Results highlights			Change on prior year
	€		Reported	Constant currency†
Revenue	6,400.1m		+15.7%	+31.0%
Operating profit*	180.4m		+7.9%	+22.4%
Profit before exceptional items, amortisation of intangible assets and tax	159.5m		+6.3%	+21.3%
Adjusted earnings per share*	169.13 cent		+2.5%	+17.0%
Dividend per share	62.34 cent		+10.0%
Free cash flow**	218.5m	(2008:€12.4m)
Net debt at 31 March 2009	90.7m	(2008:€123.7m)
Return on capital employed	17.8%	(2008:17.5%)

 

†	all constant currency figures quoted in this report are based on retranslating 2008/09 figures at prior year translation rates
*	excluding net exceptionals and amortisation of intangible assets
**	after interest and tax payments

 

DCC achieved another year of excellent underlying growth despite the rapidly deteriorating economic and business climate. Group operating profit of €180.4 million represented growth, on a constant currency basis, of 22.4% over the prior year of which approximately half was organic. On a reported basis, operating profit was up 7.9%, reflecting the fact that approximately 76% of the Group’s operating profit in the year was denominated in sterling and that there was a 15% adverse movement in the average sterling translation rate . Adjusted earnings per share of 169.13 cent was 17.0% ahead of the prior year on a constant currency basis and 2.5% ahead on a reported basis.

 

Dividend per share is up 10% to 62.34 cent with dividend cover at 2.7 times (2.9 times in 2008).

 

As the year progressed there was a heightened focus throughout the Group on cash generation and, in particular, on the quality of the Group’s working capital profile. It is pleasing to note that free cash flow in the year was a record €218.5 million and that a reduction in debtors days to 41.3 compared to 45.7 in the prior year, resulted in an overall reduction in working capital days to 11.9 from 16.4 last year. The Group’s strong financial position has been reinforced with debt declining by €33.0 million in the year to €90.7 million at 31 March 2009 which left gearing at 12.5% and a net debt/EBITDA ratio of 0.4%.

 

Return on capital employed (including intangibles) was 17.8% compared to 17.5% in the prior year.

 

Divisional Highlights
Detailed business reviews for each of the five divisions are set out on pages 14 to 33. Some of the key features of the year include:

 

DCC Energy had an exceptional year in terms of profit growth, cash generation and development across each of its business areas. The business sold 5.3 billion litres of product throughout Britain and Ireland and, aided by the successful integration of a number of acquisitions, a more favourable product cost environment than in recent years and a very cold winter, grew its operating profit by 59.3% on a constant currency basis. Substantial progress was achieved in the pursuit of a number of strategic objectives, including the acquisition, in August 2008, of Chevron’s UK oil distributor business, the impact of which was to increase DCC Energy’s annual oil volumes in the UK by approximately 30% on a full year basis. DCC Energy now has an approximate 12% share of the UK oil distribution market and continues to target the achievement of a 20% market share in the medium term. We are also pleased to have announced that we have reached conditional agreement with Shell Denmark to acquire the trade, assets and goodwill of Shell’s oil distribution business in Denmark, which distributes heating oils and transport fuels to domestic and small commercial and industrial companies throughout Denmark. This is an initial modest step for DCC Energy in expanding its oil distribution business beyond Britain and Ireland.

 

DCC SerCom achieved strong profit growth in the year of 9.2%, on a constant currency basis, despite challenging conditions in some of its markets. This result continues the business’s long track record of outperforming almost all of its industry peers. The growth was achieved in large part due to the success of DCC SerCom’s strategic focus on expanding its product range (including its own brand) and market coverage in the Retail market and through further progress in the development of a pan-European presence in the Enterprise market. Continued expansion of the product portfolio across the businesses is targeted for the current financial year.

 

DCC Healthcare experienced difficult market conditions across its businesses and was particularly impacted by budgetary constraints in the Irish Health Service Executive and by significant raw material price increases in its Health & Beauty and Mobility & Rehab businesses. The German mobility and rehabilitation market has proved particularly difficult over a number of years and led to DCC taking the decision to close its subsidiary there. International customers who have been dealing with our German business will now be serviced from our British subsidiary. Other initiatives have been taken to address the trading issues experienced in DCC Healthcare, including cost reductions and the implementation of price increases in the Health & Beauty and Mobility & Rehab businesses.

