreed actions arising from the 2020 Board evaluation process.
All agreed actions from the 2019 internally facilitated evaluation process were fully implemented during the year.
The Chairman of the Audit Committee reports to the Board at each meeting on the activities of the Committee since the previous meeting.
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.
Strategic Report Governance Financial Statements Supplementary Info
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 18 to 26.
The Audit Committee is briefed in detail at each PHHWLQJE\*URXS,QWHUQDO\$XGLWo*,\$p DQGE\ executive management on the updated Group Risk Register and the divisional risk registers. There is a particular focus on emerging risks and on ensuring that changes to the Group's risk profile are matched by enhancements to risk assurance activities, as set out in the Integrated Assurance Report.
The Head of Group Legal & Compliance attends each Committee meeting to provide an update on legal and compliance risks, on related assurance activities and on broader developments in his area of responsibility.
Findings from audits and other reviews completed by the GIA function that impact the risk profile are discussed with the Committee and appropriate responses are agreed.
The Chairman of the Audit Committee briefs the Board at each meeting on the Committee's activities in regard to the Group's risk management and internal control systems and, to facilitate this, the papers relating to risk management and internal control, as noted above, are also made available to all Directors. Separately, the Board receives a quarterly report on health, safety and environmental matters from the Head of Group Sustainability.
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 GIA, utilising the risk register process described in the Risk Report on page 20. This review took account of the principal business risks facing the Group, the controls in place to manage those risks LQFOXGLQJILQDQFLDORSHUDWLRQDODQGFRPSOLDQFH FRQWUROV DQGWKHSURFHGXUHVLQSODFHWR 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. The Board statement on Risk Management and Internal Control is included in the Corporate Governance Statement on page 98.
The Board has delegated responsibility to the Audit Committee for ensuring that the
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The Committee considered a series of update papers and had detailed discussions on the LPSDFWRI%UH[LWRQWKH*URXSpVDFWLYLWLHV
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The Committee engaged with KPMG on a change during the year in lead partner for the audit of the Group's financial statements and also discussed succession planning for the new lead partner.
-DQH/RGJHDV&KDLUPDQRIWKH&RPPLWWHHDQG&RUPDF0F&DUWK\ZHUHLQYROYHGZLWKWKH Nomination and Governance Committee in the process which lead to the Board accepting DUHFRPPHQGDWLRQWKDW.HYLQ/XFH\EHDSSRLQWHGDV&KLHI)LQDQFLDO2IILFHU'HVLJQDWH
Group maintains suitable whistleblowing arrangements for employees.
Those arrangements are outlined in the Corporate Governance Statement on page 98 and are also described in our 'Code of Conduct' which is available on the Company's website, www.dcc.ie.
The Committee reviewed the operation of the Group's whistleblowing facilities, including the matters raised and how they were resolved, on the basis of a report from the Head of Group Legal & Compliance.
The Audit Committee approves the charter and the annual work programme for the GIA function, ensures that it is adequately resourced and has appropriate standing within the Group.
The Head of GIA, the Deputy Head of GIA and the Head of IT Assurance, together with other executives from the GIA function, report to each meeting of the Committee on:
Issues arising from audits completed and related corrective action plans are tracked using the Teammate audit management system. The Audit Committee reviews progress on these corrective actions with the Head of GIA at each of its meetings.
([WHUQDO4XDOLW\$VVHVVPHQWVo(4\$p E\ 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. An internal review, against the same standards, is completed in years in which an EQA is not conducted. The results of both external and internal reviews are considered by the Audit Committee.
The Audit Committee ensures co-ordination between GIA and the external auditor, KPMG, with regular meetings being held each year to maximise the benefits from clear communication and co-ordinated activities.
The Head of GIA has direct access to the Chairman of the Audit Committee and the Audit Committee meets with the Head of GIA on a regular basis without the presence of management.
In addition to IT audit reports, the Head of IT Assurance reports to the Audit Committee on initiatives being undertaken around the Group in relation to IT security, cybersecurity and IT project management. This includes the ongoing rollout of the Group cybersecurity programme and the update of the Group's Target IT Standards framework.
A dedicated resource has been assigned to continue to develop and deliver the GIA data analytics strategy. Various data analytics tools, including ACL and QlikView, are used to support the audit process.
With regard to the 2020 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 2020.
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.
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*LYHQWKDWWKH&RYLGSDQGHPLFZDVGHFODUHGEHIRUHWKH*URXSpV\HDUHQGPDQDJHPHQW GHHPHGLWDSSURSULDWHWRUXQWKHLPSDLUPHQWUHYLHZXVLQJFDUU\LQJYDOXHVDVDW0DUFK 2020 and the latest cash flow forecasts. Whilst the full financial impact of the crisis is LPSRVVLEOHWRSUHGLFWZLWKDKLJKGHJUHHRIFHUWDLQW\FDVKIORZVH[WUDFWHGIURPWKHWKUHH \HDUSODQVZHUHDGMXVWHGLQOLQHZLWKPDQDJHPHQWpVMXGJHPHQWDQGHVWLPDWLRQRIWKHOLNHO\ WLPLQJDQGFDVKIORZLPSDFWRI&RYLG
,QSHUIRUPLQJWKHLULPSDLUPHQWUHYLHZVPDQDJHPHQWGHWHUPLQHGWKHUHFRYHUDEOHDPRXQW RIHDFKFDVKJHQHUDWLQJXQLWo&*8p DQGFRPSDUHGWKLVWRWKHFDUU\LQJYDOXHDWWKHGDWHRI WHVWLQJ7KHUHFRYHUDEOHDPRXQWRIHDFK&*8LVGHILQHGDVWKHKLJKHURILWVIDLUYDOXHOHVV costs to sell and its value in use. Management uses the present value of future cash flows to GHWHUPLQHWKHYDOXHLQXVH,QFDOFXODWLQJWKHYDOXHLQXVHPDQDJHPHQWMXGJHPHQWLVUHTXLUHG LQIRUHFDVWLQJFDVKIORZVRI&*8VLQGHWHUPLQLQJWKHORQJWHUPJURZWKUDWHDQGVHOHFWLQJDQ appropriate discount rate.
0DQDJHPHQWUHSRUWHGWRWKH&RPPLWWHHWKDWIXWXUHFDVKIORZVRIHDFK&*8KDGEHHQ HVWLPDWHGEDVHGRQWKHPRVWXSWRGDWHWKUHH\HDUSODQDVDSSURYHGE\WKH%RDUGDV DGMXVWHGIRUWKHOLNHO\LPSDFWRI&RYLGDQGGLVFRXQWHGXVLQJGLVFRXQWUDWHVWKDWUHIOHFWHG WKHULVNVDVVRFLDWHGZLWKHDFK&*86HQVLWLYLW\DQDO\VLVZDVFRQVLGHUHGRQWKHGLVFRXQWUDWH cash flows and the long-term growth rate. The Committee considered and discussed with PDQDJHPHQWWKHNH\DVVXPSWLRQVWRXQGHUVWDQGWKHLULPSDFWRQWKH&*8VUHFRYHUDEOH amounts. The Committee was satisfied that the significant assumptions used for GHWHUPLQLQJWKHUHFRYHUDEOHDPRXQWVKDGEHHQDSSURSULDWHO\VFUXWLQLVHGFKDOOHQJHGDQG ZHUHVXIILFLHQWO\UREXVW7KH&RPPLWWHHDJUHHGZLWKPDQDJHPHQWpVFRQFOXVLRQWKDWWKH FDVKIORZIRUHFDVWVVXSSRUWHGWKHFDUU\LQJYDOXHRIJRRGZLOODQGLQWDQJLEOHDVVHWV
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Strategic Report Governance Financial Statements Supplementary Info
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 2020 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 2020 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.
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 21.
The Audit Committee oversees the relationship with the external auditor, KPMG, 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 2019 and received an update at the meeting in April 2020, at the commencement of the audit.
This review focused on key audit risks as identified by KPMG, materiality, the background and experience of the KPMG audit partners responsible for the largest local teams and the extent of oversight and review by the Irish firm, including of Group components not audited by KPMG.
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 auditor on a regular basis without the presence of management.
The Audit Committee discusses with KPMG their approach to audit quality and the findings from the reports issued by the Irish and UK regulators in respect of audits completed by KPMG firms in Ireland and in the UK.
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.
As noted on page 105, the Committee engaged with KPMG on audit lead partner changes and succession planning.
The Audit Committee reviews the effectiveness of the external audit process.
As part of this process, the Head of Group Accounting sought the views of Group and subsidiary finance executives and their 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.
The Audit Committee's conclusion that the external audit process was effective was conveyed to the Board.
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. No such appointments were made in the year ended 31 March 2020.
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. In addition, a number of specific types of non-audit services are prohibited under the policy.
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.
The Chairman of the Audit Committee is kept informed by management of all non-audit assignments being undertaken by the external auditor and the aggregate level of fees to be paid for such assignments is pre-approved by 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 158. The table opposite sets out the audit and non-audit fees paid to the external auditor over the five-year period from 2016 to 2020 inclusive.
The Remuneration Committee's key focus is aligning executive remuneration with Company performance and strategy and with the interests of shareholders.
Leslie Van de Walle &KDLUPDQ5HPXQHUDWLRQ&RPPLWWHH
As Chairman of DCC's Remuneration Committee, I am pleased to present the Remuneration Report for the year ended 31 March 2020.
The Report includes the following sections:
The purpose of DCC's Remuneration Policy is to incentivise executive Directors and other senior Group executives to create shareholder value on a consistent and sustainable basis. Consequently, their remuneration is weighted towards performance, both in terms of financial and strategic objectives.
During the year, the Remuneration Committee conducted a thorough review of the current Remuneration Policy to ensure it remains appropriate to support the business, is aligned with shareholders' interests and takes into account evolving best practice and regulatory developments. We have concluded that while the current Policy remains overall fit for purpose, we are proposing a number of minor changes to the Policy and are also seeking to clarify the wording in the Policy in respect of a number of matters.
A summary of the proposed changes is set out in the table on page 109 and the proposed new Remuneration Policy is set out on pages 113 to 120.
A letter setting out the background to and details of the proposed changes was sent by me to the Company's major shareholders UHSUHVHQWLQJRIWKHLVVXHGVKDUHFDSLWDO to the Investment Association and to various proxy voting agencies. Both the Company Secretary, Ger Whyte, and I subsequently engaged with these shareholders and with a number of the organisations to hear their views on the proposed changes, which were overall very positive.
DCC delivered a strong performance in the year ended 31 March 2020.
Group adjusted operating profit was 7.3% ahead of the prior year.
Adjusted earnings per share grew by 1.3% and it is proposed that the total dividend for the year will be increased by 5%.
Return on capital employed, a key metric for DCC, was 16.5% and is again substantially in excess of the Group's cost of capital.
DCC has generated a total shareholder return of 36% over the last five years and 274% over the last ten years as demonstrated in the charts on page 110.
The Committee is satisfied that the executive Directors' short and longer term remuneration, as detailed below, properly reflects the Group's strong performance in the year.
The responsibilities of the Remuneration Committee are summarised in the table on page 132 and are set out in full in its Terms of Reference, which are available on the DCC website, www.dcc.ie.
| 6XPPDU\RI3URSRVHG&KDQJHVWR5HPXQHUDWLRQ3ROLF\ | |||||
|---|---|---|---|---|---|
| ---------------------------------------------- | -- | -- | -- | -- | -- |
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| Current Policy | Proposed Changes |
|---|---|
| Long Term Incentive Plan ('LTIP') | |
| Quantum of Award • 1RPLQDOFRVWRSWLRQVJUDQWHGZLWKWKHPDUNHWYDOXHRIWKHVKDUHV VXEMHFWWRWKHRSWLRQVJUDQWHGLQUHVSHFWRIDQ\DFFRXQWLQJSHULRG QRWWRH[FHHGRIEDVHVDODU\ |
Proposed Policy Change: • 1RFKDQJHWRWKHQRUPDODZDUGOLPLW+RZHYHULWLVSURSRVHGWR LQWURGXFHDQH[FHSWLRQDOOLPLWRIRIEDVHVDODU\7KLVKLJKHU OLPLWZLOORQO\EHXVHGLQH[FHSWLRQDOFLUFXPVWDQFHVIRUH[DPSOH LIQHFHVVDU\LQWKHFDVHRIH[WHUQDOUHFUXLWPHQW |
| Vesting and Performance Conditions • \$ZDUGVQRUPDOO\YHVWILYH\HDUVIURPWKHGDWHRIJUDQWZLWKWKH H[WHQWRIYHVWLQJEHLQJGHWHUPLQHGRYHUWKHILUVWWKUHH\HDUV EDVHGRQWKHIROORZLQJSHUIRUPDQFHFRQGLWLRQV - 5HWXUQRQ&DSLWDO(PSOR\HGo52&(p - (DUQLQJVSHU6KDUHo(36p - 7RWDO6KDUHKROGHU5HWXUQo765p UHODWLYHWRWKH)76(,QGH[ • The relative weighting of these performance conditions in recent \HDUVKDVEHHQ • 7KHUHTXLUHPHQWVUDQJHVIRUHDFKRIWKHSHUIRUPDQFHFRQGLWLRQV DUHHLWKHUVSHFLILHGRUDUHGHWHUPLQHGHDFK\HDUE\WKH5HPXQHUDWLRQ Committee and disclosed in the Annual Report on Remuneration. • 7KHSHUIRUPDQFHFRQGLWLRQVWKHLUUHODWLYHZHLJKWLQJDQGWKH UHTXLUHPHQWVUDQJHVPD\EHPRGLILHGE\WKH5HPXQHUDWLRQ &RPPLWWHHLQDFFRUGDQFHZLWKWKH5XOHVRIWKH/7,3SURYLGHGWKDW they remain no less challenging and are aligned with the interests of the Company's shareholders. |
Proposed Policy Change and Clarification: • :HSURSRVHLQOLQHZLWKPDUNHWSUDFWLFHWKDWGHWDLOVRIWKH SHUIRUPDQFHFRQGLWLRQVWKHLUZHLJKWLQJVDQGWKHUHTXLUHPHQWV UDQJHVIRUHDFKRIWKHSHUIRUPDQFHFRQGLWLRQVZLOOEHFRQWDLQHGLQ the 'Operation of Remuneration Policy' section of the Annual Report RQ5HPXQHUDWLRQUDWKHUWKDQLQWKH5HPXQHUDWLRQ3ROLF\WDEOH • 7KLVZLOOFRQWLQXHWRJLYHWKH&RPPLWWHHIOH[LELOLW\WRVHWSHUIRUPDQFH FRQGLWLRQVZHLJKWLQJVDQGUHTXLUHPHQWVUDQJHVIRUHDFKDQQXDODZDUG EDVHGRQHYROYLQJVWUDWHJLFSULRULWLHVDWWKHWLPHRIJUDQW • 7KHSHUIRUPDQFHFRQGLWLRQVWKHZHLJKWLQJVDQGWKHUHTXLUHPHQWV UDQJHVVHWZLOOEHGLVFORVHGLQIXOOLQWKH\$QQXDO5HSRUWRQ Remuneration. • :HSURSRVHWRPDNHDFKDQJHWRWKH765SHUIRUPDQFHFRQGLWLRQVXFK WKDWSHUIRUPDQFHZLOOQRZEHPHDVXUHGFRPSDUHGWRWKHFRQVWLWXHQWV RIWKH)76(,QGH[UDWKHUWKDQWKH)76(,QGH[DWSUHVHQW • )RUWKHDZDUGVLQ1RYHPEHUZHLQWHQGWKDWWKHSHUIRUPDQFH FRQGLWLRQVDQGZHLJKWLQJVZLOOEHXQFKDQJHGIURPWKHDZDUGV |
| Leaver Policy • The provisions in respect of leavers under the LTIP are set out in detail LQWKH5HPXQHUDWLRQ3ROLF\5HSRUWRQSDJH |
LH52&( (36 DQG765 • :KLOHQRFKDQJHVWROHDYHUSURYLVLRQVDUHSURSRVHGZHLQWHQG WRFODULI\WKDWWKHQRUPDODSSURDFKZLOOEHWRSURUDWHDZDUGVIRU o*RRG/HDYHUVpEDVHGRQWLPHVHUYHGDVDSURSRUWLRQRIWKHWKUHH\HDU SHUIRUPDQFHSHULRG7KHH[WHQWRIYHVWLQJXQGHUWKHSHUIRUPDQFH FRQGLWLRQVZLOOEHGHWHUPLQHGLQWKHQRUPDOZD\DWWKHHQGRIWKHWKUHH year performance period. |
| Pension | |
| Contributions • 3HQVLRQFRQWULEXWLRQVSDLGLQWRWKHGHILQHGFRQWULEXWLRQVFKHPH RUDVFDVKLQOLHX IRUH[HFXWLYH'LUHFWRUVRIEHWZHHQDQG RIEDVHVDODU([LVWLQJH[HFXWLYH'LUHFWRUVUHFHLYHRIEDVHVDODU\ |
Proposed Policy Change and Clarification: • &RQWULEXWLRQVIRUH[LVWLQJH[HFXWLYH'LUHFWRUVFDSSHGDW LQOLQHZLWKWKHEURDGHUZRUNIRUFH • 1HZO\DSSRLQWHGH[HFXWLYH'LUHFWRUVZLOOUHFHLYHSHQVLRQFRQWULEXWLRQV LQOLQHZLWKWKHEURDGHUZRUNIRUFH |
| Restricted Retirement Stock • 7KH3ROLF\LQFOXGHGDRQHRII5HVWULFWHG5HWLUHPHQW6WRFN DUUDQJHPHQWIRUWKH&)2)HUJDO2p'Z\HUWRJUDQWUHVWULFWHGVKDUHV ZLWKDQDQQXDOYDOXHRIbWRUHSODFHDFDVKDOORZDQFHLQOLHXRI |
• Does not form part of revised Policy. |
1RFKDQJHVDUHSURSRVHGWRWKH3ROLF\LQUHVSHFWRI%DVH6DODU\%HQHILWV\$QQXDO%RQXV&ODZEDFN3ROLF\5HPXQHUDWLRQ&RPPLWWHH'LVFUHWLRQ RUWKH5HPXQHUDWLRQ3ROLF\IRU5HFUXLWPHQWRI1HZ([HFXWLYH'LUHFWRUV
Annual bonuses for the executive Directors were based on performance against targets for growth in Group adjusted earnings per share o*URXS(36p DQGRYHUDOOFRQWULEXWLRQDQG attainment of personal/strategic objectives.
Group and individual Director performance against these targets has been reflected in bonus outcomes for each of the current executive Directors, Donal Murphy and Fergal O'Dwyer, of 95.0% and 95.9% of salary UHVSHFWLYHO\FRPSDUHGWRPD[LPXPSRWHQWLDOV RIRIVDODU\
Further details of the performance targets and achievement against those targets are set out on pages 121 to 122.
In November 2019, the Remuneration Committee determined that 80% of the share options granted in February 2017 under the LTIP would vest in February 2022, based on DCC's performance over the three-year period ended 31 March 2019 under the ROCE, EPS DQG765FRQGLWLRQVWKLVZDVWKHVDPHDVWKH estimated vesting of 80% included in last year's 5HSRUW 7KHHDUOLHVWH[HUFLVHGDWHZLOOEH February 2022.
The extent of vesting of the share options granted in November 2017, which was based on DCC's performance over the three-year period ended 31 March 2020, under the ROCE, EPS and TSR conditions, will be formally determined by the Remuneration Committee in November 2020. It is expected that 62.75% of the share options granted will vest. The earliest exercise date will be November 2022.
Further details on these vestings are set out on page 123.
Further details in relation to the LTIP are set out on page 115.
Details of share options granted to the executive Directors during the year are set out in the table on page 128. Details of the performance conditions are also set out on page 128.
The charts above show the growth of a hypothetical £100 holding in DCC plc shares since 1 April 2015 and 1 April 2010 respectively, relative to the FTSE 100 Index.
In February 2020, we announced that our Chief Financial Officer, Fergal O'Dwyer, will be retiring at the conclusion of our forthcoming \$QQXDO*HQHUDO0HHWLQJo\$*0p RQ-XO\ 2020. We are pleased to have a successor from ZLWKLQ'&&DQG.HYLQ/XFH\FXUUHQWO+HDG RI&DSLWDO0DUNHWV ZLOOEHDSSRLQWHGDV&KLHI Financial Officer from the same date. Details of Fergal's remuneration arrangements on retirement, which are in line with the current Remuneration Policy, are provided on page 129.
Details of Kevin Lucey's remuneration as Chief Financial Officer, which are also in line with Remuneration Policy, are set out on pages 129 to 131.
The global onset of Covid-19 means that we are operating in unprecedented times, and target setting for the financial year ending 31 March 2021 is extremely challenging. Against this very uncertain context, we are postponing our financial target setting for bonuses and long term incentives until later in the first half of the year when our businesses and the markets have stabilised.
In terms of salaries for the year ending 31 March 2021, the executive Directors will not be receiving any salary increases this year. In addition, the non-executive Directors' fees will not be increased for the year ending 31 March 2021.
Further details in relation to remuneration arrangements for the year ending 31 March 2021 are set out on page 129.
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. At the 2020 AGM, a resolution on the Remuneration Report H[FOXGLQJWKH5HPXQHUDWLRQ3ROLF\ ZLOODJDLQ be put to shareholders, on an advisory rather than on a binding basis. The Remuneration Policy will also be put to shareholders, again on an advisory basis.
Details of shareholders' proxy votes on the 2019 Remuneration Report are set out in the chart on page 111, along with a history of votes on remuneration reports and/or policies since 2009.
The Committee is conscious of the provisions in the 2018 UK Corporate Governance Code in regard to taking account of workplace remuneration in setting policy for executive Director remuneration. The Committee's approach to this matter is detailed on page 117.
The Committee's approach to the implementation of the requirements in regard to remuneration in the 2018 UK Corporate Governance Code, which applied to DCC with effect from 1 April 2019, was set out in detail in last year's Report, on page 95 of the 2019 Annual Report.
As an Irish registered company, DCC is not subject to UK regulations but we recognise that they represent best practice and, given our listing on the London Stock Exchange, we continue our established practice of substantially applying these regulations on a voluntary basis. Details of implementation of WKH8.&RPSDQLHV0LVFHOODQHRXV5HSRUWLQJ Regulations 2018 were also set out in last year's Report, on page 95 of the 2019 Annual Report.
I can confirm that all actions required in relation to the 2018 UK Corporate Governance Code DQGWKH8.&RPSDQLHV0LVFHOODQHRXV 5HSRUWLQJ 5HJXODWLRQVKDYHEHHQFRPSOHWHG
The Shareholders Rights Directive II has been implemented in Ireland and took effect on 30 March 2020. The Directive requires an advisory shareholder vote on the Remuneration Report and the Remuneration Policy at the AGM. As indicated earlier, these will be put to shareholders in line with DCC's existing practices.
Our priorities for the coming year will include:
I am satisfied that the Remuneration Committee has implemented the Group's existing Remuneration Policy in the year ended 31 March 2020 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 proposed new Remuneration Policy and the Remuneration Report at the 2020 AGM.
We welcome and will consider any shareholder feedback on the Remuneration Policy and the Remuneration Report.
Finally, I will be retiring from the Board and all Committees at the conclusion of the 2020 AGM on 17 July. I would like to thank all Directors who served on the Committee with me, executive management and our external advisors for their support and assistance during my period as Chairman of the Committee and I would also like to wish my successor, David Jukes, the very best.
On behalf of the Remuneration Committee
&KDLUPDQ5HPXQHUDWLRQ&RPPLWWHH 18 May 2020
%For %Against
DCC delivered a strong performance in the year ended 31 March 2020 and this strong performance is reflected in the executive Directors' short and longer term remuneration.
| Adjusted operating profit | +7.3% | Adjusted EPS | +1.3% | Return on capital employed |
|---|---|---|---|---|
| Pension | |||||
|---|---|---|---|---|---|
| 2021 € |
Increase % |
2020 € |
Increase % |
2019 € |
|
| 857,300 | 0% | 857,300 | 2.0% | 840,500 | |
| 522,750 | 0% | 522,750 | 2.0% | 512,500 | |
| 450,000 | n/a | n/a | n/a | n/a | |
For the year ending 31 March 2021, the maximum bonus potentials that will apply are 180% of base salary for Donal Murphy, 180% of base salary on a pro-rata basis for Fergal O'Dwyer and 150% of base salary for Kevin Lucey.
| % of base salary | ||
|---|---|---|
| 2021 € |
2020 € |
|
| Donal Murphy | 15% | 15% |
| Fergal O'Dwyer | 15% | 15% |
| Kevin Lucey | 14% | n/a |
The maximum bonus potential that applied to the executive Directors for the year ended 31 March 2020 was 180% of base salary.
7KHDQQXDOERQXVLVEDVHGRQSHUIRUPDQFHDJDLQVWWDUJHWVIRUJURZWKLQ(36LHXSWRDERQXVRIRIVDODU\ DQGRYHUDOOFRQWULEXWLRQ DQGDWWDLQPHQWRISHUVRQDOVWUDWHJLFREMHFWLYHVLHXSWRDERQXVRIRIVDODU\
Min Max 0% 180% Actual Donal Murphy 95.0% (€814,500) Fergal O'Dwyer 95.9% (€501,340) 54% 1. As detailed on page 121, the Committee made
Further details on Annual Bonus on page 121
The extent of vesting of the LTIP awards granted in November 2017 was based on results for the three-year period ended 31 March 2020. The performance conditions which applied to these awards, the actual performance under those conditions and the expected vesting are summarised below.
'&&pV5HPXQHUDWLRQ3ROLF\oWKH3ROLF\p LVVHWRXWEHORZ\$VDQ,ULVKLQFRUSRUDWHGFRPSDQ\'&&LVQRWUHTXLUHGWRFRPSO\ZLWKWKH8.OHJLVODWLRQ 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. Furthermore, the Shareholders Rights Directive II which was implemented in Ireland on 30 March 2020 requires an advisory shareholder vote on the Remuneration Policy at the AGM.
As such, we will be submitting the revised Remuneration Policy to an advisory, non-binding vote at the 2020 AGM, reflecting the changes outlined in the Chairman's Introduction and set out in detail on pages 113 to 120.
The Company would intend to operate its remuneration arrangements in line with the proposed new Remuneration Policy, from the date of the 2020 AGM, subject to shareholder approval.
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.
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 seeks to ensure:
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.
In its decision-making process regarding the determination of the revised Remuneration Policy, the Remuneration Committee considered its appropriateness to support the business, its alignment with shareholders' interests and evolving best practice and regulatory developments. The Committee developed the Policy and consulted with the Company's major shareholders, whose views were overall very positive. The Committee was mindful of managing any conflicts of interest during the process and no individual was involved in determining his/her own arrangements.
| Element and link to strategy |
Operation | Maximum opportunity | Changes from previous policy |
|---|---|---|---|
| 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 • Salary increases across the Group • Benchmarking versus companies of similar size |
No prescribed maximum base salary or maximum annual increase. General intention that any increases will be in line with the increase across the Group's workforce. Increases may be higher in certain circumstances such as changes in |
No change. |
| and complexity within UK and Irish markets When setting pay policy, account is taken of movements in pay generally across the Group. |
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. |
No change. |
| 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 130. 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 116. The Committee has discretion in relation to bonus payments to joiners and leavers. |
The maximum bonus potential, for the executive Directors, permitted under the Policy is 200% of base salary. The Remuneration Committee will set a maximum to apply for each financial year, which 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. |
No change. |
| Element and link to strategy |
Operation | Maximum opportunity | Changes from previous policy |
|---|---|---|---|
| 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 LTIP provides for the Remuneration Committee WRJUDQWQRPLQDOFRVWb RSWLRQVWRDFTXLUHVKDUHV 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 in the Annual Report on Remuneration. 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 in the Annual Report on Remuneration each year. 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 |
The market value of the shares subject to the options granted in respect of any accounting period may not normally exceed 200% of base salary. In exceptional circumstances, the market value of the shares subject to the options granted in respect of any accounting period may not exceed 300% of base salary. This higher limit will only be used in exceptional circumstances, for example if necessary in the case of external recruitment. 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% or 300% maximum, as having been made in the preceding accounting period. |
An exceptional limit of 300% of base salary is being introduced. In line with market practice, details of the performance conditions, their weightings and the requirements/ ranges for each of the performance conditions will be contained in the 'Operation of Remuneration Policy' section of the Annual Report on Remuneration, rather than in this Remuneration Policy table. This will continue to give the Committee flexibility to set performance conditions, weightings and requirements/ranges for each annual award based on evolving strategic priorities at the time of grant. For the awards in November 2020 we intend that the performance conditions and weightings will be unchanged from the 2019 DZDUGVLH52&( (36 DQG765 TSR performance will now be measured compared to the constituents of the FTSE 100 Index, rather than the FTSE 350 Index. |
| 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 116. |
| Element and link to strategy |
Operation | Maximum opportunity | Changes from previous policy |
|---|---|---|---|
| Pension | |||
| To reward sustained contribution. |
The executive Directors are eligible to participate LQDGHILQHGFRQWULEXWLRQSHQVLRQVFKHPHRUUHFHLYH cash in lieu of contributions to a defined contribution SHQVLRQVFKHPH |
3HQVLRQFRQWULEXWLRQVSDLGLQWR the defined contribution scheme RUSDLGDVFDVKLQOLHX IRUH[LVWLQJ executive Directors are capped at 15% of base salary, in line with the broader workforce. |
Pension contributions could be between 15% and 25% of base salary, although existing executive Directors were eligible to receive 15% of base salary. |
| Newly appointed executive Directors will receive pension contributions in line with the broader workforce. |
|||
| Pensionable salary is defined as base salary. |
|||
| Restricted Retirement Stock | |||
| The Restricted Retirement Stock arrangement does not form part of Policy and all payments to Fergal O'Dwyer under it will cease on his retirement on 17 July 2020. |
The 2017 Policy included a one-off Restricted Retirement Stock arrangement for the CFO, Fergal O'Dwyer, to grant restricted shares with an annual value of €575,000 to replace a cash allowance in lieu of defined benefit pension benefits foregone. Full details are set out on page 100 of the 2019 Annual Report. |
||
| This arrangement does not form part of the revised Policy. |
Fixed pay comprises base salary, benefits, pension and, for the current CFO only, Restricted Retirement Stock. Variable pay comprises annual bonus and LTIP.
The discretion available to the Committee in respect of the various elements of executive remuneration is summarised below.
| Pay element | Discretion available |
|---|---|
| Bonus | The Committee can apply appropriate discretion in specific circumstances in respect of the financial and personal/strategic targets which determine the bonuses to be awarded and, 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. |
| LTIP | The extent of vesting for awards granted to participants is determined by the Remuneration Committee, in its absolute discretion, based on certain performance conditions. |
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.
Bonus payments made to executives may be subject to clawback for a period of three years from payment in certain circumstances including:
The LTIP allows for the giving of discretion to the Remuneration Committee to reduce or impose further conditions on awards prior to vesting in some circumstances as outlined above.
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 SD\PHQWVZKLFKUHODWHWRWKHEX\RXWRIYDULDEOHSD\ERQXVHVRUDZDUGV IURPDSUHYLRXVHPSOR\HUZLOOEHEDVHGRQPDWFKLQJWKHHVWLPDWHGIDLUYDOXH of that variable pay and will take account of the performance conditions and the time until vesting of that variable pay.
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.
While the Remuneration Committee's specific oversight of individual executive remuneration packages extends only to the executive Directors and a number of senior Group executives, it aims to create a broad policy framework, to be applied by management to senior executives throughout the Group, through its oversight of remuneration structures for other Group and subsidiary senior management and of any major changes in employee benefits structures throughout the Group.
DCC employs over 13,200 people in 20 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.
Although the Remuneration Committee does not consult directly with employees on the Remuneration Policy, it does consider remuneration arrangements and trends across the broader employee population when determining the Policy. In this regard, it receives regular briefings from the Group HR function.
In addition, matters relating to remuneration which come to the attention of Cormac McCarthy, in his capacity as the non-executive Director designated by the Board for the purposes of engagement with the workforce, will be reported to the Committee.
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.
The provisions on exit in respect of each of the elements of pay are as follows:
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 RIEHQHILWVVXFKDVSD\PHQWVLQOLHXRIGHILQHGFRQWULEXWLRQSHQVLRQ IRUWKHQRWLFHSHULRG,QDOOFDVHVWKHQRWLFHSHULRGDSSOLHVWRERWKWKH Company and the executive.
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.
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.
The normal approach is to pro-rate awards for 'good leavers' based on time served as a proportion of the three-year performance period. The extent of vesting under the performance conditions will be determined in the normal way at the end of the three-year performance period.
