Notes to the Financial Statements

47. Financial Risk and Capital Management

46. Business Combinations

The principal acquisitions completed by the Group during the year, together with percentages acquired were as follows:

-	the acquisition of the trade, assets and goodwill of Chevron’s UK oil distributor business (‘Chevron’) announced on 15 August 2008;
-	Findlater Grants (100%): an Irish based wine and spirits distributor, announced on 15 September 2008;
-	Cooke Fuel Cards business (100%): a UK based fuel card sales and marketing business, announced on 5 January 2009; and
-	Mambo Technology (100%): a Spanish based enterprise distribution business, announced on 3 February 2009.

The carrying amounts of the assets and liabilities acquired (excluding net cash 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:

	2009 €’000 Chevron	2009 €’000 Others	2009 €’000 Total	2008 €’000 Total

Assets
Non-current assets
Property, plant and equipment (note 19)	5,776	3,565	9,341	16,130
Intangible assets - goodwill (note 20)	23,383	46,513	69,896	112,545
Intangible assets - other intangible assets (note 20)	2,120	5,791	7,911	8,482
Deferred income tax assets (note 31)	-	3,415	3,415	479
Total non-current assets	31,279	59,284	90,563	137,636

Current assets
Inventories (note 26)	6,105	10,020	16,125	48,244
Trade and other receivables (note 26)	84,994	28,146	113,140	139,071
Total current assets	91,099	38,166	129,265	187,315

Equity
Minority interest (note 40)	-	(12)	(12)	-
Total equity	-	(12)	(12)	-

Liabilities
Non-current liabilities
Deferred income tax liabilities (note 31)	(593)	(1,692)	(2,285)	(2,044)
Provisions for liabilities and charges (note 34)	-	-	-	(553)
Government grants (note 35)	-	(6)	(6)	-
Total non-current liabilities	(593)	(1,698)	(2,291)	(2,597)

Current liabilities
Trade and other payables (note 26)	(85,183)	(33,179)	(118,362)	(140,828)
Current income tax liabilities	-	(734)	(734)	(1,971)
Total current liabilities	(85,183)	(33,913)	(119,096)	(142,799)

Total consideration (enterprise value)	36,602	61,827	98,429	179,555

Satisfied by:
Cash	36,602	63,432	100,034	156,859
Net (cash)/debt acquired	-	(10,309)	(10,309)	9,725
Net cash outflow	36,602	53,123	89,725	166,584
Deferred acquisition consideration	-	8,704	8,704	12,971
Total consideration	36,602	61,827	98,429	179,555

The acquisition of Chevron has been deemed to be a substantial transaction and separate disclosure of the fair values of the identifiable assets and liabilities has therefore been made. None of the remaining 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:

Chevron	Book value €’000	Fair value adjustments €’000	Fair value €’000

Non-current assets (excluding goodwill)	5,776	2,120	7,896
Current assets	93,250	(2,151)	91,099
Non-current liabilities and minority interest	-	(593)	(593)
Current liabilities	(85,183)	-	(85,183)
Identifiable net assets acquired	13,843	(624)	13,219
Goodwill arising on acquisition	22,759	624	23,383
Total consideration (enterprise value)	36,602	-	36,602

Other acquisitions	Book value €’000	Fair value adjustments €’000	Fair value €’000

Non-current assets (excluding goodwill)	6,980	5,791	12,771
Current assets	38,586	(420)	38,166
Non-current liabilities and minority interest	(88)	(1,622)	(1,710)
Current liabilities	(33,913)	-	(33,913)
Identifiable net assets acquired	11,565	3,749	15,314
Goodwill arising on acquisition	50,262	(3,749)	46,513
Total consideration (enterprise value)	61,827	-	61,827

Total	Book value €’000	Fair value adjustments €’000	Fair value €’000

Non-current assets (excluding goodwill)	12,756	7,911	20,667
Current assets	131,836	(2,571)	129,265
Non-current liabilities and minority interest	(88)	(2,215)	(2,303)
Current liabilities	(119,096)	-	(119,096)
Identifiable net assets acquired	25,408	3,125	28,533
Goodwill arising on acquisition	73,021	(3,125)	69,896
Total consideration (enterprise value)	98,429	-	98,429

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 deals. Any amendments to these fair values within the twelve month timeframe from the date of acquisition will be disclosable in the 2010 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.

