DCC plc (DCC) Earnings Call Transcript & Summary

Good afternoon, and welcome back to everyone that joined our results call this morning. I'm Donal Murphy, Chief Executive of DCC, and I'm delighted that you can join us today for our Energy event. I'm joined this afternoon by Kevin Lucey, our CFO, and by Eddie O'Brien, Interim CEO of DCC Energy, but more about that later. Today, we will outline a new strategy for our energy business and demonstrate to you the growth opportunity ahead of us by leading our customers through their energy transition to Net Zero. DCC is focused on energy transition from the point of view of the customer. As a multi-energy distributor, our role is to understand our customers' transition pathways and support their transition to cleaner energy products and services, by leveraging our long-term deeply embedded relationships with our customers to target our cleaner energy offerings. The evolution of the energy mix plays to DCC's strengths as an agile, experienced multi-energy business with leadership positions in the markets we operate in, backed by our scale and industry partnerships. Throughout the session today, we will demonstrate that DCC is leading with energy. We have 6 key takeaways for you from this session today. One, our new strategy and structure for DCC Energy, which I'll outline shortly. Two, our point of view on the energy transition pathways for our customer segments. We have carried out extensive research into the transition pathways for each of our customer segments and have a clear vision for how our customers will transition to net zero. We will bring these pathways to life by hearing directly from a number of our business leaders, our customers and our partners. Three, how we will expand our customer offerings and solutions, bringing multi-energy solutions for our commercial and industrial, domestic and mobility customers. Four, what the financial characteristics of the transition looks like and demonstrate to you how we will grow our profitability through the transition to net zero. Five, while we are growing our business, we believe this strategy will support our customers' decarbonization agenda and the path to net zero. This is why we are adding to our Scope 1 and 2 net zero target with a Scope 3 net zero target by 2050 or sooner. And six, in December, we updated the market on our group strategy and our capital allocation priorities. By pursuing our group strategy and deploying capital in line with our priorities, the size and shape of DCC will be very different by 2030. By 2030, we will have more than doubled the size of the group and approximately 70% to 75% of our profitability will come from our health care, technology and clean energy and renewable activities. So now let's take a quick look at how we have grown our energy business. DCC has operated in the energy sector since investing in the startup of Flogas, our LPG business here in Ireland back in 1977. Since that initial investment, we have grown our energy business into a multi-energy business, operating in 13 countries on 3 continents. We've had a clear strategy to consolidate the fragmented off gas grid energy markets. We scaled our business in the U.K. and Ireland over the following decades, expanded into Continental Europe when we acquired Shell's business in Denmark in 2009 and scaled this business into one of the largest multi-energy groups in Denmark. We continued to scale in Europe. We expanded into the U.S. and Asia in 2018. In the space of just 4 years, we have grown our U.S. business substantially. And today, we have operations in 22 states, employ 800 people and served 310,000 customers. We have been investing in new energy products and services to accelerate the transition of our customers since 2012. We initially acquired a biomass and a renewable energy products distribution business. We expanded our gas and power activities in France and Ireland. We've scaled our biofuels business, bringing 100% HVO solutions in Sweden and in the U.K. We were the first company to supply sustainable aviation fuel in Denmark. More recently, we've been expanding in renewable electricity and biomethane in Ireland through the acquisitions of Budget Energy and Naturgy Ireland. And we've been investing in the solar PV installation and maintenance market in France. DCC is innovating with energy. One of our core values is partnership. Across all our divisions, partnership is a value we take pride in and has been key to how we've grown with energy. DCC is not a producer of energy. We build long-term partnerships with the producers of energy, be they global organizations or local producers. We provide over 9 million customers with the essential energy they require to heat their homes, run their businesses and to move about. Partnership has been key to the growth of our business. And as the energy ecosystem continues to decentralize, we will build lots of new partnerships to provide innovative, low-carbon or renewable energy solutions to our customers. You will hear from a number of our partners later in this event. Building on our strong track record of growth, today, we look at the next chapter of growth by leading with energy. Leading with energy means accelerating the net zero journey of our customers by leading the sales, marketing and distribution of low-carbon energy solutions. Aligned with our purpose, DCC has a critical role to play in leading our customers through their complex decarbonization challenges. We continue to make great progress in energy transition, introducing many innovative energy solutions for our commercial and industrial, domestic and mobility customers. DCC is focused on energy transition from the point of view of our customer. As a multi-energy distributor, our role is to understand our customers' transition journey and support their transition to cleaner energy products and services. We leverage our long-term deeply embedded relationships with our customers to target our cleaner energy offerings. The evolution of the energy mix plays to DCC's strengths as an agile, experienced, multi-energy business with leadership positions in the markets we operate in, backed by our scale and industry partnerships. We deliver real practicable decarbonization solutions and help educate our customers on their transition pathways. Energy transition is complex and will require many excellent organizations working in partnership, something DCC has excelled at over many years and is one of our core values. We are extending existing partnerships and creating new ones to make multi-energy products and solutions available to our customers. As I outlined earlier, we have been and continue to invest in building capabilities in renewable and low-carbon products and services. Our strategy is to accelerate the net zero journey of our customers by leading the sales, marketing and distribution of low-carbon energy solutions. We believe that through the changes we are making and the strategy that we are adopting, DCC Energy will continue to grow through energy transition. Here is a graphical representation, showing the growth of our profits, while showing the reduction in carbon emissions. As we will demonstrate later, we believe that through the shift to new types of energy we will grow the overall lifetime value of our customers. This is based on the organic development of our business. I've no doubt that the transition will happen faster than we can see today as government policy continues to evolve and innovation and increased levels of capital investment accelerate the shift to a net zero world. I have also no doubt that DCC's new energy strategy is a winning strategy, and we'll continue to grow and develop our business regardless of the pace of change. Our strategy requires a customer-first approach with the breadth of DCC Energy's capability available to all of our customers. This is why we're changing our divisional structure to a new single energy division. DCC Energy. DCC Energy will have two business segments, Energy Solutions and Mobility, and I will take you through the shape of the new division shortly. From a leadership perspective, we are bringing in a new CEO to lead DCC Energy and implement our strategy. The new CEO has a depth of experience leading in the energy sector and driving change and energy transition. Until our new CEO is in situ, Eddie O'Brien will act as the Interim CEO of DCC Energy and will then take up a new group management role as Chief Strategy and Sustainability Officer. Henry Cubbon, Managing Director of DCC LPG will retire at the end of the current financial year. I'd like to thank Henry for his significant contribution to the growth and development of the group over the last 14 years. Thank you, Henry. Let's take a look now at DCC Energy under our new structure. DCC Energy is a multi-energy sales, marketing and distribution business with operations in 13 countries on 3 continents. The business serves 9 million customers and employs 7,600 people. Energy Solutions is by far the largest part of the business, representing 75% of the division's profits with the balance in Mobility. The operating profit mix for the division is 29% in traditional energy, 49% in lower carbon energy and 22% in services, renewables and other income. I'll hand you over to Eddie now who will take you through the transition pathways for our customers. Eddie?