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.
The rules of the Company's defined contribution pension scheme contain detailed provisions in respect of termination of employment.
The Restricted Retirement Stock awards made to the outgoing CFO will vest in full after his retirement.
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, ceases employment immediately in which case he would receive compensation in the form of base salary RQO\LQUHVSHFWRIWKHQRWLFHSHULRG7KHVHUYLFHFRQWUDFWDOVRSURYLGHVIRUVXPPDU\WHUPLQDWLRQLHZLWKRXWQRWLFH LQDQXPEHURIFLUFXPVWDQFHV 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. Kevin Lucey has a letter of appointment which provides for a three month notice period.
Strategic Report Governance Financial Statements Supplementary Info
Set out below is an illustration of the potential future remuneration that could be received by each executive Director for the year ending 0DUFKDWPLQLPXPPHGLDQDQGPD[LPXPSHUIRUPDQFHDVVXPLQJL DFRQVWDQWVKDUHSULFHDQGLL DQXSOLIWRILQWKHVKDUHSULFH
Kevin Lucey is due to take up the position of CFO on 17 July 2020. The figures disclosed here in relation to his remuneration are on a full year basis. As Fergal O'Dwyer is due to retire on 17 July 2020, no scenario chart is shown for him.
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.
Minimum Performance comprises:
Median Performance comprises:
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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 | Share ownership guideline |
|---|---|
| Chief Executive | 3 times annual base salary |
| Other executive Directors | 2 times annual base salary |
| Senior Group executives | 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 2020 is set out in the Annual Report on Remuneration on page 129.
In accordance with the requirements of Provision 36 of the UK Corporate Governance Code, the Remuneration Committee has introduced, with effect from 1 April 2019, Post-Employment Share Ownership Requirements under which the Chief Executive and other executive Directors are required, after leaving the Group, including through retirement, to maintain a shareholding in the Company for a two-year period, as below:
| Executive | Ratio of Share Ownership to Base Salary |
|---|---|
| Chief Executive | 3 times annual base salary |
| Other executive Directors | 2 times annual base salary |
Base salary will be the base salary of the Director in effect at the date of ceasing employment.
For the purposes of these Requirements, share ownership will include shares, vested share options, unvested options no longer subject to performance conditions, deferred bonus share awards, restricted stock awards and any other vested or unvested share awards made under incentive plans operated by the Company which are not subject to performance conditions.
Shares held by a Director's spouse and/or minor children and shares held in any trust for the benefit of the Director and/or his/her spouse and minor children will be counted towards the share ownership requirement.
The valuation of the shareholdings in the Company will be reviewed at the end of each year, based on the closing market price of the Company's shares. If the required ratio fails to be met due to factors other than a decrease in the market price of the Company's shares, the Director will be allowed an additional period of twelve months, or such other period as the Remuneration Committee may determine, to bring the shareholding back to the required level.
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.
Mr. Murphy does not currently hold any external board appointments. Following Board approval earlier this year, Mr. O'Dwyer has taken up a non-executive director position with an Irish private company, which is in a different area of business and not in any way in conflict with DCC.
| Operation | Maximum Opportunity |
|---|---|
| The remuneration of the Chairman is | No prescribed maximum annual increase. |
| for approval by the Board. The Chairman absents himself from the Committee meeting |
In accordance with the Articles of Association, shareholders set the maximum aggregate RUGLQDU\UHPXQHUDWLRQEDVLFIHHVH[FOXGLQJ |
| fees for committee membership and chairman | |
| The remuneration of the other non-executive Directors is determined by the Chairman and |
IHHV 7KHFXUUHQWOLPLWRIbZDVVHWDW the 2019 AGM. |
| Non-executive Directors do not participate | |
| 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. |
in the Company's LTIP and do not receive any pension benefits from the Company. |
| determined by the Remuneration Committee while this matter is being considered. the Chief Executive for approval by the Board. |
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.
Strategic Report Governance Financial Statements Supplementary Info
This section of the Remuneration Report gives details of remuneration outcomes for the year ended 31 March 2020, sets out how DCC's proposed new Remuneration Policy, as described on pages 113 to 120, will operate in the year ending 31 March 2021 and provides additional information on the operation of the Remuneration Committee.
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 2020, together with prior year comparatives. An explanation of how the figures are calculated follows the table.
| Salary | Benefits | Bonus | Retirement Benefit Expense |
Retirement Stock | Restricted | LTIP | Audited Total | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 €'000 |
2019 €'000 |
2020 €'000 |
2019 €'000 |
2020 €'000 |
2019 €'000 |
2020 €'000 |
2019 €'000 |
2020 €'000 |
2019 €'000 |
2020 €'000 |
2019 €'000 |
2020 €'000 |
2019 €'000 |
|
| Donal Murphy | 857 | 840 | 66 | 69 | 815 | 1,332 | 129 | 126 | – | – | 747 | 722 | 2,614 | 3,089 |
| Fergal O'Dwyer | 523 | 512 | 34 | 35 | 501 | 812 | 78 | 77 | 575 | 575 | 456 | 722 | 2,167 | 2,733 |
| 1,380 | 1,352 | 100 | 104 | 1,316 | 2,144 | 207 | 203 | 575 | 575 | 1,203 | 1,444 | 4,781 | 5,822 |
Fixed remuneration comprises Salary, Benefits, Retirement Benefit Expense and, in the case of Mr. O'Dwyer, Restricted Retirement Stock. Variable remuneration comprises Bonus and LTIP. The proportion of fixed and variable remuneration for the year ended 31 March 2020 for Mr. Murphy is 40:60 and for Mr. O'Dwyer is 56:44.
The salaries of the executive Directors for the year ended 31 March 2020 represented increases over the prior year as shown in the table below. These increases were in line with the expected salary inflationary increase of 2% to 3% across the Group.
| Salary € |
Increase % |
|
|---|---|---|
| Donal Murphy | 857,300 | 2% |
| Fergal O'Dwyer | 522,750 | 2% |
Benefits include the use of a company car, life/disability cover, health insurance and club subscriptions.
7KHWDEOHEHORZVHWVRXWWKHSHUIRUPDQFHLQWKH\HDUHQGHG0DUFKLQWHUPVRIJURZWKLQ*URXSDGMXVWHGHDUQLQJVSHUVKDUHo*URXS(36p compared to the performance target range set for the year.
| Target | ||||
|---|---|---|---|---|
| Minimum | Maximum | Outcome | ||
| Growth in Group EPS | 1% | 8% | 3.5% |
While Group EPS increased by 1.3% on a reported basis, the Committee was mindful that the Group EPS figure for the year ended 31 March 2020 was negatively impacted by the adoption of IFRS16 and by the prior year comparatives including a full year's contribution from DCC Healthcare's generic pharmaceutical business, which was disposed of during the year. Accordingly, to calculate Group EPS growth on a consistent and like-for-like basis and to maintain the intention of the original targets, these two items were adjusted for, on a purely formulaic non-discretionary basis, giving a revised growth in Group EPS of 3.5%.
The increase of 3.5% in Group EPS compared to the range set resulted in the Remuneration Committee determining that there should be payment of 35.4% of the bonuses related to this performance target.
In regard to the achievement of targets set for overall contribution and personal/strategic objectives, the Remuneration Committee considered the following matters:
| Executive Director |
Area | Objectives for the year and Committee assessment of performance |
|---|---|---|
| Donal Murphy, Chief Executive |
Succession planning and broader talent development |
Led a comprehensive process over time to identify the CFO's successor, with detailed oversight by the Nomination and Governance Committee, which led to the appointment of a new CFO from July 2020. |
| Beyond Board succession, he also played a leading role in ensuring that our Ashridge Business Leadership Programme was implemented successfully, and took an active role in other management development programmes for high-potential executives and in connection with the Graduate Programme. |
||
| Strategic approach and decision-making |
Significant progress has been made with a number of critical objectives for our go forward strategy, including: • A strategic review of our approach for maturing markets in the oil/gas sector and the impact of Energy Transition for our businesses and shareholders. • Re-shaping of the DCC Vital business. • Ensuring our plans for international development, including the Americas, are well resourced in terms of both numbers and talent. • Implementing the Investment Committee which is already taking an active support role in early development project appraisal. |
|
| Business operation and innovation |
Ensured that measures have been implemented to capture Group/Divisional innovation to help drive future business performance. This will include tracking the showcasing of new innovation, and creating a culture of innovation across the Group. |
|
| HSE and sustainability | Has overseen the appointment of a new Head of Sustainability at DCC, with a broader and holistic approach to health & safety, environmental and Energy Transition. |
|
| Fergal O'Dwyer, Chief Financial Officer |
Succession planning | Worked closely with the CEO during the comprehensive process of identifying the CFO's successor, with detailed oversight by the Nomination and Governance Committee, which led to the appointment of a new CFO from July 2020. |
| Worked throughout the year to develop a new structure and support team to enable a smooth transition for the new CFO once in place. |
||
| Talent development | Took an active role in the Group's talent development and graduate talent programmes. | |
| Addressed a number of talent gaps during the year. | ||
| Capital allocation decisions | One of the main contributors to the decision-making process for capital allocation and the acquisition process, resulting in £168.6 million of capital committed during the year ended 31 March 2020. |
|
| HSE and sustainability | A visible leader for our health & safety agenda, including completing numerous safety tours across the operations. |
After due consideration of the above matters, the Remuneration Committee determined that 93% of this element of the bonus should be awarded to Mr. Murphy and that 95% of this element of the bonus should be awarded to Mr. O'Dwyer.
The resultant bonus payout levels for the year ended 31 March 2020 were as follows:
| Donal Murphy – % of Salary | ||||
|---|---|---|---|---|
| Component | Max % | Payout % | Max % | Payout % |
| Group EPS | 126.0 | 44.6 | 126.0 | 44.6 |
| Contribution and Personal/Strategic | 54.0 | 50.4 | 54.0 | 51.3 |
| 180.0 | 95.0 | 180.0 | 95.9 |
In the case of Mr. Murphy, 33% of his bonus, net of tax and social security deductions, will be invested in DCC shares, which will be made available to him after three years, or on his employment terminating if earlier, together with accrued dividends.
In the case of Mr. O'Dwyer, as he is retiring in July 2020 and to avoid administrative costs, deferral will not apply to this 2020 bonus.
Strategic Report Governance Financial Statements Supplementary Info
Retirement Benefit Expense for Donal Murphy and Fergal O'Dwyer comprised 15% of base salary in the form of a cash allowance, in lieu of contribution to a defined contribution pension scheme.
The current Remuneration Policy, which applied for the year ended 31 March 2020, allowed for a range of between 15% to 25% of salary, with 15% applying for the existing executive Directors.
Fergal O'Dwyer receives an annual award of DCC shares with a value of €575,000, which do not vest until he retires. 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.
As noted earlier, this arrangement will cease on Mr. O'Dwyer's retirement on 17 July 2020.
The values of the LTIP as shown in the table on page 121 for 2020 and 2019 relate to awards made in November 2017 and February 2017 respectively.
(November 2017 grants)
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As the share price at the date of grant was higher than the share price DW0DUFKWKHUHLVQRYDOXHDWWULEXWDEOHWRDVKDUHSULFHXSOLIW WREHGLVFORVHG
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The extent of vesting of awards made under the LTIP since its introduction in 2009 is set out below.
% vested % lapsed
The chart below shows the total remuneration for the Director undertaking the role of Chief Executive for the ten years from 1 April 2010 to 31 March 2020. The years 2011 to 2017 inclusive relate to Tommy Breen and the years 2018 to 2020 relate to Donal Murphy.
Strategic Report Governance Financial Statements Supplementary Info
This graph maps the total remuneration for the Director undertaking the role of Chief Executive against the ten-year trend in EPS and TSR, using a base of 100 for 2010 for comparator purposes.
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.
| % change between 2018/19 and 2019/20 | |||||||
|---|---|---|---|---|---|---|---|
| Salary | Benefits | Bonus | Pension | Overall | |||
| Donal Murphy | +2% | -4% | -39% | +2% | -21.2% | ||
| All Group employees | +1.7% |
The Chief Executive's total remuneration for the year ended 31 March 2020 is 56 times that of the average Group employee for the same period.
,QDGGLWLRQWDNLQJDFFRXQWRIWKH8.&RPSDQLHV0LVFHOODQHRXV5HSRUWLQJ 5HJXODWLRQVZHDUHYROXQWDULO\GLVFORVLQJWKHUDWLRRI&KLHI([HFXWLYHpV total pay to the average UK employee's total pay, based on UK gender pay gap data, of 56 times.
The chart below sets out the amount paid in remuneration to all employees of the Group compared to dividends to shareholders, for 2020 and 2019.
The chart below shows the growth of a hypothetical £100 holding in DCC plc shares since 1 April 2010, relative to the FTSE 100 Index.
The remuneration paid to non-executive Directors for the year ended 31 March 2020 is set out 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.
| Basic Fee | Committee Chair and Membership Fees |
Chairman/Senior Independent Director Fees |
Audited Total | |||||
|---|---|---|---|---|---|---|---|---|
| 2020 €'000 |
2019 €'000 |
2020 €'000 |
2019 €'000 |
2020 €'000 |
2019 €'000 |
2020 €'000 |
2019 €'000 |
|
| John Moloney | 73 | 72 | 8 | 8 | 233 | 228 | 314 | 308 |
| Mark Breuer1 | 73 | 28 | 8 | 3 | – | – | 81 | 31 |
| Caroline Dowling2 | 65 | – | 7 | – | – | – | 72 | – |
| Emma FitzGerald3 | – | 42 | – | 3 | – | – | – | 45 |
| David Jukes | 73 | 72 | 5 | 7 | – | – | 78 | 79 |
| Pamela Kirby | 73 | 72 | 8 | 8 | – | – | 81 | 80 |
| Jane Lodge | 73 | 72 | 23 | 23 | – | – | 96 | 95 |
| Cormac McCarthy | 73 | 72 | 8 | 8 | – | – | 81 | 80 |
| Mark Ryan | 73 | 72 | 8 | 8 | – | – | 81 | 80 |
| Leslie Van de Walle | 73 | 72 | 23 | 23 | 15 | 15 | 111 | 110 |
| Total | 6494 | 574 | 98 | 91 | 248 | 243 | 995 | 908 |
Mark Breuer was appointed as a Director on 9 November 2018.
Caroline Dowling was appointed as a Director on 13 May 2019.
Emma FitzGerald resigned as a Director on 30 October 2018.
Compares to current shareholder approved limit of €850,000.
Tufan Erginbilgic was appointed as a Director on 6 April 2020.
All of the above fees are considered to be fixed remuneration under the Shareholders Rights Directive II.
| Total Directors' Remuneration | Audited Total | |
|---|---|---|
| 2020 €'000 |
2019 €'000 |
|
| Executive Directors | ||
| Salary | 1,380 | 1,352 |
| Benefits | 100 | 104 |
| Bonus | 1,316 | 2,144 |
| Retirement Benefit Expense | 207 | 203 |
| Restricted Retirement Stock | 575 | 575 |
| LTIP | 1,203 | 1,444 |
| Total executive Directors' remuneration | 4,781 | 5,822 |
| Non-executive Directors | ||
| Fees | 995 | 908 |
| Total non-executive Directors' remuneration | 995 | 908 |
| Total Directors' remuneration | 5,776 | 6,730 |
7KHLQWHUHVWVRIWKH'LUHFWRUVDQGWKH&RPSDQ\6HFUHWDU\LQFOXGLQJVKDUHVKHOGE\FRQQHFWHGSHUVRQV LQWKHVKDUHFDSLWDORI'&&SOFDW0DUFK WRJHWKHUZLWKWKHLULQWHUHVWVDW0DUFK DUHVHWRXWEHORZ
| No. of Ordinary Shares At 31 March 2020 |
No. of Ordinary Shares At 31 March 2019 |
|
|---|---|---|
| Directors | ||
| John Moloney | 2,000 | 2,000 |
| Donal Murphy1 | 129,849 | 118,746 |
| Caroline Dowling2 | – | – |
| Mark Breuer | 340 | 340 |
| David Jukes | 94 | 94 |
| Pamela Kirby | 2,500 | 2,500 |
| Jane Lodge | 3,000 | 3,000 |
| Cormac McCarthy | 1,200 | 1,200 |
| Fergal O'Dwyer3 | 213,480 | 211,863 |
| Mark Ryan | 9,696 | 9,696 |
| Leslie Van de Walle | 670 | 670 |
| Emma FitzGerald4 | – | 224 |
| Company Secretary | ||
| Gerard Whyte | 155,000 | 155,000 |
Donal Murphy's 2020 and 2019 holdings include 6,529 and 3,878 shares respectively held under the deferred bonus arrangement as detailed on page 114.
Caroline Dowling was appointed as a Director on 13 May 2019.
Fergal O'Dwyer's 2020 and 2019 holdings include 4,591 and 2,974 shares respectively held under the deferred bonus arrangement as detailed on page 114. In addition to the DERYHKROGLQJV0U2p'Z\HUKDVDULJKWWRVKDUHVXQGHUWKH5HVWULFWHG5HWLUHPHQW6WRFNDUUDQJHPHQWKROGLQJRIVKDUHVRQ0DUFK
Emma FitzGerald resigned as a Director on 30 October 2018. Her holding is at the date of her 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 2020.
There were no changes in the above Directors' and Secretary's interests between 31 March 2020 and 18 May 2020.
The shareholdings held by the executive Directors are substantially in excess of the share ownership guidelines in place, which are set out on page 129 of this Report.
7KH&RPSDQ\pV5HJLVWHURI'LUHFWRUVp,QWHUHVWVZKLFKLVRSHQWRLQVSHFWLRQ FRQWDLQVIXOOGHWDLOVRI'LUHFWRUVpVKDUHKROGLQJVDQGVKDUHRSWLRQV
DCC plc Long Term Incentive Plan 2009
'HWDLOVRIWKHH[HFXWLYH'LUHFWRUVpDQGWKH&RPSDQ\6HFUHWDU\pVDZDUGVLQWKHIRUPRIQRPLQDOFRVWb RSWLRQVXQGHUWKH'&&SOF/RQJ7HUP Incentive Plan 2009 are set out below:
| Market | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| At 31 March 2019 |
Granted in year |
Exercised in year |
Lapsed in year |
At 31 March 2020 |
Date of grant |
Market price on grant |
Three-year performance period end |
Normal exercise period | price at date of exercise £ |
| Executive Directors | |||||||||
| 17,652 | – | – | 0 | 12.11.12 | 12 Nov 2015 – 11 Nov 2019 | £69.51 | |||
| 12,059 | – | – | – | 12,059 | 12.11.13 | 12 Nov 2016 – 11 Nov 2020 | |||
| 16,686 | – | – | – | 16,686 | 12.11.14 | 12 Nov 2019 – 11 Nov 2021 | |||
| 10,830 | – | – | – | 10,830 | 17.11.15 | 17 Nov 2020 – 16 Nov 2022 | |||
| 11,707 | – | – | 9,366 | 10.02.17 | 10 Feb 2022 – 09 Feb 2024 | ||||
| 20,783 | – | – | – | 20,783 | 16.11.17 | 16 Nov 2022 – 15 Nov 2024 | |||
| 24,127 | – | – | – | 24,127 | 15.11.18 | 15 Nov 2023 – 14 Nov 2025 | |||
| – | 21,373 | – | 21,373 | 14.11.19 | 14 Nov 2024 – 13 Nov 2026 | ||||
| 113,844 | 21,373 | (17,652) | (2,341) | 115,224 | |||||
| 17,652 | – | – | 0 | 12.11.12 | 12 Nov 2015 – 11 Nov 2019 | £69.51 | |||
| 12,647 | – | – | 0 | 12.11.13 | 12 Nov 2016 – 11 Nov 2020 | £69.51 | |||
| 17,481 | – | – | – | 17,481 | 12.11.14 | 12 Nov 2019 – 11 Nov 2021 | |||
| 11,138 | – | – | – | 11,138 | 17.11.15 | 17 Nov 2020 – 16 Nov 2022 | |||
| 11,707 | – | – | 9,366 | 10.02.17 | 10 Feb 2022 – 09 Feb 2024 | ||||
| 12,672 | – | – | – | 12,672 | 16.11.17 | 16 Nov 2022 – 15 Nov 2024 | |||
| 14,711 | – | – | – | 14,711 | 15.11.18 | 15 Nov 2023 – 14 Nov 2025 | |||
| – | 13,032 | – | 13,032 | 14.11.19 | 14 Nov 2024 – 13 Nov 2026 | ||||
| 98,008 | 13,032 | (30,299) | (2,341) | 78,400 | |||||
| Company Secretary | |||||||||
| 8,109 | – | – | 0 | 12.11.12 | 12 Nov 2015 – 11 Nov 2019 | £69.51 | |||
| 5,559 | – | – | – | 5,559 | 12.11.13 | 12 Nov 2016 – 11 Nov 2020 | |||
| 5,834 | – | – | – | 5,834 | 12.11.14 | 12 Nov 2019 – 11 Nov 2021 | |||
| 3,574 | – | – | – | 3,574 | 17.11.15 | 17 Nov 2020 – 16 Nov 2022 | |||
| 3,758 | – | – | 3,006 | 10.02.17 | 10 Feb 2022 – 09 Feb 2024 | ||||
| 3,875 | – | – | – | 3,875 | 16.11.17 | 16 Nov 2022 – 15 Nov 2024 | |||
| 5,113 | – | – | – | 5,113 | 15.11.18 | 15 Nov 2023 – 14 Nov 2025 | |||
| – | 4,530 | – | – | 4,530 | 14.11.19 | 14 Nov 2024 – 13 Nov 2026 | |||
| 35,822 | 4,530 | (8,109) | (752) | 31,491 | |||||
| Number of options | €22.66 31 Mar 2015 £28.54 31 Mar 2016 £34.56 31 Mar 2017 £57.35 31 Mar 2018 £67.75 31 Mar 2019 £70.95 31 Mar 2020 £60.65 31 Mar 2021 £68.80 31 Mar 2022 €22.66 31 Mar 2015 £28.54 31 Mar 2016 £34.56 31 Mar 2017 £57.35 31 Mar 2018 £67.75 31 Mar 2019 £70.95 31 Mar 2020 £60.65 31 Mar 2021 £68.80 31 Mar 2022 €22.66 31 Mar 2015 £28.54 31 Mar 2016 £34.56 31 Mar 2017 £57.35 31 Mar 2018 £67.75 31 Mar 2019 £70.95 31 Mar 2020 £60.65 31 Mar 2021 £68.80 31 Mar 2022 |
As at 31 March 2020, the total number of options granted under the LTIP, net of options lapsed, amounted to 1.5% of issued share capital, of which 0.8% is currently outstanding.
The extent of vesting of the LTIP awards which were granted in November 2019 will be based on the three-year performance period from 1 April 2019 to 31 March 2022. The requirements/ranges set by the Remuneration Committee in respect of these performance conditions were set out at page 116 of the 2019 Annual Report.
Strategic Report Governance Financial Statements Supplementary Info
The market price of DCC shares on 31 March 2020 was £51.00 and the range during the year was £38.78 to £74.96.
Additional information in relation to the DCC plc Long Term Incentive Plan 2009 appears in note 2.5 to the financial statements on pages 160 to 161.
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The shareholdings held by the executive Directors as at 31 March 2020, as shown below, are substantially in excess of the guidelines set out on page 119.
| Number of shares held as at |
Shareholding as a multiple of base salary for the year ended |
Share ownership | |
|---|---|---|---|
| Executive | 31 March 2020 | 31 March 2020 | guideline |
| Donal Murphy | 129,849 | 9 | 3 |
| Fergal O'Dwyer | 213,480 | 23 | 2 |
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Fergal O'Dwyer will be retiring from the Company on 17 July 2020. His remuneration arrangements on retirement have been determined in line with the current Policy, the rules of the LTIP and best practice:
The salaries of the executive Directors for the year commencing on 1 April 2020, together with comparative figures, are as follows:
| Executive Director | Year ending 31 March 2021 € |
Year ended 31 March 2020 € |
|---|---|---|
| Donal Murphy | 857,300 | 857,300 |
| Fergal O'Dwyer | 522,750 | 522,750 |
| Kevin Lucey | 450,000 | n/a |
Fergal O'Dwyer will retire as Chief Financial Officer on 17 July 2020 and will be succeeded by Kevin Lucey, whose salary of €450,000 will commence upon his appointment as Chief Financial Officer. The salaries of Donal Murphy and Fergal O'Dwyer are not being increased for the year commencing 1 April 2020.
Benefits payable to the executive Directors for the year ending 31 March 2021 include the use of a company car, life/disability cover, health insurance and club subscriptions.
The Remuneration Committee has maintained the maximum bonus potential that will apply for the year ending 31 March 2021 at 180% for the current executive Directors. Kevin Lucey, on his appointment as a Director and Chief Financial Officer will have a maximum bonus potential of 150%. All of these potentials are below the Policy maximum of 200%, as shown below.
| Executive Director | Maximum bonus potential | Deferral of bonus |
|---|---|---|
| Donal Murphy | 180% of salary | |
| Fergal O'Dwyer | 180% of salary | 33% of any bonus earned by the executive Directors will be deferred into DCC shares and be available after three years. |
| Kevin Lucey | 150% of salary |
As noted earlier, in the case of Mr. O'Dwyer who will retire in July 2020, deferral will not apply.
The extent of payment of bonuses to the executive Directors will be determined as follows:
| Executive Director | Performance Targets |
|---|---|
| Donal Murphy | |
| Fergal O'Dwyer | 70% based on growth in Group adjusted EPS and 30% based on overall contribution and attainment of personal/strategic objectives. |
| Kevin Lucey |
Growth in Group adjusted EPS will be measured against a pre-determined range, with zero payment below threshold up to full payment at the maximum of the range.
The global onset of the Covid-19 pandemic has resulted in target setting for the year ending 31 March 2021 being extremely challenging. Given this very uncertain context, the Remuneration Committee has postponed the setting of the Group adjusted EPS range until later in the first half of the year.
The Committee considers that information on the Group adjusted EPS range and on the personal/strategic objectives is commercially confidential and therefore it will not be disclosed on a prospective basis but, to the extent no longer commercially confidential, will be disclosed on a retrospective basis.
The Committee will keep the performance targets under review in light of acquisition and other development activity during the year ending 31 March 2021.
The Committee has the discretion to reduce bonuses in the event that a pre-determined target return on capital employed is not achieved.
For Donal Murphy and Fergal O'Dwyer, retirement benefits comprise a cash allowance, paid in lieu of contributions to a defined contribution pension plan, at a rate of 15% of base salary.
Kevin Lucey, on his appointment as a Director and Chief Financial Officer, will be entitled to contributions to a defined contribution pension plan at a rate of 14% of base salary.
\$QDPRXQWRIbEHLQJbDQQXDO SURUDWHGIRUWKHSHULRG\$SULOWR-XO\ZLOOEHLQYHVWHGLQVKDUHVLQ0D\DQG released to Mr. O'Dwyer on retirement.
Mr. O'Dwyer will also, on retirement, become the beneficial owner of those shares which were acquired in respect of the years ended 31 March 2018, 0DUFKDQG0DUFKYDOXHRIbSHUDQQXP
The extent of vesting for awards granted during the year commencing 1 April 2020 will be based on the performance conditions set out below. After due consideration, the Remuneration Committee took a decision to postpone the setting of the requirements/ranges for each of the performance conditions until later in the first half of the year, given the uncertainty that the Covid-19 pandemic has created.
8SWRRIDQDZDUGZLOOYHVWGHSHQGLQJRQ52&(DFKLHYHGLQH[FHVVRIWKH*URXSpV:HLJKWHG\$YHUDJH&RVWRI&DSLWDOo:\$&&p RYHUDWKUHH\HDU period, with the Remuneration Committee to set a range for threshold and maximum vesting in respect 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 | % if total award vesting |
|---|---|
| Below % set as threshold | 0% |
| At % set as threshold | 10% |
| Between % set as threshold and % set as maximum | 10% to 40% pro-rata |
| Above % set as maximum | 40% |
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 FRPSDUHGZLWKWKHFKDQJHLQWKH8.5HWDLO3ULFH,QGH[o53,p DVVHWRXWEHORZ7KHLQWHQWLRQLVWKDWWKHVSHFLILHGWKUHVKROGSHUFHQWDJHDQGVSHFLILHG PD[LPXPSHUFHQWDJHOHYHORIH[FHVVRYHU53, ZLOOEHVHWLQUHVSHFWRIHDFKDZDUGLQWKHOLJKWRIGHYHORSPHQWDFWLYLW\LQFOXGLQJDQ\VLJQLILFDQW corporate transactions, three-year plans for the Group and prevailing business and economic circumstances.
| Annualised EPS growth in excess of annualised change in RPI | % if total award vesting |
|---|---|
| Less than % set as threshold | 0% |
| At % set as threshold | 10% |
| Between % set as threshold and % set as maximum | 10% to 40% pro-rata |
| Above % set as maximum | 40% |
However, as noted above, the Remuneration Committee, taking account of the current impact of Covid-19, has deferred any decision on the threshold and maximum ranges for both ROCE and EPS until later in the first half of the year.
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 ending 31 March 2021.
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 100.
| TSR | % if total award vesting |
|---|---|
| Below median | 0% |
| At median | 5% |
| Between median and upper quartile | 5% to 20% pro-rata |
| Above upper quartile | 20% |
For the year ending 31 March 2021, the Committee has agreed that the market value of the shares subject to the options which will be granted WR'RQDO0XUSK\WKH&KLHI([HFXWLYHDQG.HYLQ/XFH\WKH&KLHI)LQDQFLDO2IILFHUIURP-XO\ ZLOOEHXSWRRIEDVHVDODU\
The Board has agreed that non-executive Directors' fees and the Chairman's total fee will not be increased for the year commencing 1 April 2020.
As such, the non-executive Director fee structure for the year ending 31 March 2021 is the same as the prior year as set out below.
| 313,650 &KDLUPDQWRLQFOXGHEDVLFDQG&RPPLWWHHIHHV Basic Fee 73,185 Committee Fees: Audit 8,000 |
313,650 |
|---|---|
| 73,185 | |
| 8,000 | |
| Nomination and Governance 3,000 |
3,000 |
| Remuneration 5,000 |
5,000 |
| Additional Fees: | |
| Audit Committee Chairman 15,000 |
15,000 |
| Remuneration Committee Chairman 15,000 |
15,000 |
| Senior Independent Director Fee 15,000 |
15,000 |
\$WWKHGDWHRIWKLV5HSRUWWKH5HPXQHUDWLRQ Committee comprised five independent QRQH[HFXWLYH'LUHFWRUV/HVOLH9DQGH:DOOH &KDLUPDQ &DUROLQH'RZOLQJ7XIDQ (UJLQELOJLF'DYLG-XNHVDQG3DPHOD.LUE\ DQGWKH&KDLUPDQRIWKH%RDUG-RKQ 0RORQH\7XIDQ(UJLQELOJLFZDVDSSRLQWHG DVDPHPEHURIWKH&RPPLWWHHRQ \$SULO
7KHPHPEHUVRIWKH&RPPLWWHHKDYH VLJQLILFDQWILQDQFLDODQGEXVLQHVVH[SHULHQFH LQFOXGLQJLQWKHDUHDRIH[HFXWLYH UHPXQHUDWLRQ(DFKPHPEHUpVOHQJWKRI WHQXUHDW0DUFKLVVHWRXWLQWKH WDEOHEHORZ)XUWKHUELRJUDSKLFDOGHWDLOV UHJDUGLQJWKHPHPEHUVRIWKH5HPXQHUDWLRQ &RPPLWWHHDUHVHWRXWRQSDJHVDQG
The Committee met five times during the \HDUHQGHG0DUFKDQGDWWHQGDQFH GHWDLOVDUHVHWRXWLQWKHWDEOHRQSDJH of the Corporate Governance Statement.
The Company Secretary is the Secretary to the Remuneration Committee.
Length of tenure on the Remuneration Committee as at 31 March 2020
| Leslie Van de Walle (Chairman) | 9.5 years | |||
|---|---|---|---|---|
| Caroline Dowling | 1 year | |||
| David Jukes | 1.5 years | |||
| Pamela Kirby | 5.8 years | |||
| John Moloney | 5.8 years | |||
The main agenda items for meetings of the Committee 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, review of the changes contained in the 2018 Code and the 2018 UK Regulations, 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. Other 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.
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.
As detailed on page 97, the Board conducts an annual evaluation of its own performance and that of its Committees, Committee Chairmen and individual Directors. The conclusion from the 2020 process was that the performance of the Remuneration Committee and of the Chairman of the Committee were satisfactory. The Committee will focus on agreed actions arising from the 2020 evaluation process.
