Ahead of the forthcoming Irish Association of Corporate Treasurers (IACT) Annual Summit in Dublin on 6^th November, Treasury Today catches up with Niall Kelly, Head of Group Treasury at DCC – a FTSE 250 listed international sales, marketing and distribution business.

DCC is an international sales, marketing and distribution business with revenue of circa €14 billion. Headquartered in Ireland, most of DCC’s revenue is generated internationally, in the UK and in Continental Europe. The Group now has over 10,000 employees and operations in 13 countries across three main divisions – energy, technology and healthcare.

Although DCC’s ongoing international growth means that the Group primarily looks to international economic indicators, Kelly notes that “the Irish economy is turning a long-awaited corner and measured optimism is the order of the day for investors, individuals and businesses alike. Employment rates are rising, GDP growth has picked up significantly and tax revenues are also increasing. In short, all the key indicators are trending positively.”

Strategic treasury

According to Kelly, DCC’s expansion in Continental Europe has benefitted from the Group’s experience in the UK and its strong relationships with the oil majors and its other supply partners.

Here, he stresses the importance of long-term relationships to DCC, and explains how the Group’s conservative financial strategy has always been a significant plus point for its suppliers. “As a Group, we are very focused on having a strong balance sheet. Having long-term debt and strong liquidity positions on the balance sheet has, over the years, proved to be a competitive advantage for us: in terms of our relationships and negotiations with our key suppliers and partners,” he says. “When we buy distribution businesses from the oil majors, they are replacing a diversified stream of smaller cash flows with a single cash flow and it’s important to clearly demonstrate the ability to readily meet monthly product payments.”

So how does DCC manage this? “Well, we are and have always been well-funded. We tightly manage our working capital and we maintain a relentless focus on Return on Capital Employed (ROCE). We go to the markets well ahead of needing funding and we think strategically about when to issue,” Kelly points out. Testament to this is the fact that the Group has been to the US Private Placement (USPP) market seven times since 1996. The two most recent issues, in February 2013 and March 2014, raised $525m and $750m respectively.

Sharing knowledge

Historically a dollar-denominated market, Kelly reveals that there are now significant direct currency capabilities in the USPP market, a market which now includes increasing numbers of UK and Continental European investors. “Even US debt investors now have the ability to provide local currency by putting in place their own hedges,” he explains. DCC included sterling and euro tranches in its USPP this year: some of which was provided by investors who had natural balances in those currencies; some of which was provided by US investors who undertook swaps in the background.

Kelly will be talking more about developments in the USPP market – and sharing the secrets of DCC’s long-term success in that market – at the IACT’s Annual Summit in the Gibson Hotel in Dublin on 6^th November. A keen supporter of the IACT, Kelly appreciates the organisation’s focus on both disseminating best practice and representing corporate treasurers in an environment of continuing change. SEPA and EMIR are two good examples here, he notes. “The IACT has done a great job of keeping its members informed of developments and also in representing them in the context of fairly significant changes in the industry.”

These changes will no doubt be discussed at length by attendees during the IACT Summit, where regulation, evolving technology and the increasing sophistication of payments fraud, are likely to be talking points around a comprehensive conference programme, says Kelly. But “rather than lamenting the challenges that change brings, this evolution is actually an enormous opportunity for treasurers to revisit legacy structures and processes and strategically position their businesses for ongoing growth,” he concludes.