Thanks, Donal. Like you said, our leading with energy strategy is customer focused enables greater profitability and reduces the emissions of our businesses in line with our net zero ambition. We lower our customers' emissions by providing both lower carbon products today and developing the solutions needed to deliver zero emissions as energy transition accelerates in the 2030s. Through 2050, there will be 4 main drivers of our success. The trust our customers have in our businesses, the passion, competence and agility of our people to deploy the solutions needed. Understanding the transition choices our customers are making, and our ability to attract new technology partners. Let's look at how this strategy will deliver in our solutions business. As Donal mentioned, we have two sets of customers within our solutions business with different transition pathways. Our commercial customers account for 40% of our gross profit in DCC Energy. In the current decade to 2030, we are growing use of biofuels in all sectors. In fast-moving, consumer-driven sectors such as light manufacturing, hospitality and leisure, we also see early adoption of solar and heat pump solutions. In the 2030s, there will be much greater cross industry adoption of biofuels, solar, heat pump and EV charging. The last stage of the move to net zero for commercial customers will be driven by technologies such as green hydrogen, ammonia and advanced fuels. This will fully support lowering the emissions of more challenging sectors such as agriculture and construction. We will hear later how DCC Energy is already leading with energy. We have conducted significant research into the transition pathways of our customer segments and the policies in our markets. We expect emissions to decline in a slow pace over the next 8 years, with acceleration towards net zero after 2030. After 2030, we expect policy shifts to make new technologies like green hydrogen more viable. This will support more rapid decarbonization of the commercial sector. Our businesses are viewed by our customers as a trusted partner. They have the capability to reduce emissions immediately while also building the solutions needed in the future. The next two clips with David and John illustrate the trust of our customers and how our business are supporting their net zero journeys. You'll also hear about our partnerships with new energy providers.

I'm David Taylor, I'm the Commercial Director of Flogas Britain. I look after our sales and marketing departments and lead the business strategy on energy transition. We're delighted to be a partner of Tarmac as they progress their decarbonization agenda. So far, over the years, we've helped them to reduce their carbon emissions by around 20%. It was clear from the outset what Tarmac wanted to achieve, and this has made it easy for us to develop tailored solutions to meet their requirements. The first oil to LPG project we conducted together was the first of its kind within the U.K. asphalt industry, proving the technology led to further oil to gas conversions. We're investing with energy in our industrial customer base, and are pleased to deliver on the aligned agendas of a net zero future. Flogas has continued to grow its market share through oil to LPG conversions, helping customers take their first steps towards decarbonization. Tarmac has been pleased with the innovative solutions we've delivered to date, and we're now entering a new phase of our long-standing relationship. We're exploring new lower carbon alternative solutions, including renewable Dimethyl-ether which will further decarbonize the industry whilst utilizing existing assets and infrastructure. We are looking forward to working with Tarmac on future projects as we accelerate our customer journey to net zero.

I'm Miles Dobson, I'm Head of Capital Management here at Tarmac. My job involves looking after our investment, making sure we're spending it in the right place, putting our investments into the right place. So Tarmac has been in the production of asphalt for more than 50 years now. And over that time, there's been lots of challenges. Our latest challenge is about how do we reduce our carbon footprint and link that to our sustainability strategy Act. Part of the work we're doing with Flogas and have been doing for the last 10 years is looking at what we can do to move from oils on to liquid gases and that will help drive up to a 20% reduction across a lot of our plants. Tarmac have now signed a 5-year contract with Flogas to supply LPG and tied into that contract is also development work that we'll be doing on a new potential renewable fuel called, DME, which hopefully will replace a lot of the LPG that we burn, and that will help drive towards our carbon zero targets. Working with Flogas means that we're tied into their R&D as well. So we've got support and help with what's coming in the future. And to me, it's very important to be looking a lot further down the line in terms of where can the journey go to help continue to drive that sustainability agenda. The acquisition of Naturgy Ireland by DCC via Flow gas in late 2021 was an important step for our business as it furthers our vision to become Ireland's provider of energy transition solutions. Our plans to expand the range of energy services and renewable solutions for our customers were accelerated by bringing Naturgy, now rebranded as Flogas enterprise solutions into our business. It expands our suite of renewable energy solutions for industrial and commercial customers, and it enables us to partner more deeply with them on their energy transition journey. We now have solar PV amongst other renewable energy products in our portfolio, which already included biomass and renewable electricity from power purchase agreements with solar and wind farms.

My name is David [indiscernible] I'm the environmental health and safety manager with [indiscernible] Recycling, [indiscernible] Recycling is a family-owned business. It was set up in 1979. Material repurposing and sustainability is at the core of our values. We are very proud to have a recycling recovery rate in excess of 90% for the past number of years. So when we were choosing our energy provider, it was very important that they share the same goals and sustainable attributes that we share. To this end, we have partnered with Flogas Enterprises for the past 7 years. Flogas Enterprises supplies us with 100% renewable green energy. All of this electrical energy is used to power all of our facilities to Ireland. We work very closely with our account manager whose expertise and guidance enables us to see market trends and source our energy at the best available value. Value is important to us, and we tender our electrical supply every 2 years. We have retained Flogas enterprises time and time again as they have offered us the best advice and prices on the market. A key differentiator for us is our ability to offer biomethane, which is currently available in very limited amounts in Ireland. We do this through our partnership with Green Generation. Here in Ireland, we make biogas from waste food, and then it's converted into green electricity and heat. And after that, we changed our process. And now we take the biogas, we put it through a machine called an upgrader, whereby we take the CO2 out of the biogas. We turn it into biomethane, which can be injected into the gas grid. So now the majority of our gas is going in as gas into the gas grid. We're the only point an island where gas is injected into the grid. We approached Flogas in 2015 to do a power purchase agreement for the electricity, and they have taken 100% of the electricity. And as a supplier of only renewable electricity, they supply to their customer base around Ireland. When we progressed from electricity to biomethane in 2019, Flogas came on the scene again and enabled us to supply customers such as United Drug, who wanted to get a renewable product rather than the carbon-based gases they were buying previously. We will be expanding our volume of biogas or biomethane we will be producing here on site. We'll be using it more for the biomethane than for the electricity, and we intend to inject it into the grid, and we will be looking for more customers and Flogas may bring us a panel of customers that are interested in renewable gas. United Drug is a good example of a customer we are partnering with on their energy transition journey. United Drug recently set a target of being carbon neutral by 2030 and asked for our help to achieve that goal. Switching from exclusively using natural gas to a blend of biomethane in February this year is just the first stage of their energy transition journey. We will increase their blend of biomethane over the coming years until 2030. And so that they achieve their carbon-neutral target. Well, the background to the relationship with Flogas gas Enterprise is about 12, 18 months ago, we as a company decided that we wanted to become carbon neutral by 2030. So with that began the quest to find a supplier for our bioenergy needs and Flogas Enterprises is the part that we've picked. It's important to us because both our employees and our stakeholders, it's a desire that they have. They want to work with partners or work for an employer, where they're taking sustainability and becoming carbon neutral is important. So here at United drug. We have many different distribution facilities, and we're using the Flogas and the bioenergies to drive all aspects of our business, be it heating, automation and technology, computer systems, et cetera. And we found the switch across to be a seamless transition and a really good one. And the last piece to cover is, it's important to us to have a sustainable platform as we push down for this quest to become carbon neutral over the next 7 to 10 years.

We know from our recent market research that commercial customers are highly aware of our brands and with them as key partners to help achieve their sustainability goals. Taking the U.K. as an example, our business is ranked more favorably than our competitors. Our customers will seek our businesses for advice, and they would be willing to consider more bundled offerings from us. Now let's hear from [ Ketan Meha ] about our approach to consultative selling.