As noted in the Sustainable Business Report on page 74, 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 the businesses' websites.
During the year, Willis Towers Watson provided advice to the Remuneration Committee 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 2020, Willis Towers Watson received fees of €45,019 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 2020, Mercer received fees of €2,761 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.
| Vote | Total votes cast | Total votes for | Total votes against |
Total abstentions |
|---|---|---|---|---|
| Advisory vote on 2019 Annual Report on Remuneration | 75,841,126 | 74,550,499 | 1,290,627 | 1,083,310 |
This table shows the voting outcome at the 2019 AGM in relation to the Annual Report on Remuneration. The Remuneration Policy was not required to be put to the 2019 AGM.
The Directors of DCC plc present their report and the audited financial statements for the year ended 31 March 2020.
DCC plc is an international sales, marketing and support services group headquartered in Dublin with operations in Europe, North America and Asia. DCC has four divisions – DCC LPG, DCC Retail & Oil, DCC Technology and DCC Healthcare. DCC employs over 13,200 people in 20 countries. DCC's shares are listed on the London Stock Exchange and are included in the FTSE 100 Index.
5HYHQXHIRUWKH\HDUDPRXQWHGWRPLOOLRQPLOOLRQ 7KHSURILWIRUWKH\HDUDWWULEXWDEOHWRRZQHUVRIWKH3DUHQW&RPSDQ\ DPRXQWHGWRPLOOLRQPLOOLRQ \$GMXVWHGHDUQLQJVSHUVKDUHDPRXQWHGWRSHQFHSHQFH )XUWKHUGHWDLOV of the results for the year are set out in the Group Income Statement on page 144.
The Chairman's Statement on pages 6 to 7, the Chief Executive's Review on pages 8 to 11, the Operating Reviews on pages 48 to 73 and the Financial Review on pages 27 to 37 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 2020, 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 206. The Covid-19 situation which emerged earlier this year is having a significant impact on the Group's employees, customers and business operations. The impact is compounded by the fact that the duration and full extent of the pandemic is difficult to predict. Further information is available on page 23.
An interim dividend of 49.48 pence per share, amounting to £49.8 million, was paid on 11 December 2019. The Directors recommend the payment RIDILQDOGLYLGHQGIRUWKH\HDUHQGHG0DUFKRISHQFHSHUVKDUHDPRXQWLQJWRPLOOLRQEDVHGRQWKHQXPEHURIVKDUHVLQLVVXH DW0D\ 6XEMHFWWRVKDUHKROGHUVpDSSURYDODWWKH\$QQXDO*HQHUDO0HHWLQJRQ-XO\WKLVGLYLGHQGZLOOEHSDLGRQ-XO\WR shareholders on the register on 29 May 2020. The total dividend for the year ended 31 March 2020 amounts to 145.27 pence per share, a total of £144.0 million. This represents an increase of 5% 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 2020 are shown in note 4.3 on page 194.
'&&pVDXWKRULVHGVKDUHFDSLWDOLVRUGLQDU\VKDUHVRIbHDFKRIZKLFKVKDUHVH[FOXGLQJWUHDVXU\VKDUHV DQG treasury shares were in issue at 31 March 2020. 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.
7KHQXPEHURIVKDUHVKHOGDVWUHDVXU\VKDUHVDWWKHEHJLQQLQJRIWKH\HDUDQGWKHPD[LPXPQXPEHUKHOGGXULQJWKH\HDU ZDVRI WKHWKHQLVVXHGVKDUHFDSLWDOH[FOXGLQJWUHDVXU\VKDUHV ZLWKDQRPLQDOYDOXHRIbPLOOLRQ
\$WRWDORIVKDUHVRIWKHLVVXHGVKDUHFDSLWDOH[FOXGLQJWUHDVXU\VKDUHV ZLWKDQRPLQDOYDOXHRIbPLOOLRQZHUHUHLVVXHGGXULQJ WKH\HDUFRQVHTXHQWWRWKHH[HUFLVHRIVKDUHRSWLRQVXQGHUWKH'&&SOF/RQJ7HUP,QFHQWLYH3ODQVKDUHVDWDSULFHRIb DQGWKH GHIHUUHGERQXVDUUDQJHPHQWVIRUH[HFXWLYH'LUHFWRUVVKDUHVDWDSULFHRIb OHDYLQJDEDODQFHKHOGDVWUHDVXU\VKDUHVDW0DUFK RIVKDUHVRIWKHLVVXHGVKDUHFDSLWDOH[FOXGLQJWUHDVXU\VKDUHV ZLWKDQRPLQDOYDOXHRIbPLOOLRQ
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These authorities have not been exercised and will expire on 17 July 2020, the date of the next AGM of the Company.
• In addition, the Directors will seek authority to allot additional shares for cash other than strictly pro-rata to existing shareholdings. This proposed DXWKRULW\LVOLPLWHGWRWKHDOORWPHQWRIVKDUHVIRUFDVKXSWRDSSUR[LPDWHO\RIWKHLVVXHGVKDUHFDSLWDOH[FOXGLQJWUHDVXU\VKDUHV DQGZLOORQO\ 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.
7KHILJXUHRIUHIOHFWVWKH3UH(PSWLRQ*URXS6WDWHPHQWRI3ULQFLSOHVIRUWKHGLVDSSOLFDWLRQRISUHHPSWLRQULJKWVWKHo6WDWHPHQW RI3ULQFLSOHVp 7KH'LUHFWRUVZLOOKDYHGXHUHJDUGWRWKH6WDWHPHQWRI3ULQFLSOHVLQUHODWLRQWRDQ\H[HUFLVHRIWKLVSRZHUDQGLQSDUWLFXODU
Details of the share capital of the Company are set out in note 4.1 on page 192 and are deemed to form part of this Report. For the purposes of the (XURSHDQ&RPPXQLWLHV'LUHFWLYH(& 5HJXODWLRQVGHWDLOVLQUHODWLRQWRWKHSXUFKDVHRIWKH&RPSDQ\pVRZQVKDUHVDUHVHWRXWDERYH
3XUVXDQWWRWKH(XURSHDQ8QLRQ'LVFORVXUHRI1RQ)LQDQFLDODQG'LYHUVLW\,QIRUPDWLRQE\FHUWDLQODUJHXQGHUWDNLQJVDQGJURXSV 5HJXODWLRQV the Group is required to report on certain non-financial information to provide an understanding of its development, performance, position and the impact of its activities, relating to, at least, environmental matters, social matters, employee matters, respect for human rights and bribery and corruption. Information on these matters can be found in the following sections of the Annual Report, which are deemed to form part of this Report: the Sustainable Business Report on pages 74 to 83, the Business Model on pages 4 and 5, the Risk Report on pages 18 to 26 and the Key Performance Indicators on pages 14 to 17.
The Board has approved a formal Board Policy on Diversity, which applies to the Board of DCC plc. Details of the policy, its objectives and its application in the current financial year are set out in the Nomination and Governance Committee Report on pages 99 to 102.
8QGHU6HFWLRQ E RIWKH&RPSDQLHV\$FWDQG5HJXODWLRQ F LL RIWKH7UDQVSDUHQF\'LUHFWLYH(& 5HJXODWLRQV'&& is required to give a description of the principal risks and uncertainties facing the Group. These are addressed in the Risk Report on pages 18 to 26.
The names of the Directors and a short biographical note on each Director appear on pages 86 and 87. 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 with a notice period of six months. 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 108 to 133.
The Corporate Governance Statement on pages 90 to 98 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 2018 version of the UK Corporate Governance Code, which applied to the Company for the year ended 31 March 2020.
)RUWKHSXUSRVHVRIWKH(XURSHDQ&RPPXQLWLHV7DNHRYHU%LGV'LUHFWLYH(& 5HJXODWLRQVGHWDLOVFRQFHUQLQJWKHDSSRLQWPHQWDQG the re-election of Directors are set out in the Corporate Governance Statement.
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.
\$OORWKHUJHQHUDOPHHWLQJVDUHFDOOHG([WUDRUGLQDU\*HQHUDO0HHWLQJVo(*0p \$Q(*0FDOOHGIRUWKHSDVVLQJRIDVSHFLDOUHVROXWLRQPXVWEHFDOOHGE\ 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, has the right to requisition a general meeting. A shareholder or a group of shareholders, holding at least 3% of the issued share capital, has the right to put an item on the agenda of an AGM or to table a draft resolution for an item on the agenda of a general meeting.
Due to the continuation of the Irish Government's Covid-19 restrictions in relation to travel and public gatherings and to prioritise the health and safety of our shareholders and employees, the 2020 Annual General Meeting will be held at 11.00 am on 17 July 2020 at DCC House, Leopardstown Road, )R[URFN'XEOLQ,UHODQGZLWKWKHPLQLPXPQHFHVVDU\TXRUXPRIWKUHHVKDUHKROGHUVZKLFKZLOOEHIDFLOLWDWHGE\WKH&KDLUPDQRIWKHPHHWLQJ DQG with revised arrangements in regard to attendance at and the conduct of the meeting.
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.
\$VUHTXLUHGE\6,7UDQVSDUHQF\'LUHFWLYH(& 5HJXODWLRQVWKHIROORZLQJVHFWLRQVRIWKH\$QQXDO5HSRUWVKDOOEHWUHDWHG as forming part of this Report: the Chairman's Statement on pages 6 and 7, the Chief Executive's Review on pages 8 and 11, the Operating Reviews on pages 48 to 73, the Financial Review on pages 27 to 37, the Principal Risks and Uncertainties on pages 22 to 26, the Transparency Report in Statement of Directors' Responsibilities on page 139, the earnings per ordinary share in note 2.11 on page 166, the Key Performance Indicators on pages 14 to 17 and the derivative financial instruments in note 3.10 on pages 176 and 177.
7KH&RPSDQ\KDVEHHQQRWLILHGRIWKHIROORZLQJVKDUHKROGLQJVRIRUPRUHLQWKHLVVXHGVKDUHFDSLWDOH[FOXGLQJWUHDVXU\VKDUHV RIWKH&RPSDQ\ DVDW0DUFKDQG0D)RUWKHSXUSRVHVRIWKH(XURSHDQ&RPPXQLWLHV'LUHFWLYH(& 5HJXODWLRQVGHWDLOVRIWKH substantial shareholdings in the Company are set out below:
| As at 31 March 2020 | As at 18 May 2020 | |||
|---|---|---|---|---|
| No. of €0.25 Ordinary Shares |
% of Issued Share Capital H[FOXGLQJ WUHDVXU\VKDUHV |
No. of €0.25 Ordinary Shares |
% of Issued Share Capital H[FOXGLQJ WUHDVXU\VKDUHV |
|
| FMR LLC and FIL Limited on behalf of its direct and indirect subsidiaries | 10,081,058 | 10.24% | 10,160,863 | 10.33% |
| Allianz Global Investors GmbH | 7,800,599 | 7.93% | 7,622,530 | 7.75% |
| BlackRock, Inc | 7,288,685 | 7.41% | 7,347,845 | 7.47% |
| Pelham Capital Limited | 4,355,822 | 4.43% | 4,105,822 | 4.17% |
| The Capital Group Companies, Inc. | 3,820,836 | 3.88% | 3,775,611 | 3.84% |
| Setanta Asset Management | 3,482,721 | 3.54% | 3,605,045 | 3.66% |
These entities have indicated that the shareholdings are not ultimately beneficially owned by them.
Details of the Company's principal operating subsidiaries are set out on pages 224 to 227.
Certain Group companies are involved in ongoing development work aimed at improving the quality, competitiveness, technology and range of their products.
There were no political contributions which require to be disclosed under the Electoral Act, 1997.
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.
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.
,WLVWKHSROLF\RIWKH&RPSDQ\WRFRPSO\ZLWKLWVUHOHYDQWREOLJDWLRQVDVGHILQHGLQWKH&RPSDQLHV\$FW 7KH'LUHFWRUVFRQILUPWKDWWKHUH LVD&RPSOLDQFH3ROLF\6WDWHPHQWLQSODFHDVGHILQHGLQ6HFWLRQ D RIWKH&RPSDQLHV\$FW
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.
\$VUHTXLUHGE\6HFWLRQ RIWKH&RPSDQLHV\$FWWKH'LUHFWRUVDFNQRZOHGJHWKDWWKH\DUHUHVSRQVLEOHIRUWKH&RPSDQ\pVFRPSOLDQFH 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.
The Company has an Audit Committee, the members of which are set out on page 104.
Each of the Directors individually confirm that:
The auditors, KPMG, who were appointed on 17 July 2015, will continue in office in accordance with the provisions of Section 383 of the Companies Act 2014.
\$VUHTXLUHGXQGHU6HFWLRQ E RIWKH&RPSDQLHV\$FWDUHVROXWLRQDXWKRULVLQJWKH'LUHFWRUVWRGHWHUPLQHWKHUHPXQHUDWLRQRIWKH auditors will be proposed at the 2020 AGM.
Directors 18 May 2020
| 139 |
|---|
| 140 |
| 144 |
| 145 |
| 146 |
| 147 |
| 148 |
| 149 |
| 149 |
| 153 |
| 167 |
| 192 |
| 195 |
| 216 |
| 217 |
| 218 |
| 219 |
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 the 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:
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.
Each of the Directors, whose names and functions are listed on pages 86 and 87 of this Annual Report, confirm that, to the best of each person's knowledge and belief:
On behalf of the Board
John Moloney Donal Murphy Non-executive Chairman Chief Executive
We have audited the financial statements of DCC plc ('the Company') for the year ended 31 March 2020 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 Company 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.
In our opinion:
We conducted our audit in accordance with International Standards on Auditing (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 members on 31 July 2015. The period of total uninterrupted engagement is the five years ended 31 March 2020. 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.
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the 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:
Refer to note 5.9 (accounting policy) and note 3.3 (financial disclosures)
Cash Generating Unit ('CGU'). These cash ƮRZVDUHLQKHUHQWO\KLJKO\MXGJHPHQWDODQG rely on certain key assumptions including future trading performance, future long-term growth rates, and country VSHFLƬFGLVFRXQWUDWHV
Our procedures in respect of this risk were performed as planned. We found that the assumptions applied LQPDQDJHPHQWpVFDVKƮRZIRUHFDVWPRGHOVXVHGLQWKHGHWHUPLQDWLRQRIYDOXHLQXVHZHUHDSSURSULDWH We read the disclosures of key judgements made and found them to be appropriate.
Refer to note 5.9 (accounting policy) and note 5.2 (financial disclosures)
| The key audit matter | How the matter was addressed in our audit |
|---|---|
| During the year ended 31 March 2020, the Group completed a number of acquisitions at a cost of £235 million. |
)RUVLJQLƬFDQWDFTXLVLWLRQVFRPSOHWHGGXULQJWKH\HDURXUDXGLWHQJDJHPHQWWHDPVXSSRUWHGE\ our tax and valuation specialists, challenged the purchase price allocation adjustments, and the LGHQWLƬFDWLRQRIDQGYDOXDWLRQRIDFTXLUHGLQWDQJLEOHDVVHWVDVDOOVXFKHOHPHQWVLQYROYHGVLJQLƬFDQW judgement by management. |
| 6LJQLƬFDQWMXGJHPHQWKDVEHHQH[HUFLVHG by management in establishing the initial HVWLPDWHVRIWKHIDLUYDOXHVRIWKHLGHQWLƬDEOH acquired assets and liabilities together with the goodwill, intangible assets and deferred tax arising on acquisition in preparing their purchase price allocation. |
As part of our procedures we considered: • the appropriateness of the acquisition accounting applied, including the timing at which control was deemed to have passed; • the appropriateness of the fair values ascribed to assets and liabilities of the acquired business by management; • the appropriateness of the period over which intangible assets identified will be amortised; and • the adequacy of the related disclosures in the notes to the financial statements. |
| 6LJQLƬFDQWDXGLWUHVRXUFHVZHUHDOORFDWHGWRWKHVHSURFHGXUHVLQFOXGLQJWKHDXGLWRIWKHRSHQLQJ |
Our audit procedures in respect of this risk were performed as planned and without exception.
balance sheets by our KPMG component teams.
Refer to note 5.9 (accounting policy) and notes 6.4 and 6.5 (financial disclosures)
| The key audit matter | How the matter was addressed in our audit |
|---|---|
| The carrying amount of the Parent Company's investments in and the amounts owed by subsidiary undertakings represents 99% (2019: 95%) of the Parent Company's |
We compared the carrying amount of 100% of amounts included in investments in subsidiaries with the respective subsidiaries' net assets values to identify whether the net assets values, being an approximation of their minimum recoverable amount, were in excess of the carrying amount. |
| total assets. Their recoverability is not a high ULVNRIVLJQLƬFDQWPLVVWDWHPHQWRUVXEMHFW WRVLJQLƬFDQWMXGJHPHQW+RZHYHUGXH to their materiality in the context of the |
We found the carrying amount of the investment in and amounts owed by subsidiaries to be acceptable. |
| 3DUHQW&RPSDQ\ƬQDQFLDOVWDWHPHQWV this is considered to be the area that had WKHJUHDWHVWHƪHFWRQRXURYHUDOO3DUHQW Company audit. |
The materiality for the Group financial statements as a whole was set at £15.4 million. This has been calculated based on 5% of the Group profit before taxation of £311 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 £16.4 million. This was calculated based on 5% of the Group profit before taxation. We report to the Audit Committee all corrected and uncorrected misstatements we identified through our audit with a value in excess of £0.8 million (2019: £0.8 million), in addition to other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds.
Materiality for the Parent Company financial statements as a whole was set at £13 million (2019: £11.8 million), determined with reference to a benchmark of Parent Company total assets of which it represents 0.8% (2019: 0.8%).
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 £5.0 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 liaised extensively with all significant components in order to assess the audit risk and strategy and work undertaken. Video and telephone conference meetings were held with these component auditors, as well as with auditors of other components across the Group. At these 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.
We are required to report to you if:
We have nothing to report in these respects.
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. The other information comprises the information the Directors' Report and the Strategic Report and Governance sections of the Annual Report.
The financial statements and our auditor's report thereon do not comprise part of the other information. 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 in those parts of the Directors' Report specified for our consideration;
We are required to address the following items and report to you in the following circumstances:
In addition, as required by the Companies Act 2014, we report, in relation to information given in the Corporate Governance Statement on pages 90 to 98, that:
We also report that, based on work undertaken for our audit, other information required by the Act is contained in the Corporate Governance Statement.
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 Parent Company were sufficient to permit the financial statements to be readily and properly audited and the financial statements are in agreement with the accounting records.
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 Companies Act 2014 also requires us to report to you if, in our opinion, the Company has not provided the information required by section 5(2) to (7) of the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017 for the year ended 31 March 2020 as required by the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) (amendment) Regulations 2018.
The Listing Rules of the UK Listing Authority require us to review:
• the Directors' statement, set out on page 21, in relation to going concern and longer-term viability;
As explained more fully in their statement set out on page 139, 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.
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
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.
for and on behalf of KPMG Chartered Accountants, Statutory Audit Firm 1 Stokes Place St. Stephen's Green Dublin 2 Ireland
18 May 2020
For the year ended 31 March 2020
| 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Note | Pre exceptionals £'000 |
Exceptionals (note 2.6) £'000 |
Total £'000 |
Pre exceptionals £'000 |
Exceptionals (note 2.6) £'000 |
Total £'000 |
|
| Revenue | 2.1 | 14,755,393 | – | 14,755,393 | 15,226,893 | – | 15,226,893 |
| Cost of sales | (13,015,419) | – | (13,015,419) (13,589,254) | – | (13,589,254) | ||
| Gross profit | 1,739,974 | – | 1,739,974 | 1,637,639 | – | 1,637,639 | |
| Administration expenses | (457,722) | – | (457,722) | (410,388) | – | (410,388) | |
| Selling and distribution expenses | (813,326) | – | (813,326) | (793,514) | – | (793,514) | |
| Other operating income/(expenses) | 2.2 | 25,342 | (65,486) | (40,144) | 26,785 | (28,185) | (1,400) |
| Adjusted operating profit | 2.1 | 494,268 | (65,486) | 428,782 | 460,522 | (28,185) | 432,337 |
| Amortisation of intangible assets | 2.1 | (62,138) | – | (62,138) | (63,312) | – | (63,312) |
| Operating profit | 432,130 | (65,486) | 366,644 | 397,210 | (28,185) | 369,025 | |
| Finance costs | 2.7 | (94,824) | (860) | (95,684) | (83,595) | – | (83,595) |
| Finance income | 2.7 | 39,510 | – | 39,510 | 36,980 | 4,307 | 41,287 |
| Share of equity accounted investments' profit after tax | 2.8 | 1,015 | – | 1,015 | 717 | – | 717 |
| Profit before tax | 377,831 | (66,346) | 311,485 | 351,312 | (23,878) | 327,434 | |
| Income tax expense | 2.9 | (60,625) | 3,290 | (57,335) | (55,617) | (685) | (56,302) |
| Profit after tax for the financial year | 317,206 | (63,056) | 254,150 | 295,695 | (24,563) | 271,132 | |
| Profit attributable to: | |||||||
| Owners of the Parent Company | 308,500 | (62,991) | 245,509 | 287,156 | (24,563) | 262,593 | |
| Non-controlling interests | 8,706 | (65) | 8,641 | 8,539 | – | 8,539 | |
| 317,206 | (63,056) | 254,150 | 295,695 | (24,563) | 271,132 | ||
| Earnings per ordinary share | |||||||
| Basic earnings per share | 2.11 | 249.64p | 280.14p | ||||
| Diluted earnings per share | 2.11 | 249.21p | 279.73p | ||||
The current financial year includes the impact of the adoption of IFRS 16 Leases; the comparatives have not been restated in accordance with transitional guidelines.
For the year ended 31 March 2020
| Note | 2020 £'000 |
2019 £'000 |
|
|---|---|---|---|
| Group profit for the financial year | 254,150 | 271,132 | |
| Other comprehensive income: | |||
| Items that may be reclassified subsequently to profit or loss | |||
| Currency translation: | |||
| – arising in the year | 5,763 | 5,649 | |
| – recycled to the Income Statement on disposal | (397) | – | |
| Movements relating to cash flow hedges | (34,206) | 1,555 | |
| Movement in deferred tax liability on cash flow hedges | 2.9 | 5,816 | (264) |
| (23,024) | 6,940 | ||
| Items that will not be reclassified to profit or loss Group defined benefit pension obligations: |
|||
| – remeasurements | 3.15 | 4,132 | (1,346) |
| – movement in deferred tax asset | 2.9 | (560) | 223 |
| 3,572 | (1,123) | ||
| Other comprehensive income for the financial year, net of tax | (19,452) | 5,817 | |
| Total comprehensive income for the financial year | 234,698 | 276,949 | |
| Attributable to: | |||
| Owners of the Parent Company | 224,496 | 269,387 | |
| Non-controlling interests | 10,202 | 7,562 | |
| 234,698 | 276,949 | ||
As at 31 March 2020
| Note | 2020 £'000 |
2019 £'000 |
|
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 3.1 | 1,089,027 | 996,536 |
| Right-of-use leased assets | 3.2 | 304,097 | – |
| Goodwill | 3.3 | 1,467,150 | 1,445,145 |
| Intangible assets | 3.3 | 659,742 | 624,413 |
| Equity accounted investments | 3.4 | 27,729 | 24,233 |
| Deferred income tax assets | 3.14 | 35,362 | 26,142 |
| Derivative financial instruments | 3.10 | 232,766 | 143,554 |
| 3,815,873 | 3,260,023 | ||
| Current assets | |||
| Inventories | 3.5 | 630,996 | 678,006 |
| Trade and other receivables | 3.6 | 1,647,117 | 1,517,507 |
| Derivative financial instruments | 3.10 | 32,656 | 67,987 |
| Cash and cash equivalents | 3.9 | 1,794,467 | 1,554,093 |
| 4,105,236 | 3,817,593 | ||
| Total assets | 7,921,109 | 7,077,616 | |
| EQUITY | |||
| Capital and reserves attributable to owners of the Parent Company | |||
| Share capital | 4.1 | 17,422 | 17,422 |
| Share premium | 4.1 | 882,887 | 882,561 |
| Share based payment reserve | 4.2 | 34,914 | 28,706 |
| Cash flow hedge reserve | 4.2 | (43,277) | (14,887) |
| Foreign currency translation reserve | 4.2 | 111,527 | 107,722 |
| Other reserves | 4.2 | 932 | 932 |
| Retained earnings | 4.3 | 1,482,288 | 1,368,250 |
| Equity attributable to owners of the Parent Company | 2,486,693 | 2,390,706 | |
| Non-controlling interests | 4.4 | 54,765 | 42,821 |
| Total equity | 2,541,458 | 2,433,527 | |
| LIABILITIES | |||
| Non-current liabilities | |||
| Borrowings | 3.11 | 1,856,004 | 1,441,904 |
| Lease creditors | 3.12 | 259,456 | 452 |
| Derivative financial instruments | 3.10 | 3,729 | 1,122 |
| Deferred income tax liabilities | 3.14 | 179,959 | 174,250 |
| Post-employment benefit obligations | 3.15 | (7,315) | (1,397) |
| Provisions for liabilities | 3.17 | 264,208 | 269,580 |
| Acquisition related liabilities | 3.16 | 77,381 | 73,586 |
| Government grants | 3.18 | 331 | 342 |
| 2,633,753 | 1,959,839 | ||
| Current liabilities | |||
| Trade and other payables | 3.7 | 2,318,758 | 2,218,838 |
| Current income tax liabilities | 36,487 | 49,799 | |
| Borrowings | 3.11 | 230,264 | 331,124 |
| Lease creditors | 3.12 | 47,411 | 449 |
| Derivative financial instruments | 3.10 | 30,144 | 9,008 |
| Provisions for liabilities | 3.17 | 46,581 | 47,208 |
| Acquisition related liabilities | 3.16 | 36,253 | 27,824 |
| 2,745,898 | 2,684,250 | ||
| Total liabilities | 5,379,651 | 4,644,089 | |
| Total equity and liabilities | 7,921,109 | 7,077,616 |
The current financial year includes the impact of the adoption of IFRS 16 Leases; the comparatives have not been restated in accordance with transitional guidelines.
| Attributable to owners of the Parent Company | Non | ||||||
|---|---|---|---|---|---|---|---|
| Share capital (note 4.1) £'000 |
Share premium (note 4.1) £'000 |
Retained earnings (note 4.3) £'000 |
Other reserves (note 4.2) £'000 |
Total £'000 |
controlling interests (note 4.4) £'000 |
Total equity £'000 |
|
| At 1 April 2019 | 17,422 | 882,561 1,368,250 | 122,473 2,390,706 | 42,821 2,433,527 | |||
| Profit for the financial year | – | – | 245,509 | – | 245,509 | 8,641 | 254,150 |
| Other comprehensive income: | |||||||
| Currency translation: | |||||||
| – arising in the year | – | – | – | 4,202 | 4,202 | 1,561 | 5,763 |
| – recycled to the Income Statement on disposal | – | – | – | (397) | (397) | – | (397) |
| Group defined benefit pension obligations: | |||||||
| – remeasurements | – | – | 4,132 | – | 4,132 | – | 4,132 |
| – movement in deferred tax asset | – | – | (560) | – | (560) | – | (560) |
| Movements relating to cash flow hedges | – | – | – | (34,206) | (34,206) | – | (34,206) |
| Movement in deferred tax liability on cash flow hedges | – | – | – | 5,816 | 5,816 | – | 5,816 |
| Total comprehensive income | – | – | 249,081 | (24,585) | 224,496 | 10,202 | 234,698 |
| Re-issue of treasury shares | – | 326 | – | – | 326 | – | 326 |
| Share based payment | – | – | – | 6,208 | 6,208 | – | 6,208 |
| Sale of equity interest to non-controlling interest | – | – | 4,169 | – | 4,169 | 1,742 | 5,911 |
| Dividends | – | – | (139,212) | – | (139,212) | – | (139,212) |
| At 31 March 2020 | 17,422 | 882,887 1,482,288 | 104,096 2,486,693 | 54,765 2,541,458 |
| For the year ended 31 March 2019 | 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 |
Total £'000 |
Non controlling interests (note 4.4) £'000 |
Total equity £'000 |
|
| At 1 April 2018 | 15,455 | 280,533 | 1,237,937 | 108,733 | 1,642,658 | 35,259 | 1,677,917 |
| IFRS 9 transition adjustment | – | – | (3,349) | – | (3,349) | – | (3,349) |
| At 1 April 2018 (restated) | 15,455 | 280,533 | 1,234,588 | 108,733 | 1,639,309 | 35,259 | 1,674,568 |
| Profit for the financial year | – | – | 262,593 | – | 262,593 | 8,539 | 271,132 |
| Other comprehensive income: | |||||||
| Currency translation | – | – | – | 6,626 | 6,626 | (977) | 5,649 |
| Group defined benefit pension obligations: | |||||||
| – remeasurements | – | – | (1,346) | – | (1,346) | – | (1,346) |
| – movement in deferred tax asset | – | – | 223 | – | 223 | – | 223 |
| Movements relating to cash flow hedges | – | – | – | 1,555 | 1,555 | – | 1,555 |
| Movement in deferred tax liability on cash flow hedges | – | – | – | (264) | (264) | – | (264) |
| Total comprehensive income | – | – | 261,470 | 7,917 | 269,387 | 7,562 | 276,949 |
| Issue of share capital | 1,967 | 600,970 | (10,847) | – | 592,090 | – | 592,090 |
| Re-issue of treasury shares | – | 1,058 | – | – | 1,058 | – | 1,058 |
| Share based payment | – | – | – | 5,823 | 5,823 | – | 5,823 |
| Dividends | – | – | (116,961) | – | (116,961) | – | (116,961) |
| At 31 March 2019 | 17,422 | 882,561 | 1,368,250 | 122,473 | 2,390,706 | 42,821 | 2,433,527 |
For the year ended 31 March 2020
| Note | 2020 £'000 |
2019 £'000 |
|
|---|---|---|---|
| Operating activities | |||
| Cash generated from operations before exceptionals | 5.3 | 723,965 | 607,505 |
| Exceptionals | (30,922) | (34,619) | |
| Cash generated from operations Interest paid (including lease interest) |
693,043 (84,975) |
572,886 (78,031) |
|
| Income tax paid | (78,961) | (34,500) | |
| Net cash flow from operating activities | 529,107 | 460,355 | |
| Investing activities | |||
| Inflows: | |||
| Proceeds from disposal of property, plant and equipment | 13,166 | 8,810 | |
| Dividends received from equity accounted investments | – | 420 | |
| Disposals of subsidiaries | 36,688 | 8,492 | |
| Interest received | 39,188 | 34,831 | |
| 89,042 | 52,553 | ||
| Outflows: | |||
| Purchase of property, plant and equipment | (181,014) | (182,311) | |
| Acquisition of subsidiaries | 5.2 | (192,189) | (266,525) |
| Payment of accrued acquisition related liabilities | 3.16 | (35,339) | (30,311) |
| (408,542) | (479,147) | ||
| Net cash flow from investing activities | (319,500) | (426,594) | |
| Financing activities | |||
| Inflows: | |||
| Proceeds from issue of shares | 326 | 593,148 | |
| Net cash inflow on derivative financial instruments | 18,574 | – | |
| Increase in interest-bearing loans and borrowings | 408,095 | 201,357 | |
| Increase in finance lease liabilities | – | 492 | |
| 426,995 | 794,997 | ||
| Outflows: | |||
| Repayment of interest-bearing loans and borrowings | (248,017) | (201,357) | |
| Repayment of lease creditors (principal) | (55,225) | (630) | |
| Dividends paid to owners of the Parent Company | 2.10 | (139,212) | (116,961) |
| (442,454) | (318,948) | ||
| Net cash flow from financing activities | (15,459) | 476,049 | |
| Change in cash and cash equivalents | 194,148 | 509,810 | |
| Translation adjustment | 24,597 | (8,075) | |
| Cash and cash equivalents at beginning of year | 1,466,028 | 964,293 | |
| Cash and cash equivalents at end of year | 3.9 | 1,684,773 | 1,466,028 |
| Cash and cash equivalents consist of: | |||
| Cash and short-term bank deposits | 3.9 | 1,794,467 | 1,554,093 |
| Overdrafts | 3.9 | (109,694) | (88,065) |
| 1,684,773 | 1,466,028 |
The current financial year includes the impact of the adoption of IFRS 16 Leases; the comparatives have not been restated in accordance with transitional guidelines.
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.
