GOOD PROGRESS HAS BEEN MADE IN RAISING OUR AWARENESS AND UNDERSTANDING OF SUSTAINABILITY AND HOW, BY HAVING A WIDER AND DEEPER PERSPECTIVE OF THE ENVIRONMENTAL AND SOCIAL TRENDS THAT IMPACT OUR BUSINESS OVER THE LONGER TERM, WE CAN MORE EFFECTIVELY IDENTIFY BOTH RISKS AND OPPORTUNITIES FOR OUR BUSINESSES.


DCC RETAINS A STRONG EQUITY BASE, RELATIVELY LONG TERM DEBT MATURITIES AND SIGNIFICANT CASH RESOURCES WHICH LEAVE IT WELL PLACED TO TAKE ADVANTAGE OF FURTHER ACQUISITION AND DEVELOPMENT OPPORTUNITIES.

CHAIRMAN'S STATEMENT

chief executive

KEY FEATURES OF RESULTS
THE OPERATING PROFIT OF THE GROUP DECLINED BY 18.3% ON A CONSTANT CURRENCY BASIS IN THE YEAR ENDED 31 MARCH 2012. AS SIGNALLED DURING THE YEAR, THE GROUP'S RESULTS WERE ADVERSELY IMPACTED BY TRADING IN DCC ENERGY DUE TO MILD WEATHER, HIGHER OIL PRICES AND THE CONTINUING DIFFICULT ECONOMIC BACKGROUND, PARTICULARLY IN THE UK. HOWEVER, THE YEAR WAS ALSO ONE OF SIGNIFICANT DEVELOPMENT ACTIVITY, WITHIN DCC ENERGY AND ACROSS THE WIDER GROUP, WITH TOTAL CAPITAL DEPLOYED ON ACQUISITIONS AND NET CAPITAL EXPENDITURE OF €235 MILLION. WITH THE BENEFIT OF THIS ACTIVITY AND THE PROSPECT OF A MORE NORMAL WINTER, DCC LOOKS FORWARD TO A RESUMPTION OF STRONG GROWTH IN THE YEAR AHEAD.

Results Highlights

% Change on Prior Year
Reported Constant
Currency†
 
Revenue 10,690.3m +23.2% +24.9%
Operating profit* 185.0m -19.4% -18.3%
Profit before net exceptional items, amortisation of intangible assets and tax 167.1m -22.2% -21.1%
Adjusted earnings per share* 163.51 cent -19.5% -18.4%
Dividend per share 77.89 cent +5.0%
Operating cash flow 277.3m (2011: €269.6m)
Free cash flow** 146.0m (2011: €123.6m)
Net debt 128.2m (2011: €45.2m)
Total equity 1,014.0m (2011: €931.9m)
Return on total capital employed 14.2% (2011: 19.9%)

† all constant currency figures quoted in this report are based on retranslating 2011/12 figures at prior year translation rates
* excluding net exceptionals and amortisation of intangible assets
** after net capital expenditure, interest and tax payments

While operating profit in DCC Energy in the year ended 31 March 2012 declined by 38.3% on a constant currency basis, reflecting the factors already referred to, operating profit in the Group's other four divisions combined increased by 11.3% on a constant currency basis.

This was driven primarily by DCC SerCom, DCC's second largest division, which increased its operating profit by 17.0% on a constant currency basis. DCC Healthcare increased its operating profit on continuing activities by 5.3% on a constant currency basis, while DCC Environmental's operating profit advanced 24.9%, also on a constant currency basis, driven primarily by acquisition activity during the year. Operating profit declined by 7.0% in DCC's smallest division, DCC Food & Beverage.

Despite the challenging trading result in the year, the Group continued to drive strong cash generation with operating cash flow of €277.3 million (€269.6 million in the prior year) and free cash flow of €146.0 million (€123.6 million in the prior year). A major factor in this was a working capital reduction of €46.6 million in the year despite a €2.0 billion increase in revenue with overall working capital days reducing to 2.5 days at 31 March 2012 from 4.9 days at 31 March 2011.

Reflecting the strong cash generation and confidence in the future development of the Group, it is proposed to increase the final dividend for the year by 5% to 50.47 cent per share, resulting in a 5% increase for the full year to 77.89 cent per share.

While return on total capital employed declined to 14.2% (19.9% in the prior year), reflecting the result in DCC Energy, this is well above the Group's cost of capital.

Delivering against Strategy

Despite a challenging year, we continued to make excellent progress against each of our key strategic objectives.

We have grown our market positions in many of our businesses. During the year we further strengthened our position as the leading distributor of oil products in the UK through the completion of the acquisition of Pace Fuelcare, certain oil distribution assets of Total in Britain and a number of other smaller oil distributors. DCC Energy's strategy is to develop its business in the retail petrol station, marine, aviation and other value added product sectors which along with other initiatives will, over time, reduce the impact of weather on its business.

Our IT distribution businesses have consolidated their number 1 or 2 positions in the Irish and UK markets through strong organic growth and the integration of Advent Data which was acquired just before the end of the prior financial year.

