Report on the Financial Statements Our opinion In our opinion: the Group financial statements give a true and fair view, in accordance with International Financial Reporting Standards ( IFRSs ) as adopted by the European Union, of the state of the Group s affairs as at 31 March 2015 and of its profit and cash flows for the year then ended; the Company financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Acts 1963 to 2013, of the state of the Company s affairs as at 31 March 2015 and of its cash flows for the year then ended; and the Group and Company financial statements have been properly prepared in accordance with the requirements of the Companies Acts 1963 to 2013 and, as regards the Group financial statements, Article 4 of the IAS Regulation. What we have audited DCC plc s financial statements comprise: the Group and Company Balance Sheets as at 31 March 2015; the Group Income Statement and the Group and Company Statements of Comprehensive Income for the year then ended; the Group and Company Cash Flow Statements for the year then ended; the Group and Company Statements of Changes in Equity for the year then ended; and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information. Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited. The financial reporting framework that has been applied in the preparation of the financial statements is Irish law and IFRSs as adopted by the European Union and, as regards the Company, as applied in accordance with the provisions of the Companies Acts 1963 to 2013. Our audit approach Overview Audit scope Areas of focus Overall Group materiality: 8.5 million (31 March 2014: 8.5 million) which represents circa. 5% of profit before tax and exceptional items. Audit scope The Group is structured across four divisions; Energy, Technology, Healthcare and Environmental. The Group s Food & Beverage division is classified as discontinued at 31 March 2015. The Group financial statements are a consolidation of 54 reporting units, comprising the Group s operating businesses and central functions. We conducted audit work in all locations. Audits of the full financial information were undertaken for Group reporting purposes at territories and functions which together represent 99% of Group turnover and 99% of Group profit before tax from continuing operations. Areas of focus Goodwill impairment assessment and acquisition and disposal accounting. Revenue recognition. Financial instruments accounting presentation, valuation and disclosure. The scope of our audit and our areas of focus We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ( ISAs (UK & Ireland) ). We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Directors that may represent a risk of material misstatement due to fraud. The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as areas of focus in the table below together with an explanation of how we tailored our audit to address these specific areas. This is not a complete list of all risks identified by our audit. 110 DCC plc Annual Report and Accounts 2015
Area of focus Goodwill impairment assessment and acquisition and disposal accounting Goodwill impairment assessment The Group has goodwill of 713.2 million at 31 March 2015 (see note 21). There are 27 individual Cash Generating Units ( CGUs ), the most significant of which is the Group s Certas Energy UK business ( 253 million) and the Group s DCC Vital business ( 135 million). We focused on this area given the scale of the assets and the judgement involved in determining key assumptions which form the basis for the assessment for impairment. How our audit addressed the area of focus We evaluated the Directors determination of recoverable amount, on a value in use basis, in respect of each CGU. We evaluated the adequacy and appropriateness of the impairment charge of 5.6 million recorded in DCC Vital in the year. Our evaluation included understanding and challenging cash flow forecasts and the process by which they were prepared, including testing the extraction of the forecast cash flows from the Board approved three year plans. Our assessment of management s forecast future cash flows for the CGUs included our independent consideration of (i) past performance against plan and (ii) challenge of management s expectations of forecast future trends by comparing them to historical results and economic and industry forecasts. Our work also included challenge of the discount rate, by assessing the cost of capital of the individual businesses against comparable organisations in those sectors. We also considered the long-term growth rates applied. Strategic Report Governance Acquisition and disposal accounting During the year, DCC plc acquired 19 businesses for an aggregate initial consideration of 115.7 million. The most significant acquisitions in the year were Qstar, Williams Medical, Beacon and Captech. Accounting for acquisitions requires the Group to determine the fair value of the consideration transferred, any non-controlling interests and the assets and liabilities acquired as part of each acquisition. In the period since year-end, the Group has entered into an agreement in principle to acquire 100% of Butagaz, a French LPG business. The Group has disclosed the fair value of consideration and the initial assessment of the assets acquired as part of the acquisition in respect of this commitment. We performed sensitivity analysis of the key assumptions and of the key drivers of the cash flow forecasts for the individual CGUs and considered the likelihood of such changes arising. We analysed in particular, the sensitivity analysis which considers reasonably possible changes in key assumptions in respect of a CGU in the Technology division where the headroom over carrying value is limited. We considered the disclosures in the Annual Report in relation to these matters. The Directors have described the impairment reviews in note 21. We have read and considered the terms of the acquisition agreements and considered the judgements relating to the allocation of purchase price to the assets and liabilities acquired and adjustments made to align accounting policies of the acquired businesses to those of DCC plc. We have also obtained an understanding of the terms of the Group s commitments to acquire Butagaz and Computers Unlimited in the period since year-end. We have considered the disclosures in the Annual Report (see note 49) in relation to this commitment. Financial Statements Supplementary Information The Group disposed of Robert Roberts, Kelkin and part of the Allied Foods businesses within the Food & Beverage segment during the year. We focused on the presentation and classification of these businesses as discontinued and the classification of the Bottle Green business as held for sale at year-end. The disposal of the Food & Beverage businesses resulted in a gain on disposal of 8.2 million. The results for the period and the gain on disposal are classified as discontinued operations. We tested the gain on disposal by agreeing the consideration to sales documents and cash received and agreed the net assets disposed of to underlying records. We considered the status of the disposal process in respect of the Group s remaining business in the Food & Beverage division at 31 March 2015, examined correspondence and considered whether the classification as held for sale at that date was appropriate. We also evaluated the presentation of items identified as held for sale or discontinued in the Annual Report (see note 16). DCC plc Annual Report and Accounts 2015 111
