Annual Report and Accounts 2014

 

Notes to the Financial Statements

6. Group Operating Profit
7. Directors’ Emoluments and Interests
8. Proportionate Consolidation of Joint Ventures
9. Employment
10. Employee Share Options and Awards

6. Group Operating Profit

Group operating profit has been arrived at after charging/(crediting) the following amounts (including the Group’s share of joint ventures accounted for on the basis of proportionate consolidation):

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

Depreciation (note 19)

56,130

54,234

Amortisation of intangible assets (note 20)

20,416

14,420

Provision for impairment of trade receivables (note 46)

4,904

3,390

Profit on sale of property, plant and equipment

(1,783)

(1,036)

Foreign exchange loss

416

180

Amortisation of government grants (note 35)

(383)

(476)

Operating lease rentals

 

- land and buildings

15,811

14,954

- plant and machinery

714

712

- motor vehicles

11,147

10,333

 

27,672

25,999

 

 

During the year the Group obtained the following services from the Group’s auditors (PricewaterhouseCoopers):

 

Statutory auditor:

 

Audit fees

683

615

Tax compliance and advisory services

154

134

Other non-audit services

4

49

 

841

798

Other PricewaterhouseCoopers network firms:

 

Audit fees

917

836

Tax compliance and advisory services

572

504

Other non-audit services

26

-

 

1,515

1,340

 

 

Auditor statutory disclosure

The audit fee for the Parent Company is £13,759 (2013: £13,291). This amount is paid to PricewaterhouseCoopers, Ireland, the statutory auditor.

7. Directors’ Emoluments and Interests

Directors’ emoluments (which are included in operating costs) and interests are presented in the Remuneration Report on this page.

8. Proportionate Consolidation of Joint Ventures

Impact on Group Income Statement

 

Restated

Year ended 31 March

2014

2013

Group share of:

£’000

£’000

 

 

 

Revenue

20,834

20,293

Cost of sales

(16,029)

(13,155)

Gross profit

4,805

7,138

Operating costs

(3,669)

(5,877)

Exceptional items

-

(392)

Operating profit

1,136

869

Finance income (net)

-

7

Profit before income tax

1,136

876

Income tax expense

(173)

(104)

Profit for the financial year

963

772

 

 

Impact on Group Balance Sheet

 

 

 

Restated

As at 31 March

2014

2013

Group share of:

£’000

£’000

 

 

 

Non-current assets

6,018

6,185

Current assets

3,198

3,038

Total assets

9,216

9,223

 

 

Total equity

5,200

4,979

Non-current liabilities

8

-

Current liabilities

4,008

4,244

Total liabilities

4,016

4,244

Total equity and liabilities

9,216

9,223

 

 

Impact on Group Cash Flow Statement

 

 

 

Restated

Year ended 31 March

2014

2013

Group share of:

£’000

£’000

 

 

 

Net cash flow from operating activities

1,008

100

Net cash flow from investing activities

(679)

(845)

Net increase/(decrease) in cash and cash equivalents

329

(745)

Translation

(21)

(6)

Cash and cash equivalents at beginning of year

697

1,448

Cash and cash equivalents at end of year

1,005

697

 

 

Reconciliation of cash and cash equivalents to net cash

 

Cash and cash equivalents as above

1,005

697

Net cash at 31 March

1,005

697

 

 

 

The Group’s share of its joint ventures’ capital commitments for property, plant and equipment at 31 March 2014, which has been authorised by the Directors but not yet contracted for, is £0.538 million (2013: £0.494 million).

Details of the Group’s principal joint ventures are shown in the Group directory on this page.