In DCC Healthcare we have reinforced our position as the market leader in the medical device and pharma products sector in Ireland and in the provision of outsourced services to brand owners in the health and beauty sector. Through the acquisition of Neolab and the Forth Medical Group, we have grown our developing market presence in Britain in the generic pharma and medical device markets. Similarly, in DCC Environmental we added to our British waste management business through the acquisitions of Oakwood and Maxi Waste.

We maintained our focus throughout the year on the continuous drive to improve the operating efficiency of our businesses. We aim to be the most efficient business within each of the sectors in which we operate, consistent always with providing optimal value and service to both our customers and suppliers. A most notable achievement during the year was the reduction in working capital days from 4.9 days last year to 2.5 days at 31 March 2012, our lowest ever level.

In the year ended 31 March 2012, 17% of operating profit was derived from businesses in Continental Europe, up from 12% in the prior year and 3% just five years ago. During the year, we acquired our first businesses in Sweden - Swea Energi, the leading oil distributor in Sweden, and Ztorm AB, a small company providing digital media distribution services to global customers. Our development strategy, which resulted in committed acquisition expenditure during the year of €169.1 million, remains focused on not just each of the geographic markets we operate in today, but also new markets where we believe attractive opportunities exist for the Group.
graph graph
We are very pleased to have strengthened our senior management teams in a number of areas at Group, divisional and subsidiary levels. A number of these appointments have been made with a view to expanding our management resource to better position the Group for future development opportunities.

Our financial position remains very strong - the Group is well funded and highly liquid. At 31 March 2012, the Group had net debt of €128.2 million and total equity of just over €1.0 billion. The Group net debt to EBITDA ratio was 0.5. The significant majority of our debt has been raised in the US private placement market with relatively long term maturities, at 31 March 2012 an average maturity of 5.5 years.

Sustainability

Good progress has been made in raising our awareness and understanding of sustainability and how, by having a wider and deeper perspective of the environmental and social trends that impact our business over the longer term, we can more effectively identify both risks and opportunities for our businesses. Notwithstanding the challenges to national economies, global social pressures continue to place greater demands on energy availability, natural resources and food production. The business community has a role to play in addressing these challenges by creating more sustainable business models that deliver shared value to our shareholders, society and the environment.

The completion of all divisional sustainability workshops during the year has engaged senior executive management teams in the sustainability agenda and forms a starting point for cascading sustainability into each subsidiary. While engagement with stakeholders (for example investors, employees, customers and suppliers) is ongoing, sustainability has not always been explicitly or systematically addressed. This is a challenge for DCC and we are committed to improving our sustainability engagement processes in the coming year.

The DCC Climate Change Strategy was issued in 2011 and included carbon intensity reduction targets to be met by each subsidiary in 2015 and 2020, using metrics that are appropriate to their operations. The Climate Change Strategy is discussed more fully in the Sustainability Report.

DCC's overall commitment to reporting carbon emissions data and policies was independently recognised by our inclusion in the Carbon Disclosure Project's (CDP) Irish Climate Leaders Index, based on DCC's response to the CDP's investor questionnaire.

Safety performance improved in terms of the number of lost time injuries sustained by employees but the number of days lost as a result of those injuries increased, i.e. on average more days lost per accident. Our objective is to have no lost time injuries and management systems are in place to identify, control and monitor health and safety risks to employees and others. In those subsidiaries with higher injury rates, additional resource will be focused on preventing incidents in the first instance and, in the event of an accident, fully supporting the recovery of injured parties and their return to work.

This is the second year that we have reported in line with the Global Reporting Initiative (GRI) level C standard. As sustainability reporting standards develop and become increasingly more complex and demanding in terms of disclosure requirements, a review of how we measure and report sustainability will be completed in the coming year to ensure that we focus resources on material issues that add value and contribute to the long term success of our business. We will include international standards such as the Greenhouse Gas Protocol, the GRI and the CDP and the work of the International Integrated Reporting Council as part of this review.

DCC has made a positive start on the sustainability journey but we recognise that we have more to do. Our priority is to develop and embed sustainability concepts into business processes to ensure that our customers, people and investors continue to benefit from their association with DCC.

Outlook

The outlook for the year to 31 March 2013 is set against a continued uncertain economic environment and the important assumption that there will be a return to more normal winter temperatures compared to the extremely mild winter last year, which should give rise to a strong recovery in DCC Energy's operating profit. Consequently, at this very early stage, the Group anticipates that its operating profit and adjusted earnings per share on continuing activities, both on a constant currency basis, will be approximately 15% ahead of the prior year. This would result in approximately a 20% increase in operating profit and in adjusted earnings per share compared to the prior year on a reported basis, assuming an exchange rate of Stg£0.81 = €1.

DCC retains a strong equity base, relatively long term debt maturities and significant cash resources which leave it well placed to take advantage of further acquisition and development opportunities.


Tommy Breen
Chief Executive
14 May 2012