Annual Report and Accounts 2014


Chairman’s Message

Michael Buckley reviews DCC’s results, highlights strategic developments, outlines key issues the Board has focussed upon, summarises a busy year of investor contacts and shares his outlook for the year to March 2015.

Dear Shareholder

Good Results and Strong Financial Position to Support Further Growth+-

I am glad to be able to report to you that the year ended 31 March 2014 was again one of growth and development for DCC. Business conditions in the countries where we operate improved, even if only slowly. Operating results were strong, with profits up in each division, and overall by 11.5%, notwithstanding the impact on DCC Energy of winter temperatures well above the ten year average. Adjusted earnings per share were up by 11.7%.

Profit growth came from a combination of successful integration of businesses we had acquired in previous years, cost efficiency initiatives and some good organic growth. Our return on average capital employed was 16.3%, so once again very substantive shareholder value was added in the year. Our conversion of operating profits to free cash flow, always a DCC strong point, was exceptional at 133%. Year end debt, at £86.3 million, was only 9.1% of total equity. DCC’s financial position remains very strong, well funded and highly liquid. My warm thanks to all 10,202 DCC colleagues for those results. In his review Tommy Breen, our Chief Executive, gives a more detailed account of the results and sets them in the context of DCC’s performance over the 20 years since it was first listed.

Dividend Increase+-

The Board is recommending a final dividend of 50.73 pence per share. This brings the total dividend to 76.85 pence per share for the year ended 31 March 2014, up 10% on the previous year. We have now had 20 years of uninterrupted dividend growth since DCC first became a publicly listed company.

Strategically Important Developments+-

Shareholders will already be aware that we changed our listing arrangements during the year. As a result, DCC became part of the FTSE All Share Index and of the FTSE 250 Index with effect from 24 June 2013. This important milestone in the life of the Company has brought the benefits we expected in terms of significantly wider analyst coverage of DCC and therefore a broader platform for communicating with existing and potential new shareholders. We are also presenting our results in sterling for the first time this year. The Group remains headquartered and tax resident in the Republic of Ireland.

After a record year in terms of acquisition spend last year, the overall acquisition spend was not particularly high in the year under review. However our acquisition of Qstar, a Swedish network of 307 unmanned petrol stations was important as a first step in delivering on our intention to enter the unmanned petrol station market and more broadly to continue to expand significantly our transport fuels business, both in the UK and more widely.

DCC’s core business development strategy has not changed. We are going about building an international sales, marketing, distribution and support services business of scale that is sustainable, cash generative, and which provides our shareholders, year on year, with returns on capital employed substantially ahead of our cost of capital. Our principal growth intentions are focussed on three businesses that already produce 90% of our profits – Oil and LPG, Technology and Healthcare. We continue to pursue development and consolidation opportunities in each of those areas, as well as working to strengthen the partnership relationships we have with our local, national and global suppliers.

The Board and What It Has Focussed On+-

The Board appointed Dr. Pamela Kirby as a non-executive Director, with effect from 3 September 2013. Dr. Kirby has extensive experience of doing business at senior management and board levels in the international pharmaceutical and medical devices sectors, and also brings FTSE 100 board experience to our discussions. Our non-executive Directors, as a group, have deep domain knowledge relevant to DCC’s main business sectors, as well as broad experience in building businesses internationally and in regulatory, accounting and risk management developments. They have lived in and are experienced in doing businesses in many jurisdictions. From a gender diversity point of view, I am happy to say that 27% of the Board are women. This benefits greatly the quality of Board discussions and, incidentally, already exceeds the corporate governance targets set for FTSE 100 companies for 2015. It is very significantly ahead of the position in FTSE 250 companies generally.

During the year, the Board devoted considerable time to strategic discussions, including carrying out a number of ‘deep dives’ both into individual businesses and into the long term risks and opportunities associated with possible significant development opportunities. Organisational and management talent development, while protecting DCC’s distinct culture, have also been big themes for Board discussion.

DCC has grown very considerably over the past ten years - operating profits are now two and a half times what they were ten years ago. Our aim is to ensure that our future growth ambitions and ability to reap the benefits of economies of scale that come with having built a number of leading market positions continue to be well supported by capable management teams that are imbued with that culture.

The corporate personality and culture of DCC, and the common’language’ of how business is consistently done across the Group, is a distinctive mix. There is a very specific framework of financial disciplines and an associated framework of management practices, both consistently applied. An emphasis on building for the long run, and on fostering an entrepreneurial and ownership mind-set is backed up by an intense and consistent rigour in dealing with issues and making fact-based decisions with a relentless focus on value, whether in commercial or acquisition negotiations.

Investor Communications+-

DCC has always had a very active and consistent approach to investor communications. Our investor relations programme typically involves direct conversations with 40% by value of our shareholders several times a year, as well as with significant long term debt providers. In addition, in the year under review, the transfer of our premium listing to London involved an intense special programme of investor activity. A key part of this was an Investor Day held in the London Stock Exchange on 6 June 2013, which was attended by all executive Directors and the senior management team, as well as by myself and other non-executive Directors. In addition, the recently completed and very successful long term debt private placement involved extensive road shows to our long term debt investors in the US, UK and Europe. Finally, Leslie Van de Walle, as Chairman of the Remuneration Committee, and I have recently engaged in a wide-ranging consultation, covering over 33% by value of our shareholder base, as well as key institutional shareholder bodies and proxy voting agencies, in relation to the changes we are proposing at the forthcoming Annual General Meeting in DCC’s Long Term Incentive Plan. I strongly believe that the changes proposed are in the interests of all shareholders.


Continuing, if moderate, improvement in DCC’s business environment seems to be the most likely scenario for the year ahead. Everyone here is clear on what we plan to achieve by way of further growth, and development on a 12 month view, over the medium term and strategically.

Thank you for your support.

Michael Buckley

20 May 2014