Annual Report and Accounts 2014

 

Notes to the Financial Statements

41. Cash Generated from Operations
42. Contingencies
43. Capital Expenditure Commitments
44. Commitments under Operating and Finance Leases
45. Business Combinations

41. Cash Generated from Operations

 

Restated

 

2014

2013

Group

£’000

£’000

 

Profit for the financial year

123,943

106,634

Add back non-operating expenses

 

- tax (note 15)

27,255

26,288

- share of (profit)/loss from associates (note 14)

(33)

259

- net operating exceptionals (note 11)

13,283

23,817

- net finance costs (note 12)

23,539

15,444

Operating profit before exceptionals

187,987

172,442

- share-based payments expense (note 10)

1,185

1,078

- depreciation (note 19)

56,130

54,234

- amortisation (note 20)

20,416

14,420

- profit on sale of property, plant and equipment

(1,783)

(1,036)

- amortisation of government grants (note 35)

(383)

(476)

- other

(1,792)

(4,249)

Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation):

- inventories (note 26)

(109,393)

(88,120)

- trade and other receivables (note 26)

189,888

(21,740)

- trade and other payables (note 26)

6,409

138,061

Cash generated from operations before exceptionals

348,664

264,614

 

Restated

 

2014

2013

Company

£’000

£’000

 

 

 

Profit for the financial year

40,894

40,173

Add back non-operating (income)/expense

 

- net operating exceptionals

-

285

- net finance income

(10,093)

(10,012)

- dividend income

(29,490)

(29,405)

Operating profit

1,311

1,041

Changes in working capital:

 

- trade and other receivables (note 26)

2,443

29,592

- trade and other payables (note 26)

47,608

(13,089)

Cash generated from operations

51,362

17,544

 

 

 

42. Contingencies

Guarantees

The Company and certain subsidiaries have given guarantees of £1,603.209 million (2013: £1,335.026 million) in respect of borrowings and other obligations arising in the ordinary course of business of the Company and other Group undertakings.

Other

Pursuant to the provisions of Section 17, Companies (Amendment) Act, 1986, the Company has guaranteed the liabilities of the following subsidiaries; Alvabay Limited, DCC Business Expansion Fund Limited, DCC Energy Limited, DCC Finance Limited, DCC Funding 2007 Limited, DCC Healthcare Limited, DCC Management Services Limited, DCC Nominees Limited, DCC Technology Limited, DCC Treasury Ireland 2013 Limited, Emo Oil Limited, Energy Procurement Limited, Exertis Ireland Limited (formerly Sharptext Limited), Fannin Limited, Fannin Compounding Limited, Flogas Ireland Limited, Great Gas Petroleum (Ireland) Limited, Lotus Green Limited, Technology Distribution Limited, Technology (Holdings) Limited, Technology Property Limited and Shannon Environmental Holdings Limited. As a result, these companies will be exempted from the filing provisions of Section 7, Companies (Amendment) Act, 1986.

43. Capital Expenditure Commitments

 

Restated

 

2014

2013

Group

£’000

£’000

 

 

 

Capital expenditure on property, plant and equipment that has been contracted for but has not been provided for in the financial statements

4,704

3,541

Capital expenditure on property, plant and equipment that has been authorised by the Directors but has not yet been contracted for

73,835

61,614

 

78,539

65,155

 

 

44. Commitments under Operating and Finance Leases

Group

Operating leases

Future minimum rentals payable under non-cancellable operating leases at 31 March are as follows:

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

Within one year

23,147

20,065

After one year but not more than five years

43,111

47,901

More than five years

62,247

68,731

 

128,505

136,697

 

 

 

The Group leases a number of properties under operating leases. The leases typically run for a period of 10 to 25 years. Rents are generally reviewed every five years.

During the year ended 31 March 2014, £27.672 million (2013: £25.999 million) was recognised as an expense in the Income Statement in respect of operating leases.