The total adjustments processed during the year to the fair value of business combinations completed during the year ended 31 March 2008 where those fair values were not readily determinable as at 31 March 2008 were as follows:

	Initial fair value assigned €’000	Adjustments to provisional fair values €’000	Revised fair value €’000

Non-current assets (excluding goodwill)	25,091	-	25,091
Current assets	187,315	377	187,692
Non-current liabilities and minority interest	(2,597)	-	(2,597)
Current liabilities	(142,799)	377	(142,422)
Identifiable net assets acquired	67,010	754	67,764
Goodwill arising on acquisition	112,545	(754)	111,791
Total consideration (enterprise value)	179,555	-	179,555

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

	2009 €’000	2008 €’000

Revenue	624,717	618,957
Cost of sales	(588,184)	(576,804)
Gross profit	36,533	42,153
Operating costs	(26,574)	(28,826)
	9,959	13,327
Operating exceptional items	(766)	(1,705)
Operating profit	9,193	11,622
Finance costs (net)	(86)	81
Profit before tax	9,107	11,703
Income tax expense	(2,199)	(3,245)
Group profit for the financial year	6,908	8,458

The revenue and profit of the Group for the financial period 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:

	2009 €’000	2008 €’000

Revenue	7,016,264	6,237,843

Group profit for the financial year	117,019	170,668

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47. Financial Risk and Capital Management
Capital risk management
The Group’s objectives when managing its capital structure are to safeguard the Group’s ability to continue as a going concern in order to provide returns to shareholders and benefits for other stakeholders, while maintaining a strong balance sheet to support the continued organic and acquisitive growth of its businesses and to maintain investor, creditor and market confidence.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or buy back existing shares, increase or reduce debt or sell assets.

The policy for net debt is to ensure a structure of longer term debt funding and cash balances with deposit maturities up to six months.

The capital structure of the Group, which comprises capital and reserves attributable to the Company’s equity holders, net debt and deferred acquisition consideration, may be summarised as follows:

Group	2009 €’000	2008 €’000

Capital and reserves attributable to the Company’s equity holders	722,650	738,664
Net debt (note 30)	90,670	123,719
Deferred acquisition consideration (note 33)	21,147	30,191
At 31 March	834,467	892,574

Financial risk management
Group financial risk management is governed by policies and guidelines which are reviewed and approved annually by the Board of Directors, most recently in February 2009. These policies and guidelines primarily cover credit risk, liquidity risk, foreign exchange risk, interest rate risk and commodity price risk. The principal objective of these policies and guidelines is the minimisation of financial risk at reasonable cost. The Group does not trade in financial instruments nor does it enter into any leveraged derivative transactions. DCC’s Group Treasury function centrally manages the Group’s funding and liquidity requirements. Divisional and subsidiary management, in conjunction with Group Treasury, manage foreign exchange and commodity price exposures within approved policies and guidelines.

There are no significant concentrations of risk and there has been no significant change during the financial year, or since the end of the year, to the types of financial risks faced by the Group or the Group’s approach to the management of those risks.

(i) Credit risk management
Credit risk arises from credit exposure to trade debtors, cash and cash equivalents including deposits with banks and financial institutions, derivative and financial instruments.

Trade receivables arise from a wide and varied customer base spread throughout the Group’s operations and as such there is no significant concentration of credit risk. The Group’s credit risk management policy in relation to trade receivables involves periodically assessing the financial reliability of customers, taking into account their financial position, past experience and other factors. The utilisation of credit limits is regularly monitored and a significant element of credit risk is covered by credit insurance.

Risk of counterparty default arising on cash and cash equivalents and derivative financial instruments is controlled within a framework of dealing with high quality institutions and, by policy, limiting the amount of credit exposure to any one bank or institution. DCC transacts with a variety of high credit quality financial institutions for the purpose of placing deposits and entering into derivative contracts. The Group actively monitors its credit exposure to each counterparty to ensure compliance with the counterparty risk limits of the Board approved treasury policy. Of the total cash and cash equivalents at 31 March 2009 of €426.789 million, a minimum of 97.3% (€415.256 million) was with financial institutions in the A-1 (short-term) category of Standard and Poors and in the P-1 (short-term) category of Moodys. As at 31 March 2009 derivative transactions were with counterparties with ratings ranging from A- to A+ (long-term) with Standard and Poors or Baa2 to Aa1 (long-term) with Moodys. In the normal course of business, the Group operates notional cash pooling systems, where a legal right of set-off applies.

Management does not expect any significant counterparty to fail to meet its obligations. The maximum exposure to credit risk is represented by the carrying amount of each asset.

Included in the Group’s trade and other receivables as at 31 March 2009 are balances of €98.421 million (2008: €131.477 million) which are past due at the reporting date but not impaired in the majority of cases. The aged analysis of these balances is as follows:

Group	2009 €’000	2008 €’000

Less than 1 month overdue	62,428	76,336
1 - 3 months overdue	25,639	26,532
3 - 6 months overdue	8,207	20,494
Over 6 months overdue	2,147	8,115
	98,421	131,477

The movements in the provision for impairment of trade receivables during the year is as follows:

Group	2009 €’000	2008 €’000

At 1 April	15,624	13,343
Provision for impairment recognised in the year	18,996	5,638
Amounts recovered during the year	930	(805)
Amounts written off during the year	(6,238)	(4,762)
Arising on acquisition	3,357	3,723
Exchange differences	(1,916)	(1,513)
At 31 March	30,753	15,624

Company
There were no past due or impaired trade receivables in the Company at 31 March 2009 (31 March 2008: none).