As the largest downstream liquid fuel distributor in the U.K., our commercial and industrial transport customers' energy needs are expansive and varies, rising energy costs and a strong push for net zero underpins our drive to source new energies and ways of working for our customers. We're seeing a sea change in the U.K. on the back of COP26 and our government setting some of the most aggressive decarbonization targets in the world. Our customers demand that their energy partner provides new and innovative solutions to help them meet their targets. In fact, we partnered with a leading Tier 1 construction company at COP to provide content on energy transition for the event. Certas is leading with energy in our industry and seen as the voice of fuel even being cited in the U.K. Houses of Parliament recently. The energy transition is going to be a jigsaw puzzle of solutions. This means that certain customers, depending on their location will be assessing a biofuel strategy, a hydrogen strategy or some will go down an electrification rate. For much of the commercial and industrial customer base, a liquid fuel solutions such as HVO is the elegant drop-in option for the next decade. We are pursuing additional energy solutions from renewables with the installation of solar panels or wind turbines for commercial customers. We are rolling out HVO, a second-generation biofuel made from waste oils for our commercial and industrial customers. The biofuel we sell reduces our customers' emissions by more than 85% and is ISCC approved. At Certas, we have changed over 3 of our hubs to HVO, and we plan to increase the footprint in the next year. We've invested in our depot network infrastructure to provide national coverage of HVO for our customer base. We have reached an agreement with the largest global HVO supplier to commence cargo supply for the first time this year. This will give us a key strategic position in the East of England and allow us to capture market share. We have several customers who are leaders in their respective sectors that have already switched fully to field, including several major construction players, needing equipment rental companies and several large councils. We anticipate that more will follow in the coming months as net zero continues to gain traction and businesses come under pressure to fulfill their obligations. We are working to decarbonize our own bunker network by utilizing a number of technology-based solutions, including adaptation of LED lighting, installation of EV charge points and backup solar panel technology.

I'm Megha Davé, Head of Specialty Projects for Certas Energy. As the industry leader, Certas Energy has a wealth of experience and expertise in understanding the nuances of the fuel and lubricant supply and value chain. We have excellent relationships with several large blue-chip customers who we work closely with to identify their energy goals and in turn, use our expertise to identify and deliver solutions. We've successfully undertaken a total cost of ownership review with several customers who are market leaders in the construction, distribution and logistics sectors. By working in partnership with them and using our insight and expertise, we've identified synergies and solutions, which would help them find additional competitive advantage in the procurement of energy. For businesses where fuel is a major expenditure, the TCO of fuel-related operations can have a major influence on the bottom line, fuel efficiency, product quality and choice, storage monitoring, administration and management practices all impact the lifetime costs of fuel-related procurement and usage. Over the last year, in particular, the TCO model has evolved and now encompasses a wider strategic consulting review particularly as the net zero and the duty equalization changes in the U.K. gain more traction. With these customers, in particular, the conversation is no longer limited to price but instead, it covers all the key aspects of their energy needs. With our experience and insight of their business, we will collaborate with energy to cater to their needs and deliver solutions that are mutually beneficial.

By leading with energy, we believe our earnings per customer will grow compared to only selling traditional fuels. We believe as we expand our bundle of solutions to commercial customers, we will significantly increase the total lifetime value of our existing customers. Our commercial and industrial customer relationships average 10 years. But for the purposes of illustration, we have used a 7-year period. Taking, for example, the distillery in the U.K., the lifetime value to us currently selling traditional or lower carbon fuels is 30,000 to 40,000 points of gross profit. Selling a hybrid solution of around 20% lower carbon LPG and a heat pump or solar installation, we expect to make 1.5 to double that margin over the same 7-year period. For expanding the solutions we provide to include energy advisory services and power, we believe we could deliver 4.5x the lifetime value compared with today. The other part of our solutions focus is our domestic customers. Our domestic customers are mainly living in homes off the gas grid. They use energy for home heating and in some markets for power and account for 35% of our gross profit in DCC Energy. Today, reducing carbon at scale in off-grids homes is challenging. The current housing stock is per installation. While policy announcements are occurring, government support remains limited for heating system replacement. Without that support, the capital cost of replacement makes it challenging for customers to switch to low carbon alternatives. We will pioneer with energy over the next decade. And we believe building capability, which will scale later is crucial for long-term success. However, our research shows that most of our customers will continue to use traditional fuels up until 2030. We believe policy support from government is critical to accelerating the adoption of new solutions in the 2030s. Today, we are innovating with industry partners and drop in biofuels for home heating in the U.K. reducing our customers' emissions without the cost of changing heating systems. We are also announcing the launch of a heat pump offer in Britain, followed by a pilot in Denmark later this year. We will help our existing customers lower their carbon emissions. We will provide multiple solutions, including solar, EV charge and heat pump and biofuels. This will give us the opportunity to also grow on the own grid market, providing a significant potential growth opportunity in the future. We're introducing these solutions today to be in pole position when opportunity arrives to scale. [indiscernible] will take you through our new domestic solutions approach in Denver.

So with DCC [indiscernible] in Denmark, we are strongly committed to have a significant footprint in the energy market in Denmark today and tomorrow. And this is why we decided 1.5 years ago to strengthen the management team with a new role, looking specifically into business development and new entities. My role is to support the development of new products, new solutions that will enable us to be relevant in also 5, 10 and 15 years in a market that is rapidly changing and to support our customers in their seek for low carbon ultimately, no carbon energy solutions and support their transition towards net zero. We are leading with energy, and we want to support our customers towards net zero. So as a company that supply both domestic customers, commercial customers, Mobility customers with different energy products, our way of looking at energy transition is very much to look at it from the point of view of the customers. So we look at it from each customer segment, being very aware on where's technology moving, where's regulation moving where our customer needs moving. And from each of those segments that make the choices, what are the solutions, what are the products that we will offer to be relevant in the long term and to make sure that customers are with us, and we are on their journey towards the future. So when we look at heating for domestic customers in Denmark, the most installed type of energy is district heating, but we have a lot of individual houses that are on the National Gas Grid that's around 350,000 to 400,000 customers. And we also have individual houses that are using oil boilers, around 60,000 approximately. And now there is a strong demand in the market right now for air to water heat pumps, and that is further encouraged by the fact that they are regulatory incentives towards that development. When we look at the market, we expect that in 10 years, about half of the houses that have oil burners and gas burners, they will be replaced by new energy sources and around 75% of those will go to heat pumps. So there is this development happening right now, which is very interesting, and we are looking into. So the market development that we spoke about, what we see is around 25,000 customers a year are installing heat pumps out of the roughly 0.5 million that have gas and oil boilers today. We have a large market share, serving customers with heating oil today for domestic purposes. And we have a loyal customer base. And as our customers may choose to go to a heat pump for the energy source, we want to be on that journey with them. And that is why we are launching this year a heat pump business pilot that would be ready in the market. And we have great expectations to the opportunities in this space. We also see there's an opportunity to actually bundle that offer with some of other offers. It could be on mobility. It could be on some of the other areas that we are selling in the Danish market today. And another area that is important for us and is very interesting in the Danish market is biogas. So biogas is made from waste and from biomass upgraded to natural gas quality and distributed in the national gas grid. We see roughly 25% of the gas in the gas grid today is from biogas and there are expectations this is going to grow significantly in Denmark. And that is why we have invested in biogas in Denmark. Today, the biogas is primarily asked for by commercial customers, and there could be opportunities also to bring this into the domestic customers that are looking for new energy solutions for heating their homes. So when we look at houses and domestic energy needs, what we see right now is that something very interesting is happening on mobility. And in December was the first month last year that more hybrid and purely electric cars were sold in Denmark than conventional cars. And for those cars, a large part of the electric charging will happen when at home. And that is the reason why we started this year in Denmark by agreeing partnerships that will allow us to serve customers on the go by fast chargers on the Shell retail site with Shell recharge at home and also we're charging at the commercial premises. So we opened the first fast chargers with Shell Recharge in the beginning of this year, and we are rolling out electric charging at home and at commercial premises right now. And this is an area that is going to be very important for DCC [indiscernible] Denmark going into the future. And we have very high ambitions on how we will take part in Mobility across retail sites, at home and at commercial premises.