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 21 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. DCC plc's shares have a Premium Listing on the Official List of the United Kingdom Listing Authority and are traded solely on the London Stock Exchange.
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 at the date of grant, 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 via fair value hedges 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 2020 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 except for the adoption of IFRS 16 Leases which has been applied in the current financial year only.
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.
The Group has adopted the following standards, interpretations and amendments to existing standards during the financial year:
This standard replaces IAS 17 Leases. The changes under IFRS 16 are significant and predominantly affect lessees, the accounting for which is substantially reformed. The lessor accounting requirements contained in IFRS 16's predecessor, IAS 17, remain largely unchanged. The main impact on lessees is that almost all leases are 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 liability (the lease creditor) to pay rentals are recognised. The only exemptions are short-term leases and low-value leased assets. The standard introduces new estimates and judgemental thresholds that affect the identification, classification and measurement of lease transactions.
The Group adopted IFRS 16 on the transition date of 1 April 2019 using the modified retrospective approach, which means that comparatives do not need to be restated. The Group applied the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:
At transition date, the Group calculated the lease commitments outstanding at that date and applied appropriate discount rates to calculate the present value of the lease commitment which was recognised as a creditor and a right-of-use leased asset on the Group's Balance Sheet. Adjustments were made for any related prepayments, accruals and onerous lease provisions with no adjustment to opening retained earnings. The discount rates applied were arrived at using a methodology to calculate the incremental borrowing rates across the Group. The Group engaged a specialist valuation expert to assist with this process. The weighted average incremental borrowing rate applied to lease creditors on the Consolidated Balance Sheet was 3.0% at 1 April 2019.
In the Income Statement, the Group previously recognised operating lease rentals in operating expenses. Under IFRS 16, a right-of-use leased asset is capitalised and depreciated over the term of the lease as an operating expense with an associated finance cost applied annually to the lease creditor. The Group avails of the exemption from capitalising lease costs for short-term leases and low-value assets where the relevant criteria are met; such lease costs continue to be expensed in the Income Statement as incurred. Wholly variable lease payments directly linked to sales or usage are also expensed as incurred. See note 3.12, Lease Creditors, for further information.
The adoption of IFRS 16 had a material impact on the Group's financial statements as follows:
A reconciliation of the operating lease commitment previously reported under IAS 17 to the discounted lease creditor as at 1 April 2019 under IFRS 16 is as follows:
| As at 1 April 2019 £'000 |
|
|---|---|
| Operating lease commitment under IAS 17 | 376,337 |
| Contracts identified as leases under IFRS 16 | 25,509 |
| Wholly variable leases not capitalised under IFRS 16 | (29,749) |
| Commitments relating to low-value leased assets and short-term leases | (5,017) |
| Impact of discounting | (72,940) |
| Impact of adoption of IFRS 16 | 294,140 |
| Existing IAS 17 finance leases | 901 |
| Discounted lease creditor under IFRS 16 as at 1 April 2019 | 295,041 |
This IFRIC clarifies the accounting for uncertainties in income taxes and is applied to the determination of taxable profit (or tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12 Income Taxes. The adoption of this IFRIC has had an immaterial impact on the Group's financial statements.
The Group has elected to early adopt the amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform issued in September 2019 for the financial year ended 31 March 2020. In accordance with the transition provisions, the amendments have been adopted retrospectively to hedging relationships that existed at the start of the financial year or were designated thereafter, and to the amount accumulated in the cash flow hedge reserve at 1 April 2019. The amendments provide temporary relief from applying specific hedge accounting requirements to hedging relationships directly affected by Interbank Offered Rates ('IBOR') reform. The reliefs have the effect that IBOR reform should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness continues to be recorded in the Income Statement. Furthermore, the amendments set out triggers for when the reliefs will end, which include the uncertainty arising from interest rate benchmark reform no longer being present.
The following changes to IFRS became effective for the Group during the year but did not result in material changes to the Group's consolidated financial statements:
The Group has not applied certain new standards, amendments and interpretations to existing standards that have been issued but are not yet effective. These include:
This section details how the Group accounts for the different types of interests it has in subsidiaries and equity accounted investments.
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.
The Group's interests in equity accounted investments comprise interests in associates. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. 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 ceases.
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.
The preparation of financial statements in conformity with IFRS requires the use of accounting estimates and assumptions. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The Group's main accounting policies affecting its results of operations and financial condition are set out in note 5.9. We continually evaluate our estimates, assumptions and judgements based on available information and experience. As the use of estimates is inherent in financial reporting, actual results could differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis and management has discussed its critical accounting estimates and associated disclosures with the Audit Committee. Management considers the accounting estimates and assumptions discussed below to be its critical accounting estimates ('E') and judgements ('J'):
The Group has capitalised goodwill of £1,467.2 million at 31 March 2020. 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 and estimation 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 3.3.
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.
The Group considers that items of income or expense which are significant by virtue of their scale and nature should be disclosed separately if the Group financial statements are to fairly present the financial performance and financial position of the Group. Determining which transactions are to be considered exceptional in nature is often a subjective matter. However, circumstances that the Group believes would give rise to exceptional items for separate disclosure are outlined in the accounting policy on exceptional items in note 5.9. Exceptional items are included on the Income Statement line item to which they relate. In addition, for clarity, separate disclosure is made of all items in one column on the face of the Group Income Statement.
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 or probability 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.
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 expected credit losses and current information in determining the level of debts for which an allowance for impairment is required. The level of allowance required is reviewed on an ongoing basis.
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 depend 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.
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 £81.0 million at 31 March 2020. 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 2020 the Group has plan assets totalling £88.3 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 3.15.
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 and estimation is used to determine the provisions required and is based on a broad range of information and prior experience.
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 estimates based on the information available to management at the time of determination of the liability and are reassessed at each reporting date.
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.
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.
The Group is organised into four operating segments (as identified under IFRS 8 Operating Segments) and generates revenue through the following activities:
DCC LPG is a leading liquefied petroleum gas ('LPG') sales and marketing business with presences in Europe, North America and Asia and a developing business in the retailing of natural gas and electricity as well as the sales and distribution of industrial gases including refrigerants;
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;
DCC Technology is a leading route-to-market and supply chain partner for global technology brands and customers; and
DCC Healthcare is a leading healthcare business, providing products and services to healthcare providers and health and beauty brand owners.
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.
The segment results for the year ended 31 March 2020 are as follows:
| Year ended 31 March 2020 | |||||
|---|---|---|---|---|---|
| DCC LPG £'000 |
DCC Retail & Oil £'000 |
DCC Technology £'000 |
DCC Healthcare £'000 |
Total £'000 |
|
| Segment revenue | 1,657,341 | 8,607,302 | 3,912,652 | 578,098 | 14,755,393 |
| Adjusted operating profit | 228,230 | 140,240 | 65,280 | 60,518 | 494,268 |
| Amortisation of intangible assets | (32,719) | (5,386) | (19,437) | (4,596) | (62,138) |
| Net operating exceptionals (note 2.6) | (6,030) | (3,281) | (15,404) | (40,771) | (65,486) |
| Operating profit | 189,481 | 131,573 | 30,439 | 15,151 | 366,644 |
| Finance costs | (95,684) | ||||
| Finance income | 39,510 | ||||
| 6KDUHRIHTXLW\DFFRXQWHGLQYHVWPHQWV̖SURILWDIWHUWD[ | 1,015 | ||||
| Profit before income tax | 311,485 | ||||
| Income tax expense | (57,335) | ||||
| Profit for the year | 254,150 |
| Year ended 31 March 2019 | ||||||
|---|---|---|---|---|---|---|
| DCC LPG £'000 |
DCC Retail & Oil £'000 |
DCC Technology £'000 |
DCC Healthcare £'000 |
Total £'000 |
||
| Segment revenue | 1,778,293 | 9,241,281 | 3,630,934 | 576,385 | 15,226,893 | |
| Adjusted operating profit | 201,826 | 133,731 | 64,638 | 60,327 | 460,522 | |
| Amortisation of intangible assets | (31,525) | (10,574) | (14,885) | (6,328) | (63,312) | |
| Net operating exceptionals (note 2.6) | (7,041) | (4,063) | (16,175) | (906) | (28,185) | |
| Operating profit | 163,260 | 119,094 | 33,578 | 53,093 | 369,025 | |
| Finance costs | (83,595) | |||||
| Finance income | 41,287 | |||||
| 6KDUHRIHTXLW\DFFRXQWHGLQYHVWPHQWV̖SURILWDIWHUWD[ | 717 | |||||
| Profit before income tax | 327,434 | |||||
| Income tax expense | (56,302) | |||||
| Profit for the year | 271,132 |
| Balance Sheet items | |
|---|---|
| -- | --------------------- |
| As at 31 March 2020 | |||||
|---|---|---|---|---|---|
| DCC LPG £'000 |
DCC Retail & Oil £'000 |
DCC Technology £'000 |
DCC Healthcare £'000 |
Total £'000 |
|
| Segment assets | 1,896,457 | 1,729,999 | 1,586,451 | 585,222 | 5,798,129 |
| Reconciliation to total assets as reported in the Group Balance Sheet: | |||||
| Equity accounted investments | 27,729 | ||||
| Derivative financial instruments (current and non-current) | 265,422 | ||||
| Deferred income tax assets | 35,362 | ||||
| Cash and cash equivalents | 1,794,467 | ||||
| Total assets as reported in the Group Balance Sheet | 7,921,109 | ||||
| Segment liabilities | 669,395 | 898,539 | 942,925 | 111,362 | 2,622,221 |
| Reconciliation to total liabilities as reported in the Group Balance Sheet: | |||||
| Borrowings (current and non-current) | 2,086,268 | ||||
| Lease creditors (current and non-current) | 306,867 | ||||
| Derivative financial instruments (current and non-current) | 33,873 | ||||
| Income tax liabilities (current and deferred) | 216,446 | ||||
| Acquisition related liabilities (current and non-current) | 113,634 | ||||
| Government grants (current and non-current) | 342 | ||||
| Total liabilities as reported in the Group Balance Sheet | 5,379,651 |
| As at 31 March 2019 | |||||
|---|---|---|---|---|---|
| DCC LPG £'000 |
DCC Retail & Oil £'000 |
DCC Technology £'000 |
DCC Healthcare £'000 |
Total £'000 |
|
| Segment assets | 1,763,899 | 1,702,878 | 1,332,031 | 462,799 | 5,261,607 |
| Reconciliation to total assets as reported in the Group Balance Sheet: | |||||
| Equity accounted investments | 24,233 | ||||
| Derivative financial instruments (current and non-current) | 211,541 | ||||
| Deferred income tax assets | 26,142 | ||||
| Cash and cash equivalents | 1,554,093 | ||||
| Total assets as reported in the Group Balance Sheet | 7,077,616 | ||||
| Segment liabilities | 621,335 | 1,064,881 | 740,906 | 107,096 | 2,534,218 |
| Reconciliation to total liabilities as reported in the Group Balance Sheet: | |||||
| Borrowings (current and non-current) | 1,773,929 | ||||
| Derivative financial instruments (current and non-current) | 10,130 | ||||
| Income tax liabilities (current and deferred) | 224,049 | ||||
| Acquisition related liabilities (current and non-current) | 101,410 | ||||
| Government grants (current and non-current) | 353 | ||||
| Total liabilities as reported in the Group Balance Sheet | 4,644,089 |
Other segment information
| Year ended 31 March 2020 | ||||||
|---|---|---|---|---|---|---|
| DCC LPG £'000 |
DCC Retail & Oil £'000 |
DCC Technology £'000 |
DCC Healthcare £'000 |
Total £'000 |
||
| Capital expenditure – additions (note 3.1) | 73,657 | 69,398 | 19,029 | 22,760 | 184,844 | |
| Capital expenditure – business combinations (note 3.1) | 4,326 | 2,965 | 987 | 25,998 | 34,276 | |
| Depreciation (note 3.1) | 60,121 | 39,509 | 10,576 | 8,339 | 118,545 | |
| Total consideration – business combinations (note 5.2) | 34,905 | 12,529 | 59,696 | 128,103 | 235,233 | |
| Intangible assets acquired – business combinations (note 3.3) | 29,633 | 8,320 | 34,076 | 85,338 | 157,367 | |
| Year ended 31 March 2019 | ||||||
| DCC LPG £'000 |
DCC Retail & Oil £'000 |
DCC Technology £'000 |
DCC Healthcare £'000 |
Total £'000 |
||
| Capital expenditure – additions (note 3.1) | 80,082 | 58,168 | 17,921 | 18,090 | 174,261 | |
| Capital expenditure – business combinations (note 3.1) | 1,144 | 5,955 | 5,692 | – | 12,791 | |
| Depreciation (note 3.1) | 56,291 | 36,109 | 9,759 | 7,467 | 109,626 | |
| Total consideration – business combinations (note 5.2) | 4,632 | 35,828 | 256,011 | – | 296,471 | |
| Intangible assets acquired – business combinations (note 3.3) | 5,737 | 29,781 | 148,273 | – | 183,791 |
The Group has a presence in 20 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 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.
| Revenue | Non-current assets* | |||
|---|---|---|---|---|
| 2020 £'000 |
2019 £'000 |
2020 £'000 |
2019 £'000 |
|
| Republic of Ireland (country of domicile) | 842,680 | 849,795 | 155,712 | 128,138 |
| United Kingdom | 6,818,145 | 7,345,634 | 1,229,019 | 1,118,552 |
| France | 2,875,390 | 2,958,479 | 952,818 | 862,014 |
| Other | 4,219,178 | 4,072,985 | 1,210,196 | 981,623 |
| 14,755,393 | 15,226,893 | 3,547,745 | 3,090,327 |
* Non-current assets comprise goodwill and intangible assets, property, plant and equipment, right-of-use leased assets and equity accounted investments.
The following table disaggregates revenue by primary geographical market, major revenue lines and timing of revenue recognition. The use of revenue as a metric of performance in the Group's LPG and Retail & Oil segments is of limited relevance due to the influence of changes in underlying oil product costs on absolute revenues. Whilst changes in underlying oil product costs will change percentage operating margins, this has little relevance in the downstream energy distribution market in which these two segments operate where profitability is driven by absolute contribution per tonne/litre of product sold, and not a percentage margin. Accordingly, management review geographic volume performance rather than geographic revenue performance for these two segments as country-specific GDP and weather patterns can influence volumes. The disaggregated revenue information presented below for DCC Technology and DCC Healthcare, which can also be influenced by country-specific GDP movements, is consistent with how revenue is reported and reviewed internally.
| Year ended 31 March 2020 | ||||||
|---|---|---|---|---|---|---|
| DCC LPG £'000 |
DCC Retail & Oil £'000 |
DCC Technology £'000 |
DCC Healthcare £'000 |
Total £'000 |
||
| Republic of Ireland (country of domicile) | 116,161 | 356,382 | 277,232 | 92,905 | 842,680 | |
| United Kingdom | 299,645 | 3,753,823 | 2,347,476 | 417,201 | 6,818,145 | |
| France | 843,974 | 1,786,321 | 245,095 | – | 2,875,390 | |
| Other | 397,561 | 2,710,776 | 1,042,849 | 67,992 | 4,219,178 | |
| 1,657,341 | 8,607,302 | 3,912,652 | 578,098 | 14,755,393 | ||
| Products transferred at point in time | 1,657,341 | 8,607,302 | 3,912,652 | 578,098 | 14,755,393 | |
| Products transferred over time | – | – | – | – | – | |
| 1,657,341 | 8,607,302 | 3,912,652 | 578,098 | 14,755,393 | ||
| LPG and related products | 1,657,341 | – | – | – | 1,657,341 | |
| Oil and related products | – | 8,607,302 | – | – | 8,607,302 | |
| Technology products and services | – | – | 3,912,652 | – | 3,912,652 | |
| Medical and pharmaceutical products | – | – | – | 328,597 | 328,597 | |
| Nutrition and health & beauty products | – | – | – | 249,501 | 249,501 | |
| 1,657,341 | 8,607,302 | 3,912,652 | 578,098 | 14,755,393 |
| Year ended 31 March 2019 | |||||||
|---|---|---|---|---|---|---|---|
| DCC LPG £'000 |
DCC Retail & Oil £'000 |
DCC Technology £'000 |
DCC Healthcare £'000 |
Total £'000 |
|||
| Republic of Ireland (country of domicile) | 128,086 | 365,814 | 268,795 | 87,100 | 849,795 | ||
| United Kingdom | 298,731 | 4,125,047 | 2,477,365 | 444,491 | 7,345,634 | ||
| France | 911,829 | 1,835,326 | 211,324 | – | 2,958,479 | ||
| Other | 439,647 | 2,915,094 | 673,450 | 44,794 | 4,072,985 | ||
| 1,778,293 | 9,241,281 | 3,630,934 | 576,385 | 15,226,893 | |||
| Products transferred at point in time | 1,778,293 | 9,241,281 | 3,630,934 | 576,385 | 15,226,893 | ||
| Products transferred over time | – | – | – | – | – | ||
| 1,778,293 | 9,241,281 | 3,630,934 | 576,385 | 15,226,893 | |||
| LPG and related products | 1,778,293 | – | – | – | 1,778,293 | ||
| Oil and related products | – | 9,241,281 | – | – | 9,241,281 | ||
| Technology products and services | – | – | 3,630,934 | – | 3,630,934 | ||
| Medical and pharmaceutical products | – | – | – | 344,955 | 344,955 | ||
| Nutrition and health & beauty products | – | – | – | 231,430 | 231,430 | ||
| 1,778,293 | 9,241,281 | 3,630,934 | 576,385 | 15,226,893 |
This note provides an analysis of the amounts included in other operating income and expenses presented in the Group Income Statement.
Other operating income/(expenses) comprise the following credits/(charges):
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Other operating income/(expenses) | ||
| Fair value gains on non-hedge accounted derivative financial instruments – commodities | 20,389 | 3,179 |
| Fair value gains on non-hedge accounted derivative financial instruments – forward exchange contracts | 1,659 | 1,535 |
| Rental income | 20,149 | 17,016 |
| Profit on disposal of property, plant and equipment | 5,604 | 2,182 |
| Throughput | 5,411 | 6,286 |
| Haulage | 4,110 | 4,211 |
| Fair value losses on non-hedge accounted derivative financial instruments – commodities | (20,389) | (3,179) |
| Fair value losses on non-hedge accounted derivative financial instruments – forward exchange contracts | (1,711) | (1,374) |
| Expensing of employee share options and awards (note 2.5) | (6,208) | (5,823) |
| Other operating (expenses)/income | (3,672) | 2,752 |
| Net other operating income before exceptional items | 25,342 | 26,785 |
| Other operating income included in net exceptional items | 1,297 | 2,537 |
| Other operating expenses included in net exceptional items | (66,783) | (30,722) |
| Total other operating expenses | (40,144) | (1,400) |
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:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Depreciation (note 3.1) | 118,545 | 109,626 |
| Depreciation on right-of-use assets (note 3.2) | 58,189 | – |
| Amortisation of intangible assets (note 3.3) | 62,138 | 63,312 |
| Amortisation of government grants (note 3.18) | (11) | (40) |
| Foreign exchange gain | (1,061) | (30) |
During the year the Group obtained the following services from the Group's auditors (KPMG):
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| KPMG Ireland (statutory auditor): | ||
| Audit fees | 1,542 | 1,527 |
| Tax compliance and advisory services | 24 | 41 |
| 1,566 | 1,568 | |
| Other KPMG network firms: | ||
| Audit fees | 1,388 | 1,213 |
| Tax compliance and advisory services | 62 | 5 |
| 1,450 | 1,218 |
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 number of persons (including executive Directors) employed by the Group during the year, analysed by class of business, was:
| 2020 Number |
2019 Number |
|
|---|---|---|
| DCC LPG | 2,868 | 2,808 |
| DCC Retail & Oil | 3,453 | 3,503 |
| DCC Technology | 4,122 | 3,822 |
| DCC Healthcare | 2,330 | 2,285 |
| 12,773 | 12,418 |
The employee benefit expense (excluding termination payments – note 2.6) for the above were:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Wages and salaries | 501,469 | 480,954 |
| Social welfare costs | 71,367 | 69,096 |
| Share based payment expense (note 2.5) | 6,208 | 5,823 |
| Pension costs – defined contribution plans | 18,574 | 16,667 |
| Pension costs – defined benefit plans (note 3.15) | 471 | 571 |
| 598,089 | 573,111 |
Directors' emoluments (which are included in operating costs) and interests are presented in the Remuneration Report on pages 108 to 133. Details of the compensation of key management personnel for the purposes of the disclosure requirements under IAS 24 are provided in note 5.6.
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 £6.208 million (2019: £5.823 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.
The total share option expense is analysed as follows:
| Number of | Expense in Income Statement | ||||||
|---|---|---|---|---|---|---|---|
| Date of grant | Minimum share awards/ Grant duration of options price vesting period granted value |
Weighted average fair |
2020 £'000 |
2019 £'000 |
|||
| DCC plc Long Term Incentive Plan 2009 | |||||||
| 12 November 2014 | £34.56 | 5 years | 192,407 | £26.96 | 672 | 1,054 | |
| 17 November 2015 | £57.35 | 5 years | 131,455 | £49.56 | 1,125 | 1,305 | |
| 10 February 2017 | £67.75 | 5 years | 137,269 | £54.17 | 973 | 1,506 | |
| 16 November 2017 | £70.95 | 5 years | 128,451 | £56.52 | 1,394 | 1,446 | |
| 15 November 2018 | £60.65 | 5 years | 167,567 | £46.13 | 1,518 | 512 | |
| 14 November 2019 | £68.80 | 5 years | 147,939 | £53.32 | 526 | – | |
| Total expense | 6,208 | 5,823 |
At 31 March 2020, under the DCC plc Long Term Incentive Plan 2009, Group employees hold awards to subscribe for 757,460 ordinary shares.
The general terms of the DCC plc Long Term Incentive Plan 2009 are set out in the Remuneration Report on pages 130 and 131.
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:
| 2020 Number of share awards |
2019 Number of share awards |
|---|---|
| At 1 April 798,603 |
719,170 |
| Granted 147,939 |
167,567 |
| Exercised (138,939) |
(73,094) |
| Expired and forfeited (50,143) |
(15,040) |
| At 31 March 757,460 |
798,603 |
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 £67.16 (2019: £69.66). The share awards outstanding at the year end have a weighted average remaining contractual life of 4.4 years (2019: 4.3 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 2020 | £53.32 |
|---|---|
| Granted during the year ended 31 March 2019 | £46.13 |
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:
| 2020 | 2019 |
|---|---|
| Risk-free interest rate (%) 0.47 |
0.92 |
| Dividend yield (%) 2.1 |
1.8 |
| Expected volatility (%) 21.0 |
21.0 |
| Expected life in years 6.0 |
6.0 |
| Share price at date of grant £68.80 |
£60.65 |
The risk free rate of return is the yield on government bonds of a term consistent with the assumed option life. The dividend yield is based on historic dividend rates. The expected volatility is based on historic volatility over the past three years. The expected life is the average expected period to exercise.
Analysis of closing balance:
| Date of grant | Date of expiry | 2020 Number of share awards |
2019 Number of share awards |
|---|---|---|---|
| 12 November 2012 | 12 November 2019 | – | 62,853 |
| 12 November 2013 | 12 November 2020 | 26,381 | 44,594 |
| 12 November 2014 | 12 November 2021 | 87,413 | 143,881 |
| 17 November 2015 | 17 November 2022 | 110,371 | 118,526 |
| 10 February 2017 | 10 February 2024 | 92,566 | 134,550 |
| 16 November 2017 | 16 November 2024 | 126,225 | 127,634 |
| 15 November 2018 | 15 November 2025 | 166,565 | 166,565 |
| 14 November 2019 | 14 November 2026 | 147,939 | – |
| Total outstanding at 31 March | 757,460 | 798,603 | |
| Total exercisable at 31 March | 113,794 | 107,447 |
The remaining 55,000 outstanding basic tier options under the DCC plc 1998 Employee Share Option Scheme were exercised during the year ended 31 March 2019. The weighted average share price at the dates of exercise for share options exercised during the prior year ended 31 March 2019 under the DCC plc 1998 Employee Share Option Scheme was £72.91.
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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Loss on disposal | (34,709) | – |
| Restructuring costs | (22,011) | (19,430) |
| Acquisition and related costs | (8,286) | (9,564) |
| Adjustments to contingent acquisition consideration (note 3.16) | 673 | 1,727 |
| Other operating exceptional items | (1,153) | (918) |
| Net operating exceptional items | (65,486) | (28,185) |
| Mark-to-market of swaps and related debt (note 2.7) | (860) | 4,307 |
| Net exceptional items before taxation | (66,346) | (23,878) |
| Income tax credit/(charge) attaching to exceptional items | 3,290 | (685) |
| Net exceptional items after taxation | (63,056) | (24,563) |
| Non-controlling interest share of net exceptional items after taxation | 65 | – |
| Net exceptional items attributable to owners of the Parent Company | (62,991) | (24,563) |
In September 2019, DCC Healthcare completed the disposal of DCC Vital's UK generic pharma activities and related manufacturing facility in Ireland (Kent Pharma and Athlone Laboratories). The disposal sharpens the strategic focus of DCC Vital, allowing it to concentrate on those areas where it has market-leading positions and sustainable competitive advantage, in particular in the sales, marketing and distribution of medical products in Britain and Ireland. Whilst part of the DCC Group, the cash flows generated by the disposed business more than recovered its acquisition cost, however, the transaction resulted in a loss on disposal of £34.709 million, principally representing proceeds received of £28.777 million, a non-cash impairment of the goodwill recognised on the initial acquisition of the business of £46.781 million together with costs, recycled currency translation and net tangible assets disposed of £16.705 million.
Restructuring and integration costs of £22.011 million principally relate to restructuring of operations related to the integration of completed acquisitions across a number of businesses, including within the LPG business in Britain and Ireland and the Technology business in the UK, and smaller restructuring costs in other businesses. The other significant contributor is ongoing dual running costs relating to the UK SAP implementation which is live in an element of the UK business and to which the remaining components of the business will transition on a phased basis during the upcoming summer months.
Acquisition and related costs include the professional fees and tax costs relating to the evaluation and completion of acquisition opportunities and amounted to £8.286 million.
Most of the Group's debt has been raised in the US private placement market, denominated in US dollars, euro and sterling. Long-term interest and cross currency interest rate derivatives have been utilised to achieve an appropriate mix of fixed and floating rate debt across the three currencies. The level of ineffectiveness calculated under IAS 39 on the fair value and cash flow hedge relationships relating to this debt is charged or credited as an exceptional item. In the year ended 31 March 2020, this amounted to an exceptional non-cash charge of £0.860 million. Following this charge, the cumulative net exceptional charge taken in respect of the Group's outstanding US Private Placement debt and related hedging instruments is £2.134 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.
There was a related income tax credit of £3.290 million and non controlling interest credit of £0.065 million in relation to certain exceptional charges.
The net cash flow impact in the current year for exceptional items was an inflow of £5.766 million (2019: an outflow of £26.127 million).
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 borrowings and lease creditors. 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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Finance costs | ||
| On bank loans, overdrafts and Unsecured Notes | (75,373) | (72,650) |
| Unwinding of discount applicable to lease creditors (note 3.12) | (8,635) | (29) |
| Unwinding of discount applicable to acquisition related liabilities (note 3.16) | (1,439) | (805) |
| Unwinding of discount applicable to provisions for liabilities (note 3.17) | (1,741) | (2,481) |
| Facility fees | (2,023) | (1,905) |
| Other interest | (5,613) | (5,725) |
| (94,824) | (83,595) | |
| Mark-to-market of swaps and related debt* | (860) | – |
| (95,684) | (83,595) | |
| Finance income | ||
| Interest on cash and term deposits | 8,805 | 3,030 |
| Net income on interest rate and currency swaps | 30,609 | 33,726 |
| Net interest income on defined benefit pension schemes (note 3.15) | 96 | 75 |
| Other income | – | 149 |
| 39,510 | 36,980 | |
| Mark-to-market of swaps and related debt* | – | 4,307 |
| 39,510 | 41,287 | |
| Net finance cost | (56,174) | (42,308) |
| * Mark-to-market of swaps and related debt | ||
| Interest rate swaps designated as fair value hedges | 11,924 | 12,359 |
| Cross currency interest rate swaps designated as fair value hedges | 59,202 | 76,211 |
| Adjusted hedged fixed rate debt | (71,986) | (84,829) |
| Mark-to-market of swaps designated as fair value hedges and related debt | (860) | 3,741 |
| Movement on cross currency interest rate swaps designated as cash flow hedges | 31,874 | 24,732 |
| Transferred to cash flow hedge reserve | (31,874) | (24,166) |
| – | 566 | |
| Total mark-to-market of swaps and related debt | (860) | 4,307 |
Share of equity accounted investments' profit after tax represents the results of businesses we do not control, but instead exercise significant influence and generally have an equity holding of up to 50%.
The Group's share of equity accounted investments' (i.e. 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: | 2020 £'000 |
2019 £'000 |
|---|---|---|
| Revenue | 35,030 | 30,706 |
| Operating profit and profit before tax | 1,146 | 831 |
| Income tax expense | (131) | (114) |
| Profit after tax | 1,015 | 717 |
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 assets and liabilities.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Current taxation | ||
| Irish corporation tax at 12.5% | 8,619 | 5,251 |
| United Kingdom corporation tax at 19% (2019: 19%) | 14,442 | 15,790 |
| Other overseas tax | 53,004 | 49,627 |
| Income tax credit attaching to exceptional items | (3,163) | – |
| Over provision in respect of prior years | (8,335) | (3,889) |
| Total current taxation | 64,567 | 66,779 |
| Deferred tax | ||
| Irish at 12.5% | 937 | 218 |
| United Kingdom at 19% (2019: 17%) | 2,612 | 278 |
| Other overseas deferred tax | (12,780) | (10,472) |
| Deferred tax (credit)/charge attaching to exceptional items | (127) | 685 |
| Under/(over) provision in respect of prior years | 2,126 | (1,186) |
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Deferred tax relating to defined benefit pension obligations | 560 | (223) |
| Deferred tax relating to cash flow hedges | (5,816) | 264 |
| Total deferred tax recognised in Other Comprehensive Income | (5,256) | 41 |
Total deferred tax (7,232) (10,477) Total income tax expense 57,335 56,302
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Profit before taxation | 311,485 | 327,434 |
| Less: share of equity accounted investments' profit after tax | (1,015) | (717) |
| Add back: amortisation of intangible assets | 62,138 | 63,312 |
| Profit before share of equity accounted investments' profit after tax and amortisation of intangible assets | 372,608 | 390,029 |
| Add back: net exceptional items before tax | 66,346 | 23,878 |
| Profit before share of equity accounted investments' profit after tax, amortisation of intangible assets and net exceptionals | 438,954 | 413,907 |
| Profit before share of equity accounted investments' profit after tax and amortisation of intangible assets | 372,608 | 390,029 |
| At the standard rate of corporation tax in Ireland of 12.5% | 46,576 | 48,754 |
| Adjustments in respect of prior years | (6,209) | (5,075) |
| Effect of earnings taxed at higher rates | 33,644 | 25,286 |
| Other differences | 611 | 1,399 |
| Income tax expense | 74,622 | 70,364 |
| Income tax attaching to exceptional items | (3,290) | 685 |
| Deferred tax attaching to amortisation of intangible assets | (13,997) | (14,747) |
| Total income tax expense | 57,335 | 56,302 |
| 2020 % |
2019 % |
|
| Income tax expense as a percentage of profit before share of equity accounted investments' profit after tax, amortisation of intangible assets and net exceptionals |
17.0% | 17.0% |
| Impact of share of equity accounted investments' profit after tax, amortisation of intangible assets and net exceptionals | 1.4% | 0.2% |
Total income tax expense as a percentage of profit before tax 18.4% 17.2%
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 French corporate income tax rate of 34.4% applied for the year ended 31 March 2020. 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.
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: | 2020 £'000 |
2019 £'000 |
|---|---|---|
| Final: paid 93.37 pence per share on 18 July 2019 (2019: paid 82.09 pence per share on 19 July 2018) | 89,424 | 73,108 |
| Interim: paid 49.48 pence per share on 11 December 2019 (2019: paid 44.98 pence per share on 12 December 2018) | 49,788 | 43,853 |
| 139,212 | 116,961 |
The Directors are proposing a final dividend in respect of the year ended 31 March 2020 of 95.79 pence per ordinary share (£94.259 million). This proposed dividend is subject to approval by the shareholders at the Annual General Meeting.