 

DCC Food & Beverage experienced a particularly challenging market environment in the second half of the financial year. The economic downturn in Ireland has led to changes in both consumer buying patterns and in the procurement strategy by one of the business’s major retail customers. Action to adapt the cost base in the business to new activity levels is ongoing. During the year DCC Food & Beverage acquired Findlater Grants, a leading Irish wine and spirits distribution business. The integration of this business has gone well and we are confident of achieving the twin objectives of creating a powerful new force in wine and spirits distribution in Ireland and of realising significant commercial and operating synergies.

 

DCC Environmental’s profits were impacted by the deteriorating economic environment and the dramatic decline in recyclate prices. Cost reductions have been implemented in those parts of the division where volumes have reduced and our businesses are focussed on maintaining their respective market leading positions. While activity levels are lower, the momentum towards more sustainable waste management solutions leaves DCC Environmental, with its particular focus on recycling, well placed for future development.

 

Exceptional Charge
DCC incurred a net exceptional charge before tax in the year of €15.9 million, principally relating to:

•	redundancy costs incurred both in relation to the integration of recently acquired businesses and the implementation of a number of cost reduction programmes across the Group;
•	the costs associated with the closure of DCC Healthcare’s German subsidiary;
•	a non cash goodwill impairment charge in relation to certain Food & Beverage and Healthcare subsidiaries; and
•	the profit on the sale of a US associate company.

 

Acquisition and Capital Expenditure
Acquisition and capital expenditure in the year amounted to €154.5 million as set out below.

 

Acquisitions €’m		Capex €’m	Total €’m
DCC Energy	65.3	31.5	96.8
DCC SerCom	10.9	3.9	14.8
DCC Healthcare	7.0	6.7	13.7
DCC Food & Beverage	12.0	4.1	16.1
DCC Environmental	3.2	9.9	13.1
Total	98.4	56.1	154.5

 

Acquisition expenditure in the year amounted to €98.4 million. Acquisition activity levels slowed throughout the year which is a reflection of a shift in the short term focus of many potential vendors in reacting to the impact of the economic downturn on their businesses as well as a period of adjustment required for valuation expectations. DCC’s strong financial position leaves the Group well placed to take advantage of an increased flow of opportunities which is likely to arise in the current environment.

 

During the year DCC spent €56.1 million on capital expenditure down from €87.6 million in the prior year. A further reduction in capital expenditure is anticipated in the current year.

 

Financial Strength
At 31 March 2009 DCC had net debt of €90.7 million (2008: €123.7 million) and total equity of €726.2 million (2008: €742.4 million). The Group’s net debt levels averaged €236 million compared to €242 million in the prior year. Interest cover in the year amounted to 8.5 times.

 

Strategy Review
The Board and management have carried out a detailed review of DCC’s overall strategic direction over the last year. An extensive analysis was carried out of the current performance and future potential of all material aspects of the Group’s business. A review was also undertaken, with the benefit of external independent advice, to consider whether any significant changes in the current composition or structure of the Group are warranted at this time. The outcome of the Strategy Review is set out on page 12.

 

Outlook
The outlook for the current financial year is set against the background of an exceptionally difficult economic environment which it is anticipated will continue throughout the year.

 

In particular, while the first half of the Group’s financial year is seasonally much less significant (33.6% of operating profit last year), results for this period will be challenged by the continuing impact of the marked economic slowdown which particularly affected some of the Group’s businesses in the second half of last year. In addition, DCC Energy, DCC’s largest division, achieved exceptional profit growth in the first half last year (82.3% in constant currency terms) benefiting from particularly cold weather conditions in April (seasonally DCC Energy’s most important trading month in the first half), which were not repeated in April 2009.

 

For the full year to 31 March 2010, it is currently anticipated that Group operating profit, on a constant currency basis, will be modestly behind to broadly in line with last year. However, the impact of the translation into euro of the significant proportion of DCC’s profit which is earned in sterling (2009: 76%) at the approximate current exchange rate of Stg£0.90 = €1 (compared to an average translation rate last year of Stg£0.8262 = €1) would result in reported operating profit being approximately 5% to 10% behind last year.

 

The Group will benefit from a significant reduction in its net finance costs as a result of lower prevailing interest rates although this will be largely offset by a higher tax charge due to lower available interest deductions in the UK against the Group’s taxable profits.

 

Consequently, at this early stage DCC anticipates adjusted earnings per share, on a constant currency basis, will be modestly behind to broadly in line with the year ended 31 March 2009, resulting in reported adjusted earnings per share being approximately 5% to 10% behind.

 

DCC’s diversified business model, strong financial position and excellent cash generation leave the Group in a strong position to benefit from acquisition and development opportunities that are likely to arise in the current environment.

 

Tommy Breen
Chief Executive
18 May 2009