From our analysis, we think emissions from the off-grid housing in our markets may remain relatively high for the 2020s, declining by around 5%. We want to help our domestic customers do more than that. Policy is key to driving change in the domestic sector. Policy is becoming more supportive of transition in countries like France, Denmark and more recently, the U.K. We would like to see more support to drive the biofuel alternative for domestic heating through subsidies and taxation. This would allow significant reduction in emissions in advance of a change in heating systems and improved installation. It is likely to be the end of this decade before we see transition at pace. After 2030, we expect the pace of decarbonization to accelerate. Now let's look at what we're doing on the ground. Our brands attract rural off-grid domestic customers today. We are not positioned as a utility. Instead, we are rated highly by our customers at trusted sources of energy advice and information. We outperform our competitors as brands associated with renewables. Our customers would look to us for more advice about renewable energy and efficiency, relative to other providers in the market. As a result of this positive brand position, we have recently looked more closely at our domestic segments in our markets over the last 12 months. The off-grid market in the U.K. is 4.3 million homes, of which about 1.3 million are used in our products. Research we carried out in the U.K. identified 3 key customer personas based on propensity to switch and affluence. We believe 2 of these are more affluent and willing to switch, represent 320,000 first movers, who can be targeted today with a heat as a service offering. [indiscernible] are our potential early adopters. For our [indiscernible] tackling climate change is a priority, and they are willing to consider upgrading their home. They are younger, aged between 30 and 60, are limited by disposable income. They are time per and use digital channels for research and shopping. [ Yan and Julia ] are likely retired, have fewer financial obligations. They are somewhat environmentally engaged, and they do their research digitally. Ultimately, they choose vendors, they trust and like face-to-face meetings when deciding on expensive home improvements. [ Jamie and Tom ], the largest group are somewhat engaged with environmental matters. In contrast to the other 2 groups, they are not as well off and a retrofit is not a priority. They are likely to remain on traditional fuels for some time to come. We believe [ Jamie and Tom ] are good candidates for our biofuel solutions if U.K. policy makes the price more affordable. The remainder of the [ GBP 1.3 million ] off-grid costs for rotational products to date are not as engaged with environmental matters or it is too expensive for them to switch systems. We believe that a successful bundled offer for early adopters has another potential for growth. The 20 million consumers on the gas grid as a large subset of this market is also suitable for a heat pump solution. Because of our long-term relationships and higher advices valued, we expect to be the first call for customers as they look to new energies. We believe we will grow our share of wallet and lifetime value from these customers as we implement our new strategy by offering bundled solutions. For the purposes of customer lifetime again, we have looked at a shorter 7-year period. Over that time, we'd expect to generate gross profit of [ GBP 1.8 to GBP 2,500 ] from providing traditional energy to a domestic customer in the U.K. If we switch that customer to an air source heat pump, the lifetime value to us from installation alone is 1 to 1.4x the original value. Installation of solar, adding service contracts and potentially battery solutions in time, all contribute to higher lifetime value. We could potentially double our original gross profit. We have just launched the heat pump offer in the U.K. Angus will talk you through the offer and our first customers will explain the rationale for choosing DCC.

Hi. I'm Angus Blundell, and I'm the Marketing Director at Certus Energy. We've been further developing our energy transition strategy, and we have some fantastic initiatives to announce that we're really excited about. We believe that the energy transition required to lead our customers to net zero by 2050 will be multifaceted. Different sectors will require different approaches and none more so for the U.K. residential sector. We already supply around 20% of the 1 million homes in Great Britain with Heating Home. And as such, we have a close and deep understanding of our customers. And we know the complexities of heating such homes, which are off the gas grid, typically bigger, older and less well-insulated than the U.K. average. We've been busy understanding the viability of drop in low-carbon liquid fuels as a direct replacement for kerosene, which is used as heating oil in the U.K. market. To that end, we are running trials in a number of properties using HVO or hydrogenated vegetable oil. These are proving to be very successful, and the product shows a 90% drop in carbon emissions compared to Kerosene. Our industry has been working together and taking the initiative to demonstrate how homes can successfully adopt HVO. See futurereadyfuel.info for more detail. We are ready and waiting to lead the change for a wider rollout, but we need the policy support of government to make this happen. Ultimately, renewable, low-carbon technologies will play a large role in the decarbonization of the U.K. housing stock. The leading technology in this space right now is air source heat pumps. Many homes will be suitable for this transition now, yet many homes will require adjustments to their thermal efficiency via insulation and other improvements. Certus Energy and DCC will be at the forefront of that transition. We have, therefore, created and launched Evolo, the evolution of energy. Evolo will take homeowners from initial inquiry about heating from electrification to technical specification, installation, after care through annual service and maintenance. We will provide 100% air source heat pumps in both low and high temperature variants and critically for many larger and older properties in the off-grid sector, offer bivalent systems where a fuel boiler potentially using HVO remains and works alongside an air source heat pump. Evolo launched this month, and we've had our first installation in North Yorkshire. [Presentation]

Evolo shows that we are pioneering with energy. As we grow, we will add solar, EV charging and battery storage as well as installation solutions to the residential and commercial sectors. We are really excited about the future.

As I mentioned earlier, digital sales channels play a key role for customers looking to retrofit their homes. To be successful, we need to be focused on a digital-first customer experience. As part of our new strategy, we'll be investing more in new digital capability to ensure we provide the digital customer journey required to succeed. As you can see, we are delivering solutions already today, which will allow us not only increase the lifetime value of our existing customers through bundling, but give us solutions, which are also relevant for the much larger on-grid market. Mobility is a distinct focus area for us. Our strategy is to develop multi-energy locations and service platforms, allowing our customers to access the energies they need while on the move and at the same time, using digital business models to access services for their fleets. Mobility accounts for 25% of our gross profit, with 3 quarters being generated through our retail business and 1/4 from our fleet services and HGV network. Policy moves in our market have been greatest in the passenger car and light commercial segments, with some markets preparing or announcing the phase out of internal combustion engines by 2030. We, therefore, anticipate a more dramatic overall decline in emissions for Mobility in the next decade. Due to the increased energy requirement for HGVs, we expect very little transition in this segment through 2030. Overall, we expect emissions to decline in our Mobility markets by 29%. We believe our HGV and fleet services business provides us with a significant growth opportunity for the next 10 to 15 years. Our research indicates that new technologies such as hydrogen, super fast charging, a new battery technology will require further development before supporting HGV's transition to net zero. We will continue to invest in our HGV networks, focusing on locations of scale that provide low carbon energies to trucks and parking facilities as we see a growing need for regulated truck parking across Europe. Some of our recent investments in the U.K. and France have the potential to generate between GBP 500,000 and GBP 1 million per location at reasonable returns. For fleet managers, complexity is growing through energy transition. Multiple vehicle types requiring a combination of low carbon fuels and power, distributed charging at home, in the depot and on the road requires more information, advice and expense management. Our strategy will continue to provide fleet management solutions which simplify the management of payments and process for our customers. Partnering with organizations like Shell to bolt charging solutions at home, work and on the go, such as those referred to by [ Lina ] will allow us to grow our fleet business into the future. These are just the new energy opportunities and fleets, choosing vehicle types, new insurance requirements adapting to leasing model, all increased complexity for our fleet customers and create opportunities for our fleet businesses. [ Giorgio ] will talk now about Hi-Shell, CDCC as a key partner.

