DCC : Energy Insights Day – Full Event Transcript

DCC Energy Insights Day

Wednesday, 6th September 2023

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Introduction

Donal Murphy

CEO, DCC plc

Welcome

Welcome, everyone. Welcome to beautiful Château de Pontarmé. I think it is a wonderful location. And I think it is a really wonderful location for the event that we are going to have today. Today is all about giving you a deeper insight into our energy business. So the location was specifically chosen to have plenty of time for interaction with our team. I am going to talk a little bit about our team in a couple of minutes. But please use the facilities and do interact with everyone that we have here on the day.

Today is very important day for us. Today is an opportunity for us to really bring to life how DCC Energy is going to win through energy transition. So you are going to hear a lot from us that you have not heard before. There is going to be a lot of detail in terms of the mechanics of how we are going to get to 2030. Lots of things that we think our investors are asking us, our investors are asking you or asking the analysts that we want to we want to bring to life today during the presentation. So you will see a lot of that.

I would just like to, firstly, start by thanking you all for coming here. I think everyone that came in, that I talked to this morning when they walked in, said, "Wow, thank you for bringing us here". But thank you for taking the time out of your busy schedules to be with us. We really, really do appreciate that. And our side of the bargain is that we will work really hard today to make this a very valuable session for each and every one of you.

Disclaimer

Our standard disclaimer. So you can all read that at your leisure. So I and Kevin, we have a very small part really to play in this today. Really what we wanted to do was, firstly, welcome everyone. And secondly, to briefly position why we believe that energy transition, and bringing cleaner energy products to our customers is probably one of the most significant, if not the most significant opportunity that DCC has in its 29 years as a public company.

So we will do very little of the session today. But we wanted to position it from that perspective.

DCC Energy Insights Day

Wednesday, 6th September 2023

Safety First

As everything we do in DCC, safety comes first. It is our number one core value. And just start by, and I am going to feel like I am on an airplane now. But just the dynamics from a health and safety perspective. There is no fire alarm planned for today. So if there is a fire alarm going, we all have to get out of here. There is doors either side of the room here, three of them. There is one around the corner there.

We leave through the bridge that we came over, and we meet in the car park outside. So any health and safety events, we will head out and follow any of the DCC people that are here today, because they will probably be first out the door.

A couple of other things just from a safety perspective. So this is an old chateau. And when you walk around, there is little steps in different places, and there is no handrails. So normally, we would expect people to be holding the handrails as they went up steps but there is not any. So just take care of when you are walking around the facility.

It is extremely hot, and it is going to be extremely hot today. So I think the projections are that it is going to be 36 degrees. So two things for everyone. Lots of water. So we have water around the room with lots of water outside. So keep yourselves hydrated. And secondly, which we thought on the plane on the way over, we have some sun cream. And again, we will be outside. And again, I think we want to use the best of the space for interaction.

So if you are outside, and I was looking at a few people, and you could see the little beads of sweat from the heat, and that is why I moved in here. So again, precautions, let us do this event very safely.

We will be going to a customer site later on in the day. We will have a very detailed health and safety briefing when we get there. We will be going on to the roof to see a solar installation. So again, when we get to the site, just pay attention to the safety briefing and follow all the instructions. So that is it from a safety perspective.

DCC Team Today

Just to talk about the team here today, so the presenters. Apart from myself and Kevin, we have Fabian, who will do the vast bulk of the presentation today and he will be joined by Conor, who is going to take us through all the financial implications. And as I say, there is a lot of new information that we are going to deliver to you today.

We have deep dive into two specific areas: our Energy Management Services, which we have, and you will see later on products that we sell and how they work. But we will be bringing to life, the Energy Management Services part of our business. Because I think, again, from questions that we get from investors, everyone understands the solar panel and maybe how a solar panel works, but how will the commercial dynamics of building an energy management business work. And again, we are going to bring that to life for you today.

And similarly on Biofuels, which is a very important part of the energy transition. So we have Emmanuel and Adrian. Adrian is new to the family. One of the acquisitions we announced today was Centreco. And Adrian built the Centreco business and will talk to you later on about his business and about the opportunity within Energy Management Services.

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And Biofuels - and you will have seen us talk about biofuels a lot over the last number of months. Biofuels is a very important part of energy transition. And again, we have Steve and Orla, who are going to take you through a deep dive later on in the session.

We are very honoured to have John MacArthur, who is a senior advisor to us and an expert in all things: carbon, ESG, regulation. So over lunch, John will talk to us on those areas. And he will introduce himself because he has a slide that has lots of details about what he has been involved in. But I think it would be very valuable conversation for all the investors and analysts in the room today.

And finally, our IR team. In fact, our entire IR team are here today. So Rossa, Hollie and Sarah. And I would just like to thank all three of them for organising. So everything you see here today is nothing to do with us. It has all been delivered by the IR team. And again, through the day, if there is any questions, if there is any support you need, just go to any member of the team. And if there is follow-up questions afterwards, please go to any member of the team.

Agenda & orientation of our session today

So our agenda for today, and I would not talk through the first part of it, because I have covered it already. So the first two hours is going to be a presentation. We will have lunch at 13.00 and lunch, John will talk, as I say, over lunch. But it is an opportunity and a real opportunity for you to interact with our team.

And not only do we have the people that are presenting here, and Fabian will talk through the energy team now in a couple of minutes. But we have other members of our energy team here today, please talk to them and ask any questions that you have on any area, and they will be happy to help.

And then later on in the day, we will go and see the customer sites. So that is what we have planned for you.