Finance leases

Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

 

2014

2013 (restated)

 

Present

Present

 

Minimum

value of

Minimum

value of

 

payments

payments

payments

payments

 

£’000

£’000

£’000

£’000

 

 

 

 

 

Within one year

503

501

725

722

After one year but not more than five years

630

619

632

619

 

1,133

1,120

1,357

1,341

Less: amounts allocated to future finance costs

(13)

-

(16)

-

Present value of minimum lease payments

1,120

1,120

1,341

1,341

 

 

 

45. Business Combinations

A key strategy of the Group is to create and sustain market leadership positions through bolt-on 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 of 100% of Bronberger & Kessler, an oil distribution business in southern Germany, completed in May 2013;
  • the acquisition of 100% of Leonhard Lang UK Limited, a UK based business which is focussed on the sales, marketing and distribution of medical consumables to hospitals and ambulance services in Britain, completed in June 2013;
  • the acquisition of 100% of Cohort Technology, a UK based distributor of security and networking products, completed in October 2013; and
  • the acquisition of 100% of Universal Products Manufacturing (Lytham) Limited, a British contract manufacturer of creams and liquids, completed in January 2014.

The carrying amounts of the assets and liabilities acquired (excluding net cash/debt acquired), determined in accordance with IFRS before completion of the business combinations, together with the fair value adjustments made to those carrying values were as follows:

 

Restated

 

2014

2013

 

£’000

£’000

Assets

 

 

Non-current assets

 

 

Property, plant and equipment (note 19)

9,171

63,438

Intangible assets - other intangible assets (note 20)

12,333

25,591

Deferred income tax assets

4

666

Total non-current assets

21,508

89,695

 

 

Current assets

 

Inventories (note 26)

6,748

17,191

Trade and other receivables (note 26)

22,209

35,755

Total current assets

28,957

52,946

 

 

Liabilities

 

Non-current liabilities

 

Deferred income tax liabilities

(2,512)

(6,595)

Provisions for liabilities and charges

(1,930)

(2,800)

Total non-current liabilities

(4,442)

(9,395)

 

 

Current liabilities

 

Trade and other payables (note 26)

(25,811)

(44,225)

Current income tax (liabilities)/assets

(680)

337

Provisions for liabilities and charges

-

(259)

Total current liabilities

(26,491)

(44,147)

 

 

Identifiable net assets acquired

19,532

89,099

Intangible assets - goodwill (note 20)

24,601

79,907

Total consideration (enterprise value)

44,133

169,006

 

 

Satisfied by:

 

Cash

51,009

166,325

Net cash acquired

(11,133)

(10,148)

Net cash outflow

39,876

156,177

Deferred and contingent acquisition consideration

4,257

12,829

Total consideration

44,133

169,006

 

 

 

None of the business combinations completed during the year 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

Fair value

Fair

 

value

adjustments

value

Total

£’000

£’000

£’000

 

 

 

 

Non-current assets (excluding goodwill)

9,175

12,333

21,508

Current assets

28,957

-

28,957

Non-current liabilities

(2,040)

(2,402)

(4,442)

Current liabilities

(26,491)

-

(26,491)

Identifiable net assets acquired

9,601

9,931

19,532

Goodwill arising on acquisition

34,532

(9,931)

24,601

Total consideration (enterprise value)

44,133

-

44,133

 

 

 

 

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 these fair values within the twelve month timeframe from the date of acquisition will be disclosable in the 2015 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.

£2.525 million of the goodwill recognised in respect of acquisitions completed during the financial year is expected to be deductible for tax purposes.

Acquisition related costs included in other operating expenses in the Group Income Statement amounted to £5.638 million (2013: £12.146 million).

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 £22.507 million. The fair value of these receivables is £22.209 million (all of which is expected to be recoverable) and is inclusive of an aggregate allowance for impairment of £0.298 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 £7.2 million.

There were no adjustments processed during the year to the fair value of business combinations completed during the year ended 31 March 2013 where those fair values were not readily determinable as at 31 March 2013.

The post-acquisition impact of business combinations completed during the year on Group profit for the financial year was as follows:

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

Revenue

353,004

212,643

Cost of sales

(334,844)

(173,762)

Gross profit

18,160

38,881

Operating costs

(12,212)

(28,625)

Operating profit

5,948

10,256

Finance costs (net)

(205)

(624)

Profit before tax

5,743

9,632

Income tax expense

(848)

(2,184)

Profit for the financial year

4,895

7,448

 

 

 

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:

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

Revenue

11,352,020

10,823,585

Profit for the financial year

127,485

113,081