Well, Shell ambition in energy transition is really big because as you know, this is a very big task and it's a very essential task that for the planet that we need to work together to drive new and better solutions to decarbonize our energy system. And as you know, and we are in Fulham in one of our sites in London, full electric, which is one of many that we are building globally, where we are really committed to drive the energy transition. And electric mobility is a key part of that solution. Partners are essential in the energy transition. And they're essential because the task to decarbonize our energy system is huge. And partners like DCC or OEMs like Daimler, BYD, NEO, Nissan, all play a key role in helping the society to decarbonize the energy system. And we are very active working with partners like DCC, not only in the U.K. but globally. DCC is a long-term partner of Shell. We have been working together for decades. And the reason why we believe DCC is also a fantastic partner for the energy transition is because of the customer focus, the excellence in operation and the customer reach. So DCC has millions of customers, many enjoy the value of the Shell brand and we work together hand in hand. There are many opportunities. But let me give you a couple of examples. One, which is very live as of today, which is the partnership that DCC and Shell Recharge will be together in that market. Shell Recharge will become the main channel for distributing Mobility offers in Denmark, and DCC will become the unique licensee. As a result, Danish customers will be able to access the Shell Recharge proposition, the hardware, the CPMS, our ecosystem, charge points at home network, and DCC will be able to deliver this offer to Danish customers very successfully. But we also have a partnership with DCC in the U.K. in fuel cards, where DCC is a distributor of the Shell hybrid card, which enable fleets to have in one invoice fuel empower and themselves drive their own energy transition. So we have many opportunities and many more to develop as this industry builds and grow.

As the electrification of passenger cars and light fleet grows, through this decade, we will continue to transform our retail networks. We believe that by focusing our investment on urban and transient locations, we cannot only maintain our current profitability but grow our business through transition. We see an opportunity to transition our urban locations from unmanned gas stations to multi-energy convenience locations. We are also building greater operational capability to capture more of this -- the profit in these locations. Other motorway locations, we are confident the transition to multi-energy mobility hubs will remain profitable in the long term. Maintaining a strategic network of urban and transient location also reinforces our fleet offering, ensuring customers have a full on-road fast charging solution. Our more rural locations will continue to focus on low-cost operations and access to more traditional fuels with a growing penetration of Bio. This low-cost focus coupled with our pricing excellence will continue to be an important contributor to our profits and cash flows in the medium term. Through this transition, we will be optimizing our network by ensuring the right format is on each location. If you take an average company-owned and operated site across our network today, we generate about GBP 60,000 with a split of about 70% fuel and 30% dollar income. As we move through transition, we expect this average site profitability to grow. We will manage the cash generated from fuel, but expected to be a smaller proportion of the mix. We know from our Norwegian experience, the shop utilization and margin from EV charging is positive compared to fuels. Finally, we have a lot of opportunity to grow convenience across our network. Ultimately, we expect the network to a very strong EV charging and nonfuel income contribution, with the overall site profitability growing over time. A lot of our network thinking has been informed by our experience from Norway. And to bring this to life in more detail, [indiscernible] will talk you through our plans there.

So looking at our locations in Norway, we're currently transitioning from what we used to think of as gas stations or petrol stations and moving towards energy stations. These energy stations will be serving the customer needs now and in the future and at the same time, helping our customers reduce their carbon footprint. The current EV penetration in Norway is at 16%, actually up to 30% in some of the locations in which we operate. In the first quarter of 2022, more than 80% of the EV -- sorry, of the cars sold in Norway were actually battery EVs. Our retail strategy in Norway is three-pronged based on the characteristics of the locations of the sites in Norway. Locations in populated areas will gradually trend transform over from liquid fuels to EV charging. For our highway locations, transient mobility hubs are becoming the new norm. Whilst for our city center locations, we're looking at developing city center mobility hub concept for the future. For locations in densely populated areas, we're planning and executing a gradual transition from liquid fuels offer only to a low-carbon liquid fuel offer in addition to a high-speed EV charging offer for a growing private and commercial customer population. We're expanding our EV offer as the share of EVs in each local market continues to rise. We started by installing high-speed chargers and available parking spaces. We now moved on to installing high-speed chargers in the storefront -- and lastly, we're now looking at an under canopy offer where we're installing chargers underneath the roof together with our low carbon fuels offer. We're investing in dynamic chargers allowing our customers to get the right amount of energy that they need for their type of car. So for instance, if a customer has a VW Golf or similar, they'll typically get 50 kilowatts charging power. Whilst for a customer with a larger SUV, we'll typically get power up to 150 kilowatts plus. We've chosen a cherry-picking approach to our EV business in Norway, starting with high-density residential areas with high EV penetration as well as transient motorway locations first. These locations are showing a 20-plus percent return on invested capital for the sites, which we've been open for a couple of months. The unit gross margin from an average EV transaction is more than 30% higher from that of a fuels transaction. Our total gross margin from our EV business is now at 25% compared to our fuels gross margin. An EV customer in Norway spends about 25 minutes refilling their car compared to a liquid fuels customer only spending about 3 minutes. This additional time represents a great opportunity to offer high-end convenience products through our partner stores, [ Deli De Luca ]. Key to this offer is a wide selection of hot and cold prepared food and drinks, mainly made to order as well as comfortable sitdown facilities in American Diner style together with Wifi and clean restroom facilities. A high-quality carwash offer is also available at more than 100 of our locations and this offer will continue to be further developed in the future. Transient mobility hubs are becoming the new norm for our motorway locations. DCC recently won the public tender for a new motorway location south of Norway, in sharp competition from other energy providers. The offer at these transient locations includes a sizable EV charging facility, where a high number of chargers and high speed is even more important to our customers. The EV charging offer for passenger cars and lighter commercial vehicles is complemented by a strong restaurant brand, in this case, McDonald's as well as the high-end convenience offer in Deli De Luca. In addition, these locations typically have outdoor recreation space for children play, legs to be stretched and food to be consumed in an outdoor environment. Lastly, let's talk about the city center mobility hubs characteristics of these locations are space-constrained high-value land, high-density residential surroundings with above-average income levels, local municipalities looking to push ICE vehicles out of the City Center as well as new forms of car ownership emerging such as car sharing and car pooling. In Oslo, we're currently developing 1 of these locations. This will include a high-rise building with small city center apartments from the second floor and above with a mobility hub concept on the ground floor and below. The residential space will be sold, freeing up significant capital for reallocation into other energy transition projects while at the same time, providing the required capital to develop the Mobility Hub offer. We have a positive outlook when it comes to the future profits of our sites. The right energy offer delivered at the right time complemented by strong C-store formats and car wash offerings will make sure we win in the marketplace in the future.

I believe by leading with energy, we will significantly grow our business into the future. And with the solutions we are developing also meet our ambition of net zero. Now I'll hand you over to Kevin.