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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Profit attributable to owners of the Parent Company | 245,509 | 262,593 |
| Amortisation of intangible assets after tax | 48,141 | 48,565 |
| Exceptionals after tax (note 2.6) | 62,991 | 24,563 |
| Adjusted profit after taxation and non-controlling interests | 356,641 | 335,721 |
| Basic earnings per ordinary share | 2020 pence |
2019 pence |
| Basic earnings per ordinary share | 249.64p | 280.14p |
| Amortisation of intangible assets after tax | 48.95p | 51.81p |
| Exceptionals after tax | 64.05p | 26.21p |
| Adjusted basic earnings per ordinary share | 362.64p | 358.16p |
| Weighted average number of ordinary shares in issue (thousands) | 98,345 | 93,736 |
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 | 2020 pence |
2019 pence |
|---|---|---|
| Diluted earnings per ordinary share | 249.21p | 279.73p |
| Amortisation of intangible assets after tax | 48.87p | 51.73p |
| Exceptionals after tax | 63.94p | 26.17p |
| Adjusted diluted earnings per ordinary share | 362.02p | 357.63p |
| Weighted average number of ordinary shares in issue (thousands) | 98,514 | 93,874 |
The earnings used for the purposes of the diluted earnings per ordinary share calculations were £245.509 million (2019: £262.593 million) and £356.641 million (2019: £335.721 million) for the purposes of the adjusted diluted earnings per ordinary share calculations.
The weighted average number of ordinary shares used in calculating the diluted earnings per ordinary share for the year ended 31 March 2020 was 98.514 million (2019: 93.874 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:
| 2020 Ś |
2019 Ś |
|
|---|---|---|
| Weighted average number of ordinary shares in issue | 98,345 | 93,736 |
| Dilutive effect of options and awards | 169 | 138 |
| Weighted average number of ordinary shares for diluted earnings per share | 98,514 | 93,874 |
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. 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.
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.
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 2020 | |||||
| Opening net book amount | 353,671 | 490,288 | 89,763 | 62,814 | 996,536 |
| Effect of adopting IFRS 16 | – | (396) | (489) | (646) | (1,531) |
| Exchange differences | (1,448) | 6,029 | 1,230 | 1,199 | 7,010 |
| Arising on acquisition (note 5.2) | 16,176 | 14,920 | 1,620 | 1,560 | 34,276 |
| Disposal of subsidiaries | (2,890) | (3,076) | (35) | – | (6,001) |
| Additions | 24,442 | 116,228 | 31,530 | 12,644 | 184,844 |
| Disposals | (1,628) | (1,602) | (3,058) | (1,274) | (7,562) |
| Depreciation charge | (12,991) | (73,027) | (20,325) | (12,202) | (118,545) |
| Closing net book amount | 375,332 | 549,364 | 100,236 | 64,095 | 1,089,027 |
| At 31 March 2020 | |||||
| Cost | 435,837 | 1,118,428 | 235,895 | 151,331 | 1,941,491 |
| Accumulated depreciation and impairment losses | (60,505) | (569,064) | (135,659) | (87,236) | (852,464) |
| Net book amount | 375,332 | 549,364 | 100,236 | 64,095 | 1,089,027 |
| Year ended 31 March 2019 | |||||
| Opening net book amount | 330,393 | 456,330 | 79,533 | 66,782 | 933,038 |
| Exchange differences | (2,953) | (1,812) | (972) | 289 | (5,448) |
| Arising on acquisition (note 5.2) | 5,107 | 228 | 6,706 | 750 | 12,791 |
| Disposal of subsidiaries | (163) | (925) | – | (764) | (1,852) |
| Additions | 36,270 | 100,013 | 27,641 | 10,337 | 174,261 |
| Disposals | (1,870) | (3,155) | (1,058) | (545) | (6,628) |
| Depreciation charge | (11,978) | (63,743) | (19,721) | (14,184) | (109,626) |
| Reclassifications | (1,135) | 3,352 | (2,366) | 149 | – |
| Closing net book amount | 353,671 | 490,288 | 89,763 | 62,814 | 996,536 |
| At 31 March 2019 | |||||
| Cost | 404,675 | 998,228 | 202,913 | 152,110 | 1,757,926 |
| Accumulated depreciation and impairment losses | (51,004) | (507,940) | (113,150) | (89,296) | (761,390) |
| Net book amount | 353,671 | 490,288 | 89,763 | 62,814 | 996,536 |
The Group adopted IFRS 16 Leases with effect from 1 April 2019. At the date of transition, the Group calculated the lease commitments outstanding at that date and applied appropriate discount rates to calculate the present value of the lease commitment which was recognised as a right-of-use leased asset (and a lease creditor) on the Group's Balance Sheet. This note details the right-of-use assets utilised by the Group to generate revenues and profits. 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 2020 | |||||
| Opening net book amount | – | – | – | – | – |
| Effect of adopting IFRS 16 | 255,212 | 1,967 | 234 | 39,393 | 296,806 |
| Exchange differences | 2,270 | 39 | 4 | (53) | 2,260 |
| Arising on acquisition (note 5.2) | 17,338 | – | – | 377 | 17,715 |
| Additions (note 3.12) | 37,460 | 2,654 | 447 | 6,139 | 46,700 |
| Disposals | (879) | (73) | (28) | (215) | (1,195) |
| Depreciation charge | (38,348) | (1,114) | (192) | (18,535) | (58,189) |
| Closing net book amount | 273,053 | 3,473 | 465 | 27,106 | 304,097 |
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.
| Goodwill £'000 |
Customer & supplier related intangibles £'000 |
Brand related intangibles £'000 |
Total £'000 |
|
|---|---|---|---|---|
| Year ended 31 March 2020 | ||||
| Opening net book amount | 1,445,145 | 450,600 | 173,813 | 2,069,558 |
| Exchange differences | 10,410 | 12,456 | 6,020 | 28,886 |
| Write-down of goodwill* | (20,000) | – | – | (20,000) |
| Arising on acquisition (note 5.2) | 78,376 | 76,626 | 2,365 | 157,367 |
| Disposal of subsidiary | (46,781) | – | – | (46,781) |
| Amortisation charge | – | (55,399) | (6,739) | (62,138) |
| Closing net book amount | 1,467,150 | 484,283 | 175,459 | 2,126,892 |
| At 31 March 2020 | ||||
| Cost | 1,506,619 | 774,972 | 200,429 | 2,482,020 |
| Accumulated amortisation and impairment losses | (39,469) | (290,689) | (24,970) | (355,128) |
| Net book amount | 1,467,150 | 484,283 | 175,459 | 2,126,892 |
* Goodwill arising on an acquisition completed in the year ended 31 March 2019 has been reduced by £20.0 million during the year. This adjustment was matched by the receipt of a corresponding amount of proceeds under a related warranty claim. Both amounts were accounted for through the current year Income Statement with no net effect.
| Goodwill £'000 |
Customer & supplier related intangibles £'000 |
Brand related intangibles £'000 |
Total £'000 |
|
|---|---|---|---|---|
| Year ended 31 March 2019 | ||||
| Opening net book amount (restated) | 1,342,783 | 430,920 | 180,128 | 1,953,831 |
| Exchange differences | (5,001) | 4,247 | (1,623) | (2,377) |
| Arising on acquisition (note 5.2) | 109,738 | 72,157 | 1,896 | 183,791 |
| Disposal of subsidiary | (6,381) | – | – | (6,381) |
| Adjustments to contingent consideration (note 3.16) | 4,006 | – | – | 4,006 |
| Amortisation charge | – | (56,724) | (6,588) | (63,312) |
| Closing net book amount | 1,445,145 | 450,600 | 173,813 | 2,069,558 |
| At 31 March 2019 | ||||
| Cost | 1,483,785 | 677,231 | 191,496 | 2,352,512 |
| Accumulated amortisation and impairment losses | (38,640) | (226,631) | (17,683) | (282,954) |
| Net book amount | 1,445,145 | 450,600 | 173,813 | 2,069,558 |
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 12.6 years (2019: 12.9 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 28.2 years (2019: 29.2 years). There are no internally generated brand related intangibles recognised on the Group Balance Sheet.
In accordance with IAS 38 Intangible Assets, details of individually significant intangible assets and their remaining amortisation periods as at 31 March 2020 are as follows:
| Customer & supplier related intangibles |
Remaining amortisation period in |
Brand related intangibles |
Remaining amortisation period in |
||
|---|---|---|---|---|---|
| Segment | £'000 | years | £'000 | years | |
| Butagaz | DCC LPG | 127,261 | 10.5 years | 123,271 | 35.5 years |
| DSG Hong Kong & Macau | DCC LPG | 71,599 | 22.8 years | – | – |
| DCC Propane | DCC LPG | 39,623 | 12.1 years | 18,279 | 17.9 years |
| Esso Retail Norway | DCC Retail & Oil | 40,827 | 17.6 years | – | – |
| TEGA | DCC LPG | 30,971 | 11.9 years | 16,913 | 18.0 years |
| Gaz Européen | DCC LPG | 28,188 | 8.8 years | 11,116 | 16.8 years |
| Jam | DCC Technology | 30,070 | 7.4 years | 1,862 | 18.4 years |
| Others | 115,744 | 4,018 | |||
| Closing net book amount | 484,283 | 175,459 |
In accordance with IAS 38 Intangible Assets, details of individually significant intangible assets and their remaining amortisation periods as at 31 March 2019 are as follows:
| CGU | Segment | Customer & supplier related intangibles £'000 |
Remaining amortisation period in years |
Brand related intangibles £'000 |
Remaining amortisation period in years |
|---|---|---|---|---|---|
| Butagaz | DCC LPG | 134,963 | 11.5 years | 122,726 | 36.5 years |
| DSG Hong Kong & Macau | DCC LPG | 69,710 | 23.8 years | – | – |
| DCC Propane | DCC LPG | 38,306 | 13.0 years | 17,926 | 19.0 years |
| Esso Retail Norway | DCC Retail & Oil | 49,787 | 18.6 years | – | – |
| TEGA | DCC LPG | 32,762 | 12.8 years | 17,286 | 19.0 years |
| Gaz Européen | DCC LPG | 30,384 | 9.8 years | 11,403 | 17.8 years |
| Jam | DCC Technology | 32,221 | 8.4 years | 1,854 | 19.4 years |
| Others | 62,467 | 2,618 | |||
| Closing net book amount | 450,600 | 173,813 |
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 35 CGUs (2019: 31 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.
| Cash-generating units | Goodwill | |||
|---|---|---|---|---|
| 2020 number |
2019 number |
2020 £'000 |
2019 £'000 |
|
| DCC LPG | 9 | 9 | 478,046 | 452,242 |
| DCC Retail & Oil | 9 | 9 | 545,498 | 551,970 |
| DCC Technology | 10 | 8 | 215,507 | 215,044 |
| DCC Healthcare | 7 | 5 | 228,099 | 225,889 |
| 35 | 31 | 1,467,150 | 1,445,145 |
In accordance with IAS 36 Impairment of Assets, the CGUs to which significant amounts of goodwill have been allocated are as follows:
| CGU | Segment | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Certas Energy UK Group | DCC Retail & Oil | 279,177 | 275,367 |
| Butagaz | DCC LPG | 193,126 | 186,729 |
| DCC Vital Group | DCC Healthcare | 139,141 | 173,434 |
| Esso Retail Norway | DCC Retail & Oil | 106,523 | 122,379 |
| Exertis UK Group | DCC Technology | 101,592 | 115,640 |
| Others | 647,591 | 571,596 | |
| Closing net book amount | 1,467,150 | 1,445,145 |
For the purpose of impairment testing, the discount rates applied to these CGUs to which significant amounts of goodwill have been allocated were 8.8% (2019: 9.3%) for the Certas Energy UK Group, Butagaz and Esso Norway, 10.1% (2019: 10.6%) for the DCC Vital Group and 10.2% (2019: 10.7%) for the Exertis UK Group. The long-term growth rates assumed for the Certas Energy UK, DCC Vital and Exertis UK Groups was 1.5% and no growth was assumed for Butagaz or Esso Norway. The remaining goodwill balance of £647.591 million is allocated across 30 CGUs (2019: £571.596 million over 26 CGUs), none of which are individually significant.
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 based on the 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 longterm growth rate used in the impairment testing was 1.3% (2019: 1.3%).
Management have given consideration to its assessment of impairment risk given that the preparation and Board approval of the Group's three year plans was completed before the global spread of Covid-19 which began before the end of the Group's financial year ending 31 March 2020. Whilst the full financial impact of the crisis is impossible to predict with a high degree of certainty, the risk of impairment of goodwill at the balance sheet date due to the impact of Covid-19 was considered and cash flows extracted from the three year plans were adjusted in line with Management's judgement and estimation.
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 8.8% to 10.2% (2019: 9.3% to 10.7%) and reflect the fact that the forecasting risk associated with Covid-19 was included in the adjusted cash flows.
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.
Applying these techniques, no impairment charge arose in 2020 (2019: nil).
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 33 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 a CGU which forms part of the DCC Retail & Oil segment, the value in use of £246.8 million represented an excess of £17.8 million over its carrying value of £229.0 million. In relation to a CGU which forms part of the DCC Technology segment, the value in use of £57.9 million represented an excess of £1.1 million over its carrying value of £56.8 million. The table below identifies the amounts by which each of the key assumptions must change in order for the recoverable amount of each CGU to be equal to its carrying amount:
| CGU in DCC Retail & Oil |
CGU in DCC Technology |
|
|---|---|---|
| Increase in discount rate | 0.6 percentage points | 0.2 percentage points |
| Reduction in long-term growth rate | 0.8 percentage points | 0.2 percentage points |
| Reduction in cash flow | 8% | 1% |
Equity accounted investments represent the Group's interests in certain entities where we exercise significant influence and generally have an equity holding of up to 50%.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| At 1 April | 24,233 | 24,461 |
| Acquisition of equity accounted investments (note 5.2) | 1,646 | 164 |
| Share of profit after tax | 1,015 | 717 |
| Dividends received | – | (420) |
| Exchange and other | 835 | (689) |
| At 31 March | 27,729 | 24,233 |
Investments in associates at 31 March 2020 include goodwill of £19.094 million (2019: £17.351 million).
Summarised financial information for the Group's share of its investment in associates which are accounted for using the equity method is as follows:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Non-current assets | 37,410 | 31,840 |
| Current assets | 6,924 | 5,739 |
| Non-current liabilities | (819) | – |
| Current liabilities | (15,786) | (13,346) |
| 27,729 | 24,233 |
Details of the Group's principal associates are included in the Group Directory on page 227.
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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Raw materials | 64,871 | 85,577 |
| Work in progress | 4,284 | 4,810 |
| Finished goods | 561,841 | 587,619 |
| 630,996 | 678,006 |
Write-downs of inventories recognised as an expense within cost of sales amounted to £7.3 million (2019: £7.2 million) and arose in the normal course of activities.
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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Trade receivables | 1,428,578 | 1,321,570 |
| Allowance for impairment of trade receivables | (36,744) | (33,367) |
| Prepayments and accrued income | 134,432 | 126,827 |
| Value-added tax recoverable | 26,734 | 27,888 |
| Other debtors | 94,117 | 74,589 |
| 1,647,117 | 1,517,507 |
Information about the Group's exposure to credit and market risks, and impairment losses for trade receivables is included in note 5.7. Included in the Group's trade and other receivables as at 31 March 2020 are balances of £249.868 million (2019: £171.212 million) which are past due at the reporting date but not impaired and are expected to be fully recoverable. The aged analysis of these balances is as follows:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Less than 1 month overdue | 158,914 | 118,036 |
| 1 – 3 months overdue | 46,702 | 34,250 |
| 3 – 6 months overdue | 35,060 | 14,212 |
| Over 6 months overdue | 9,192 | 4,714 |
| 249,868 | 171,212 |
The movement in the allowance for impairment of trade receivables during the year is as follows:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| At 1 April | 33,367 | 22,120 |
| IFRS 9 transition adjustment | – | 3,349 |
| At 1 April (restated) | 33,367 | 25,469 |
| Allowance for impairment recognised in the year | 10,644 | 12,240 |
| Subsequent recovery of amounts previously provided for | (1,002) | (1,213) |
| Amounts written off during the year | (7,803) | (8,199) |
| Arising on acquisition | 883 | 5,427 |
| Exchange | 655 | (357) |
| At 31 March | 36,744 | 33,367 |
The vast majority of the allowance for impairment relates to trade and other receivables balances which are over six months overdue.
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 12 months.
| 2020 £'000 |
2019 £'000 |
|---|---|
| Trade payables 1,673,409 |
1,664,664 |
| Other creditors and accruals 517,775 |
426,865 |
| PAYE and National Insurance or equivalent 16,160 |
19,564 |
| Value-added tax 93,156 |
99,845 |
| Government grants (note 3.18) 11 |
11 |
| Interest payable 11,963 |
5,058 |
| Amounts due in respect of property, plant and equipment 6,284 |
2,831 |
| 2,318,758 | 2,218,838 |
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.
| Inventories £'000 |
Trade and other receivables £'000 |
Trade and other payables £'000 |
Total £'000 |
|
|---|---|---|---|---|
| Year ended 31 March 2020 | ||||
| At 1 April 2019 | 678,006 | 1,517,507 | (2,218,838) | (23,325) |
| Translation adjustment | 10,026 | 20,813 | (21,356) | 9,483 |
| Arising on acquisition (note 5.2) | 44,307 | 65,888 | (59,626) | 50,569 |
| Disposal of subsidiaries | (12,522) | (9,426) | 9,703 | (12,245) |
| Effect of adopting IFRS 16 | – | (1,913) | 124 | (1,789) |
| Exceptional items, interest accruals, capital accruals and other | (2,113) | 226 | (12,261) | (14,148) |
| (Decrease)/increase in working capital (note 5.3) | (86,708) | 54,022 | (16,504) | (49,190) |
| At 31 March 2020 | 630,996 | 1,647,117 | (2,318,758) | (40,645) |
| Year ended 31 March 2019 | ||||
| At 1 April 2018 | 530,473 | 1,426,217 | (2,063,260) | (106,570) |
| IFRS 9 transition adjustment | – | (3,349) | – | (3,349) |
| At 1 April 2018 (restated) | 530,473 | 1,422,868 | (2,063,260) | (109,919) |
| Translation adjustment | (2,343) | (15,398) | 18,377 | 636 |
| Arising on acquisition (note 5.2) | 104,591 | 141,388 | (129,118) | 116,861 |
| Disposal of subsidiaries | (559) | (8,280) | 8,263 | (576) |
| Exceptional items, interest accruals, capital accruals and other | – | 70 | 7,068 | 7,138 |
| Increase/(decrease) in working capital (note 5.3) | 45,844 | (23,141) | (60,168) | (37,465) |
| At 31 March 2019 | 678,006 | 1,517,507 | (2,218,838) | (23,325) |
The majority of the Group's cash and cash equivalents are held in deposit accounts with maturities of up to three months.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Cash at bank and in hand | 616,229 | 526,546 |
| Short-term deposits | 1,178,238 | 1,027,547 |
| 1,794,467 | 1,554,093 |
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:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Cash and short-term deposits | 1,794,467 | 1,554,093 |
| Bank overdrafts | (109,694) | (88,065) |
| 1,684,773 | 1,466,028 |
Bank overdrafts are included within current borrowings (note 3.11) in the Group Balance Sheet.
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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Non-current assets | ||
| Cross currency interest rate swaps – fair value hedges | 145,983 | 101,158 |
| Cross currency interest rate swaps – cash flow hedges | 58,209 | 25,477 |
| Interest rate swaps – fair value hedges | 28,530 | 16,878 |
| Commodity forward contracts – cash flow hedges | 44 | 41 |
| 232,766 | 143,554 | |
| Current assets | ||
| Cross currency interest rate swaps – fair value hedges | 10,430 | 62,482 |
| Currency swaps – not designated as hedges | 1,379 | 27 |
| Foreign exchange forward contracts – cash flow hedges | 1,581 | 316 |
| Foreign exchange forward contracts – not designated as hedges | 115 | 36 |
| Commodity forward contracts – cash flow hedges | 750 | 3,248 |
| Commodity forward contracts – not designated as hedges | 18,401 | 1,878 |
| 32,656 | 67,987 | |
| Total assets | 265,422 | 211,541 |
| Non-current liabilities | ||
| Interest rate swaps – fair value hedges | – | (273) |
| Commodity forward contracts – cash flow hedges | (3,729) | (849) |
| (3,729) | (1,122) | |
| Current liabilities | ||
| Currency swaps – not designated as hedges | (3) | (531) |
| Foreign exchange forward contracts – cash flow hedges | (1,419) | (338) |
| Foreign exchange forward contracts – not designated as hedges | (138) | (26) |
| Commodity forward contracts – cash flow hedges | (27,946) | (6,235) |
| Commodity forward contracts – not designated as hedges | (638) | (1,878) |
| (30,144) | (9,008) | |
| Total liabilities | (33,873) | (10,130) |
| Net asset arising on derivative financial instruments | 231,549 | 201,411 |
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 12 months and as a current asset or current liability if the maturity of the hedged item is less than 12 months.
The notional principal amounts of the outstanding interest rate swap contracts designated as fair value hedges under IAS 39 at 31 March 2020 total £197.5 million and €300.0 million. At 31 March 2020, the fixed interest rates vary from 1.96% to 4.49% and the floating rates are based on sterling LIBOR and EURIBOR.
The Group utilises cross currency interest rate swaps to swap fixed rate US dollar denominated debt of \$783.0 million into floating rate sterling debt of £156.885 million and floating rate euro debt of €401.338 million. At 31 March 2020 the fixed interest rates vary from 3.41% to 5.81%. These swaps are designated as fair value hedges under IAS 39.
The Group utilises cross currency interest rate swaps to swap fixed rate US dollar denominated debt of \$317.0 million into fixed rate sterling debt of £61.189 million and fixed rate euro debt of €163.045 million. At 31 March 2020 the fixed US dollar 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.
During the year ended 31 March 2020, the Group entered into currency swaps to manage currency risk related to the funding of certain acquisitions. The principal amounts of outstanding currency swaps at 31 March 2020 total £40.254 million (2019: £40.557 million).
The notional principal amounts of outstanding forward foreign exchange contracts at 31 March 2020 total £104.011 million (2019: £79.141 million). Gains and losses recognised in the cash flow hedge reserve in equity (note 4.2) at 31 March 2020 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 12 months after the reporting date.
The notional principal amounts of outstanding forward commodity contracts at 31 March 2020 total £280.662 million (2019: £170.099 million). Gains and losses recognised in the cash flow hedge reserve in equity (note 4.2) at 31 March 2020 on forward commodity contracts designated as cash flow hedges under IAS 39 will be released to the Income Statement at various dates up to 47 months after the reporting date.
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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Non-current | ||
| Lease creditors (note 3.12) | 259,456 | 452 |
| Unsecured Notes | 1,856,004 | 1,441,904 |
| Total non-current borrowings and lease creditors | 2,115,460 | 1,442,356 |
| Current | ||
| Bank borrowings | 166,328 | 88,065 |
| Unsecured Notes | 63,936 | 243,059 |
| Total borrowings | 230,264 | 331,124 |
| Lease creditors (note 3.12) | 47,411 | 449 |
| Total current borrowings and lease creditors | 277,675 | 331,573 |
| Total borrowings and lease creditors | 2,393,135 | 1,773,929 |
The maturity of non-current borrowings is as follows:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Between 1 and 2 years | 207,653 | 59,843 |
| Between 2 and 5 years | 743,678 | 411,190 |
| Over 5 years | 1,164,129 | 971,323 |
| 2,115,460 | 1,442,356 |
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 Group has a £400 million five-year committed revolving credit facility with nine relationship banks: Barclays, BNP Paribas, Danske Bank, HSBC, ING, J.P. Morgan, RBS, Bank of Ireland and Deutsche Bank. The facility matures in March 2023 and £343.4 million remained undrawn at 31 March 2020. The Group had various other uncommitted bank facilities available at 31 March 2020.
The Group's Unsecured Notes which fall due between 2020 and 2034 are comprised of fixed rate debt of US\$59.0 million issued in 2010 and maturing in 2022 (the '2022 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'), floating rate debt of €145.0 million issued in September 2017 and maturing in 2024, 2027 and 2029 (the '2024/27/29 Notes') and fixed rate debt of US\$350.0 million and €100.0 million issued in April 2019 and maturing in 2026, 2029, 2031 and 2034 (the '2026/29/31/34 Notes').
Of the 2022 Notes denominated in US dollars, \$44.0 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 \$15.0 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 2026/29/31/34 Notes have not been swapped.
The maturity and interest profile of the Unsecured Notes is as follows:
| 2020 | 2019 |
|---|---|
| Average maturity 6.1 years |
6.4 years |
| Average fixed interest rates*: – US\$ denominated 4.42% |
4.69% |
| – sterling denominated 3.36% |
3.36% |
| – euro denominated 2.33% |
2.33% |
| Average floating rate including swaps: | |
| – sterling denominated 2.53% |
2.56% |
| – euro denominated 1.17% |
1.31% |
* Issued and repayable at par.
6
The Group adopted IFRS 16 Leases with effect from 1 April 2019. At the date of transition, the Group calculated the lease commitments outstanding at that date and applied appropriate discount rates to calculate the present value of the lease commitment which was recognised as a lease creditor (and a right-of-use leased asset) on the Group's Balance Sheet.
The movement in the Group's lease creditors during the year ended 31 March 2020 is as follows:
| 2020 £'000 |
|
|---|---|
| At 1 April 2019 | 901 |
| Effect of adopting IFRS 16 | 294,140 |
| Exchange differences | 1,474 |
| Additions of right-of-use assets (note 3.2) | 46,700 |
| Disposals | (589) |
| Arising on acquisition (note 5.2) | 19,466 |
| Lease repayments | (63,860) |
| Unwinding of discount applicable to lease creditors (note 2.7) | 8,635 |
| At 31 March 2020 | 306,867 |
An analysis of the maturity profile of the discounted lease creditor arising from the Group's leasing activities as at 31 March 2020 is as follows:
| 2020 £'000 |
|
|---|---|
| Within one year | 47,411 |
| Between one and two years | 40,131 |
| Between two and five years | 90,905 |
| Over five years | 128,420 |
| At 31 March 2020 | 306,867 |
| Analysed as: | |
| Non-current liabilities | 259,456 |
| Current liabilities | 47,411 |
| 306,867 |
The Group has availed of the exemption from capitalising lease costs for short-term leases and low-value assets where the relevant criteria are met. Wholly variable lease payments directly linked to sales or usage are also expensed as incurred. The following lease costs have been charged to the Income Statement as incurred:
| 2020 £'000 |
|
|---|---|
| Short-term leases | 7,931 |
| Leases of low-value assets | 483 |
| Wholly variable lease payments (not included in lease creditors) | 50,304 |
| Total | 58,718 |
The total cash outflow for lease payments during the period was as follows:
| 2020 £'000 |
|
|---|---|
| Cash outflow for short-term leases, leases of low value assets and wholly variable lease payments | 58,718 |
| Lease payments relating to capitalised right-of-use leased assets | 63,860 |
| Total cash outflow for lease payments | 122,578 |
Lease commitments for short-term leases are similar to the portfolio of short-term leases for which costs were expensed to the Income Statement. Certain contracts within the Group contain variable payment terms. The overall financial effect of using variable payment terms is that higher levels of activity result in higher wholly variable lease payments.
The effect of excluding future cash outflows arising from termination options and leases not yet commenced from lease creditors was not material for the Group. Income from subleasing and gains/losses on sales and leaseback transactions were not material for the Group.
Future minimum rentals payable under non-cancellable operating leases at 31 March 2019 are as follows:
| 2019 £'000 |
|
|---|---|
| Within one year | 60,079 |
| After one year but not more than five years | 154,225 |
| More than five years | 162,033 |
| 376,337 |
The Group entered into operating leases for a range of assets, primarily comprising property and motor vehicles. During the year ended 31 March 2019, £65.971 million was recognised as an expense in the Income Statement in respect of operating leases.
Future minimum lease payments under finance leases together with the present value of the net minimum lease payments as at 31 March 2019 were as follows:
| 2019 | ||
|---|---|---|
| Minimum payments £'000 |
Present value of payments £'000 |
|
| Within one year | 454 | 449 |
| After one year but not more than five years | 469 | 452 |
| 923 | 901 | |
| Less: amounts allocated to future finance costs | (22) | – |
| Present value of minimum lease payments | 901 | 901 |
| 2019 £'000 |
||
| Operating lease rentals: | ||
| – land and buildings | 51,800 | |
| – plant and machinery | 1,437 | |
| – motor vehicles | 12,734 |
65,971
Net (debt)/cash is a key metric of the Group and represents cash and cash equivalents less borrowings, derivative financial instruments and lease creditors.
The reconciliation of opening to closing net debt for the year ended 31 March 2020 is as follows:
| Fair value adjustment | |||||||
|---|---|---|---|---|---|---|---|
| At 1 April 2019 £'000 |
Adoption of IFRS 16 £'000 |
Cash/debt movements £'000 |
Income Statement £'000 |
Cash Flow Hedge Reserve £'000 |
Translation adjustment £'000 |
At 31 March 2020 £'000 |
|
| Cash and short-term deposits | 1,554,093 | – | 214,596 | – | – | 25,778 | 1,794,467 |
| Overdrafts | (88,065) | – | (20,448) | – | – | (1,181) | (109,694) |
| 1,466,028 | – | 194,148 | – | – | 24,597 | 1,684,773 | |
| Bank loans and loan notes | – | – | (54,885) | – | – | (1,749) | (56,634) |
| Unsecured Notes | (1,684,963) | – | (105,193) | (71,986) | – | (57,798) | (1,919,940) |
| Derivative financial instruments (net) | 201,411 | – | 13,669 | 71,126 | (55,481) | 824 | 231,549 |
| Group net debt (excl. lease creditors) | (17,524) | – | 47,739 | (860) | (55,481) | (34,126) | (60,252) |
| Lease creditors | (901) | (294,140) | (10,352) | – | – | (1,474) | (306,867) |
| Group net debt (incl. lease creditors) | (18,425) | (294,140) | 37,387 | (860) | (55,481) | (35,600) | (367,119) |
The reconciliation of opening to closing net debt for the year ended 31 March 2019 is as follows:
| Fair value adjustment | ||||||
|---|---|---|---|---|---|---|
| At 1 April 2018 £'000 |
Cash/debt movements £'000 |
Income Statement £'000 |
Cash Flow Hedge Reserve £'000 |
Translation adjustment £'000 |
At 31 March 2019 £'000 |
|
| Cash and short-term deposits | 1,038,827 | 523,013 | – | – | (7,747) | 1,554,093 |
| Overdrafts | (74,534) | (13,203) | – | – | (328) | (88,065) |
| 964,293 | 509,810 | – | – | (8,075) | 1,466,028 | |
| Unsecured Notes | (1,597,829) | – | (84,829) | – | (2,305) | (1,684,963) |
| Derivative financial instruments (net) | 91,929 | (3,334) | 89,136 | 24,166 | (486) | 201,411 |
| Group net debt (excl. finance leases) | (541,607) | 506,476 | 4,307 | 24,166 | (10,866) | (17,524) |
| Finance leases | (1,055) | 138 | – | – | 16 | (901) |
| Group net debt (incl. finance leases) | (542,662) | 506,614 | 4,307 | 24,166 | (10,850) | (18,425) |
The currency profile of net debt at 31 March 2020 and 31 March 2019 is as follows:
| equivalents £'000 |
lease creditors* £'000 |
Derivatives £'000 |
Total £'000 |
|---|---|---|---|
| As at 31 March 2020 | |||
| Euro 531,402 |
(1,263,225) | 143,631 | (588,192) |
| Sterling 754,180 |
(714,676) | 72,665 | 112,169 |
| US dollar 327,699 |
(373,258) | (2,465) | (48,024) |
| Danish krone 56,269 |
(8,198) | 17,778 | 65,849 |
| Swedish krona 43,724 |
(19,231) | – | 24,493 |
| Norwegian krone 36,484 |
(11,782) | (60) | 24,642 |
| Hong Kong dollar 23,610 |
(1,048) | – | 22,562 |
| Other 21,099 |
(1,717) | – | 19,382 |
| At 31 March 2020 1,794,467 |
(2,393,135) | 231,549 | (367,119) |
| As at 31 March 2019 | |||
| Euro 420,643 |
(1,015,769) | 102,924 | (492,202) |
| Sterling 883,529 |
(730,745) | 99,214 | 251,998 |
| US dollar 110,849 |
(26,834) | (718) | 83,297 |
| Danish krone | 54,877 | (2) | (7) | 54,868 |
|---|---|---|---|---|
| Swedish krona | 29,764 | (579) | (1) | 29,184 |
| Norwegian krone | 19,537 | – | (1) | 19,536 |
| Hong Kong dollar | 26,178 | – | – | 26,178 |
| Other | 8,716 | – | – | 8,716 |
| At 31 March 2019 | 1,554,093 | (1,773,929) | 201,411 | (18,425) |
* Euro, sterling and US dollar borrowings reflect the cross currency interest rate swaps referred to in note 3.10.
