DCC plc Annual Report and Accounts 2019 WorldReginfo - 47739327-57d6-4662-9440-8b5adb4dd3e6 DCC is a leading international sales, marketing and support services group with a clear focus on performance and growth, which operates across four divisions: LPG, Retail & Oil, Technology and Healthcare. DCC is an ambitious and entrepreneurial business operating in 17 countries, supplying products and services used by millions of people every day. Building strong routes to market, driving for results, focusing on cash conversion and generating superior sustainable returns on capital employed enable the Group to reinvest in its business, creating value for its stakeholders. DCC plc is listed on the London Stock Exchange and is a constituent of the FTSE 100. LPG Retail & Oil Technology Healthcare Page 42 Page 48 Page 54 Page 60 Strategic Report Governance Financial Statements ii DCC at a Glance 73 Chairman’s Introduction 124 Statement of Directors’ 1 Highlights of the Year 74 Board of Directors Responsibilities 2 Strategy 76 Group Management Team 125 Independent Auditor’s Report 4 Business Model 77 Corporate Governance Statement 129 Financial Statements 6 Chairman’s Statement 84 Nomination and Governance 8 Chief Executive’s Review Committee Report Supplementary Information 88 Audit Committee Report 10 Key Performance Indicators 210 Principal Subsidiaries, Joint Ventures 14 Risk Report 93 Remuneration Report and Associates 21 Financial Review 119 Report of the Directors 214 Shareholder Information 30 Strategy in Action 216 Corporate Information 42 Operating Reviews 217 Independent Limited 42 – DCC LPG Assurance Report 48 – DCC Retail & Oil 218 Alternative Performance Measures 54 – DCC Technology 223 5 Year Review 60 – DCC Healthcare 224 Index 68 Responsible Business Report DCC at a Glance WorldReginfo - 47739327-57d6-4662-9440-8b5adb4dd3e6 DCC at a Glance Our Strategy Our objective is to continue to build a growing, sustainable and cash generative business which FRQVLVWHQWO\SURYLGHVUHWXUQVRQFDSLWDOHPSOR\HGVLJQLƬFDQWO\DKHDGRILWVFRVWRIFDSLWDO Market leading positions Operational excellence Innovation Creating and sustaining leading positions Continuously benchmarking and improving Creating a culture of innovation to in each of the markets in which we operate. the efficiency of our operating model in each succeed in a rapidly changing, digitally of our businesses. enabled environment. Extend our geographic footprint Development of our people Financial discipline Developing our business to enter new Developing and investing in our employees Maintaining financial strength through geographic markets on a selective basis has long been recognised as fundamental a disciplined approach to balance sheet in the coming years. to DCC’s success. management and maintaining relatively low levels of financial risk. Read more: Strategy on page 2 Our Divisions The Group is organised and managed across four divisions and employs over 12,500 people in 17 countries. LPG Retail & Oil $OHDGLQJOLTXHƬHGSHWUROHXPJDV o/3*p VDOHV A leader in the sales, marketing and retailing of and marketing business, with a developing business transport and commercial fuels, heating oils and in the