Thanks, Eddie. In this section, we will look at DCC Energy in terms of its financial metrics, growth profile, carbon intensity and capital allocation. We will hear from Natasha many of the renewable and bio supply initiatives we have underway around the division. We'll put DCC Energy into context within our overall group ambition. In addition, I will share an update on our sustainability progress and the further commitments we are making in that regard today. So to get going. There are 4 drivers to our energy growth strategy. Firstly, we will continue to support and assist today's customers who require traditional and lower carbon energies into the future. This is particularly relevant to the resilience of our profits and cash flows. Secondly, we are organically expanding our approach to the energy market, developing more sales, advisory and transition solution capability, which provides more value for customers. In other words, we are investing behind growth areas of the energy market. Thirdly, we have a very clear focus on driving strong cash flows and returns from the business as we do across all of DCC. And finally, success across these 3 ensures we have capital to deploy in accelerating our transition capability through acquisition. A quick look at the shape of DCC Energy today. A lot of what you will hear about today is new. However, we have been making good progress across our energy business in recent years. Those of you listening to our results call this morning will know that DCC Energy delivered GBP 407 million operating profit in financial year 2022. As Donal called out earlier, all our energy activities will be reported in DCC Energy on a go-forward basis. Within DCC Energy, we will have 2 business units. We will report on our progress in Energy Solutions, which accounts for 75% of DCC Energy profits today and Mobility, which includes HGV and fleet services as well as retail and accounts for 25%. DCC Energy is a business of real scale with a presence across 13 countries. Our growth in Europe through the last decade and more recently into Asia and the U.S. means that Continental Europe now accounts for 39% of profits, Britain and Ireland for 35% of profits, Scandinavia, 15% and the rest of the world, 11%. Finally, on the right-hand side, the overall divisional makeup by product or service. Lower carbon products, such as propane, natural gas, electricity, account for just under 50% of profits. You will see the traditional fuels such as gasoline or diesel, now account for 29% of profits. The final category, Energy Services, renewables and other services which includes our solar profits, our fleet payment services, our lubricants, our refrigerants, accounts for 22%. Just a point to note on this split, which is relevant for our Scope 3 carbon emissions discussion later that final category where the 22% of energy profits isn't as relevant for our Scope 3 carbon emissions and trajectories as it contains no or very, very modest Scope 3 carbon. So this is DCC Energy's very impressive track record of profit growth, really strong and resilient returns and cash generation. Across this period, profits have grown at a CAGR of 10%. This has been achieved in what our mature energy markets with our focus on operational excellence, innovation in new products, providing more value to customers, giving us our growth opportunity. The growth of DCC Energy in recent years has been predominantly driven by profit growth in lower carbon products, in services, in energy adjacent areas such as lubricants, refrigerants and solar. The breadth of the customer base today significantly increased. What has not changed through all this growth and development into new energy areas is the very strong returns profile and cash flow generation. As you can see on the slide, the free cash flow conversion has averaged 99% across the last 5 years. Despite significant acquisition spend, the return on capital employed has also been very consistent and actually improved modestly, averaging north of 18% over the last 5 years. In terms of returns, it's important to note that the growth of the division into new energy products such as renewable power or services such as solar has not diluted returns. We believe the return on capital employed and cash flow characteristics of the business will continue to be an important enabler of our overall group strategy, the very strong cash flow profile funds the growth of DCC Energy, but importantly, also enables the growth of DCC Healthcare and DCC technology as we recycle and deploy capital in line with our priorities. Finally, and this will be relevant for our discussion to come, the growth in lower carbon products and services across the last 5 years has meant that the carbon intensity of our profits in DCC Energy has fallen significantly. Our Scope 3 carbon to profit ratio has reduced by over 25% over this 5-year period as our absolute Scope 3 emissions have fallen and our profits have grown. This is a key metric for us, and we expect, as we execute our strategy, it will continue to improve. Now we will talk about the future to 2030 and beyond. Earlier, you heard about the transition pathways that we think are relevant for our sectors of the market. In general, we operate in a slow to transition area of the market in the off-grid sector, where customers really are going to need help on their transition journey. I think that really came across from interviews with both our people and customers you saw earlier. Even in this decade, be it for technology reasons for affordability reasons or other, many customers will not be able to transition to net zero. So that does underpin the resilience of the profits and cash flows coming from the traditional areas of business. DCC is committed to helping all customers to decarbonize when feasible for them to do so. and to accelerate it where we can and provide practicable solutions. The work we have put into understanding our customers of the future and the nature of the pathways for our existing customers, informs us in terms of what we expect into the future from a financial perspective. In volume terms to 2030, we see modest declines overall in traditional fuels, primarily towards the end of the decade. Very resilient demand for lower carbon solutions as commercial and industrial customers, in particular, look for practical ways to lower their carbon footprint. Very good growth in demand for renewable or bio products. For example, our growth in HVO or renewable power in recent years. In terms of what that means for our overall volumes, we would expect that by 2030, organically, we will be selling approximately 6% less volumes, driven by the traditional product volumes, mainly in Mobility declining modestly. As you can see on the slide, we believe profits will grow in this area at approximately 2% on average. In terms of the mix, we will be selling a lot more lower carbon and renewable products, providing more services in 2030 than we are today. Of course, a lot of the newer service areas we have, such as solar has no bearing on volumes, and we will come on to that later. Finally, for this slide, the emissions profile of DCC Energy will continue to improve as traditional fuels decline towards the end of the decade and greater penetration of renewable and lower carbon products come into the mix. By 2030, we believe our emissions can be approximately 15% lower than they are today. We are working hard on ensuring we have access to more renewable and bio products, and this will mean we can reduce carbon emissions faster than volumes. This is core to our strategy. We will be actively trying to sell lower carbon alternatives to customers. For example, this drove our recent investment in our French retail network to accommodate E85 product offering the potential to reduce the emissions of a gasoline customer by 60%. It also drove the rollout of HVO for commercial transport customers in the U.K., as you heard from Cat earlier. We are investing to lower the Scope 3 emissions of our customers. As we think about our overall profits in DCC Energy, we believe that DCC Energy will continue to grow its profits organically with differing profiles across the traditional lower carbon and services renewables businesses. As we covered in the last slide, we believe that organic profit growth in traditional and lower carbon products is approximately 2%. Our strategy should drive greater proportions of profits over time coming from newer energy products and services. This represents approximately 22% of our profits today in DCC Energy and where the business has low or no Scope 3 emissions. This is a higher growth part of the business where we are providing renewable products solar installation and maintenance, roadside services and convenience amongst other services. As Eddie mentioned, what we are seeing as we enter the solar and heat pump markets and research the energy needs of our customer in the future, is that a different proposition, the lifetime value of a new energy service customer can be higher than a traditional DCC Energy customer. Albeit smaller today, we believe this part of the business can grow at around 5% on average to 2030. Overall, this would give DCC Energy an organic growth profile to 2030 of over 2.5%. The final point on an organic look forward. I just mentioned that we see our Scope 3 emissions reducing by approximately 15% by 2030. And that the overall growth in profits of DCC Energy will be driven by new energy products and service revenues and very resilient profits in traditional and lower carbon products. If we look at the Scope 3 carbon operating profit ratio, our strategy will deliver continued meaningful declines in the carbon intensity of the profits we generate. While we have made very good progress on this over the last 5 years, we need to continue to innovate to ensure we have access to the right solutions for customers as renewable technologies and products change or emerge. -- ensuring we have developed the solutions such as solar or heat pump and access to renewable products is fundamental to our strategy. We will hear from Natasha now, and she will explain our approach to some of the renewable supply partnerships and innovations that are happening in our markets.

