Annual Report and Accounts 2006 - DCC plc

12chief executive’s review“ The quality of DCC’s businesses is better today,measured in terms of scale, strategic positioningand management skills and know-how, than atany earlier time.”Overview of 2006The year to 31 March 2006 wasanother year of double-digit profitgrowth, resulting in cumulativeearnings per share growth of 16.6%per annum since DCC shares werelisted on the Irish and London stockexchanges in 1994.On a constant currency basis,revenues grew by 30.0% to €3.4billion, while profit before exceptionalitems, amortisation of intangibleassets and tax increased by 16.5% to€142.0 million and adjusted earningsper share for the year was 157.23cent, growth of 15.5%.Excellent profit growth was achievedin DCC Energy, DCC Healthcare, DCCFood & Beverage and in DCC’s shareof associates’ profit after tax. DCCSerCom also achieved strong profitgrowth in the second half after adifficult first half.Operating profit*DCC’s cash generation in the yearwas strong, with cash generatedfrom Group operations, excludingassociates, of €141.9 million, anincrease of 23.3% over last year.At 31 March 2006, DCC had netdebt of just €32.7 million.Return on capital employed (ROCE)is the key performance measure inall the businesses of the Group.For the year to March 2006, ROCE(excluding intangible assets) was43.0% (2005: 44.9%) and ROCE(including intangible assets) was19.1% (2005: 20.4%).Business reviewDCC’s rate of profit growth wasstronger in the seasonally moreimportant second half of the year,as set out in the table below.Second half First half€’m Change €’m ChangeDCC Energy 45.3 +9.8% 10.7 +1.2%DCC SerCom 17.4 +22.0% 7.6 -37.0%DCC Healthcare 11.5 +33.8% 10.1 +48.1%DCC Food & Beverage 8.1 +8.1% 7.4 +37.9%DCC Environmental 2.7 -0.3% 2.8 +2.6%Group operating profit 85.0 +14.4% 38.6 +2.9%Share of associates’ profit after tax 19.8 +104.8% 5.7 -20.7%Net financing costs (3.9) (3.2)Profit before exceptional items,amortisation of intangibles and tax 100.9 +25.3% 41.1 -3.0%Adjusted EPS* (cent) 111.89 +24.6% 45.34 -4.4%*excluding net exceptional items and amortisation of intangible assetsStrategy forcontinued growthDCC’s strategy has beendemonstrably successful ingenerating excellent shareholderreturns. The principal elementsof the strategy are:• To focus on two broad businessactivities:- sales, marketing and distribution- business support services;• To constantly seek tomaximise organic growth;• To constantly seek complementarybolt-on acquisitions;• A rigorous focus on returnon capital employed;• A rigorous focus oncash generation.DCC applies a core competencein the management of sales,marketing and distributionbusinesses across diversemarket sectors, i.e. in energy,IT & entertainment products,healthcare and food & beverage.DCC provides business supportservices, specifically contractservices to the health andbeauty market, environmentalservices and out-sourcedprocurement and supply-chainmanagement services to theIT industry.DCC also has a significantassociate company investment,a 49% shareholding in Manor ParkHomebuilders, a leading Irish house,apartment and commercial buildingand development company.