Cash and cash equivalents at 31 March 2020 and 31 March 2019 have maturity periods up to three months (note 3.9).
Bank borrowings are at floating interest rates for periods less than three months while the Group's Unsecured Notes due 2020 to 2034 comprises debt swapped to a combination of fixed rates and floating rates which reset on a quarterly and semi-annual basis, and debt which has not been swapped.
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 2020:
| 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 2019 | 17,562 | 145,127 | (1,442) | 23 | (3,271) | (9,891) | 148,108 |
| Consolidated Income Statement | 7,873 | (13,259) | 627 | 580 | (127) | (2,926) | (7,232) |
| Recognised in Other Comprehensive Income | – | – | – | 560 | (5,816) | – | (5,256) |
| Arising on acquisition (note 5.2) | 372 | 5,018 | (96) | – | – | 29 | 5,323 |
| Exchange differences and other | 551 | 3,489 | (8) | (9) | – | (369) | 3,654 |
| At 31 March 2020 | 26,358 | 140,375 | (919) | 1,154 | (9,214) | (13,157) | 144,597 |
| Analysed as: | |||||||
|---|---|---|---|---|---|---|---|
| Deferred tax asset | (2,866) | (78) | (919) | (588) | (9,214) | (21,697) | (35,362) |
| Deferred tax liability | 29,224 | 140,453 | – | 1,742 | – | 8,540 | 179,959 |
| 26,358 | 140,375 | (919) | 1,154 | (9,214) | (13,157) | 144,597 |
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 2019:
| 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 2018 (restated) | 14,265 | 142,601 | (836) | 935 | (3,740) | (9,958) | 143,267 |
| Consolidated Income Statement | 4,065 | (15,535) | (95) | (801) | 685 | 1,204 | (10,477) |
| Recognised in Other Comprehensive Income | – | – | – | (223) | 264 | – | 41 |
| Arising on acquisition (note 5.2) | (770) | 19,051 | (474) | 100 | – | (1,187) | 16,720 |
| Exchange differences and other | 2 | (990) | (37) | 12 | (480) | 50 | (1,443) |
| At 31 March 2019 | 17,562 | 145,127 | (1,442) | 23 | (3,271) | (9,891) | 148,108 |
| Analysed as: | |||||||
| Deferred tax asset | (7,192) | (83) | (1,442) | (1,460) | (3,271) | (12,694) | (26,142) |
| Deferred tax liability | 24,754 | 145,210 | – | 1,483 | – | 2,803 | 174,250 |
| 17,562 | 145,127 | (1,442) | 23 | (3,271) | (9,891) | 148,108 |
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 2020 of £35.362 million is expected to be settled/recovered more than 12 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.
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 ('ROI'), 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 31 August 2015 and 1 April 2019. 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 2020 for IAS 19 by a qualified actuary.
The schemes expose the Group to a number of risks, the most significant of which are as follows:
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.
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.
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.
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:
| 2020 | 2019 |
|---|---|
| Republic of Ireland schemes | |
| Rate of increase in salaries n/a* |
n/a* |
| Rate of increase in pensions in payment 1.10% – 2.50% |
1.25% – 2.50% |
| Discount rate 1.80% |
1.75% |
| Inflation assumption 1.10% |
1.75% |
| UK schemes | |
| Rate of increase in salaries 0.00% – 2.55% |
0.00% – 3.25% |
| Rate of increase in pensions in payment 1.28% – 4.00% |
1.63% – 4.00% |
| Inflation assumption 2.55% |
3.25% |
|---|---|
| Rate of increase in salaries | 2.10% | 2.50% |
|---|---|---|
| Rate of increase in pensions in payment | 1.10% | 1.25% – 1.70% |
| Discount rate | 1.80% | 1.75% |
| Inflation assumption | 1.10% | 1.75% |
Discount rate 2.30% 2.50%
* There is no future service accrual for the Irish schemes.
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:
| 2020 Years |
2019 Years |
|
|---|---|---|
| Current retirees | ||
| Male | 23.3 | 23.2 |
| Female | 25.2 | 25.1 |
| Future retirees | ||
| Male | 25.7 | 25.6 |
| Female | 27.6 | 27.5 |
The Group does not operate any post-employment medical benefit schemes.
The net pension asset recognised in the Balance Sheet is analysed as follows:
| 2020 | ||||
|---|---|---|---|---|
| ROI £'000 |
UK £'000 |
Germany £'000 |
Total £'000 |
|
| Equities | 11,651 | 2,668 | – | 14,319 |
| Bonds | 39,052 | 13,879 | – | 52,931 |
| Property | 36 | – | – | 36 |
| Investment funds | 3,222 | 10,662 | – | 13,884 |
| Cash | 5,203 | 1,092 | 886 | 7,181 |
| Total fair value at 31 March 2020 | 59,164 | 28,301 | 886 | 88,351 |
| Present value of scheme liabilities | (47,438) | (23,729) | (9,869) | (81,036) |
| Net pension asset/(liability) at 31 March 2020 | 11,726 | 4,572 | (8,983) | 7,315 |
| 2019 | ||||
|---|---|---|---|---|
| ROI £'000 |
UK £'000 |
Germany £'000 |
Total £'000 |
|
| Equities | 14,497 | 7,370 | – | 21,867 |
| Bonds | 34,741 | 21,295 | – | 56,036 |
| Property | 53 | – | – | 53 |
| Investment funds | 3,107 | 3,067 | – | 6,174 |
| Cash | 5,494 | 1,600 | 823 | 7,917 |
| Total fair value at 31 March 2019 | 57,892 | 33,332 | 823 | 92,047 |
| Present value of scheme liabilities | (49,858) | (30,107) | (10,685) | (90,650) |
| Net pension asset/(liability) at 31 March 2019 | 8,034 | 3,225 | (9,862) | 1,397 |
The amounts recognised in the Group Income Statement in respect of defined benefit pension schemes are as follows:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Current service cost | (318) | (335) |
| Past service cost | – | (193) |
| Administration expenses | (153) | (43) |
| Total, included in employee benefit expense (note 2.4) | (471) | (571) |
| Interest cost on scheme liabilities | (1,801) | (2,004) |
| Interest income on scheme assets | 1,897 | 2,079 |
| Net interest income, included in net finance costs (note 2.7) | 96 | 75 |
Based on the assumptions employed for the valuation of assets and liabilities at 31 March 2020, the net charge in the Group Income Statement in the year ending 31 March 2021 is expected to be broadly in line with the current year figures.
Remeasurements recognised in Other Comprehensive Income are as follows:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Return on scheme assets excluding interest income | (4,520) | 3,300 |
| Experience variations | 2,581 | 369 |
| Actuarial gain/(loss) from changes in financial assumptions | 6,071 | (5,015) |
| Total, included in Other Comprehensive Income | 4,132 | (1,346) |
Cumulatively since transition to IFRS on 1 April 2004, £48.367 million has been recognised as a charge in the Group Statement of Comprehensive Income.
The movement in the fair value of plan assets is as follows:
| £'000 | £'000 |
|---|---|
| At 1 April 92,047 |
89,651 |
| Interest income on scheme assets 1,897 |
2,079 |
| Remeasurements: | |
| – return on scheme assets excluding interest income (4,520) |
3,300 |
| Contributions by employers 2,144 |
2,920 |
| Contributions by members 11 |
9 |
| Administration expenses (153) |
(43) |
| Benefit and settlement payments (4,988) |
(4,719) |
| Exchange 1,913 |
(1,150) |
| At 31 March 88,351 |
92,047 |
The actual return on plan assets was a loss of £2.623 million (2019: gain of £5.379 million).
The movement in the present value of defined benefit obligations is as follows:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| At 1 April | 90,650 | 89,365 |
| Current service cost | 318 | 335 |
| Past service cost | – | 193 |
| Interest cost | 1,801 | 2,004 |
| Remeasurements: | ||
| – experience variations | (2,581) | (369) |
| – actuarial (gain)/loss from changes in financial assumptions | (6,071) | 5,015 |
| Contributions by members | 11 | 9 |
| Benefit and settlement payments | (4,988) | (4,719) |
| Exchange | 1,896 | (1,183) |
| At 31 March | 81,036 | 90,650 |
The weighted average duration of the defined benefit obligation at 31 March 2020 was 18.9 years (2019: 20.3 years).
Employer contributions for the forthcoming financial year are estimated at £0.6 million. The difference between the actual employer contributions paid in the current year of £2.1 million and the expectation of £1.7 million included in the 2019 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 2019 financial statements.
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, UK and German 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 4.5% | Decrease/increase by 5.2% | Decrease/increase by 4.7% |
| Price inflation | Increase/decrease by 0.25% | Increase/decrease by 2.5% | Increase/decrease by 4.5% | Increase/decrease by 4.4% |
| Mortality | Increase/decrease by one year | Increase/decrease by 3.4% | Increase/decrease by 3.9% | Increase/decrease by 4.3% |
| Republic of Ireland | UK | Germany | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 2020 £'000 |
2019 £'000 |
2020 £'000 |
2019 £'000 |
2020 £'000 |
2019 £'000 |
2020 £'000 |
2019 £'000 |
|
| Investments quoted in active markets: | ||||||||
| Equity instruments: | ||||||||
| – developed markets | 11,203 | 13,863 | 2,668 | 7,003 | – | – | 13,871 | 20,866 |
| – emerging markets | 448 | 634 | – | 367 | – | – | 448 | 1,001 |
| Debt instruments: | ||||||||
| – non government debt instruments | 2,406 | – | 12,316 | 19,859 | – | – | 14,722 | 19,859 |
| – government debt instruments | 36,646 | 34,741 | 1,563 | 1,436 | – | – | 38,209 | 36,177 |
| Investment funds | 3,222 | 3,107 | 10,662 | 3,067 | – | – | 13,884 | 6,174 |
| Cash and cash equivalents | 5,203 | 5,494 | 1,092 | 1,600 | 886 | 823 | 7,181 | 7,917 |
| Unquoted investments: | ||||||||
| Property | 36 | 53 | – | – | – | – | 36 | 53 |
| 59,164 | 57,892 | 28,301 | 33,332 | 886 | 823 | 88,351 | 92,047 |
6
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 £113.634 million (2019: £101.410 million) as stated on the Balance Sheet are payable as follows:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Within one year | 36,253 | 27,824 |
| Between one and two years | 40,322 | 27,693 |
| Between two and five years | 37,059 | 45,893 |
| 113,634 | 101,410 | |
| Analysed as: | ||
| Non-current liabilities | 77,381 | 73,586 |
| Current liabilities | 36,253 | 27,824 |
| 113,634 | 101,410 |
The currency profile of the Group's acquisition related liabilities, which are all floating rate liabilities, is as follows:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Euro | 54,987 | 46,954 |
| Sterling | 7,031 | 25,155 |
| US dollar | 44,859 | 22,050 |
| Hong Kong dollar | 6,648 | 6,437 |
| Other | 109 | 814 |
| 113,634 | 101,410 |
The movement in the Group's acquisition related liabilities is as follows:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| At 1 April | 101,410 | 97,853 |
| Arising on acquisition (note 5.2) | 43,044 | 29,946 |
| Unwinding of discount applicable to acquisition related liabilities (note 2.7) | 1,439 | 805 |
| Adjustments to contingent consideration (adjustment to goodwill) (note 3.3) | – | 4,006 |
| Adjustments to contingent consideration (recognised in the Income Statement) (note 2.6) | (673) | (1,727) |
| Paid during the year | (35,339) | (30,311) |
| Exchange and other | 3,753 | 838 |
| At 31 March | 113,634 | 101,410 |
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 programmes, environmental obligations, cylinder and tank deposits and insurance liabilities.
The reconciliation of the movement in provisions for liabilities for the year ended 31 March 2020 is as follows:
| Rationalisation, restructuring and redundancy £'000 |
Environmental and remediation £'000 |
Cylinder and tank deposits £'000 |
Insurance and other £'000 |
Total £'000 |
|---|---|---|---|---|
| 36,372 | 84,779 | 168,187 | 27,450 | 316,788 |
| (654) | – | – | – | (654) |
| 15,888 | 2,218 | 7,380 | 8,653 | 34,139 |
| – | 291 | 1,450 | – | 1,741 |
| (19,233) | (1,899) | (1,259) | (9,147) | (31,538) |
| (284) | (3,182) | (14,181) | (2,362) | (20,009) |
| 601 | – | – | 608 | 1,209 |
| 1,140 | 1,912 | 5,578 | 483 | 9,113 |
| 33,830 | 84,119 | 167,155 | 25,685 | 310,789 |
| 18,020 | 78,836 | 157,025 | 10,327 | 264,208 |
| 15,810 | 5,283 | 10,130 | 15,358 | 46,581 |
| 33,830 | 84,119 | 167,155 | 25,685 | 310,789 |
| Unwinding of discount applicable to provisions for liabilities (note 2.7) |
The reconciliation of the movement in provisions for liabilities for the year ended 31 March 2019 is as follows:
| Rationalisation, restructuring and redundancy £'000 |
Environmental and remediation £'000 |
Cylinder and tank deposits £'000 |
Insurance and other £'000 |
Total £'000 |
|
|---|---|---|---|---|---|
| At 1 April 2018 | 44,751 | 86,295 | 164,985 | 27,310 | 323,341 |
| Provided during the year | 5,393 | 869 | 9,394 | 11,631 | 27,287 |
| Unwinding of discount applicable to provisions for liabilities (note 2.7) | 15 | 287 | 2,179 | – | 2,481 |
| Utilised during the year | (13,101) | (572) | (2,044) | (8,559) | (24,276) |
| Unutilised/reversed during the year | (1,154) | (717) | (2,056) | (2,630) | (6,557) |
| Arising on acquisition (note 5.2) | 912 | 323 | – | – | 1,235 |
| Exchange and other | (444) | (1,706) | (4,271) | (302) | (6,723) |
| At 31 March 2019 | 36,372 | 84,779 | 168,187 | 27,450 | 316,788 |
| Analysed as: | |||||
| Non-current liabilities | 19,143 | 79,552 | 160,301 | 10,584 | 269,580 |
| Current liabilities | 17,229 | 5,227 | 7,886 | 16,866 | 47,208 |
| 36,372 | 84,779 | 168,187 | 27,450 | 316,788 |
This provision relates to various rationalisation and restructuring programmes across the Group. The Group expects that the majority of this provision will be utilised within three years.
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.
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.
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 one to three years from the date of the claim.
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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| At 1 April | 353 | 246 |
| Arising on acquisition (note 5.2) | – | 147 |
| Amortisation in year | (11) | (40) |
| At 31 March | 342 | 353 |
| Analysed as: | ||
| Non-current liabilities | 331 | 342 |
| Current liabilities (note 3.7) | 11 | 11 |
| 342 | 353 |
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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Authorised | ||
| 152,368,568 ordinary shares of €0.25 each | 25,365 | 25,365 |
| Year ended 31 March 2020 | Number of shares |
Share capital £'000 |
Share premium £'000 |
Total £'000 |
|---|---|---|---|---|
| At 31 March 2019 (including 3,075,681 ordinary shares held as treasury shares) | 101,333,904 | 17,422 | 882,561 | 899,983 |
| Premium arising on re-issue of treasury shares | – | – | 326 | 326 |
| At 31 March 2020 (including 2,932,474 ordinary shares held as treasury shares) | 101,333,904 | 17,422 | 882,887 | 900,309 |
| Year ended 31 March 2019 | Number of shares |
Share capital £'000 |
Share premium £'000 |
Total £'000 |
| At 31 March 2018 (including 3,207,501 ordinary shares held as treasury shares) | 92,429,404 | 15,455 | 280,533 | 295,988 |
| Issue of share capital | 8,904,500 | 1,967 | 600,970 | 602,937 |
| Premium arising on re-issue of treasury shares | – | – | 1,058 | 1,058 |
| At 31 March 2019 (including 3,075,681 ordinary shares held as treasury shares) | 101,333,904 | 17,422 | 882,561 | 899,983 |
As at 31 March 2020, the total authorised number of ordinary shares is 152,368,568 shares (2019: 152,368,568 shares) with a par value of €0.25 per share (2019: €0.25 per share). Share premium relates to the share premium arising on the issue of shares.
During the year the Company re-issued 143,207 treasury shares for a consideration of £0.326 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 130 and 131.
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.
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% 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.
This note details the movement in the Group's other reserves which are treated as different categories of equity as required by accounting standards.
| Share based payment reserve1 £'000 |
Cash flow hedge reserve2 £'000 |
Foreign currency translation reserve3 £'000 |
Other reserves4 £'000 |
Total £'000 |
|
|---|---|---|---|---|---|
| At 31 March 2018 | 22,883 | (16,178) | 101,096 | 932 | 108,733 |
| Currency translation | – | – | 6,626 | – | 6,626 |
| Cash flow hedges: | |||||
| – fair value gain in year – private placement debt | – | 24,166 | – | – | 24,166 |
| – fair value gain in year – other | – | 3,000 | – | – | 3,000 |
| – tax on fair value net gains | – | (4,618) | – | – | (4,618) |
| – transfers to sales | – | 2,686 | – | – | 2,686 |
| – transfers to cost of sales | – | (8,003) | – | – | (8,003) |
| – transfers to operating expenses | – | (20,294) | – | – | (20,294) |
| – tax on transfers | – | 4,354 | – | – | 4,354 |
| Share based payment | 5,823 | – | – | – | 5,823 |
| At 31 March 2019 | 28,706 | (14,887) | 107,722 | 932 | 122,473 |
| Currency translation | |||||
| – arising in the year | – | – | 4,202 | – | 4,202 |
| – recycled to the Income Statement on disposal | – | – | (397) | – | (397) |
| Cash flow hedges: | |||||
| – fair value gain in year – private placement debt | – | 31,874 | – | – | 31,874 |
| – fair value loss in year – other | – | (87,355) | – | – | (87,355) |
| – tax on fair value net gains | – | 9,433 | – | – | 9,433 |
| – transfers to sales | – | 28 | – | – | 28 |
| – transfers to cost of sales | – | 30,056 | – | – | 30,056 |
| – transfers to operating expenses | – | (8,809) | – | – | (8,809) |
| – tax on transfers | – | (3,617) | – | – | (3,617) |
| Share based payment | 6,208 | – | – | – | 6,208 |
| At 31 March 2020 | 34,914 | (43,277) | 111,527 | 932 | 104,096 |
The share based payment reserve comprises the amounts expensed in the Income Statement in connection with share based payments.
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.
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.
The Group's other reserves principally comprises a capital conversion reserve fund.
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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| At 1 April | 1,368,250 | 1,237,937 |
| IFRS 9 transition adjustment | – | (3,349) |
| At 1 April (restated) | 1,368,250 | 1,234,588 |
| Net income recognised in Income Statement | 245,509 | 262,593 |
| Net income recognised in Other Comprehensive Income: | ||
| – remeasurements of defined benefit pension obligations | 4,132 | (1,346) |
| – deferred tax on remeasurements | (560) | 223 |
| Sale of equity interest to non-controlling interest | 4,169 | – |
| Directly attributable costs of share capital issuance | – | (10,847) |
| Dividends | (139,212) | (116,961) |
| At 31 March | 1,482,288 | 1,368,250 |
The cost to the Group and the Company of €42.831 million to acquire the 2,932,474 shares held in Treasury has been deducted from the Group and Company Retained Earnings. These shares were acquired at prices ranging from €12.80 to €17.90 each (average: €14.61) between 27 November 2003 and 19 June 2006 and are primarily held to satisfy exercises under the Group's share options and awards schemes.
Non-controlling interests principally comprises the 40% equity interest in our Danish subsidiary DCC Holding A/S which is not owned by the Group.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| At 1 April | 42,821 | 35,259 |
| Share of profit for the financial year | 8,641 | 8,539 |
| Sale of equity interest to non-controlling interest | 1,742 | – |
| Exchange | 1,561 | (977) |
| At 31 March | 54,765 | 42,821 |
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:
| Average rate | Closing rate | |||
|---|---|---|---|---|
| 2020 Stg£1= |
2019 Stg£1= |
2020 Stg£1= |
2019 Stg£1= |
|
| Euro | 1.1460 | 1.1319 | 1.1282 | 1.1651 |
| Danish krone | 8.5639 | 8.4407 | 8.4244 | 8.6977 |
| Swedish krona | 12.1816 | 11.7467 | 12.4789 | 12.1146 |
| Norwegian krone | 11.4062 | 10.9172 | 12.9851 | 11.2536 |
| US dollar | 1.2754 | 1.3184 | 1.2360 | 1.3090 |
| Hong Kong dollar | 9.9760 | 10.3392 | 9.5831 | 10.2755 |
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 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.
| Total 2020 £'000 |
Total 2019 £'000 |
|
|---|---|---|
| Assets | ||
| Non-current assets | ||
| Property, plant and equipment (note 3.1) | 34,276 | 12,791 |
| Right-of-use leased assets (note 3.2) | 17,715 | – |
| Intangible assets (note 3.3) | 78,991 | 74,053 |
| Equity accounted investments (note 3.4) | 1,646 | 164 |
| Deferred income tax assets | 120 | 2,602 |
| Total non-current assets | 132,748 | 89,610 |
| Current assets | ||
| Inventories (note 3.8) | 44,307 | 104,591 |
| Trade and other receivables (note 3.8) | 65,888 | 141,388 |
| Total current assets | 110,195 | 245,979 |
| Liabilities | ||
| Non-current liabilities | ||
| Deferred income tax liabilities | (5,443) | (19,322) |
| Provisions for liabilities | (588) | (846) |
| Government grants (note 3.18) | – | (147) |
| Lease creditors | (16,403) | – |
| Total non-current liabilities | (22,434) | (20,315) |
| Current liabilities | ||
| Trade and other payables (note 3.8) | (59,626) | (129,118) |
| Provisions for liabilities | (621) | (389) |
| Current income tax (liability)/asset | (342) | 966 |
| Lease creditors | (3,063) | – |
| Total current liabilities | (63,652) | (128,541) |
| Identifiable net assets acquired | 156,857 | 186,733 |
| Goodwill (note 3.3) | 78,376 | 109,738 |
| Total consideration | 235,233 | 296,471 |
| Satisfied by: | ||
| Cash | 186,324 | 274,678 |
| Net debt/(cash and cash equivalents) acquired | 5,865 | (8,153) |
| Net cash outflow | 192,189 | 266,525 |
| Acquisition related liabilities (note 3.16) | 43,044 | 29,946 |
| Total consideration | 235,233 | 296,471 |
6
None of the 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:
| Book value £'000 |
Fair value adjustments £'000 |
Fair value £'000 |
|---|---|---|
| 56,604 | 76,144 | 132,748 |
| 116,020 | (5,825) | 110,195 |
| (17,416) | (5,018) | (22,434) |
| (62,809) | (843) | (63,652) |
| 92,399 | 64,458 | 156,857 |
| 142,834 | (64,458) | 78,376 |
| 235,233 | – | 235,233 |
The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of a number of the business combinations above given the timing of closure of these transactions. Any amendments to fair values within the 12 month timeframe from the date of acquisition will be disclosable in the 2021 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.
£40.5 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 £8.286 million (note 2.6).
No contingent liabilities were recognised on the acquisitions completed during the financial year or the prior financial years.
The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to £66.771 million. The fair value of these receivables is £65.888 million (all of which is expected to be recoverable) and is inclusive of an aggregate allowance for impairment of £0.883 million.
The fair value of contingent consideration recognised at the date of acquisition is calculated by discounting the expected future payment to present value at the acquisition date. In general, for contingent consideration to become payable, pre-defined profit thresholds must be exceeded. On an undiscounted basis, the future payments for which the Group may be liable for acquisitions in the current year range from nil to £64.4 million.
The post-acquisition impact of business combinations completed during the year on Group profit for the financial year was as follows:
| 2020 £'000 |
|
|---|---|
| Revenue | 149,359 |
| Cost of sales | (99,880) |
| Gross profit | 49,479 |
| Operating costs | (33,183) |
| Operating profit | 16,296 |
| Finance costs (net) | (969) |
| Profit before tax | 15,327 |
| Income tax expense | (4,090) |
| Profit for the financial year attributable to Owners of the Parent Company | 11,237 |
The revenue and profit of the Group for the financial year determined in accordance with IFRS as though the acquisition date for all business combinations effected during the year had been the beginning of that year would be as follows:
| 2020 £'000 |
|
|---|---|
| Revenue | 14,886,693 |
| Profit for the financial year attributable to Owners of the Parent Company | 256,766 |
This note reconciles how the Group's profit for the year translates into cash flows generated from operating activities.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Profit for the financial year | 254,150 | 271,132 |
| Add back non-operating expenses/(income): | ||
| – tax | 57,335 | 56,302 |
| – share of equity accounted investments' profit | (1,015) | (717) |
| – net operating exceptionals | 65,486 | 28,185 |
| – net finance costs | 56,174 | 42,308 |
| Operating profit before exceptionals | 432,130 | 397,210 |
| – share-based payments expense (note 2.5) | 6,208 | 5,823 |
| – depreciation (including right-of-use leased assets) | 176,734 | 109,626 |
| – amortisation of intangible assets (note 3.3) | 62,138 | 63,312 |
| – profit on disposal of property, plant and equipment | (5,604) | (2,182) |
| – amortisation of government grants (note 3.18) | (11) | (40) |
| – other | 3,180 | (3,709) |
| Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation): | ||
| – inventories (note 3.8) | 86,708 | (45,844) |
| – trade and other receivables (note 3.8) | (54,022) | 23,141 |
| – trade and other payables (note 3.8) | 16,504 | 60,168 |
| Cash generated from operations before exceptionals | 723,965 | 607,505 |
A commitment represents an obligation to make a payment in the future as long as the counterparty meets its obligations, and mainly relates to 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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Capital expenditure on property, plant and equipment that has been contracted for but has not been SURYLGHGIRULQWKHƬQDQFLDOVWDWHPHQWV |
13,734 | 16,320 |
| Capital expenditure on property, plant and equipment that has been authorised by the Directors but has not yet been contracted for |
144,148 | 154,099 |
| 157,882 | 170,419 |
6
Contingent liabilities include guarantees given in respect of borrowings and other obligations arising in the ordinary course of business.
The Company has given guarantees of £2,512.777 million (2019: £2,045.217 million) in respect of borrowings and other obligations arising in the ordinary course of business of the Company and other Group undertakings.
Pursuant to the provisions of Section 357 of the Companies Act, 2014, the Company has guaranteed the liabilities of the following Irish subsidiaries; Alvabay Limited, CC Lubricants Limited, DCC Corporate Funding Unlimited Company, DCC Corporate Partners Unlimited Company, DCC Corporate Services dac, DCC Energy Limited, DCC Facilities Limited, DCC Finance & Treasury dac, DCC Finance Holdings Limited, DCC Finance Limited, DCC Financial Services Holdings ULC, DCC Financial Services International dac, DCC Financial Services Investments CLG, DCC Financial Services Ireland Limited, DCC Financial Services Unlimited Company, DCC Financial Services US dac, DCC Funding 2007 dac, DCC Healthcare Limited, DCC Management Services Limited, DCC Nominees Unlimited Company, DCC Technology Limited, DCC Treasury 2010 dac, DCC Treasury Ireland 2013 dac, DCC Treasury Management Unlimited Company, DCC Treasury Solutions Limited, Emo Oil Limited, Energy Procurement Ireland 2013 Limited, Energy Procurement Limited, Exertis Arc Telecom 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.
Three of the Group's German subsidiaries, Bronberger & Kessler Handelsgesellschaft und Gilg & Schweiger GmbH & Co.KG, TEGA-Technische Gase und Gasetechnik GmbH and DCC Germany Holding GmbH availed of disclosure exemptions pursuant to Section 264 of the German Commercial Code (HGB) and are therefore exempted from the obligations to prepare and disclose audited financial statements.
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 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.
The consolidated financial statements include the financial statements of the Parent Company and its subsidiaries 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 and associates is provided in the Group Directory on pages 224 to 227 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.
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:
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Short-term benefits | 3,809 | 4,490 |
| Post-employment benefits | 181 | 179 |
| Share-based payment (calculated in accordance with the principles disclosed in note 2.5) | 1,229 | 1,240 |
| 5,219 | 5,909 |
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.
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, lease creditors and acquisition related liabilities, may be summarised as follows:
| 2020 £'000 |
2019 £'000 |
|---|---|
| Capital and reserves attributable to the owners of the Parent Company 2,486,693 |
2,390,706 |
| Net debt (excl. lease creditors) (note 3.13) 60,252 |
17,524 |
| Lease creditors (note 3.12) 306,867 |
901 |
| Acquisition related liabilities (note 3.16) 113,634 |
101,410 |
| At 31 March 2,967,446 |
2,510,541 |
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 2019. 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.
The Group's consistent focus on maintaining financial strength through a disciplined approach to balance sheet management and maintaining relatively low levels of financial risk leaves it well placed to address the uncertainty created by the Covid-19 pandemic. At 31 March 2020, the Group had cash and cash equivalents of £1,794.467 million (note 3.9) and £343.4 million undrawn under its committed revolving credit facility (note 3.11). At 31 March 2020, the capital structure, as summarised above had net debt excluding lease creditors of £60.252 million and the Group's net debt (excluding lease creditors):EBITDA ratio was 0.1 times.
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It arises principally 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 allocates each exposure to a credit risk grade, based on data that is determined to be predictive of risk of loss. 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.
The Group applies the simplified approach to providing for expected credit losses ('ECL') permitted by IFRS 9 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the trade receivables. The Group uses an allowance matrix to measure the ECL's of trade receivables, which comprises a very large number of small balances. Loss rates are based on actual credit loss experience.
6
As detailed in note 3.6, the Group's trade receivables at 31 March 2020 amount to £1,428.578 million (2019: £1,321.570 million). Customer credit risk arising in the context of the Group's operations is not significant and the total allowance for impairment of trade receivables amounts to 2.6% of the Group's gross trade receivables (2019: 2.5%). The vast majority of the allowance for impairment relates to trade and other receivables balances which are over six months overdue.
Receivable balances classified as neither past due nor impaired represent 80% of the total trade receivables balance at 31 March 2020 (2019: 85%). These balances are expected to be fully recoverable. Included in the Group's trade receivables at 31 March 2020 are balances of £249.868 million (2019: £171.212 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 2020 was £207.840 million (2019: £211.391 million) and has been derecognised from 'Trade and other receivables' in accordance with the Group's accounting policy. Revenues relating to the non-recourse sale of receivables included in overall Group revenues in the year ended 31 March 2020 amounted to £1,402,707 million (2019: £1,324.932 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 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 2020 of £1,794.467 million, 26.6% (£476.799 million) was with money market funds, 97.3% (£1,746.543 million) was with money market funds or financial institutions with minimum short-term ratings of A-1 (Standard and Poor's) or P-1 (Moody's) and 99.1% (£1,777.944 million) was with money market funds or financial institutions with minimum short-term ratings of A-2 (Standard and Poor's) or P-2 (Moody's). In the normal course of business, the Group operates notional cash pooling systems, where a legal right of set-off applies. As at 31 March 2020, derivative transactions were with counterparties with ratings ranging from AA- to A- (long-term) with Standard and Poor's or Aa1 to A2 (long-term) with Moody's. The Group accordingly does not expect any loss in relation to its cash and cash equivalents or its derivative balances at 31 March 2020.
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.
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 2020, 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.