(ii) Liquidity risk management
The Group maintains a strong balance sheet with long term debt funding and cash balances with deposit maturities up to six months. Wherever possible, surplus funds in the Group are transferred to the centralised treasury department through the repayment of borrowings, deposits and dividends. These are then lent to Group companies or contributed as equity to fund Group operations, used to retire external debt or invested externally. The Group does not use off-balance sheet special purpose entities as a source of liquidity or for other financing purposes. In addition, the Group maintains significant committed and uncommitted credit lines with its relationship banks. Compliance with the Group’s biannual debt covenants is monitored continuously based on the management accounts. Sensitivity analyses using various scenarios are applied to forecasts to assess their impact on covenants and net debt. During the year to 31 March 2009 all covenants have been complied with and based on current forecasts it is expected that all covenants will continue to be complied with for the foreseeable future.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period to contractual maturity at the balance sheet date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Group As at 31 March 2009	Less than 1 year €’000	Between 1 and 2 years €’000	Between 2 and 5 years €’000	Over 5 years €’000	Total €’000

Trade and other payables	696,294	-	-	-	696,294
Borrowings (principal repayments)	101,657	1,361	66,108	349,425	518,551
Derivative financial instruments	1,660	-	-	-	1,660
Deferred acquisition consideration	6,151	3,261	12,746	-	22,158
Future finance charges	13,023	10,673	29,744	14,649	68,089
	818,785	15,295	108,598	364,074	1,306,752
Less: future finance charges	(13,023)	(10,673)	(29,744)	(14,649)	(68,089)
	805,762	4,622	78,854	349,425	1,238,663

Group As at 31 March 2008	Less than 1 year €’000	Between 1 and 2 years €’000	Between 2 and 5 years €’000	Over 5 years €’000	Total €’000

Trade and other payables	796,902	-	-	-	796,902
Borrowings (principal repayments)	233,161	1,459	9,376	364,086	608,082
Derivative financial instruments	1,534	-	-	-	1,534
Deferred acquisition consideration	14,407	9,392	8,941	-	32,740
Future finance charges	33,999	22,506	66,423	73,022	195,950
	1,080,003	33,357	84,740	437,108	1,635,208
Less: future finance charges	(33,999)	(22,506)	(66,423)	(73,022)	(195,950)
	1,046,004	10,851	18,317	364,086	1,439,258

The Group has sufficient cash resources and liquid assets to enable it to meet its current borrowing obligations and trade and other payables.

Company As at 31 March 2009	Less than 1 year €’000	Between 1 and 2 years €’000	Between 2 and 5 years €’000	Over 5 years €’000	Total €’000

Trade and other payables	264,149	-	10,387	-	274,536

Company As at 31 March 2008	Less than 1 year €’000	Between 1 and 2 years €’000	Between 2 and 5 years €’000	Over 5 years €’000	Total €’000

Trade and other payables	271,843	-	10,387	-	282,230

The Company has sufficient cash resources and liquid assets to enable it to meet its trade and other payables.

(iii) Market risk management
Foreign exchange risk management
DCC’s reporting currency and that in which its share capital is denominated is the euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations giving rise to exposure to other currencies, primarily sterling and the US dollar.

Divisional and subsidiary management, in conjunction with Group Treasury, manage foreign currency exposures within approved policies and guidelines using forward currency contracts.

The portion of the Group’s operating profits which are sterling denominated are offset to a limited degree by certain natural economic hedges that exist within the Group in that a proportion of the purchases by certain of its Irish businesses are sterling denominated. The Group does not hedge the remaining translation exposure on the translation of the profits of foreign currency subsidiaries on the basis that they are not intended to be repatriated.

The Group has investments in sterling operations which are highly cash generative. The Group seeks to manage the resultant foreign currency translation risk through borrowings denominated in or swapped (utilising currency swaps or cross currency interest rate swaps) into sterling, although this hedge is offset by the strong ongoing cash flow generated by the Group’s sterling operations leaving the Group with a net investment in sterling assets. The 14.5% reduction in the value of sterling against the euro during the year ended 31 March 2009 gave rise to a translation loss of €85.8 million on the translation of the Group’s sterling denominated net asset position at 31 March 2009 as set out in the Statement of Recognised Income and Expense. Included in this figure is €34.6 million relating to the Group’s sterling denominated intangible assets.

