DCC’s strategy has remained unchanged and further good progress has been made in the ongoing execution of this strategy.
A key element of DCC Energy’s strategy is the continued growth of the business within the transport fuels market, in particular road transport. During the year, DCC announced that it had agreed to acquire Qstar, a business focussed on unmanned petrol retailing in Sweden. Unmanned petrol retailing is a very important part of the market in many European countries and the business model fits well with DCC Energy’s core fuel distribution skills, allowing the business access to the end user margin in the supply chain. This acquisition represents a further development of DCC Energy’s transport fuels business in Europe and the first material step in building a presence in the unmanned retail petrol station market. The acquisition also represents a strengthening of DCC Energy’s market position in Scandinavia where DCC already has growing oil and LPG businesses and market leadership positions in Sweden and Norway with a number two position in Denmark.
In response to the very mild winter in the year ended 31 March 2012, DCC Energy management worked hard to optimise the efficiency of its operating model and ensure maximum flexibility in the cost base to cope with unseasonably warm weather. During the year, the business generated significant savings by driving further operational efficiencies, particularly in the oil business in Britain. These savings helped to offset the impact of further mild winter weather during the year and are expected to continue to do so into the future.
DCC Technology grew its business during the year with market share gains in Britain in SME and consumer IT products, reflecting its excellent supplier portfolio and proactive market approach. The business has developed its relationships with key suppliers and has begun trading with some significant new suppliers during the year. In addition, DCC Technology has broadened its product offering in Britain with the acquisition of Cohort Technologies, a specialist distributor in security and unified communications. The business also strengthened the DCC Technology management team during the year, especially in Continental Europe. The year also saw a rebranding of the businesses within the division to Exertis, in order to help create a platform for sustained growth into new market sectors and geographies, and build greater recognition from supplier and customer partners as to the scale and capability of the business.
In DCC Healthcare, the acquisition of UPL, a British contract manufacturer of creams and liquids, has helped to cement DCC’s position as one of the two leading British creams and liquids contract manufacturers for brand owners. Strong organic growth in DCC Health & Beauty Solutions has also helped to strengthen its market position in the wider health and beauty contract manufacturing market. Following on from the acquisition of Kent Pharma in the prior year and its integration into DCC Healthcare’s existing infrastructure, DCC Healthcare has strengthened its devices business with the acquisition of Leonhard Lang UK, which was integrated into DCC Healthcare’s existing devices business and brought new expertise and expanded the product portfolio and customer relationships in Britain.
Both DCC Environmental and DCC Food & Beverage strengthened their market positions in key areas and delivered increased operating profit and return on capital employed.
DCC is committed to attracting, empowering and retaining entrepreneurial leadership teams and to deploying a devolved management structure. Some of the key acquisitions during the year saw DCC retain and incentivise key management teams who are capable of delivering a very strong performance for their businesses and contributing to the success of the Group. DCC has also benefitted from its ongoing talent retention programme, strengthening the team in recent years at Group, divisional and subsidiary levels, allowing us to provide opportunities for existing employees and also bring in new talent to DCC.
The success of DCC in the last 20 years reflects the talent and commitment of all the employees across the Group. I would like to thank them for their ongoing dedication and loyalty to DCC.
Embedded in DCC’s strategy is a commitment to maintaining financial strength through a disciplined approach to balance sheet management. It is pleasing that in the year ended 31 March 2014, DCC ended the year with a net debt:EBITDA ratio of 0.3x. This strong financial position, along with the Group’s liquidity position, leaves DCC well poised for continuing development.
Growth in the Group’s operating profit (driven by both organic and acquisitive growth) and strong working capital management has contributed to an increase in the Group return on capital employed from 15.6% to 16.3%, well in excess of DCC’s cost of capital.