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 2020 | Less than 1 year £'000 |
Between 1 and 2 years £'000 |
Between 2 and 5 years £'000 |
Over 5 years £'000 |
Total £'000 |
|---|---|---|---|---|---|
| Financial liabilities – cash outflows | |||||
| Trade and other payables | (2,318,758) | – | – | – | (2,318,758) |
| Interest bearing loans and borrowings | (230,244) | (161,815) | (611,253) | (1,016,743) | (2,020,055) |
| Interest payments on interest bearing loans and borrowings | (66,382) | (62,050) | (143,257) | (112,100) | (383,789) |
| Lease creditors | (47,411) | (40,131) | (90,905) | (128,420) | (306,867) |
| Interest payments on lease creditors | (9,254) | (7,978) | (17,902) | (47,595) | (82,729) |
| Acquisition related liabilities | (36,253) | (40,322) | (37,059) | – | (113,634) |
| Cross currency swaps – gross cash outflows | (71,032) | (113,496) | (422,622) | (187,981) | (795,131) |
| Other derivative financial instruments | (5,966) | (4,114) | (1,523) | – | (11,603) |
| (2,785,300) | (429,906) | (1,324,521) | (1,492,839) | (6,032,566) | |
| Derivative financial instruments – cash inflows | |||||
| Interest rate swaps – net cash inflows | 5,368 | 4,745 | 12,121 | 6,983 | 29,217 |
| Cross currency swaps – gross cash inflows | 100,386 | 155,093 | 542,350 | 236,972 | 1,034,801 |
| 105,754 | 159,838 | 554,471 | 243,955 | 1,064,018 | |
| As at 31 March 2019 | Less than 1 year £'000 |
Between 1 and 2 years £'000 |
Between 2 and 5 years £'000 |
Over 5 years £'000 |
Total £'000 |
| Financial liabilities – cash outflows | |||||
| Trade and other payables | (2,218,838) | – | – | – | (2,218,838) |
| Interest bearing loans and borrowings | (329,156) | (60,535) | (410,112) | (949,584) | (1,749,387) |
| Interest payments on interest bearing loans and borrowings | (73,875) | (62,872) | (161,882) | (141,424) | (440,053) |
| Acquisition related liabilities | (27,824) | (27,693) | (44,054) | (1,839) | (101,410) |
| Cross currency swaps – gross cash outflows | (201,642) | (69,423) | (358,166) | (351,728) | (980,959) |
| Other derivative financial instruments | (3,503) | (645) | (163) | – | (4,311) |
| (2,854,838) | (221,168) | (974,377) | (1,444,575) | (5,494,958) | |
| Derivative financial instruments – cash inflows | |||||
| Interest rate swaps – net cash inflows | 4,647 | 4,584 | 11,997 | 7,986 | 29,214 |
| Cross currency swaps – gross cash inflows | 285,946 | 94,788 | 450,574 | 431,729 | 1,263,037 |
| 290,593 | 99,372 | 462,571 | 439,715 | 1,292,251 |
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'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 and US dollar 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 gain of £5.8 million arising on the translation of DCC's non-sterling denominated net asset position at 31 March 2020 as set out in the Group Statement of Comprehensive Income mainly reflects the weakening in the value of sterling against the euro and the US dollar which was partly offset by a strengthening in the value of sterling against certain Scandinavian currencies.
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 18 months with such transactions qualifying as 'highly probable' forecast transactions for IAS 39 hedge accounting purposes.
A change in the value of other currencies by 10% against sterling would have a £20.0 million (2019: £16.8 million) impact on the Group's profit before tax and exceptional items, would change the Group's equity by £140.1 million and change the Group's net debt by £49.4 million (2019: £116.0 million and £27.3 million respectively). These amounts include an insignificant amount of transactional currency exposure.
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.
Based on the composition of net debt at 31 March 2020 a one percentage point (100 basis points) change in average floating interest rates would have a £0.8 million (2019: £4.1 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 3.10 and 3.11.
DCC, through its LPG and Retail & Oil divisions, procures, markets and sells LPG, natural gas, electricity and oil products, 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 may be 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 fuel oil 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 are 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.
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 (2019: immaterial) and an immaterial impact on the Group's equity (2019: 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.
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 allowance 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:
| 2020 | 2019 | |||
|---|---|---|---|---|
| Book value £'000 |
Fair value £'000 |
Book value £'000 |
Fair value £'000 |
|
| Financial assets | ||||
| Derivative financial instruments | 265,422 | 265,422 | 211,541 | 211,541 |
| Trade and other receivables | 1,647,117 | 1,647,117 | 1,517,507 | 1,517,507 |
| Cash and cash equivalents | 1,794,467 | 1,794,467 | 1,554,093 | 1,554,093 |
| 3,707,006 | 3,707,006 | 3,283,141 | 3,283,141 | |
| Borrowings (excluding lease creditors) | 2,086,268 | 2,033,882 | 1,773,028 | 1,783,888 |
|---|---|---|---|---|
| Lease creditors | 306,867 | 306,867 | 901 | 901 |
| Derivative financial instruments | 33,873 | 33,873 | 10,130 | 10,130 |
| Acquisition related liabilities | 113,634 | 113,634 | 101,410 | 101,410 |
| Trade and other payables | 2,318,758 | 2,318,758 | 2,218,838 | 2,218,838 |
| 4,859,400 | 4,807,014 | 4,104,307 | 4,115,167 |
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;
| Fair value measurement as at 31 March 2020 | Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
|---|---|---|---|---|
| Financial assets | ||||
| Derivative financial instruments (note 3.10) | – | 265,422 | – | 265,422 |
| – | 265,422 | – | 265,422 | |
| Financial liabilities | ||||
| Acquisition related liabilities (note 3.16) | – | – | 113,634 | 113,634 |
| Derivative financial instruments (note 3.10) | – | 33,873 | – | 33,873 |
| – | 33,873 | 113,634 | 147,507 | |
| Fair value measurement as at 31 March 2019 | Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
| Financial assets | ||||
| Derivative financial instruments (note 3.10) | – | 211,541 | – | 211,541 |
| – | 211,541 | – | 211,541 | |
| Financial liabilities | ||||
| Acquisition related liabilities (note 3.16) | – | – | 101,410 | 101,410 |
| Derivative financial instruments (note 3.10) | – | 10,130 | – | 10,130 |
| – | 10,130 | 101,410 | 111,540 |
6
Acquisition related liabilities are included in level 3 of the fair value hierarchy. Details of the movement in the year are included in note 3.16.
The specific valuation techniques used to value contingent consideration that is carried at fair value using level 3 valuation techniques are:
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 2020, holding the other inputs constant, would have the following effects:
| Impact on the carrying value of contingent consideration | 2020 £'000 |
2019 £'000 |
|---|---|---|
| Forecasted average adjusted operating profit growth rate (1% movement) | 694 | 631 |
| Forecasted outflow on Butagaz acquisition related liabilities (5% movement) | 1,490 | 1,918 |
| Risk adjusted discount rate (0.5% movement) | 1,046 | 1,151 |
(i) Financial assets
The following financial assets are subject to offsetting, enforceable master netting arrangements or similar agreements:
| Gross amounts of recognised |
Net amounts of financial |
Related amounts not set off in the Balance Sheet |
||||
|---|---|---|---|---|---|---|
| As at 31 March 2020 | Gross amounts of recognised financial assets £'000 |
financial assets liabilities set presented in off in the the Balance Balance Sheet Sheet £'000 £'000 |
Financial liabilities £'000 |
Cash collateral received £'000 |
Net amount £'000 |
|
| Derivative financial instruments | 243,152 | – | 243,152 | – | – | 243,152 |
| Cash and cash equivalents | 357,179 | – | 357,179 | (108,175) | – | 249,004 |
| 600,331 | – | 600,331 | (108,175) | – | 492,156 |
| 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 |
|||||
|---|---|---|---|---|---|---|---|
| As at 31 March 2019 | Gross amounts of recognised financial assets £'000 |
Financial liabilities £'000 |
Cash collateral received £'000 |
Net amount £'000 |
|||
| Derivative financial instruments | 205,995 | – | 205,995 | (273) | – | 205,722 | |
| Cash and cash equivalents | 326,642 | – | 326,642 | (84,911) | – | 241,731 | |
| 532,637 | – | 532,637 | (85,184) | – | 447,453 |
The following financial liabilities are subject to offsetting, enforceable master netting arrangements or similar agreements:
| Gross amounts Net amounts of recognised of financial financial liabilities presented in assets set off in the the Balance Balance Sheet Sheet £'000 £'000 |
Related amounts not set off | ||||
|---|---|---|---|---|---|
| of recognised financial liabilities £'000 |
Financial assets £'000 |
Cash collateral provided £'000 |
Net amount £'000 |
||
| – | – | – | – | – | – |
| 108,175 | – | 108,175 | (108,175) | – | – |
| 108,175 | – | 108,175 | (108,175) | – | – |
| Gross amounts | in the Balance Sheet |
| Gross amounts Net amounts of recognised of financial financial liabilities assets set presented in off in the the Balance Balance Sheet Sheet £'000 £'000 |
Related amounts not set off in the Balance Sheet |
|||||
|---|---|---|---|---|---|---|
| As at 31 March 2019 | Gross amounts of recognised financial liabilities £'000 |
Financial assets £'000 |
Cash collateral provided £'000 |
Net amount £'000 |
||
| Derivative financial instruments | 273 | – | 273 | (273) | – | – |
| Bank borrowings | 84,911 | – | 84,911 | (84,911) | – | – |
| 85,184 | – | 85,184 | (85,184) | – | – |
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.
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 2020 which would require disclosure in this Report.
6
This section sets out the Group's accounting policies which are applied in recognising and measuring transactions and balances arising in the year.
Revenue comprises the fair value of the sale of goods and services to external customers net of applicable sales taxes, volume and promotional rebates, allowances and discounts. Revenue is generally recognised on a duty inclusive basis where applicable. The Group is deemed to be a principal in an arrangement when it controls a promised good or service before transferring them to a customer, and accordingly recognises revenue on a gross basis. Where the Group is determined to be an agent in a transaction, based on the principle of control, the net amount retained after the deduction of any costs to the principal is recognised as revenue.
The Group operates across a wide range of business segments and jurisdictions with varying customer credit terms which are in line with normal credit terms offered in that business segment and/or country of operation. Given the short-term nature of these credit terms, no element of financing is deemed present. Group revenues do not include any significant level of variable consideration.
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.
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, refrigerants 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 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.
DCC Healthcare derives its revenue from the sale of a broad range of third-party and own-branded medical devices and pharmaceuticals. 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.
Revenue from the rendering of services is recognised in the period in which the services are rendered. Contracts do not contain multiple performance obligations as defined by IFRS 15.
Service revenue in DCC LPG and DCC Retail & Oil is generated from a variety of value-added services provided to customers. Revenue is recognised as the service is provided.
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.
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.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income from investments is recognised when shareholders' right to receive payment have been established.
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.
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 Technology and DCC Healthcare.
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 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.
Results and cash flows of subsidiaries 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 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 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 and acquisition related liabilities. The interest expense component of lease creditor 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.
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.
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 acquisition consideration, 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.
6
The Group's income tax charge is based on reported profit and enacted statutory tax rates, which reflect various allowances and reliefs available to the Group in the multiple tax jurisdictions in which it operates. The determination of the Group's provision for income tax requires certain judgements and estimates in relation to matters where the ultimate tax outcome may not be certain. The recognition or non-recognition of deferred tax assets as appropriate also requires judgement as it involves an assessment of the future recoverability of those assets. In addition, the Group is subject to tax audits which can involve complex issues that could require extended periods to conclude, the resolution of which is often not within the control of the Group. Although management believes that the estimates included in the Consolidated Financial Statements and its tax return positions are correct, there is no certainty that the final outcome of these matters will not be different to that which is reflected in the Group's historical income tax provisions and accruals. Whilst it is possible, the Group does not currently anticipate that any such differences could have a material impact on the income tax provision and profit for the period in which such a determination is made nor does it expect any significant impact on its financial position in the near term. This is based on the Group's knowledge and experience, as well as the profile of the individual components which have been reflected in the current tax liability, the status of the tax audits, enquiries and negotiations in progress at each year end.
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. Any interest or penalties arising are included within current tax. Where items are accounted for outside of profit or loss, the related income tax is recognised either in other comprehensive income or directly in equity as appropriate.
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:
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:
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 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.
| Annual Rate | |
|---|---|
| Freehold and long-term leasehold buildings | 2% |
| Plant and machinery | tƂ |
| Cylinders | ƃt |
| Motor vehicles | tƂ |
| Fixtures, fittings & office equipment | tƂ |
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.
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 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 remeasured 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 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.
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, net of any impairment, is included in investments in associates under the equity method in the Group Balance Sheet.
Goodwill is subject to impairment testing on an annual basis and at any time during the year if an indicator of impairment is considered to exist; the goodwill impairment tests are undertaken at a consistent time in each annual period. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. Impairment losses arising in respect of goodwill are not reversed following recognition.
Where a subsidiary is sold, any goodwill arising on acquisition, net of any impairments, is included in determining the profit or loss arising on disposal.
Where goodwill forms part of a cash-generating unit and part of the operations within that unit are disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the proportion of the cash-generating unit retained.
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 40 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 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.
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.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less allowance for impairment.
An allowance for impairment of trade receivables is established based on both expected credit losses and information available 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 allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows. The amount of the allowance is recognised in the Income Statement.
The Group derecognises a receivable only when the contractual rights to the cash flows from the receivable expire, or when it transfers the receivable and substantially all of the risks and rewards of ownership of the asset to another entity. The Group applies a number of tests to receivable purchase agreements to determine whether derecognition is appropriate or not. These tests are applied to the entire portfolio of receivables rather than to each individual receivable as the receivables comprise 'a group of similar assets' in accordance with IFRS 9. The testing procedure includes consideration of the following; whether the arrangement represents a qualifying transfer of assets, whether substantially all of the risks and rewards of the receivable transferred from the Group and whether the Group has lost control of the receivable.
On derecognition of a receivable the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in the Income Statement. Following derecognition, receivables arising from non-recourse sales are excluded from 'Trade and other receivables' in the Group Balance Sheet. The Group presents cash flows arising from non-recourse sales as part of operating activities in the Group Cash Flow Statement.
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 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.
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.
The Group enters into leases for a range of assets, principally relating to property. These property leases have varying terms and renewal rights, including periodic rent reviews linked with indices. The Group also leases motor vehicles, plant, machinery and other equipment. The terms and conditions of these leases do not impose significant financial restrictions on the Group.
A contract contains a lease if it is enforceable and conveys the right to control the use of a specified asset for a period of time in exchange for consideration, which is assessed at inception. A right-of-use asset and lease creditor are recognised at the commencement date for contracts containing a lease, with the exception of leases with a term of 12 months or less, leases where the underlying asset is of low value and leases with associated payments that vary directly in line with usage or sales (such lease costs continue to be expensed in the Income Statement as incurred). The commencement date is the date at which the asset is made available for use by the Group.
The lease creditor is initially measured at the present value of the future minimum lease payments, discounted using the incremental borrowing rate over the remaining lease term. Lease payments include fixed payments, variable payments that are dependent on an index known at the commencement date, payments for an optional renewal period and termination option payments, if the Group is reasonably certain to exercise those options. The lease term is the non-cancellable period of the lease adjusted for any renewal or termination options which are reasonably certain to be exercised. Management applies judgement in determining whether it is reasonably certain that a renewal or termination option will be exercised.
Incremental borrowing rates are calculated using a portfolio approach, based on the risk profile of the entity holding the lease and the term and currency of the lease.
After initial recognition, the lease creditor is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future minimum lease payments or when the Group changes its assessment of whether it is reasonably certain to exercise an option within the contract. A corresponding adjustment is made to the carrying amount of the right-of-use asset.
The right-of-use asset is initially measured at cost, which comprises the lease creditor adjusted for any payments made at or before the commencement date, initial direct costs incurred, lease incentives received and an estimate of the cost to dismantle or restore the underlying asset or the site on which it is located at the end of the lease term. The right-of-use asset is depreciated over the lease term and is tested periodically for impairment if an impairment indicator is considered to exist.
Regarding the 2019 prior year comparatives, leases where the lessor retains substantially all the risks and rewards of ownership were classified as operating leases. Operating lease rentals were charged to the Consolidated Income Statement on a straight-line basis over the lease term.
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/Expenses'.
6
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 3.10 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 12 months and as a current asset or current liability if the remaining maturity of the derivative is less than 12 months.
In the case of fair value hedges which satisfy the conditions for hedge accounting, any gain or loss arising from the remeasurement 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.
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/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.
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.
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.
In certain DCC LPG operations, 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 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 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.
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.
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.
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.
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.
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.
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 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 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.
The financial statements were approved by the Board of Directors on 18 May 2020.
Company Balance Sheet
As at 31 March 2020
| Note | 2020 £'000 |
2019 £'000 |
|
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Investments in subsidiary undertakings | 6.4 | 1,218,408 | 807,349 |
| Current assets | |||
| Trade and other receivables | 6.5 | 379,285 | 569,825 |
| Cash and cash equivalents | 6.7 | 4,899 | 64,897 |
| 384,184 | 634,722 | ||
| Total assets | 1,602,592 | 1,442,071 | |
| EQUITY | |||
| Capital and reserves | |||
| Share capital | 4.1 | 17,422 | 17,422 |
| Share premium | 4.1 | 882,887 | 882,561 |
| Other reserves | 6.8 | 156,099 | 116,936 |
| Retained earnings | 6.9 | 245,168 | 315,760 |
| Total equity | 1,301,576 | 1,332,679 | |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 6.6 | 301,016 | 109,392 |
| Total equity and liabilities | 1,602,592 | 1,442,071 |
John Moloney, Donal Murphy, Directors
| Share capital (note 4.1) £'000 |
Share premium (note 4.1) £'000 |
Retained earnings (note 6.9) £'000 |
Other reserves (note 6.8) £'000 |
Total equity £'000 |
|
|---|---|---|---|---|---|
| At 1 April 2019 | 17,422 | 882,561 | 315,760 | 116,936 | 1,332,679 |
| Profit for the financial year | – | – | 68,620 | – | 68,620 |
| Other comprehensive income: | |||||
| Currency translation | – | – | – | 32,955 | 32,955 |
| Total comprehensive income | – | – | 68,620 | 32,955 | 101,575 |
| Re-issue of treasury shares | – | 326 | – | – | 326 |
| Share based payment | – | – | – | 6,208 | 6,208 |
| Dividends | – | – | (139,212) | – | (139,212) |
| At 31 March 2020 | 17,422 | 882,887 | 245,168 | 156,099 | 1,301,576 |
| Share capital (note 4.1) |
Share premium (note 4.1) |
Retained earnings (note 6.9) |
Other reserves (note 6.8) |
Total equity |
|
|---|---|---|---|---|---|
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 April 2018 | 15,455 | 280,533 | 395,206 | 142,035 | 833,229 |
| Profit for the financial year | – | – | 48,362 | – | 48,362 |
| Other comprehensive income: | |||||
| Currency translation | – | – | – | (30,922) | (30,922) |
| Total comprehensive income | – | – | 48,362 | (30,922) | 17,440 |
| Issue of share capital | 1,967 | 600,970 | (10,847) | – | 592,090 |
| Re-issue of treasury shares | – | 1,058 | – | – | 1,058 |
| Share based payment | – | – | – | 5,823 | 5,823 |
| Dividends | – | – | (116,961) | – | (116,961) |
| At 31 March 2019 | 17,422 | 882,561 | 315,760 | 116,936 | 1,332,679 |
For the year ended 31 March 2020
| Note | 2020 £'000 |
2019 £'000 |
|
|---|---|---|---|
| Operating activities Cash generated from operations |
6.10 | 125,090 | 40,068 |
| Interest paid | (5) | (12) | |
| Income tax paid | (1) | (134) | |
| Net cash flow from operating activities | 125,084 | 39,922 | |
| Investing activities | |||
| Inflows: | |||
| Interest received | 9,623 | 7,810 | |
| Proceeds on disposal | 482,723 | 300,902 | |
| Dividends received from subsidiaries | 131,079 | 33,284 | |
| 623,425 | 341,996 | ||
| Outflows: | |||
| Acquisition of subsidiaries | (670,779) | (849,506) | |
| Net cash flow from investing activities | (47,354) | (507,510) | |
| Financing activities | |||
| Inflows: | |||
| Proceeds from issue of shares | 326 | 593,148 | |
| Outflows: | |||
| Dividends paid | 2.10 | (139,212) | (116,961) |
| Net cash flow from financing activities | (138,886) | 476,187 | |
| Change in cash and cash equivalents | (61,156) | 8,599 | |
| Translation adjustment | 1,158 | (1,324) | |
| Cash and cash equivalents at beginning of year | 64,897 | 57,622 | |
| Cash and cash equivalents at end of year | 6.7 | 4,899 | 64,897 |
In accordance with the Companies Act 2014, information regarding the ultimate Parent Company, DCC plc, is presented below.
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.
The audit fee for the Parent Company is £15,000 and is payable to KPMG, Ireland, the statutory auditor (2019: £13,000).
Profit after taxation for the year attributable to owners of the Parent Company amounting to £68.620 million (2019: £48.362 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.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| At 1 April | 807,349 | 266,408 |
| Additions | 997,198 | 849,506 |
| Capital contribution in respect of share based payments | 2,307 | 5,823 |
| Disposals | (468,520) | (293,303) |
| Impairment | (131,079) | – |
| Exchange and other | 11,153 | (21,085) |
| At 31 March | 1,218,408 | 807,349 |
Details of the Group's principal operating subsidiaries are included in the Supplementary Information section on pages 224 to 227. 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 de Paris SAS (97%) where put and call options exist to acquire the remaining 3%, Jam Industries Limited (94%) where put and call options exist to acquire the remaining 6%, Amacom Holding BV (75%) where put and call options exist to acquire the remaining 25% 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 Zuiderzeestraatweg 1, 3882 NC, Putten, The Netherlands.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Amounts owed by subsidiary undertakings | 379,285 | 569,825 |
| 379,285 | 569,825 |
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 2020 (31 March 2019: nil). The Company does not expect any loss in relation to trade and other receivables at 31 March 2020.
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Amounts due to subsidiary undertakings | 300,475 | 108,867 |
| Other creditors and accruals | 541 | 525 |
| 301,016 | 109,392 |
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Cash at bank and in hand | 4,899 | 64,897 |
| 4,899 | 64,897 |
| Share based payment reserve1 £'000 |
Foreign currency translation reserve2 £'000 |
Other reserves3 £'000 |
Total £'000 |
|
|---|---|---|---|---|
| At 1 April 2018 | 22,883 | 118,923 | 229 | 142,035 |
| Share based payment | 5,823 | – | – | 5,823 |
| Currency translation | – | (30,922) | – | (30,922) |
| At 31 March 2019 | 28,706 | 88,001 | 229 | 116,936 |
| Share based payment | 6,208 | – | – | 6,208 |
| Currency translation | – | 32,955 | – | 32,955 |
| At 31 March 2020 | 34,914 | 120,956 | 229 | 156,099 |
The share based payment reserve comprises capital contributions to subsidiaries in connection with share based payments.
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.
The Company's other reserves is a capital conversion reserve fund.
| 2020 £'000 |
2019 £'000 |
|---|---|
| At 1 April 315,760 |
395,206 |
| Total comprehensive income for the financial year 68,620 |
48,362 |
| Directly attributable costs of share capital issuance – |
(10,847) |
| Dividends (139,212) |
(116,961) |
| At 31 March 245,168 |
315,760 |
| 2020 £'000 |
2019 £'000 |
|
|---|---|---|
| Profit for the financial year | 68,620 | 48,362 |
| Add back non-operating income: | ||
| – tax | 1 | 134 |
| – net operating exceptionals | 116,876 | (7,599) |
| – net finance income | (9,618) | (7,798) |
| – dividend income | (175,819) | (33,284) |
| Operating profit | 60 | (185) |
| Changes in working capital: | ||
| – trade and other receivables | 205,939 | 42,828 |
| – trade and other payables | (80,909) | (2,575) |
| Cash generated from operations | 125,090 | 40,068 |
The Company's Income Statement includes dividends from its subsidiary companies DCC Treasury Management Unlimited Company (£131.080 million), DCC Management Services (£38.827 million), DCC Business Expansion Fund Limited (£3.337 million) and DCC Food & Beverage Limited (£2.575 million). Details of loan balances to/from subsidiaries are provided in the Company Balance Sheet on page 216, in note 6.5 'Trade and Other Receivables' and in note 6.6 'Trade and Other Payables'.
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.
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 2020 amount to £379.285 million (2019: £569.825 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 2020 of £4.899 million was held with financial institutions with a minimum rating in the A-2 (short-term) category of Standard and Poor's.
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 2020 | Less than 1 year £'000 |
Between 1 and 2 years £'000 |
Between 2 and 5 years £'000 |
Over 5 years £'000 |
Total £'000 |
|---|---|---|---|---|---|
| Financial liabilities – cash outflows | |||||
| Trade and other payables | 301,016 | – | – | – | 301,016 |
| 301,016 | – | – | – | 301,016 | |
| As at 31 March 2019 | Less than 1 year £'000 |
Between 1 and 2 years £'000 |
Between 2 and 5 years £'000 |
Over 5 years £'000 |
Total £'000 |
| Financial liabilities – cash outflows | |||||
| Trade and other payables | 109,392 | – | – | – | 109,392 |
| 109,392 | – | – | – | 109,392 |
The Company has sufficient cash resources and liquid assets to enable it to meet its trade and other payables.
The Company does not have any material assets or liabilities denominated in any currency other than euro at 31 March 2020 or at 31 March 2019 which would give rise to a significant transactional currency exposure. However, as the presentation currency for the Company is sterling, it is exposed to fluctuations in the sterling/euro exchange rate. A change in the value of euro by 10% against sterling would have a £6.2 million (2019: £4.4 million) impact on the Company's profit before tax, would change the Company's equity by £114.6 million and change the Company's net cash by £0.4 million (2019: £120.6 million and £6.6 million respectively).
Based on the composition of net cash at 31 March 2020 a one percentage point (100 basis points) change in average floating interest rates would have a £0.1 million (2019: £0.6 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.
The Company has no exposure to commodity price risk.
The following is a comparison by category of book values and fair values of the Company's financial assets and financial liabilities:
| 2020 | 2019 | |||
|---|---|---|---|---|
| Book value £'000 |
Fair value £'000 |
Book value £'000 |
Fair value £'000 |
|
| Financial assets | ||||
| Trade and other receivables | 379,285 | 379,285 | 569,825 | 569,825 |
| Cash and cash equivalents | 4,899 | 4,899 | 64,897 | 64,897 |
| 384,184 | 384,184 | 634,722 | 634,722 | |
| Financial liabilities | ||||
| Trade and other payables | 301,016 | 301,016 | 109,392 | 109,392 |
| 301,016 | 301,016 | 109,392 | 109,392 | |
As at 31 March 2020 and 31 March 2019 the Company had no financial assets or financial liabilities which were carried at fair value.
Guarantees given in respect of borrowings and other obligations are detailed in note 5.5 to the Group financial statements.
