Annual Report and Accounts 2014

 

Notes to the Financial Statements

16. Profit Attributable to DCC plc
17. Dividends
18. Earnings per Ordinary Share
19. Property, Plant and Equipment
20. Intangible Assets

16. Profit Attributable to DCC plc

Profit after taxation for the year attributable to owners of the Parent amounting to £40.894 million (2013: £40.173 million) has been accounted for in the financial statements of the Company. In accordance with Section 148(8) of the Companies Act 1963, 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 7(1A) of the Companies (Amendment) Act 1986.

17. Dividends

 

Restated

 

2014

2013

Dividends paid per Ordinary Share are as follows:

£’000

£’000

 

 

 

Final - paid 56.20 cent per share on 25 July 2013

39,721

34,375

(2013: paid 50.47 cent per share on 26 July 2012)

 

Interim - paid 26.12 pence per share on 29 November 2013

22,167

20,105

(2013: paid 29.48 cent per share on 30 November 2012)

 

 

61,888

54,480

 

 

 

The Directors are proposing a final dividend in respect of the year ended 31 March 2014 of 50.73 pence per ordinary share (£42.543 million). This proposed dividend is subject to approval by the shareholders at the Annual General Meeting.

Interim and final dividends declared previously in euro have been translated to sterling using the relevant average sterling/euro exchange rate for the period.

18. Earnings per Ordinary Share

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

Profit attributable to owners of the Parent

121,234

106,295

Amortisation of intangible assets after tax

16,237

11,333

Exceptionals after tax (note 11)

22,721

25,474

Adjusted profit after taxation and non-controlling interests

160,192

143,102

 

 

 

 

Restated

 

2014

2013

Basic earnings per ordinary share

pence

pence

 

 

 

Basic earnings per ordinary share

144.70p

127.17p

Amortisation of intangible assets after tax

19.38p

13.56p

Exceptionals

27.12p

30.47p

Adjusted basic earnings per ordinary share

191.20p

171.20p

 

Weighted average number of ordinary shares in issue (thousands)

83,781

83,586

 

 

 

Basic earnings per share is calculated by dividing the profit attributable to owners of the Parent 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 are intended to demonstrate the results of the Group after eliminating the impact of amortisation of intangible assets and net exceptionals.

 

Restated

 

2014

2013

Diluted earnings per ordinary share

pence

pence

 

Diluted earnings per ordinary share

143.90p

126.77p

Amortisation of intangible assets after tax

19.27p

13.51p

Exceptionals

26.97p

30.38p

Adjusted diluted earnings per ordinary share

190.14p

170.66p

 

Weighted average number of ordinary shares in issue (thousands)

84,250

83,850

 

The earnings used for the purposes of the diluted earnings per share calculations were £121.234 million (2013: £106.295 million) and £160.192 million (2013: £143.102 million) for the purposes of the adjusted diluted earnings per share calculations.

The weighted average number of ordinary shares used in calculating the diluted earnings per share for the year ended 31 March 2014 was 84.250 million (2013: 83.850 million). A reconciliation of the weighted average number of ordinary shares used for the purposes of calculating the diluted earnings per share amounts is as follows:

 

2014

2013

 

‘000

‘000

 

 

 

Weighted average number of ordinary shares in issue

83,781

83,586

Dilutive effect of options and awards

469

264

Weighted average number of ordinary shares for diluted earnings per share

84,250

83,850

 

 

 

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Share options and awards are the Company’s only category of dilutive potential ordinary shares.

Employee share options and awards, which are performance-based, are treated as contingently issuable shares because their issue is contingent upon satisfaction of specified performance conditions in addition to the passage of time. These contingently issuable shares are excluded from the computation of diluted earnings per ordinary share where the conditions governing exercisability have not been satisfied as at the end of the reporting period.

The adjusted figures for diluted earnings per ordinary share are intended to demonstrate the results of the Group after eliminating the impact of amortisation of intangible assets and net exceptionals.

