Annual Report and Accounts 2006 - DCC plc

20operating reviewDCC Healthcarebusiness reviewKevin MurrayManaging DirectorDCC HealthcareApproximately 65% of DCC Healthcare’s revenue and 55% ofits operating profits are derived from marketing and selling arange of healthcare products to the acute and communitycare sectors in Ireland, Britain and export markets. Theremaining 45% of operating profits arise from contractservices to the nutraceutical and cosmetic sectors. DCCHealthcare currently employs approximately 900 people.35%45%DCC Healthcare -operating profit splitSales & marketingContract services65%DCC Healthcare - revenue splitSales & marketingContract services55%Sales and marketing ofacute and communitycare productsIn Ireland, DCC Healthcare is theleading supplier of third party andown brand products to the acute caresector, selling and marketing a broadrange of medical, surgical, laboratoryand intravenous pharmaceuticals andrelated devices through its specialistfield sales teams. DCC Healthcarealso sells and markets a range ofrehabilitation and independent livingproducts in Ireland, Britain, Germanyand other markets, principally underits own “Days Healthcare” and“Physio-Med” brands. The acquisitionof Physio-Med Services in June 2005has expanded the range of productssold and broadened the channels tomarket to include catalogue sales.DCC Healthcare distributes manystrong brands including DaysHealthcare*, Diagnostica Stago,DiaMed, Fannin*, Fresenius Kabi,Grifols, Molnlycke, Oxoid, Physio-Med*, Smiths, Strider* and Theraband.*DCC owned brandsDuring the year, DCC Healthcareenhanced its distribution capacity andefficiency by moving its operationsin Bridgend in Wales and BadOeynhausen in Germany to newfacilities. Together with premises inGlossop and Reading in Englandand Dublin and Belfast in Ireland,customers are now serviced fromsix facilities.DCC Healthcare has invested furtherin its sourcing capability in China,with the establishment earlier in theyear of a permanent procurementand quality control office in Shenzhen.The strength of the sourcingcapability, the breadth of the productrange and the depth of the distributionreach leaves DCC Healthcare’s salesand marketing activities well placedfor continued growth.Contract servicesDCC is a leading supplier of contractservices to the nutraceutical andcosmetic industries. The businesshas three MHRA licensed facilities inBritain and supplies a broad range ofcustomers, principally brand ownersin Britain and Northern Europe. Asa result of the increasing use ofnutraceuticals in cosmetic products,it was decided to broaden thecontract services business into thatmarket through the acquisition ofLaleham Healthcare in December2004. Laleham Healthcare has beensuccessfully integrated into thecontract services business, whichnow provides outsourced productdevelopment, manufacturing andpackaging to both the nutraceuticaland cosmetic markets.Performance managementThe performance of DCC Healthcare’sbusinesses is constantly monitoredthrough a broad range of performanceindicators, principally focused onsales growth, margin management,operational and cost efficiencies, cashflow and return on capital employed.Over the past ten years, DCCHealthcare has achieved a compoundannual growth rate of 18.9% inoperating profit.