Hello. I'm Natasha Cambriels. I'm leading the LPG business in France in Butagaz. DCC works with existing and new customers to convert their energy systems from ethanol to LPG, thus allowing them to lower their carbon emissions by 20%. LPG has a very important role to play in the energy transition as it is a low carbon gaseous fuse, which is transportable, affordable and widely available for all of good customers. But we can see the path for commercial and industrial customers to move to renewable gases to further reduce their carbon emissions by 70% to 80%. Let me tell you about many of the initiatives we have to ensure we will have those products for our customers in the near future. Starting with renewable LPG. Currently, DCC is suppling renewable LPG in France, U.K., Ireland, Germany and the Netherlands. Let's start with the example of France, which is close to my heart. And starting with the biomethane offers, we have developed with [indiscernible] for our B2B customers. Thanks to long-term supply partnerships we have signed with local French farmers. Through those partnerships, DCC managed to secure the access to renewable molecules for 15 years. Still in France, Butagaz has also developed renewable LPG offers, one containing 20% of biopropane, the other one, 100% of biopropane, to really support the customer throughout a progressive energy transition journey. In DCC, we are pioneering with energy. And this is why I'm going to describe 2 other renewable cases we are working on. Let's start with the first one, which is a renewable Dimethyl-ether (rDME). rDME is very similar to LPG. And as such, it is a liquefied gas at mild pressure, and it can be transported, stored and used in the same way, up to contain of something like 20% rDME is a pure drop in fuels. Moving to higher percentages of rDME into LPG or a pure product, so modifications need to be made mainly on the seals and the rubbers, but a reasonable cost for the customer. The first partnership I want to discuss about is the one which is going to transform municipal solid waste into rDME. This project is expected to go live by late 2023, early 2024 in the U.K. A second partnership has been signed between GCC and a major engine manufacturer to convert a diesel engine, which is used in mining or construction industry, for instance, to run on DME. Another partnership focuses on capturing CO and CO2 from excess gas from heavy industry to combine that with Green H2 to obtain DME. Even at an earlier stage of development, we are expecting this production to go live sometime in 2025. Another promising renewable energy is renewable ammonia, which can be used as a fuel or as a hydrogen carrier. Renewable ammonia can be stored and transported in the same way as LPG. DCC has been awarded a U.K. government fund to make designs for megawatt scale ammonia fed heating boiler and a small prototype for the off-main industry. DCC has also signed a partnership, an MOU with Equinor to set the potential of renewable ammonia in the Swedish market. Because this is a very important topic for us. We have commissioned a research from [indiscernible] on all those very important renewable cases. Let me share some of the conclusion of this result. Between now and 2030, there will be enough HVO feedstock to produce at 1.8 million tons of renewable LPG each year in Europe. But realistically, though, not all of it will be marketed. Part of it will be used in the biorefineries as fuel or to produce green hydrogen and other competition will also come from [pet chem]. Emerging technologies such as e-fuel, are really expected to grow and develop after 2030. When the price of renewable electricity will come down and the conversion technologies mature. The first recommendation from the study is really to thrive for the use of renewable LPG in eating because when it is used in pet chem, it's just about capturing the carbon molecule. It's not about releasing it. The second recommendation is to produce on purpose renewable ammonia and renewable DME as an alternative to renewable LPG. At DCC an another industry, we need to develop as many renewable alternatives as possible to ensure to get those products available and affordable for our customers today and in the future. Longer term and [ first ] from specific customers like industrial ones, Green H2 is also an important opportunity. DCC is currently involved in several studies and projects looking at the production and the distribution of Greenwich [ to ] for our customers.

Hopefully, that provided insight into the importance we place on renewable and bio-products as we look forward. So to summarize in terms of financial profile for DCC Energy, and of what we expect to 2030 and beyond based on the organic profile of the business and what we can see today. We think that combined, the traditional and lower carbon areas of DCC Energy are extremely resilient and have profit growth potential of circa 2%. There will be higher growth in the services and renewable offerings of approximately 5%. With such a resilient profile, we expect DCC Energy to continue to deliver high teen returns on capital employed and have excellent cash generation. which will enable both the growth of DCC Energy, but also provide cash flow and capital to enable the group's capital allocation priorities and DCC Energy will be less carbon-intensive. We will switch gears now to talk about capital allocation and how it fits into DCC's overall growth aspiration. Those of you who follow us will remember this slide from December when we announced the acquisition of Almo by DCC Technology. I won't go over the slide in detail. The key point here is what we -- is that we have clear priorities for capital allocation in DCC. And our prioritization is informed by the growth opportunity we believe exists and the sustainability of the opportunity. That same sustainable growth mindset and priorities informs how we think about capital allocation in DCC Energy. Looking at the left-hand side here, we will be deploying capital in DCC Energy to accelerate the transition capability of the business and accelerate transition for our customers. We'll come on to talk briefly about some examples of recent acquisitions and development CapEx we have made under this priority. We would also deploy capital where we see a clear transition pathway for the customer base. Finally, in terms of things that are not a priority for DCC Energy today, we will not acquire large retail estates, particularly where the transition pathway is not clear for DCC, such as those states with more rural footprints. We also have a clear preference for partnership and offtake arrangements for supply rather than making substantial upstream investments. We will consider modest investments, but our clear priority would be offtake or partnership where we can bring value to a producer with a market for their products. Partnerships are fundamental to a business like ours, we're building distribution and supply relationships and developing customer partnerships are the essence of what we do. You heard from both global and local partners earlier, Shell, for example, where we are working with them across both mobility and energy solutions and across multiple markets to local solutions like the biogas offtake example in Ireland with green generation; and last year when we publicized our partnership with [ MG ] in France. A lot of the growth in our services or renewable profits in recent years has come about through acquisition or development CapEx. Some examples of investments we've made in the very recent past include building out our solar capability in France. We have added renewable power and biogas capability in Ireland, developing our own capability in heat pumps in the U.K., adding EV charging to our stations in France, Norway and Denmark and multi-location charging in Denmark in partnership with Shell. These acquisitions on the left-hand side and developments are delivering good returns for DCC today. The acquisitions I mentioned are delivering 15% plus ROCE and the organic developments are higher again. We are not rigid when it comes to transition and returns. We expect some of the acquisitions we make in this area to be more expensive initially in the low double-digit range. But we expect that the growth will be stellar and our ability to deliver synergies and cross-sell products to our existing customers will also add value. And so our return on capital employed aspiration from these investments will remain consistent over time. We are going to zoom right out now and just talk about DCC Energy in the context of the group overall, and how it contributes to our compounding growth model. From a financial perspective, we have a clear vision of what we believe that DCC Group's strategy will achieve to 2030 and beyond. And it informs our aim to continue to compound earnings growth for shareholders by at least 10% on average. We are aiming to deliver between 3% and 4% organic profit growth on average. As I mentioned earlier, DCC Energy is likely to be a little lower with DCC Healthcare and DCC Technology, which together are now a more material part of the group, delivering higher growth. We believe we will continue to consolidate in our markets. We believe that on average, this can deliver between 6% and 8% additional growth per annum. In our results call this morning, we reported that in 2022, our organic growth at a group level was higher than this at 6% and so was M&A at 9% growth. We know it was an excellent year from an organic performance perspective. And as I mentioned this morning, above our 5-year historic average and M&A, by its nature, will be lumpy. But on average, we believe we can deliver over 10% profit growth. In terms of free cash flow, at a group level, we expect approximately 85% to 90% free cash flow conversion and for mid-teen returns. DCC Energy has higher metrics. The lower free cash flow conversion here is because we believe that we will be investing in development CapEx and working capital to deliver higher organic growth in DCC Healthcare and DCC technology. We also believe the growth can be self-funded. Given the very strong free cash flow generation and again, referring back to our results call this morning, given our starting position of approximately 0.5x net debt to EBITDA. This financial view of DCC is just a reflection of our compounding business model and enabled by the strength of the platforms we have. Our organic growth is enabled by our presence in large markets with growth opportunities. We have leadership positions in our sectors of the market. We have great teams around the group who drive operational excellence every day in DCC. Our capital allocation priorities are clear. And we have great teams of people who can identify the right opportunities in our fragmented markets. We have a very strong heritage in M&A, having completed over 350 transactions since we went public. And with return on capital employed being our key metric, it really does drive huge focus around the group on cash flow. So if we look forward, the organic growth profile of our different business areas, and most materially, our capital allocation priorities will change the shape of the group over time. We know that on a pro forma basis, DCC Energy accounts for 64% of the profits of the group today. And within that, the fossil energy products we sell traditional or low carbon represent the majority of DCC Energy profits today. If we look at the energy products that have a material Scope 3 carbon impact being just under half of group profits, we expect the reliance on these profits will reduce over time. We are ambitious to continue to grow and develop DCC. We believe DCC will be over twice as large in profit terms by 2030. If our strategy and capital allocation are successful, we expect that the reliance on fossil profits will reduce meaningfully and account for approximately 25% to 30% of the group, down from 48% today. And again, really important, even within that 25% to 30%, as I mentioned earlier, it will be less carbon intensive than today as we continue to strive to reduce customers' emissions. At our Capital Markets event in November 2020, we said that we wanted to be known for excellence in sustainability. In just 18 months, we have made great progress, but we want to do more. Although only one lens, the ESG rating and disclosure agencies have recognized we are making progress. Our CDP score has improved 2 notches in their most recent annual appraisal. Our sustainalytics score has improved by 15 points on a 50-point scale in the last 2 years. We've retained our AAA MSCI rating, and we have consistently had the highest ISS score for governance. To ensure sustainability is at the heart of everything we are doing, we are creating a new position at our group management team, our executive committee, where we are combining the leadership of our strategy and sustainability functions, and we are delighted that Eddie -- once he has completed his interim CEO position, will be taking over as our new Chief Strategy and Sustainability Officer. Our updated energy strategy today will reduce the carbon footprint of our customers over time. We believe this is really significant and present a meaningful and tangible opportunity for investors to partake an active transition with a team and business who are really committed to delivering a lower carbon future for people and businesses. We recently completed an upsizing of our RCF with our banking group from GBP 400 million to GBP 800 million. And for the first time, we have included ESG metrics within this, creating a sustainability-linked revolver. This was a great example of our treasury and sustainability teams working together to deliver a fantastic outcome for DCC. And finally, we are setting targets and our ambition for the future that will demonstrate further commitment to excellence in sustainability. DCC's purpose is to enable people and businesses to grow and progress. We believe that by 2030, DCC will have made substantial progress in its own growth and development, while helping people and businesses to do likewise. Our energy strategy makes it clear that DCC is committed to decarbonizing the energy used by our customers. We will lead by example and put this to work within our own operations. With our new Scope 3 target, we are now committed to be net zero across Scope 1, 2 and 3 by 2050 or sooner. In the shorter term, since we set our Scope 1 and 2 targets a couple of years ago, we have made great progress. Indeed, we have made so much progress against our Scope 1 and Scope 2 trajectory to 2025. We are resetting our sights on 2030 and targeting to reduce our Scope 1 and 2 emissions by 50%. Our strategy and ambition is to drive sustainable growth. We believe the group can be more than twice as profitable by 2030 and that it will be less carbon-intensive. The remainder of this decade will be about building capability in energy transition to enable us to thrive beyond. We believe our Scope 3 emissions can reduce by approximately 15% to 2030, positioning the group to drive acceleration in the next decade and creating the momentum to achieve our net 2050 target. Our strategy and capital allocation priorities should also see the shape of the group change, with the material Scope 3 carbon producing areas of the group, reducing to approximately 25% to 30% of the group. We are excited by the opportunities in front of us, and we believe we have the platform and capability to deliver them. I'll hand you back now to Donal.