19. Property, Plant and Equipment

 

Fixtures &

 

Plant &

fittings &

 

Land &

machinery

office

Motor

 

buildings

& cylinders

equipment

vehicles

Total

Group

£’000

£’000

£’000

£’000

£’000

 

Year ended 31 March 2014

 

 

 

 

 

Opening net book amount (restated)

149,839

202,500

27,665

61,496

441,500

Exchange differences

(1,111)

(1,667)

(192)

(207)

(3,177)

Arising on acquisition (note 45)

5,701

2,595

426

449

9,171

Disposal of subsidiaries

(875)

(129)

(46)

-

(1,050)

Additions

7,606

39,756

13,347

25,745

86,454

Disposals

(712)

(1,026)

(760)

(4,303)

(6,801)

Depreciation charge

(3,785)

(29,563)

(10,255)

(12,527)

(56,130)

Impairment charge (note 11)

(550)

-

-

-

(550)

Reclassifications

(1,238)

(1,414)

2,475

177

-

Closing net book amount

154,875

211,052

32,660

70,830

469,417

 

At 31 March 2014

Cost

195,750

552,380

108,814

156,648

1,013,592

Accumulated depreciation and impairment losses

(40,875)

(341,328)

(76,154)

(85,818)

(544,175)

Net book amount

154,875

211,052

32,660

70,830

469,417

 

 

 

 

 

 

Year ended 31 March 2013 (restated)

 

 

 

 

 

Opening net book amount

136,298

144,591

29,071

66,210

376,170

Exchange differences

1,060

610

219

62

1,951

Arising on acquisition (note 45)

12,339

49,068

902

1,129

63,438

Additions

5,347

32,343

8,446

12,046

58,182

Disposals

(1,119)

(1,093)

(101)

(1,694)

(4,007)

Depreciation charge

(3,034)

(26,362)

(8,585)

(16,253)

(54,234)

Reclassifications

(1,052)

3,343

(2,287)

(4)

-

Closing net book amount

149,839

202,500

27,665

61,496

441,500

 

 

 

 

 

 

At 31 March 2013 (restated)

 

 

 

 

 

Cost

186,948

518,214

100,158

144,005

949,325

Accumulated depreciation and impairment losses

(37,109)

(315,714)

(72,493)

(82,509)

(507,825)

Net book amount

149,839

202,500

27,665

61,496

441,500

 

 

 

 

 

 

Assets held under finance leases

The net carrying amount and the depreciation charge during the year in respect of assets held under finance leases and accordingly capitalised in property, plant and equipment are as follows:

 

Restated

 

2014

2013

 

£’000

£’000

 

Cost

45,047

48,484

Accumulated depreciation

(43,605)

(47,016)

Net book amount

1,442

1,468

 

 

Depreciation charge for the year

276

771

 

 

 

20. Intangible Assets

 

Customer

 

Goodwill

related

Total

Group

£’000

£’000

£’000

 

Year ended 31 March 2014

 

 

 

Opening net book amount (restated)

685,918

63,399

749,317

Exchange differences

(6,392)

(1,239)

(7,631)

Arising on acquisition (note 45)

24,601

12,333

36,934

Impairment charge (note 11)

(13,923)

-

(13,923)

Other movements (note 33)

(208)

-

(208)

Amortisation charge

-

(20,416)

(20,416)

Closing net book amount

689,996

54,077

744,073

 

At 31 March 2014

Cost

723,876

133,721

857,597

Accumulated amortisation and impairment losses

(33,880)

(79,644)

(113,524)

Net book amount

689,996

54,077

744,073

 

 

 

 

Year ended 31 March 2013 (restated)

 

 

 

Opening net book amount

603,234

51,548

654,782

Exchange differences

4,336

680

5,016

Arising on acquisition (note 45)

79,907

25,591

105,498

Other movements (note 33)

(1,559)

-

(1,559)

Amortisation charge

-

(14,420)

(14,420)

Closing net book amount

685,918

63,399

749,317

 

 

 

 

At 31 March 2013 (restated)

 

 

 

Cost

705,667

122,627

828,294

Accumulated amortisation and impairment losses

(19,749)

(59,228)

(78,977)

Net book amount

685,918

63,399

749,317

 

 

 

 

Customer related intangible assets principally comprise contractual and non-contractual customer relationships arising from business combinations and are amortised over their estimated useful lives. The weighted average remaining amortisation period is 2.7 years (2013: 3.2 years).

Cash-generating units

Goodwill acquired in business combinations is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from that business combination. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. The CGUs represent the lowest level within the Group at which the associated goodwill is assessed for internal management purposes and are not larger than the operating segments determined in accordance with IFRS 8 Operating Segments. A total of 30 CGUs (2013: 29 CGUs) have been identified and these are analysed between the five operating segments below together with a summary of the allocation of the carrying value of goodwill by segment.

 

Cash-generating units

Goodwill (£’000)

 

Restated

 

2014

2013

2014

2013

 

number

number

£’000

£’000

 

 

 

 

 

DCC Energy

12

11

406,511

401,885

DCC Technology

5

5

63,643

69,141

DCC Healthcare

4

4

125,197

117,331

DCC Environmental

4

4

78,909

76,694

DCC Food & Beverage

5

5

15,736

20,867

 

30

29

689,996

685,918

 

 

 

 

 

In accordance with IAS 36 Impairment of Assets, the CGUs to which significant amounts of goodwill have been allocated are as follows:

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

Certas Energy UK Group

252,408

251,742

DCC Vital Group

106,700

101,328

 

 

 

For the purpose of impairment testing, the discount rates applied to these CGUs to which significant amounts of goodwill have been allocated were 8.5% (2013: 9%) for the Certas Energy UK Group and 8.5% (2013: 10%) for the DCC Vital Group. The long term growth rate assumed in both cases was 2.3% (2013: 2.5%). The remaining goodwill balance of £330.888 million is allocated across 28 CGUs (2013: £332.848 million over 27 CGUs), none of which are individually significant.

Impairment testing of goodwill

Goodwill acquired through business combinations has been allocated to CGUs for the purpose of impairment testing. Impairment of goodwill occurs when the carrying value of a CGU is greater than the present value of the cash that it is expected to generate (i.e. the recoverable amount). The Group reviews the carrying value of each CGU at least annually or more frequently if there is an indication that the CGU may be impaired.

The recoverable amount of each CGU is based on a value in use computation. The cash flow forecasts employed for this computation are extracted from a three year plan that has been formally approved by the Board of Directors and specifically excludes future acquisition activity. Cash flows for a further two years are based on the assumptions underlying the three year plan. A long term growth rate reflecting the lower of the extrapolated cash flow projections and the long term GDP rate for the country of operation is applied to the year five cash flows. The weighted average long term growth rate used in the impairment testing was 2.3% (2013: 2.5%).

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 7.5% to 8.5% (2013: 7% to 10%).

Key assumptions include management’s estimates of future profitability, working capital investment and capital expenditure requirements. Cash flow forecasts and key assumptions are generally determined based on historical performance together with management’s expectation of future trends affecting the industry and other developments and initiatives in the business. The prior year assumptions were prepared on the same basis.

Applying these techniques, an impairment charge of £13.923 million arose in 2014 (2013: nil). The impairment charge, which is included in the Income Statement in other operating expenses, primarily arose in MSE Limited (a subsidiary of the Group’s Technology division) following the closure of the Irish DVD business and in Bottle Green Limited (a subsidiary of the Group’s Food & Beverage division) as this CGU experienced weak demand in the current year whilst the recovery in profits is forecasted at a slower rate than previously anticipated. The recoverable amounts for both CGUs were determined on a value in use basis. For the purpose of impairment testing, the discount rates applied to these CGUs were 8.4% (2013: 8.0%) for MSE Limited and 8.0% (2013: 8.0%) for Bottle Green Limited.

Sensitivity analysis was performed by increasing the discount rate by 1.5%, 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 all 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.