Continued Area of focus Revenue recognition The Group has a number of different divisions with different revenue recognition policies. We focused on the terms of sale arrangements within each of the Group s divisions, including the timing of transfer of risk and rewards and the nature of discount and rebate arrangements. How our audit addressed the area of focus We evaluated the relevant IT systems and tested the internal controls over the completeness, accuracy and timing of revenue recognised in the financial statements. We read the relevant customer terms of sale and agreements and tested the accounting for consistency with those terms of sale for the Group s businesses. Our work included consideration of the accounting for and presentation of rebate and discount arrangements. We also tested journal entries posted to revenue accounts focusing on unusual or irregular items. Financial instruments accounting presentation, valuation and disclosure The Group manages its treasury function and engages in financial risk management using a variety of tools including derivative instruments to hedge exposure to interest rate, commodity and currency risks. In addition the Group actively manages corporate debt and during the year it issued new Private Placement debt. We focused on the accounting for financial instruments given the extent of the movement in US Dollar, Sterling and Euro exchange rates and the decrease in oil prices during the year. We tested the fair values ascribed to treasury instruments, including derivatives by reference to observable foreign exchange rates, interest rates or broker prices. As set out in note 29 derivatives are valued in accordance with level 2 of the fair value hierarchy. We tested the year-end reconciliation process and we independently obtained third party confirmations of year-end balances. We tested the assessment of hedge ineffectiveness by evaluation of hedging processes and procedures, consideration of hedging documentation and independent valuation of the treasury instruments at year-end and considered the classification of hedge ineffectiveness within exceptional items in accordance with the Group s accounting policy. We obtained an understanding of the Group s Private Placement debt agreements and evaluated the related disclosures in note 30 of the Group financial statements. We considered the disclosure of financial instruments (note 47) and of key financial risks (note 2). How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the geographic structure of the Group, the accounting processes and controls, and the industries in which the Group operates. The Group is comprised of four divisions; Energy, Technology, Healthcare and Environmental. The Group s Food & Beverage division is classified as discontinued at 31 March 2015. The four divisions and ultimately the Group financial statements are a consolidation of 54 reporting units, comprising the Group s operating businesses and centralised functions. Audits of the full financial information were undertaken for Group reporting purposes at territories and functions which together represent 99% of Group turnover and 99% of Group profit before tax from continuing operations. The scope of our audit is influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall Group materiality How we determined it Rationale for benchmark applied 8.5 million (31 March 2014: 8.5 million). This represents circa. 5% of profit before tax and exceptional items. In our professional judgement, this benchmark is the best measure of recurring financial performance. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above 0.45 million (2014: 0.45 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Going concern As noted in the Directors statement, the Directors have concluded that it is appropriate to prepare the Group and Company financial statements using the going concern basis of accounting. The going concern basis presumes that the Group and Company have adequate resources to remain in operation, and that the Directors intend them to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the Directors use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group s and the Company s ability to continue as a going concern. 112 DCC plc Annual Report and Accounts 2015
Other required reporting Consistency of other information Companies Acts 1963 to 2013 opinions In our opinion the information given in the Directors Report is consistent with the financial statements and the description in the Corporate Governance Statement of the main features of the internal control and risk management systems in relation to the process for preparing the Group financial statements is consistent with the Group financial statements. Strategic Report ISAs (UK & Ireland) reporting Under ISAs (UK & Ireland) we are required to report to you if, in our opinion: information in the Annual Report is: materially inconsistent with the information in the audited financial statements; or apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group and Company acquired in the course of performing our audit; or is otherwise misleading. Governance the statement given by the Directors on page 109, in accordance with provision C.1.1 of the UK Corporate Governance Code (the Code ), that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group s performance, business model and strategy is materially inconsistent with our knowledge of the Group acquired in the course of performing our audit. the section of the Annual Report on pages 78 and 79, as required by provision C.3.8 of the Code, describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee. Directors remuneration Under the Companies Acts 1963 to 2013 we are required to report to you if, in our opinion, the disclosure of Directors remuneration and transactions specified by law have not been made. Corporate governance statement Under the United Kingdom Listing Authority Listing Rules we are required to review the part of the Corporate Governance Statement relating to the Company s compliance with ten provisions of the UK Corporate Governance Code specified for our review. We have nothing to report having performed our review. Other matters on which we are required to report by the Companies Acts 1963 to 2013 We have obtained all the information and explanations which we consider necessary for the purposes of our audit. In our opinion proper books of account have been kept by the Company. The Company Balance Sheet is in agreement with the books of account. The net assets of the Company, as stated in the Company Balance Sheet, are more than half of the amount of its called-up share capital and, in our opinion, on that basis there did not exist at 31 March 2015 a financial situation which under Section 40(1) of the Companies (Amendment) Act, 1983 would require the convening of an extraordinary general meeting of the Company. Responsibilities for the financial statements and the audit Our responsibilities and those of the directors As explained more fully in the Statement of Directors Responsibilities set out on page 109, the Directors are responsible for the preparation of the Group and Company financial statements giving a true and fair view. Financial Statements Supplementary Information Our responsibility is to audit and express an opinion on the Group and Company financial statements in accordance with Irish law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Company s members as a body in accordance with Section 193 of the Companies Act, 1990 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. DCC plc Annual Report and Accounts 2015 113
Continued What an audit of financial statements involves An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group s and Company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. We primarily focus our work in these areas by assessing the Directors judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements. We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Paul Hennessy for and on behalf of PricewaterhouseCoopers Chartered Accountants and Statutory Audit Firm Dublin 18 May 2015 114 DCC plc Annual Report and Accounts 2015