9. Employment

The average weekly number of persons (including executive Directors and the Group’s share of employees of joint ventures, applying proportionate consolidation) employed by the Group during the year analysed by class of business was:

 

2014

2013

 

Number

Number

 

 

 

DCC Energy

4,635

4,507

DCC Technology

1,753

1,573

DCC Healthcare

1,602

1,280

DCC Environmental

952

903

DCC Food & Beverage

862

890

 

9,804

9,153

 

 

 

 

Restated

 

2014

2013

The employee benefit expense (excluding termination payments - note 11) for the above were:

£’000

£’000

 

 

 

Wages and salaries

315,851

281,613

Social welfare costs

33,037

28,594

Share based payment expense (note 10)

1,185

1,078

Pension costs - defined contribution plans

9,394

9,763

Pension costs - defined benefit plans (note 32)

614

975

 

360,081

322,023

 

 

 

 

 

 

10. Employee Share Options and Awards

The Group’s employee share options and awards are equity-settled share-based payments as defined in IFRS 2 Share-based Payment. The IFRS requires that a recognised valuation methodology be employed to determine the fair value of share options granted. The expense reported in the Income Statement of £1.185 million (2013: £1.078 million) has been arrived at by applying a Monte Carlo simulation technique for share awards issued under the DCC plc Long Term Incentive Plan 2009 and a binomial model, which is a lattice option-pricing model, for options issued under the DCC plc 1998 Employee Share Option Scheme.

Impact on Income Statement

In compliance with IFRS 2 Share-based Payment, the Group has implemented the measurement requirements of the IFRS in respect of share options that were granted after 7 November 2002 and had not vested by 1 April 2004.

The total share option expense is analysed as follows:

Expense in Income Statement

Minimum

Number of

Weighted

Restated

Grant

duration of

share awards/

average

2014

2013

Date of grant

price

vesting period

options granted

fair value

£’000

£’000

 

DCC plc Long Term Incentive Plan 2009

 

 

 

 

 

 

20 August 2009

€15.63

3 years

255,406

€8.97

-

(465)

15 November 2010

€21.25

3 years

212,525

€12.00

(62)

693

15 November 2011

€17.50

3 years

252,697

€9.17

270

629

12 November 2012

€22.66

3 years

215,489

€12.09

731

236

12 November 2013

£28.54

3 years

153,430

£14.42

246

-

 

 

 

 

 

1,185

1,093

 

 

 

 

 

 

DCC plc 1998 Employee Share Option Scheme

 

 

 

 

23 June 2006

€18.05

3 years

223,500

€4.54

-

(15)

 

 

 

 

 

-

(15)

Total expense

 

 

 

 

1,185

1,078

 

 

 

 

 

 

 

Share options and awards

DCC plc Long Term Incentive Plan 2009

At 31 March 2014, under the DCC plc Long Term Incentive Plan 2009, Group employees hold awards to subscribe for 742,574 ordinary shares.

The general terms of the DCC plc Long Term Incentive Plan 2009 are set out in the Remuneration Report on this page.

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:

 

2014

2013

 

Number of

Number of

 

share awards

share awards

 

 

 

At 1 April

733,414

714,755

Granted

153,430

215,489

Exercised

(15,941)

(11,776)

Expired

(128,329)

(185,054)

At 31 March

742,574

733,414

 

 

 

The weighted average share price at the dates of exercise for share awards exercised during the year under the DCC plc Long Term Incentive Plan 2009 was £29.39 (2013: €22.16). The share awards outstanding at the year end have a weighted average remaining contractual life of 5.1 years (2013: 5.5 years).

The weighted average fair values assigned to share awards granted under the DCC plc Long Term Incentive Plan 2009, which were computed in accordance with the Monte Carlo valuation methodology, were as follows:

Granted during the year ended 31 March 2014

£14.42

Granted during the year ended 31 March 2013

€12.09

Granted during the year ended 31 March 2012

€9.17

Granted during the year ended 31 March 2011

€12.00

Granted during the year ended 31 March 2010

€8.97

 

The fair values of share awards granted under the DCC plc Long Term Incentive Plan 2009 were determined taking account of peer group total share return volatilities and correlations together with the following assumptions:

 

2014

2013

Risk-free interest rate (%)

1.65

0.67

Dividend yield (%)

3.1

2.5

Expected volatility (%)

23.3

30.0

Expected life in years

5.0

5.0

Share price at date of grant

£28.54

€22.65

 

 

 

The expected volatility is based on historic volatility over the past 5 years. The expected life is the average expected period to exercise. The risk free rate of return is the yield on zero coupon government bonds of a term consistent with the assumed option life.