retailing of natural gas and electricity. related products and services. Share of Group adjusted operating profit 44% Share of Group adjusted operating profit 29% Volume (tonnes) 10.8% Operating profit 20.5% Volume (litres) 1.3% Operating profit 17.6% 2.1m £201.8m 12.2bn £133.7m Customers Trucks Employees Owned facilities Customers Trucks Employees Locations 730k 1,400 2,800 170 900k 1,300 3,600 1,400 Principal operating locations Principal operating locations France, Britain, Ireland, USA, Germany, Hong Kong & Macau, Britain, Denmark, Norway, France, Sweden, Ireland, Austria the Netherlands, Belgium, Sweden and Norway. and Germany. Read more: on page 42 Read more: on page 48 WorldReginfo - 47739327-57d6-4662-9440-8b5adb4dd3e6 Why diversity works for DCC 6LJQLƬFDQWRSHUDWLQJSURƬWJURZWKDFURVVDOOGLYLVLRQVVLQFH 2SHUDWLQJSURƬW)<t)< pP &$*5 500 ‘08 – ’19 CAGR ROCE ‘19 450 DCC Healthcare +12.5% 16.6% 400 350 DCC Technology +7.9% 14.3% 300 DCC Retail & Oil +14.2% 18.6% 250 200 150 100 DCC LPG +22.7% 17.1% 50 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 DCC Group +15.2% 17.0% Facilitates Growing our Organic and Optionality Maintaining geographic opportunity set in acquisitive growth in capital allocation returns discipline expansion across attractive markets the Group Read more: on page 12 Technology Healthcare A leading route-to-market and supply chain partner A leading healthcare business, providing products for global technology brands. and services to healthcare providers and health and beauty brand owners. Share of Group adjusted operating profit 14% Share of Group adjusted operating profit 13% Revenue 20.8% Operating profit 35.1% Revenue 12.0% Operating profit 11.1% £3.6bn £64.7m £576.4m £60.3m Customers Brands Employees Capacity (m2) Customers SKUs Employees CMO facilities 50k 1,400 3,800 200k 19k 42k 2,300 6 Principal operating locations Principal operating locations Britain, Ireland, France, Sweden, Germany, the Netherlands, Britain, Ireland, USA and Sweden. Belgium, Poland, Spain, Norway, UAE, China, USA and Canada. Read more: on page 54 Read more: on page 60 WorldReginfo - 47739327-57d6-4662-9440-8b5adb4dd3e6 Strategic Report Governance Financial Statements Supplementary Info Highlights of the Year Excellent performance and new acquisitions 7KH\HDUHQGHG0DUFKKDVEHHQDQRWKHU\HDURIVLJQLƬFDQWSURJUHVVIRUWKH*URXS$QH[FHOOHQW WUDGLQJSHUIRUPDQFHYHU\VWURQJFDVKJHQHUDWLRQDQGFRQWLQXHGDFTXLVLWLRQDFWLYLW\DFURVVWKH*URXS H[HPSOLƬHVWKH'&&EXVLQHVVPRGHO(DFKGLYLVLRQUHFRUGHGYHU\VWURQJJURZWKLQRSHUDWLQJSURƬW DQGWUDGHGLQOLQHZLWKH[SHFWDWLRQV7KHUHVXOWVUHƮHFWWKHFRQWLQXHGVXFFHVVIXOH[HFXWLRQRIRXU strategy, and in particular: • $OOGLYLVLRQVUHFRUGHGJRRGSURƬWJURZWKZLWK*URXSDGMXVWHGRSHUDWLQJSURƬW1,2 20.1% ahead of the prior year at £460.5 million. • Adjusted earnings per share1,2 up 12.8% to 358.2 pence. • ([FHOOHQWFDVKƮRZSHUIRUPDQFHZLWKFRQYHUVLRQRIDGMXVWHGRSHUDWLQJSURƬW1,2WRIUHHFDVKƮRZRI • Return on capital employed 1 of 17.0%. • $QRWKHUDFWLYHSHULRGRIGHYHORSPHQWZLWKDSSUR[LPDWHO\PLOOLRQRIFDSLWDOFRPPLWWHGWRDFTXLVLWLRQV • $SURSRVHGLQFUHDVHLQWKHƬQDOGLYLGHQGZLOOVHHWKHWRWDOGLYLGHQGIRUWKH\HDULQFUHDVHE\ This represents the 25thFRQVHFXWLYH\HDURIGLYLGHQGJURZWKVLQFH'&&OLVWHGLQ Outlook 7KH*URXSH[SHFWVWKDWWKH\HDUHQGLQJ0DUFKZLOOEHDQRWKHU\HDURISURƬWJURZWKDQGGHYHORSPHQW Revenue 1 16.0% Adjusted operating profit 1, 2 20.1% Adjusted EPS 1, 2 12.8% £15.2bn £460.5m 358.16p 2019 £15.2bn 2019 £460.5m 2019 358.16p 20183 £13.1bn 2018 £383.4m 2018 317.45p 2017 £12.3bn 2017 £345.0m 2017 286.59p Dividend per share 12.5% Free cash flow Return on capital employed 1 138.35p £434.0m 17.0% 2019 138.35p 2019 £434.0m 2019 17.0% 2018 122.98p 2018 £328.1m 2018 17.5% 2017 111.80p 2017 £415.5m 2017 20.3% 1. Continuing operations (i.e. excluding DCC Environmental). 2. All references to ‘adjusted operating profit’ and ‘adjusted earnings per share’ included in the Strategic Report are stated excluding net exceptionals and amortisation of intangible assets. Other ‘Alternative Performance Measures’ (‘APMs’) are detailed on pages 218 to 222. 3. Prior year revenue restated for IFRS 15 (see note 1.5 of the financial statements). Read more: KPIs on page 10 DCC plc Annual Report and Accounts 2019 1 WorldReginfo - 47739327-57d6-4662-9440-8b5adb4dd3e6 Strategic Report Strategy 6XVWDLQDEOH*URZWK Our objectiveLVWREXLOGDJURZLQJVXVWDLQDEOHDQGFDVKJHQHUDWLYHEXVLQHVVZKLFK consistently provides returns on capital employed significantly ahead of its cost of FDSLWDO:HZLOODFKLHYHWKLVE\IRFXVLQJRQVL[VWUDWHJLFSULRULWLHVDVLOOXVWUDWHG Strategic Priorities Strategy in action '&&DLPVWREHWKHQXPEHURQHRUWZR Market operator in each of its chosen markets. leading This is achieved through a consistent focus on increasing market share organically and positions YLDYDOXHHQKDQFLQJDFTXLVLWLRQV:HKDYH a long and successful track record of DFTXLVLWLRQVZKLFKKDYHVWUHQJWKHQHGRXU market positions and generated attractive returns on capital invested. Certas Energy on page 32 '&&VWULYHVWREHWKHPRVWHƯFLHQWEXVLQHVV Operational LQHDFKRIWKHVHFWRUVLQZKLFKLWRSHUDWHV excellence We continuously benchmark our businesses DJDLQVWWKRVHVSHFLƬF.3,VZHMXGJHDUH important indicators in our drive for superior returns on capital in the short, medium and longer term. Investing in growth capacity on page 36 Fostering and supporting a culture of Innovation LQQRYDWLRQZLWKLQWKH*URXSpVEXVLQHVVHV LVIXQGDPHQWDOWRZLQQLQJLQRXUFKRVHQ markets in a rapidly changing, digitally enabled HQYLURQPHQW:HFKDOOHQJHHDFK*URXS business to be innovative in continuously HYROYLQJRXURƪHULQJWRH[LVWLQJDQGQHZ customers, enhancing the value of our SDUWQHUVKLSVZLWKNH\VXSSOLHUVDQGDGYDQFLQJ WKHHƯFLHQF\UHVSRQVLYHQHVVDQGH[FHOOHQFH of operations. Smart automatic gas cylinders on page 31 ,QUHFHQW\HDUVZHKDYHEHHQH[SDQGLQJFHUWDLQ Extend our RIWKH*URXSpVEXVLQHVVHVLQWRQHZJHRJUDSKLF geographic PDUNHWVZHEHOLHYHSURYLGHJRRGRSSRUWXQLW\ IRUIXWXUHJURZWK:HZLOOORRNWRIXUWKHU footprint develop our businesses in these markets and WRHQWHUQHZJHRJUDSKLFPDUNHWVRQDVHOHFWLYH basis in the coming years. Acquisitions in North America on page 34 Developing and investing in our employees Development has long been recognised as fundamental of our people to DCC’s success. The devolved nature of RXUPDQDJHPHQWVWUXFWXUHUHTXLUHVXQLTXH OHDGHUVKLSFDSDELOLW\DQGVNLOOVDQGZHEHOLHYH RXUSHRSOHDUHDNH\GLƪHUHQWLDWRUIRUXV :HFRPPLWVLJQLƬFDQWUHVRXUFHVWRHQVXUH ZHDWWUDFWGHYHORSDQGUHWDLQRXUSHRSOH