| Principal Subsidiaries and Associates | 224 |
|---|---|
| Shareholder Information | 228 |
| Corporate Information | 230 |
| Independent Assurance Report | 231 |
| Alternative Performance Measures | 232 |
| 5 Year Review | 237 |
| Index | 238 |
| Company name | Company address | Principal activity | Incorporated and operating in |
Group shareholding % |
|---|---|---|---|---|
| DCC LPG Limited | DCC House, Leopardstown Road, Foxrock, Dublin 18, Ireland |
Holding and divisional management company |
Ireland | 100 |
| Butagaz SAS | 47-53 Rue Raspail, 92300 Levallois – Perret, Paris, France |
Procurement, sales, marketing and GLVWULEXWLRQRIOLTXHƬHGSHWUROHXPJDV |
France | 100 |
| Gaz de Paris SAS (trading as Gaz Européen) |
47-53 Rue Raspail, 92300 Levallois – Perret, Paris, France |
Procurement, sales, marketing and distribution of natural gas |
France | 97 |
| Flogas Britain Limited | 81 Rayns Way, Syston, Leicester LE7 1PF, England |
Procurement, sales, marketing and GLVWULEXWLRQRIOLTXHƬHGSHWUROHXPJDV |
Britain | 100 |
| Flogas Ireland Limited | Knockbrack House, Matthews Lane, Donore Road, Drogheda, Co. Louth, Ireland |
Procurement, sales, marketing and GLVWULEXWLRQRIOLTXHƬHGSHWUROHXPJDV and natural gas |
Ireland | 100 |
| DSG Energy Limited | Suites 2201-2, 22nd Floor, AIA Kowloon Tower, Landmark East, 100 How Ming Street, Kwun Tong, Kowloon, Hong Kong |
Procurement, sales, marketing and GLVWULEXWLRQRIOLTXHƬHGSHWUROHXPJDV |
Hong Kong | 100 |
| DCC Propane LLC | 204 North State Route 54, Roberts, IL 60962, USA |
Procurement, sales, marketing and GLVWULEXWLRQRIOLTXHƬHGSHWUROHXPJDV |
USA | 100 |
| DCC Germany Holding GmbH | Werner-von Siemens-Str. 18, 97076 Würzburg, Germany |
Holding company | Germany | 100 |
| TEGA – Technische Gase und Gasetechnik GmbH |
Werner-von-Siemens-Straße 18, 97076 Würzburg, Germany |
Procurement, sales, marketing and GLVWULEXWLRQRIOLTXHƬHGSHWUROHXPJDV and refrigerant gases |
Germany | 100 |
| Flogas Sverige AB | Brännkyrkagatan 63, 11822 Stockholm, Sweden |
Procurement, sales, marketing and GLVWULEXWLRQRIOLTXHƬHGSHWUROHXPJDV |
Sweden | 100 |
| Flogas Norge AS | Nydalsveien 15, 0484 Oslo, Norway |
Procurement, sales, marketing and GLVWULEXWLRQRIOLTXHƬHGSHWUROHXPJDV |
Norway | 100 |
| Benegas BV | Zuiderzeestraatweg 1, 3882NC, Putten, The Netherlands |
Procurement, sales, marketing and GLVWULEXWLRQRIOLTXHƬHGSHWUROHXPJDV |
The Netherlands |
100 |
| Company name | Company address | Principal activity | Incorporated and operating in |
Group shareholding % |
|---|---|---|---|---|
| DCC Retail & Oil Limited | DCC House, Leopardstown Road, Foxrock, Dublin 18, Ireland |
Holding and divisional management company |
Ireland | 100 |
| Certas Energy UK Limited | 302 Bridgewater Place, Birchwood Park, Warrington WA3 6XG, England |
Procurement, sales, marketing and distribution of petroleum and lubricant products |
Britain | 100 |
| Fuel Card Services Limited | 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 |
Norway | 100 |
| Certas Energy France SAS | 9 Avenue Edouard Belin, 92500 Rueil Malmaison, Paris, France |
Procurement, sales and marketing of petroleum products |
France | 100 |
| Energy Procurement Ireland 2013 Limited |
DCC House, Leopardstown Road, Foxrock, Dublin 18, Ireland |
Procurement, sales and marketing of petroleum products |
Ireland | 100 |
| DCC Energi Danmark A/S | Naerum Hovedgade 8, 2850 Naerum, Denmark |
Procurement, sales, marketing and distribution of petroleum and lubricant products and natural gas |
Denmark | 60 |
| Qstar Försäljning AB | Spårgatan 5, Box 633,601 14 Norrköping, Sweden |
Procurement, sales and marketing of petroleum products |
Sweden | 100 |
| Company name | Company address | Principal activity | Incorporated and operating in |
Group shareholding % |
|---|---|---|---|---|
| Energie Direct MineralölhandelsgesmbH |
Alte Poststraße 400, A-8055 Graz, Austria |
Procurement, sales, marketing and distribution of petroleum and lubricant products and natural gas |
Austria | 100 |
| Swea Energi AB | Box 3123, 600 03 Norrköping, Sweden |
Procurement, sales, marketing and distribution of petroleum products |
Sweden | 100 |
| Emo Oil Limited | Clonminam Industrial Estate, Portlaoise, Co. Laois, Ireland |
Procurement, sales, marketing and distribution of petroleum and lubricant products |
Ireland | 100 |
| Company name | Company address | Principal activity | Incorporated and operating in |
Group shareholding % |
|---|---|---|---|---|
| DCC Technology Limited | DCC House, Leopardstown Road, Foxrock, Dublin 18, Ireland |
Holding and divisional management company |
Ireland | 100 |
| Exertis (UK) Ltd | Technology House, Magnesium Way, Hapton, Burnley BB12 7BF, England |
Sales, marketing and distribution of technology products |
Britain | 100 |
| Exertis Hammer Limited | Intec 1, Intec Business Park, Wade Road, Basingstoke, Hampshire RG24 8NE, England |
Sales, marketing and distribution of technology products |
Britain | 100 |
| MTR Group Limited | Unit 10, Spire Green Centre, The Pinnacles, Harlow, Essex CM19 5TR, England |
Sales and refurbishment of mobile handsets |
Britain | 100 |
| Kondor Limited | Christchurch Business Park, Radar Way, Christchurch BH23 4FL, England |
Sales, marketing and distribution of technology products |
Britain | 100 |
| Hypertec Limited | 2 Charnham Park, Swangate, Hungerford RG17 0YX, England |
Sales, marketing and distribution of memory and accessories |
Britain | 100 |
| Exertis Ireland Limited | M50 Business Park, Ballymount Road Upper, Dublin 12, Ireland |
Sales, marketing and distribution of technology products |
Ireland | 100 |
| Jam Industries Ltd. | 21000 Trans-Canada Highway, Baie-D'Urfe, QC H9X 4B7, Canada |
Sales, marketing and distribution of professional audio products, musical instruments and consumer electronics |
Canada | 94 |
| Stampede Presentation Products, Inc. |
55 Woodridge Drive, Amherst, NY 14228, USA |
Sales, marketing and distribution of professional audiovisual products and solutions |
USA | 100 |
| Exertis Arc Telecom Limited | Unit No. 702, X3 Building, Jumeirah Lake Towers, Dubai, UAE |
Sales, marketing and distribution of technology products |
Ireland and operating in Dubai |
100 |
| Exertis CapTech AB | Aminogatan 17, SE- 43153 Mölndal, Gotëborg, Sweden |
Sales, marketing and distribution of technology products |
Sweden | 100 |
| CUC SAS (trading as Exertis Connect) |
Zone Industrielle Buchelay 3000, BP 1126, 78204 Mantes en Yvelines Cedex, France |
Sales, marketing and distribution of technology products and connecting solutions |
France | 100 |
| Exertis France SAS | 5 Rue Pleyel, 93200 Saint Denis, France |
Sales, marketing and distribution of technology peripherals and accessories |
France | 100 |
| Go Telecom BV (trading as Exertis Go Connect) |
Laan Van Kopenhagen 100, 3317 DM Dordrecht, The Netherlands |
Sales, marketing and distribution of XQLƬHGFRPPXQLFDWLRQVDQGDXGLR visual products |
The Netherlands |
100 |
| Company name | Company address | Principal activity | Incorporated and operating in |
Group shareholding % |
|---|---|---|---|---|
| Amacom Holding BV | De Tweeling 24-A, 5215 MC 's-Hertogenbosch, The Netherlands |
Sales, marketing and distribution of technology products and consumer electronics |
The Netherlands |
75 |
| Comm-Tec GmbH | Siemensstraße 14, 73066 Uhingen, Germany |
Sales, marketing and distribution of professional audiovisual and IT products |
Germany | 100 |
| Exertis Supply Chain Services Limited |
M50 Business Park, Ballymount Road Upper, Dublin 12, Ireland |
Provision of supply chain management and outsourced procurement services |
Ireland | 100 |
| Company name | Company address | Principal activity | Incorporated and operating in |
Group shareholding % |
|---|---|---|---|---|
| DCC Healthcare Limited | DCC House, Leopardstown Road, Foxrock, Dublin 18, Ireland |
Holding and divisional management company |
Ireland | 100 |
| DCC Vital | ||||
| DCC Vital 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 Limited | Fannin House, South County Business Park, Leopardstown, Dublin 18, Ireland |
Sales, marketing and distribution of medical and pharmaceutical products to healthcare providers |
Ireland | 100 |
| Williams Medical Supplies Limited |
Craiglas House, The Maerdy Industrial Estate, Rhymney, Gwent NP22 5PY, Wales |
Sales, marketing and distribution of medical supplies and services to UK healthcare market, primarily GPs and primary care organisations |
Britain | 100 |
| Fannin (UK) Limited | Westminster Industrial Estate, Repton Road, Measham, Swadlincote, Derbyshire DE12 7DT, England |
Sales, marketing and distribution of medical devices to healthcare providers |
Britain | 100 |
| Medisource Ireland Limited | Unit 24-26 Bullford Business Campus, Kilcoole, Co. Wicklow, Ireland |
A leading provider of Exempt Medicinal Products ('EMP') in Ireland |
Ireland | 87 |
| SP Services (UK) Limited | Bastion House, Hortonwood 30, Telford, Shropshire TF1 7XT, England |
A leading provider of medical and safety equipment to the blue light and occupational health sectors |
Britain | 100 |
| Squadron Medical Limited | Greaves Close, Markham Vale, &KHVWHUƬHOG'HUE\VKLUH6)% England |
Provision of value-added distribution services to healthcare providers and brand owners/manufacturers |
Britain | 100 |
| The TPS Healthcare Group Limited |
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 |
Norgal (GIE) Route de la Chimie, 76700
Gonfreville L'Orcher, France
| Company name | Company address | Principal activity | and operating in | shareholding % |
|---|---|---|---|---|
| Health & Beauty Solutions | ||||
| DCC Health & Beauty Solutions Limited |
9-12 Hardwick Road, Astmoor Industrial Estate, Runcorn, Cheshire WA7 1PH, England |
Outsourced solutions for the health and beauty industry |
Britain | 100 |
| Amerilab Technologies, Inc. | 2765 Niagara Lane, North Plymouth, MN 55447, USA |
Development, contract manufacture DQGSDFNLQJRIHƪHUYHVFHQWQXWULWLRQDO products in powder and tablet formats |
USA | 100 |
| Elite One Source Nutritional Services, Inc. |
1001 South 3rd Street West, Missoula, MT 59801, USA |
Development, contract manufacture and packing of nutritional products in tablet and hard shell capsule format |
USA | 100 |
| Ion Labs, Inc. | 8031 114th Ave, Suite 4000, Largo, FL 33773, USA |
Development, contract manufacture and packing of nutritional products across a range of formats including tablets, capsules, powders and liquids |
USA | 100 |
| EuroCaps Limited | Crown Business Park, Dukestown, Tredegar, Gwent NP22 4EF, Wales |
Development and contract manufacture of nutritional products in softgel capsule format |
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 |
| Laleham Health and Beauty Limited |
Sycamore Park, Mill Lane, Alton, Hampshire GU34 2PR, England |
Development, contract manufacture and packing of liquids and creams for the beauty and consumer healthcare sectors |
Britain | 100 |
| Design Plus Holdings Limited |
Rowan House, 3 Stevant Way, White Lund, Morecambe, Lancashire LA3 3PU, England |
Development, contract manufacture and packing of liquids and creams for the beauty and consumer healthcare sectors |
Britain | 100 |
| Associates | Incorporated | Group | ||
| Company name | Company address | Principal activity | and operating in | shareholding % |
| KSG Dining Limited | McKee Avenue, Finglas, Dublin 11, Ireland |
Restaurant and hospitality service provider |
Ireland | 47.5 |
| Geogaz Lavera SA | 2 Rue des Martinets, 92500 Rueil Malmaison, Paris, France |
Owns and operates an LPG storage facility |
France | 25 |
Receiving, storage and distribution site
for LPG products
France 18
Incorporated
Group
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 | 2020 £ |
2019 £ |
|---|---|---|
| Share price at 18 May Market capitalisation at 18 May |
59.84 5,888m |
|
| Share price at 31 March Market capitalisation at 31 March |
51.00 5,018m |
66.35 6,519m |
| Share price movement during the year – High – Low |
74.96 38.78 |
75.65 55.55 |
DCC plc's ordinary share price information can be accessed on the Company's website under the 'Investors' tab.
| Shareholdings as at 31 March 2020 | Geographic division1 | Number of shares2 |
||
|---|---|---|---|---|
| UK | 33,465,445 | |||
| By location | North America | 32,863,920 | ||
| Continental Europe | 17,250,823 | |||
| UK 34.01% | Ireland | 10,904,911 | ||
| North America 33.40% | Asia/Rest of World | 3,156,586 | ||
| Continental Europe 17.53% | Retail3 | 759,745 | ||
| Ireland 11.08% Asia/Rest of World 3.21% |
Total | 98,401,430 | ||
| Retail 0.77% | Range of shares held | Number of accounts |
% of accounts |
Number of shares2 |
| Over 250,000 | 68 | 1.91 | 76,133,638 | |
| 100,001 – 250,000 | 49 | 1.38 | 7,519,200 | |
| 10,000 – 100,000 | 334 | 9.38 | 11,297,412 | |
| By size of holding | Less than 10,000 | 3,109 | 87.33 | 3,451,180 |
| Over 250,000 78.03% | Total | 3,560 | 100 | 98,401,430 |
| 100,001 – 250,000 7.42% | ||||
| 10,000 – 100,000 11.15% | Notes: | |||
| Less than 10,000 3.40% | 1. This represents the best estimate of the number of shares controlled by fund managers resident | |||
| in the relevant geographic regions. 2. Excludes 2,932,474 shares held as Treasury Shares. |
||||
Details of shareholdings in excess of 3% in the Company are set out on page 136.
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 49.48 pence per share was paid on 11 December 2019.
Subject to shareholders' approval at the Annual General Meeting, a final dividend of 95.79 pence per share will be paid on 23 July 2020 to shareholders on the register of members at the close of business on 29 May 2020.
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.
From 1 January 2020, the Company is obliged to deduct Dividend Withholding Tax ('DWT') at the rate of 25% from dividends paid to its shareholders (prior to 1 January 2020, the applicable rate was 20%), 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).
The Irish Revenue Commissioners have published a tax and duty manual entitled 'Dividend Withholding Tax – Details of Scheme' which was updated in January 2020 and can be obtained by contacting the Company's Registrar.
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.
| 19 May 2020 | Final results announcement for 2020 |
|---|---|
| 28 May 2020 | Ex-dividend date – final dividend |
| 29 May 2020 | Record date – final dividend |
| 17 July 2020 | Interim Management Statement |
| 17 July 2020 | Annual General Meeting |
| 23 July 2020 | Proposed payment date – final dividend |
| 10 November 2020 | Interim results announcement |
| December 2020 | Proposed payment date – interim dividend |
| February 2021 | Interim Management Statement |
Due to the continuation of the Irish Government's Covid-19 restrictions in relation to travel and public gatherings and to prioritise the health and safety of our shareholders and employees, the 2020 Annual General Meeting will be held at 11.00 am on 17 July 2020 at DCC House, Leopardstown Road, Foxrock, Dublin 18, Ireland with the minimum necessary quorum and with revised arrangements in regard to attendance at and the conduct of the meeting. 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 2020 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.
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.
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 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.
All administrative queries about the holding of DCC shares should be addressed to the Company's Registrar, Computershare Investor Services (Ireland) Limited, 3100 Lake Drive, Citywest Business Campus, Dublin 24, Ireland.
Tel: + 353 1 247 5698 Fax: + 353 1 447 5571 www.investorcentre.com/ie/contactus
For investor enquiries please contact Sarah Kenny, Investor Relations Administrator, DCC plc, DCC House, Leopardstown Road, Foxrock, Dublin 18, Ireland.
Tel: + 353 1 2799 400 email: [email protected]
DCC House Leopardstown Road Foxrock Dublin 18 Ireland
KPMG 1 Stokes Place St. Stephen's Green Dublin 2 Ireland
Computershare Investor Services (Ireland) Limited 3100 Lake Drive Citywest Business Campus Dublin 24 Ireland
Bank of Ireland Bank of America Merrill Lynch Barclays BayernLB BNP Paribas Danske Bank DBS Bank Deutsche Bank HSBC ING Bank J.P. Morgan MUFG Bank Nordea Rabobank National Westminster Bank Société Générale Standard Chartered Bank
William Fry 2 Grand Canal Square Dublin 2 Ireland
Pinsent Masons 1 Park Row Leeds LS1 5AB England
Davy 49 Dawson Street Dublin 2 Ireland
J.P. Morgan Cazenove 25 Bank Street Canary Wharf London E14 5JP England
www.dcc.ie
The scope of our work includes only the information included within the Sustainable Business Report ('the Report') of the DCC Annual Report and \$FFRXQWVIRUWKH\HDUHQGHG0DUFKPDUNHGZLWKWKHV\PERO˔oWKH6XEMHFW0DWWHU,QIRUPDWLRQp DQGLVOLPLWHGWR6FRSHDQG6FRSH greenhouse gas emissions (GHGs).
DCC management is responsible for the collection and presentation of the information within the Report. DCC management is also responsible for the design, implementation and maintenance of internal controls relevant to the preparation of the Report, so that it is free from material misstatement, whether due to fraud or error. DCC management is also responsible for selecting and/or developing objective Carbon Reporting Criteria ('Reporting Criteria'), and for measuring and reporting the Subject Matter Information in accordance with the Reporting Criteria.
Our responsibility is to plan and perform our work to obtain limited assurance about whether the Subject Matter 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.
We do not accept or assume any responsibility for any other purpose or to any other person or organisation. Any reliance any such third party may place on the Report is entirely at its own risk.
Our assurance engagement has been planned and performed in accordance with the International Standard for Assurance Engagements (ISAE) 3000 Revised, Assurance Engagements Other Than Audits or Reviews of Historical Financial Information (ISAE 3000). The Subject Matter Information has been evaluated against the following criteria:
Our evidence gathering procedures were designed to obtain a 'limited level' of assurance (as set out in ISAE3000) on which to base our conclusions. The extent of evidence gathering procedures performed is less than that of a reasonable assurance engagement and therefore a lower level of assurance is provided.
Completion of our testing activities has involved placing reliance on DCC's controls for managing and reporting Subject Matter Information, with the degree of reliance informed by the results of our review of the effectiveness of these controls. We have not sought to review systems and controls at DCC beyond those used for the Subject Matter Information.
The responsibility for the prevention and detection of fraud, error and non-compliance with laws or regulations rests with DCC management. Our work should not be relied upon to disclose all such material misstatements, frauds, errors or instances of non-compliance that may exist.
Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that the Subject Matter Information has not been prepared, in all material respects, in accordance with the Reporting Criteria, which were applied by management.
We have implemented measures to comply with IFAC Code of Ethics for Professional Accountants1 . We also adhere to the professional competence rules as articulated in the ISQC (UK & Ireland) 1: Quality control for firms that perform audits and reviews of financial statements and other assurance and related service engagements2 .
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) as well as applicable legal and regulatory requirements.
18 May 2020
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:
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:
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 | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Operating profit | Income Statement | 366,644 | 369,025 |
| Net operating exceptional items | Income Statement | 65,486 | 28,185 |
| Amortisation of intangible assets | Income Statement | 62,138 | 63,312 |
| Adjusted operating profit (EBITA) | 494,268 | 460,522 |
EBITDA represents earnings before net interest, tax, depreciation on property, plant and equipment, 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 | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Adjusted operating profit (EBITA) | Per above | 494,268 | 460,522 |
| Depreciation of property, plant and equipment | Note 3.1 | 118,545 | 109,626 |
| Adjusted operating profit before depreciation (EBITDA) | 612,813 | 570,148 |
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 | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Finance costs before exceptional items | Income Statement | (94,824) | (83,595) |
| Finance income before exceptional items | Income Statement | 39,510 | 36,980 |
| Net interest | (55,314) | (46,615) |
Strategic Report Governance Financial Statements Supplementary Info
The EBITDA interest cover ratio measures the Group's ability to pay interest charges on debt from cash flows. In order to maintain comparability with the definitions contained in the Group's lending arrangements, EBITDA and net interest exclude the impact arising from the adoption of IFRS 16 in the current year.
| Calculation | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| EBITDA | Per above | 612,813 | 570,148 |
| Less: impact of adoption of IFRS 16 in the current year | (4,999) | – | |
| EBITDA for covenant purposes | 607,814 | 570,148 | |
| Net interest | Per above | (55,314) | (46,615) |
| Less: impact of adoption of IFRS 16 in the current year | Note 2.7 | 8,635 | – |
| Net interest for covenant purposes | (46,679) | (46,615) | |
| EBITDA interest cover (times) | 13.0x | 12.2x |
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 | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| \$GMXVWHGRSHUDWLQJSURƬW | Per above | 494,268 | 460,522 |
| Net interest | Per above | (55,314) | (46,615) |
| Earnings before taxation | 438,954 | 413,907 | |
| Income tax expense | Income Statement | 57,335 | 56,302 |
| Income tax attaching to exceptional items Deferred tax attaching to amortisation of intangible assets |
Note 2.9 Note 2.9 |
3,290 13,997 |
(685) 14,747 |
| Total Income tax expense before exceptionals and deferred tax attaching to amortisation of intangible assets |
74,622 | 70,364 | |
| (ƪHFWLYHWD[UDWH | 17.0% | 17.0% |
The dividend cover ratio measures the Group's ability to pay dividends from earnings.
| Calculation | Reference in Financial Statements | 2020 pence |
2019 pence |
|---|---|---|---|
| Adjusted earnings per share | Note 2.11 | 362.64 | 358.16 |
| Dividend | Note 2.10 | 145.27 | 138.35 |
| Dividend cover (times) | 2.5x | 2.6x |
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 | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Purchase of property, plant and equipment | Group Cash Flow Statement | 181,014 | 182,311 |
| Proceeds from disposal of property, plant and equipment | Group Cash Flow Statement | (13,166) | (8,810) |
| Net capital expenditure | 167,848 | 173,501 |
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 repayment of lease creditors and net capital expenditure. Following the adoption of IFRS 16 Leases, the Group has redefined 'free cash flow' to include repayment of lease creditors which ensures that the Group's reported free cash flow is consistent with those measures previously reported and consequently the comparative measures have not been restated.
| Calculation | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Cash generated from operations before exceptionals | Group Cash Flow Statement | 723,965 | 607,505 |
| Repayment of lease creditors | Note 3.12 | (63,860) | – |
| Net capital expenditure | Per above | (167,848) | (173,501) |
| Free cash flow | 492,257 | 434,004 |
Free cash flow (after interest and tax payments) is defined by the Group as free cash flow after interest paid (excluding interest relating to lease creditors), income tax paid, dividends received from equity accounted investments and interest received. As noted in the definition of free cash flow, interest amounts relating to the repayment of lease creditors has been deducted in arriving at the Group's free cash flow and are therefore excluded from the interest paid figure in arriving at the Group's free cash flow (after interest and tax payments).
| Calculation | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Free cash flow | Per above | 492,257 | 434,004 |
| Interest paid (excluding interest relating to lease creditors) | (76,340) | (78,031) | |
| Income tax paid | Group Cash Flow Statement | (78,961) | (34,500) |
| Dividends received from equity accounted investments | Group Cash Flow Statement | – | 420 |
| Interest received | Group Cash Flow Statement | 39,188 | 34,831 |
| Free cash flow (after interest and tax payments) | 376,144 | 356,724 |
Definition
The cash conversion ratio expresses free cash flow as a percentage of adjusted operating profit.
| Calculation | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Free cash flow | Per above | 492,257 | 434,004 |
| Adjusted operating profit | Per above | 494,268 | 460,522 |
| Cash conversion ratio (%) | 100% | 94% |
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. In order to maintain comparability with the definitions contained in the Group's lending arrangements, EBITDA for this calculation excludes the benefit arising in the current year from the adoption of IFRS 16.
| Calculation | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Net debt (excluding lease creditors) | Note 3.13 | 60,252 | 18,425 |
| EBITDA (excluding the impact of IFRS 16) | Per above | 607,814 | 570,148 |
| Net debt/EBITDA (times) | 0.1x | <0.1x |
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 *URXSpVDVVHWV,QRUGHUWRPDLQWDLQFRPSDUDELOLW\ZLWKWKHGHILQLWLRQVFRQWDLQHGLQWKH*URXSpVOHQGLQJDUUDQJHPHQWVQHWGHEWH[FOXGHVOHDVHFUHGLWRUV|
| Calculation | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Net debt (excluding lease creditors) | Note 3.13 | 60,252 | 18,425 |
| Total equity | Group Balance Sheet | 2,541,458 | 2,433,527 |
| Net debt/total equity (%) | 2.4% | 0.8% |
ROCE represents adjusted operating profit expressed as a percentage of the average total capital employed. Total capital employed represents total equity adjusted for net debt/cash (including lease creditors), 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.
The Group adopted IFRS 16 Leases on the transition date of 1 April 2019 using the modified retrospective approach, meaning that comparatives have not been restated. To assist comparability with the prior year, the impact on ROCE due to the adoption of IFRS 16 has been excluded from both adjusted operating profit and capital employed in the current year. ROCE for the year ended 31 March 2020, inclusive of the impact of IFRS 16, was 15.1%. Future measures of ROCE will be prepared including the impact of IFRS 16.
| Calculation | Reference in Financial Statements | 2019 £'000 |
|
|---|---|---|---|
| Total equity | Group Balance Sheet | 2,541,458 | 2,433,527 |
| Net debt (including lease creditors) | Note 3.13 367,119 |
18,425 | |
| Goodwill and intangibles written off | 395,577 | 333,439 | |
| Right-of-use leased assets | Note 3.2 | (304,097) | – |
| Equity accounted investments | Group Balance Sheet | (27,729) | (24,233) |
| Acquisition related liabilities (current and non-current) | Note 3.16 | 113,634 | 101,410 |
| 3,085,962 | 2,862,568 | ||
| Average total capital employed | 2,974,265 | 2,713,969 | |
| Adjusted operating profit | Per above | 494,268 | 460,522 |
| Less: impact of adoption of IFRS 16 on operating profit | (4,999) | – | |
| 489,269 | 460,522 | ||
| Return on capital employed (%) | 16.5% | 17.0% |
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 | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Net cash outflow on acquisitions during the year | Group Cash Flow Statement | 192,189 | 266,525 |
| Cash outflow on acquisitions which were committed to in the previous year | (75,365) | (14,750) | |
| Acquisition related liabilities arising on acquisitions during the year | Note 3.16 | 43,044 | 29,946 |
| Acquisition related liabilities which were committed to in the previous year | (10,768) | (4,099) | |
| Amounts committed in the current year | 19,500 | 90,700 | |
| Committed acquisition expenditure | 168,600 | 368,322 |
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 | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Inventories | Note 3.5 | 630,996 | 678,006 |
| Trade and other receivables | Note 3.6 | 1,647,117 | 1,517,507 |
| Less: interest receivable | (428) | (193) | |
| Trade and other payables | Note 3.7 | (2,318,758) | (2,218,838) |
| Less: interest payable | Note 3.7 | 11,963 | 5,058 |
| Less: amounts due in respect of property, plant and equipment | Note 3.7 | 6,284 | 2,831 |
| Less: government grants | Note 3.7 | 11 | 11 |
| Net working capital | (22,815) | (15,618) |
Working capital days measures how long it takes in days for the Group to convert working capital into revenue.
| Calculation | Reference in Financial Statements | 2020 £'000 |
2019 £'000 |
|---|---|---|---|
| Net working capital | Per above | (22,815) | (15,618) |
| March revenue | 1,279,731 | 1,343,551 | |
| Working capital (days) | (0.6 days) | (0.4 days) |
| Group Income Statement Year ended 31 March |
2016 £'m |
2017 £'m |
2018 £'m |
2019 £'m |
2020 £'m |
|---|---|---|---|---|---|
| Revenue | 10,601.1 | 12,445.0 | 13,121.7 | 15,226.9 | 14,755.4 |
| Adjusted operating profit | 300.5 | 363.6 | 384.4 | 460.5 | 494.3 |
| Exceptional items | (14.6) | (36.3) | (15.3) | (28.2) | (65.5) |
| Amortisation of intangible assets | (31.6) | (39.2) | (43.0) | (63.2) | (62.1) |
| Operating profit | 254.3 | 288.1 | 326.1 | 369.1 | 366.7 |
| Finance costs (net) | (38.4) | (22.0) | (35.5) | (42.3) | (56.2) |
| Share of equity accounted investments | 0.5 | 0.7 | 0.4 | 0.7 | 1.0 |
| Profit before tax | 216.4 | 266.8 | 291.0 | 327.5 | 311.5 |
| Income tax expense | (35.4) | (49.1) | (24.1) | (56.4) | (57.3) |
| Non-controlling interests | (3.0) | (1.5) | (5.1) | (8.5) | (8.7) |
| Profit attributable to owners of the Parent Company | 178.0 | 216.2 | 261.8 | 262.6 | 245.5 |
| Earnings per share | |||||
| – basic (pence) | 202.64p | 243.64p | 293.83p | 280.14p | 249.64p |
| – basic adjusted (pence) | 257.14p | 303.68p | 318.35p | 358.16p | 362.64p |
| Dividend per share (pence) | 97.22p | 111.80p | 122.98p | 138.35p | 145.27p |
| Dividend cover (times) | 2.6x | 2.7x | 2.6x | 2.6x | 2.5x |
| Interest cover (times)* | 10.4x | 11.3x | 10.8x | 9.9x | 10.5x |
| * excludes exceptional items. | |||||
| Group Balance Sheet As at 31 March |
2016 £'m |
2017 £'m |
2018 £'m |
2019 £'m |
2020 £'m |
| Non-current and current assets: | |||||
| Property, plant and equipment | 739.5 | 750.0 | 933.0 | 996.5 | 1,089.0 |
| Right-of-use leased assets | – | – | – | – | 304.1 |
| Intangible assets | 1,297.1 | 1,422.6 | 1,953.8 | 2,069.6 | 2,126.9 |
| Equity accounted investments | 22.1 | 24.9 | 24.5 | 24.2 | 27.7 |
| Cash/derivatives | 1,407.5 | 1,340.1 | 1,150.0 | 1,765.6 | 2,059.9 |
| Other assets | 1,331.3 | 1,894.8 | 1,982.8 | 2,221.7 | 2,313.5 |
| Total assets | 4,797.5 | 5,432.4 | 6,044.1 | 7,077.6 | 7,921.1 |
| Equity | 1,350.5 | 1,507.7 | 1,677.9 | 2,433.5 | 2,541.5 |
| Non-current and current liabilities: | |||||
| Borrowings/derivatives | 1,462.0 | 1,474.8 | 1,692.7 | 1,784.0 | 2,120.0 |
| Lease creditors | – | – | – | – | 306.8 |
| Retirement benefit obligations | 0.3 | – | (0.3) | (1.4) | (7.3) |
| Other liabilities | 1,984.7 | 2,449.9 | 2,673.8 | 2,861.5 | 2,960.1 |
| Total liabilities | 3,447.0 | 3,924.7 | 4,366.2 | 4,644.1 | 5,379.6 |
| Total equity and liabilities | 4,797.5 | 5,432.4 | 6,044.1 | 7,077.6 | 7,921.1 |
| Net cash/(debt) included above (excl. lease creditors) | (54.5) | (121.9) | (542.7) | (18.4) | (60.2) |
| Group Cash Flow Year ended 31 March |
2016 £'m |
2017 £'m |
2018 £'m |
2019 £'m |
2020 £'m |
| 2SHUDWLQJFDVKƮRZ | 411.7 | 546.9 | 473.3 | 607.5 | 724.0 |
| Capital expenditure | 134.2 | 131.4 | 145.4 | 173.5 | 167.8 |
| Acquisitions | 394.0 | 262.4 | 691.0 | 296.8 | 227.5 |
| Other Information | 2016 | 2017 | 2018 | 2019 | 2020 |
| Return on capital employed (%) | 21.0% | 19.8% | 17.5% | 17.0% | 16.5% |
| Working capital (days) | (3.9) | (3.3) | (2.0) | (0.4) | (0.6) |
| Accounting Policies | 207 | Earnings per Ordinary Share | 166 |
|---|---|---|---|
| Acquisition Related Liabilities | 189 | Electronic Communications | 229 |
| Alternative Performance Measures | 232 | Employee Share Options and Awards | 160 |
| Analysis of Net Debt | 181 | Emerging Risks | 20 |
| Annual General Meeting | 229 | Employment | 159 |
| Approval of Financial Statements | 215 | Energy Transition | 38, 52, 53, 76 |
| Audit Committee Report | 103 | Engagement with Stakeholders | 95 |
| Auditors | 107 | Equity Accounted Investments | 172 |
| Events After the Balance Sheet Date | 206 | ||
| Basis of Consolidation | 151 | Exceptionals | 162 |
| Basis of Preparation | 149 | Executive Directors' Remuneration | 121 |
| Board Committees | 99, 103, 108 | Executive Risk Committee | 19, 90 |
| Board of Directors | 86 | Exit Payments Policy | 117 |
| Board Performance Evaluation | 97 | ||
| Borrowings and Lease Creditors | 177 | Finance Costs and Finance Income | 163 |
| Business Combinations | 195 | Financial Calendar | 229 |
| Business Model | 4 | Financial Review | 27 |
| Financial Risk and Capital Management | 35, 200, 221 | ||
| Cash and Cash Equivalents | 175, 220 | Five Year Review | 237 |
| Cash Generated from Operations | 198, 221 | Foreign Currency | 208 |
| Chairman's Statement | 6 | Foreign Exchange Risk Management | 36 |
| Chief Executive's Remuneration | 124 | ||
| Chief Executive's Review | 8 | General Meetings | 135, 229 |
| Clawback Policy | 116 | Going Concern | 21 |
| Commitments | 198 | Governance | 84 |
| Commodity Price Risk Management | 37 | Government Grants | 191 |
| Company Balance Sheet | 216 | Greenhouse Gas Emissions | 17, 53, 77 |
| Company Cash Flow Statement | 218 | Group Balance Sheet | 146 |
| Company Statement of Changes in Equity | 217 | Group Cash Flow Statement | 148 |
| Compliance | 98 | Group Income Statement | 144 |
| Contingencies | 199, 222 | Group Management Team | 88 |
| Corporate Governance Statement | 90 | Group Profit for the Year | 158 |
| Corporate Information | 230 | Group Statement of Changes in Equity | 147 |
| Covid-19 | 6, 11, 12, 22, 23, 27, 71 | Group Statement of Comprehensive Income | 145 |
| Credit Risk Management | 37 | ||
| Critical Accounting Estimates and Judgements | 151 | Health & Safety | 74 |
| Highlights of the Year | 1 | ||
| Deferred Income Tax | 183 | ||
| Derivative Financial Instruments | 176 | Inclusion and Diversity | 11, 81, 102 |
| Directors | 135 | Income Tax Expense | 164 |
| Directors' and Company Secretary's Interests | 127 | Intangible Assets and Goodwill | 168 |
| Directors' Compliance Statement | 137 | Interest Rate Risk and Debt/ Liquidity Management | 36 |
| Diversity | 102 | Inventories | 172 |
| Dividends | 165, 228 | Investments in Subsidiary Undertakings | 219 |
| Investor Relations | 37, 229 |
Strategic Report Governance Financial Statements Supplementary Info
| Key Performance Indicators | 14 | |
|---|---|---|
| Lease Creditors | 179 | |
| Long Term Incentive Plan | 115, 123 | |
| Movement in Working Capital | 174 | |
| Nomination and Governance Committee Report | 99 | |
| Non-Controlling Interests | 194 | |
| Non-Executive Directors' Remuneration | 126 | |
| Non-Financial Reporting | 74, 135 | |
| Notes to the Financial Statements | 149 | |
| Operating Reviews | ||
| – DCC LPG | 48 | |
| – DCC Retail & Oil | 54 | |
| – DCC Technology | 60 | |
| – DCC Healthcare | 66 | |
| Other Operating Income/Expenses | 158 | |
| Other Reserves | 193, 220 | |
| Outlook | 14 | |
| Post-Employment Benefit Obligations | 184 | |
| Principal Risks and Uncertainties | 22 | |
| Principal Subsidiaries | 224 | |
| Profit Attributable to DCC plc | 219 | |
| Property, Plant and Equipment | 167 | |
| Provisions for Liabilities | 190 | |
| Purpose | 7, 9, 92 | |
| Registrar | 229 | |
| Related Party Transactions | 199, 221 | |
| Remuneration Policy Report | 113 | |
| Remuneration Report | 108 | |
| Report of the Directors | 134 | |
| Report of the Independent Auditors | 140 | |
| Retained Earnings | 194, 220 | |
| Return on Capital Employed | 31 | |
| Right-Of-Use Leased Assets | 168 | |
| Risk Management and Internal Control | 105 | |
| Risk Report | 18 | |
| Segment Information | 153 |
|---|---|
| Share Capital and Share Premium | 192 |
| Share of Equity Accounted Investments' Profit after Tax | 164 |
| Shareholder Information | 228 |
| Share Listing | 228 |
| Share Ownership and Dealing | 98 |
| Share Price and Market Capitalisation | 37 |
| Statement of Compliance | 149 |
| Statement of Directors' Responsibilities | 139 |
| Strategy | 2 |
| Strategy in Action | 38 |
| Substantial Holdings | 136 |
| Summary of Significant Accounting Policies | 207 |
| Sustainable Business Report | 74 |
| Takeover Regulations | 137 |
| Trade and Other Payables | 174, 220 |
| Trade and Other Receivables | 173, 219 |
| Transparency Rules | 136 |
| Values | 4, 7, 9 |
| Viability Statement | 21 |
| Website | 229 |
Supplementary Info
DCC plc, DCC House, Leopardstown Road, Foxrock, Dublin 18, Ireland
Tel: + 353 1 279 9400 Email: [email protected]
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