Analysis of closing balance - outstanding at end of year

2014

2013

Number of

Number of

Date of grant

Date of expiry

share awards

share awards

 

 

 

 

20 August 2009

20 August 2016

47,148

52,703

15 November 2010

15 November 2017

79,066

212,525

15 November 2011

15 November 2018

249,211

252,697

12 November 2012

12 November 2019

214,143

215,489

12 November 2013

12 November 2020

153,006

-

Total outstanding at 31 March

 

742,574

733,414

 

 

 

 

Analysis of closing balance - exercisable at end of year

As at 31 March 2014, 126,214 of the outstanding share awards under the DCC plc Long Term Incentive Plan 2009 were exercisable.

DCC plc 1998 Employee Share Option Scheme

At 31 March 2014, under the DCC plc 1998 Employee Share Option Scheme, Group employees hold basic tier options to subscribe for 714,750 ordinary shares and second tier options to subscribe for 89,500 ordinary shares.

The general terms of the DCC plc 1998 Employee Share Option Scheme are set out in the Remuneration Report on this page.

The DCC plc 1998 Employee Share Option Scheme contains non-market based vesting conditions which are not taken into account when estimating the fair value of entitlements as at the grant date. The expense in the Income Statement represents the product of the total number of options anticipated to vest and the fair value of those options. This amount is allocated on a straight-line basis over the vesting period to the Income Statement. The cumulative charge to the Income Statement is only reversed where entitlements do not vest because non-market performance conditions have not been met or where an employee in receipt of share entitlements relinquishes service before the end of the vesting period.

A summary of activity under the DCC plc 1998 Employee Share Option Scheme over the year is as follows:

 

2014

2013

 

Average

Average

 

exercise

exercise

 

price in €

price in €

 

per share

Options

per share

Options

 

At 1 April

17.09

1,024,350

15.51

1,443,000

Exercised

15.35

(152,600)

13.61

(153,150)

Expired

10.70

(67,500)

10.50

(265,500)

At 31 March

17.96

804,250

17.09

1,024,350

 

Total exercisable at 31 March

18.49

714,750

17.94

867,350

 

The weighted average share price at the dates of exercise for share options exercised during the year under the DCC plc 1998 Employee Share Option Scheme was £27.87 (2013: €23.40). The share options outstanding at the year end have a weighted average remaining contractual life of 2.6 years (2013: 3.3 years).

Analysis of closing balance - outstanding at end of year

2014

2013

Exercise

Exercise

price

price

Date of grant

Date of expiry

per share

Options

per share

Options

 

 

 

 

 

 

22 December 2003

22 December 2013

€10.70

-

€10.70

75,000

18 May 2004

18 May 2014

€12.75

67,000

€12.75

118,000

9 November 2004

9 November 2014

€15.65

93,000

€15.65

120,500

15 December 2005

15 December 2015

€16.70

81,250

€16.70

107,350

23 June 2006

23 June 2016

€18.05

117,000

€18.05

131,500

23 July 2007

23 July 2017

€23.35

212,000

€23.35

222,000

20 December 2007

20 December 2017

€19.50

12,500

€19.50

12,500

20 May 2008

20 May 2018

€15.68

221,500

€15.68

237,500

Total outstanding at 31 March

 

804,250

1,024,350

 

 

 

 

 

 

Analysis of closing balance - exercisable at end of year

2014

2013

Exercise

Exercise

price

price

Date of grant

Date of expiry

per share

Options

per share

Options

 

 

 

 

22 December 2003

22 December 2013

€10.70

-

€10.70

7,500

18 May 2004

18 May 2014

€12.75

7,500

€12.75

58,500

9 November 2004

9 November 2014

€15.65

63,000

€15.65

90,500

15 December 2005

15 December 2015

€16.70

81,250

€16.70

107,350

23 June 2006

23 June 2016

€18.05

117,000

€18.05

131,500

23 July 2007

23 July 2017

€23.35

212,000

€23.35

222,000

20 December 2007

20 December 2017

€19.50

12,500

€19.50

12,500

20 May 2008

20 May 2018

€15.68

221,500

€15.68

237,500

Total exercisable at 31 March

 

714,750

867,350