A strategy fit for the future

I would just like to start and I would say two very brief slides, because some of this is well known to you. But DCC has had a very consistent strategy ever since we went public over 29 years ago. And that strategy has delivered a 14% on average year-on-year growth in our earnings. So the strategy has worked really well. But we believe that that strategy is very much fit for the future.

And why do we believe that? Well, because we make future-focused decisions. So every time we are looking at investing in a business, we are looking at that investment not just in the short-term, but the short, medium and longer term. And the sectors that we are in and the businesses that we are in are all in areas that have long-term growth opportunities and are long term. So the macro trends in those sectors are all very positive for the long term.

And we get sometimes that energy. That is a mature business. Is it going to go into decline? And it is quite the opposite. And you will see through the day, how we make that happen.

Our businesses, we grow our businesses. Very much we operate those businesses. We add value to the businesses. We drive strong organic growth. And as Kevin will talk to you now in a minute, we put capital to work then in those sectors to build bigger scale within the market

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that we are in. And we are in a really interesting space now, where we have so many opportunities within the broader energy transition space that to put capital to work and to be standing here today, to be announcing five new acquisitions, £160 million have spent so far this year on acquisitions in this area to have pro forma profitability of almost £50 million from an area that we have only started to invest in within the last 18 months. That is pretty good progress in a short period of time. So, again, we will come back and talk about that in much more detail.

And finally, we are really focused on creating future value and delivering high returns for everyone. And that is driven by our purpose of enabling people and businesses to grow and progress. So each of our sectors, we have really strong growth opportunities within them. And you are going to hear from Fabian and the team, how over the periods of 2030, in energy, we are going to double our profitability and we are going to significantly reduce our carbon emissions, and dramatically actually improve our carbon intensity of our profitability. So you are going to hear all that.

DCC: Invest in what the world needs

Finally, from me, DCC, what do we do? We invest in what the world needs in each of our sectors. So if I look at the healthcare sector, people are living longer, but they want to live longer and healthier lives. And what do we do? We bring the products and services to those customers to help them live longer and healthier lives.

In our technology sector, again, we are all using lots of technology, lots of devices. We are marketing and selling the technology products to make that progressive world. And we are bringing those products and services for all the world's leading brands to our customer base.

But today is all about energy. And what are we doing in energy? We believe there is a fundamental need to accelerate the pace of bringing cleaner energy products and services to our customers. And that is what we are going to do.

And through the presentation, Fabian and the team are going to demonstrate and showcase how we will bring and accelerate energy transition. I think it is the most phenomenal opportunity that DCC has. I think, and we think that maybe the market does not really appreciate it, or underestimates the benefit that is within it. And hopefully by the end of today, that you will believe what I believe that this is one of the, if not the biggest opportunities for DCC to create value for you, our shareholders into the future.

So I will now hand over to Kevin, who will do another brief.

Cleaner Energy in Your Power

Kevin Lucey

CFO, DCC plc

Welcome

Thanks, Donal. And it is great to see you all here today. I have not spoken to you yet, I look forward to connecting over the course of the day, as Donal mentioned. Just one very quick thing to mention. The slides that you are going to see in a minute have been or are in

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cyberspace presently on the way into your inboxes. So everyone will have those available to them, toot sweet as they say.

You would be glad to hear I won't keep you long. And so again, like Donal, I suppose I just wanted to set a little bit of Group context around really one of the growth opportunity that we see in DCC Energy. And then secondly, maybe a bit of an overlay or a context on some of the financial perspectives that Conor is going to go through in detail with you a little bit later in the presentation.

We have an ambition to double Group profits by 2030

Okay. So, you will know that last year, obviously, we set out our belief that we believe the Group can be at least twice as large in profit terms by 2030. And that we will be significantly less capital-intensive or carbon-intensive, I should say. Everything you will hear from the energy team today is consistent with that ambition, and should reinforce that for you.

So we will see, over the course of today, how DCC Energy will deliver substantial growth out to 2030 and reduce its carbon. So the DCC energy growth agenda very much aligns with that of the Group as a whole.

So as you can see on the screen our Group financial model, if you like, has really three important pillars. We aim to deliver organic profit growth on average each year of about 3% to 4%, building on our leading market positions, really strong operational platforms we have within our markets, and obviously then our empowered management teams and many of whom you will hear from later during the course of today. And we do believe that that provides really solid pillar for the organic growth of the Group.

We believe again, that we can add approximately 6-8% profit growth each year through M&A. And the focus on return on capital employed in DCC is deeply embedded. And again, as you network today, you might pick up some of that from some of my colleagues. And that deep focus on return on capital employed being deeply embedded, that drives the cash flow of the Group. And obviously, in turn, that gives us the capital to reinvest in our businesses and invest in new businesses.

So that means that this growth can be delivered. And what you are going to see from DCC Energy in a while can be delivered on a self-funded basis.

If I think about these three pillars in the context of DCC energy, I suppose what you are going to hear later today, and what you are going to see is that we have really strong operating platforms in our markets, that we have leading market positions within those markets. And that those businesses and platforms that we have operate in growth segments.

So that gives us the opportunity to grow organically. And we believe that the organic growth opportunity in DCC Energy is substantial.

You are going to see how we are investing both organically and through M&A behind the growth trends in the energy sector, and how we are building sustainable long-term positions to support our customers through transition. I think the Group's programmatic approach to M&A is a real differentiator for DCC. And that programmatic approach to M&A, I guess, is evidenced or has been evidenced even this morning in the announcements we have made, but it is very much part and core of what DCC Energy is doing. So consolidating in fragmented markets.

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