The Group has a moderate level of transactional currency exposure arising from sales or purchases by operating units in currencies other than their functional currencies. Where sales or purchases are invoiced in other then the local currency and there is not a natural hedge with other activities within the Group, DCC generally hedges between 50% and 90% of those transactions for the subsequent two months. The Group also hedges a proportion of anticipated transactions in certain subsidiaries for periods ranging up to twelve months with such transactions qualifying as ‘highly probable’ forecast transactions for IAS 39 hedge accounting purposes.

Sensitivity to currency movements:
Group
A change in the value of other currencies by 10% against the euro would have a €11.2 million (2008: €8.3 million) impact on the Group’s profit before tax, would change the Group’s equity by €45.5 million and change the Group’s net debt by €0.6 million (2008: €42.6 million and €4.8 million respectively). These amounts include an insignificant amount of transactional currency exposure.

Company
The Company does not have significant levels of non-functional currency assets and liabilities at 31 March 2009 or at 31 March 2008.

Interest rate risk management
On a net debt basis, the Group is exposed to changes in interest rates, primarily changes in EURIBOR and sterling LIBOR. Having borrowed at both fixed and floating rates of interest, DCC has swapped its fixed rate borrowings to floating interest rates, using interest rate and cross currency interest rate swaps. Overall interest rate risk on gross borrowings is mitigated by matching, to the extent possible, the maturity of its cash balances with the interest rate reset periods on the swaps related to its borrowings.

Sensitivity of interest charges to interest rate movements:
Group
Based on the composition of net debt at 31 March 2009, a one percentage point (100 basis points) change in average floating interest rates would have a €1.5 million (2008: €1.2 million) impact on the Group’s profit before tax.

Company
The effective interest rates earned during the year on cash at bank ranged from 0.1% to 3.7%.

Commodity price risk management
The Group is exposed to commodity cost price risk in its oil distribution and LPG businesses. Market dynamics are such that these commodity cost price movements are immediately reflected in oil commodity sales prices and, within a short period, in LPG commodity sales prices. Fixed price oil supply contracts are occasionally provided to certain customers for periods of less than one year. To manage this exposure, the Group enters into matching forward commodity contracts, not designated as hedges under IAS 39. While LPG price changes are being implemented, the Group hedges a proportion of its anticipated LPG commodity exposure, with such transactions qualifying as ‘highly probable’ forecast transactions for IAS 39 hedge accounting purposes. In addition, to cover certain customer segments for whom it is commercially beneficial to avoid price increases, a proportion of LPG commodity price and related foreign exchange exposure is hedged. All commodity hedging counterparties are approved by the Board.

Sensitivity to commodity price movements:
Group
An increase or decrease of 10% in the commodity cost price of oil would have a nil impact on the Group’s profit before tax and on the Group’s equity (2008: nil).

The impact on the Group’s profit before tax and on the Group’s equity of an increase or decrease of 10% in the commodity cost price of LPG would be dependant on seasonal variations, competitive pressures and the underlying absolute cost of the commodity at the time and, as such, is difficult to quantify but would not be material.

Company
The Company has no exposure to commodity price risk.

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48. Related Party Transactions
The principal related party relationships requiring disclosure in the consolidated financial statements of the Group under IAS 24 Related Party Disclosures relate to the existence of subsidiaries, joint ventures and associates and transactions with these entities entered into by the Group and the identification and compensation of key management personnel as addressed in more detail below:

Group
Subsidiaries, joint ventures and associates
The consolidated financial statements include the financial statements of the Company and its subsidiaries, joint ventures and associates as documented in the accounting policies on pages 64 to 72. A listing of the principal subsidiaries, joint ventures and associates is provided in the Group Directory on pages 112 to 114 of this Annual Report.

Transactions are entered into in the normal course of business on an arm’s length basis.

Sales to and purchases from, together with outstanding payables and receivables to and from subsidiaries and joint ventures are eliminated in the preparation of the consolidated financial statements.

Compensation of key management personnel
For the purposes of the disclosure requirements under IAS 24, the term ‘key management personnel’ (i.e. those persons having authority and responsibility for planning, directing and controlling the activities of the Company) comprises the Board of Directors which manages the business and affairs of the Company. Full disclosure in relation to the compensation entitlements of the Board of Directors is provided in the Report on Directors’ Remuneration and Interests on pages 52 to 55 of this Annual Report.

Company
Subsidiaries, joint ventures and associates
During the year the Company did not receive dividends from its subsidiaries or associates (2008: received €230.000 million). Details of loan balances to/from subsidiaries are provided in the Company Balance Sheet on page 62, in note 24 ‘Trade and Other Receivables’ and in note 25 ‘Trade and Other Payables’.

During the year the Company was charged a management fee of €2.352 million (2008: €2.209 million) by its subsidiary, DCC Management Services Limited.

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49. Approval of Financial Statements
The financial statements were approved by the Board of Directors on 18 May 2009.

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