Many thanks, Kevin. In a few moments, we'll have a panel discussion, where we will answer the questions we received prior to the event. So in summary, we've outlined today our new strategy and structure for DCC Energy, our point of view on the pathways for energy transition for our customer segments, how we are expanding our customer offerings and solutions, the financial characteristics of the transition, our new commitment to drive our progress to Net Zero, and we've given you a vision of what the group might look like in 2030. DCC has a critical role to play in leading our customers through their complex decarbonization challenges. We continue to make great progress in energy transition, introducing many innovative energy solutions for our commercial and industrial, domestic and mobility customers. Our strategy is to accelerate the net zero journey of our customers by leading the sales, marketing and distribution of low-carbon energy solutions. We are providing our customers with a wide range of renewable and low carbon energy solutions already today to help them on their net zero journey. We are scaling our solutions in solar, biofuels, renewable power and e-mobility. The customer lifetime value is compelling. By 2030, we will have more than doubled the size of the group, and approximately 70% to 75% of our profitability will come from our health care, technology and clean energy and renewable activities. While we are growing our business we believe our strategy will support our customers' decarbonization agenda and the path to net zero. This is why we're adding to our Scope 1 and 2 net zero target with a Scope 3 net zero target by 2050 or sooner. Our strategy is a winning strategy. DCC is leading with energy. [Presentation]

Thanks to everyone who submitted questions in advance of today's event. Hopefully, through the session, you're after getting lots of new insights, but no doubt you'll have some further questions on the back of it. We've grouped the questions received in advance into teams, and we'll try to get through as many as we can in the next few minutes. Donal, we've got lots of questions on biofuels, George Gregory, Allan Smylie and [ David ] both asking similar questions about scaling up of biofuels, supply considerations and as those confidence levels about availability levels going forward.

Yes. Thanks, Hollie. And we see biofuels as being a very important part of the mix over the next and particularly through the next decade. We've been making great progress actually in building partnerships we talked about during the presentation, the 100% HVO. We have within the Swedish market. we are bringing biopropane into our LPG business. So bio today is an important part of the mix for us. But it's going to be an increasingly important part going forward. There's going to be a lot more investment in producing biofuels. We're seeing it from some of our very large global partners, and we're seeing it from local partners as well. And one of the key aspects that DCC has is that partnership capability where we bring and build partnerships with local, global players to be the partner of choice in bringing biofuels into the market? And maybe, Eddie, you'd like to expand on what we're doing in some of the markets?

Yes. Donald, I think we should be very confident about the availability of biofuels because if you think about some of the more advanced markets in Europe like Scandinavia, where we're already at 20% and 30% penetration, what we've seen over the last number of years is a ramp-up in production, not only in the traditional suppliers, but more people coming into the space as they start to see the economic opportunity. So I think given that, I'm pretty confident we'll get there. And more recently, in the markets have started to see the biofuels is going to be pretty critical for the next 10 to 20 years as we go through a transition, you start to see the big producers actually put HVO plants into their own refinery production and things like that. So I think production is going to increase in line with the expectation. But I also think what's very important for us is we've started early, we've built confidence with the suppliers that we put the product in the right sector at the right time. And more recently, we're starting to see our customers actually understand that we know what we're talking about, that we understand the product and when to use it and when not to use it. So I think confidence in production is pretty high, and I think the confidence in our people selling the product in the right space at the right time is also growing. So I'd be very confident.

And just to add, Eddie, I think fundamentally, Hollie, the demand is driven by the fact that for our customers, this is a low-cost transition from an investment perspective for them. It's low cost. And actually for DCC as well, the upgrading of some of our infrastructure to enable bio like the U.K. team were mentioning earlier in regard to HBO. I mean there are modest investments for us. but it gives us drop in capability with Bio it's a very important part in terms of our own ambition around reducing carbon emissions -- Scope 3 carbon emissions for DCC and obviously then for our customers who are using these products.

I think a great example of innovation in biofuels has been the trials that we've been running in the domestic market in Britain, where we've been using HBO in -- for domestic customers. It's a Kevin said, a drop in fuel into their existing infrastructure. But for customers that [ happen ] solution may not suit Bio is a really good example of where we can put biofuels to work today to give a cost-effective solution to those customers and working with government. So the government policy is incentivizing customers to transition to biofuels.

Okay. Thank you. Next question is from Andy Grobler from Credit Suisse. Andrew is asking about balancing investments in the traditional high returns business area versus maybe the lower returns in the new energies?

Yes. And I think thanks, Andy, for the question. Indeed, thanks to everyone, who submitted questions in advance of the event. Investment, it's interesting as we look at the investments that we're making because maybe there is that conception preconception that actually implementing the lower carbon areas or the renewable areas is going to be a lower return area than investments in the traditional part of our business. That's not what we're seeing. And we're investing in lots of areas. If we look at the EV infrastructure that we're investing in up in Norway, we're getting a 20% return on that investment straight away really from sites going live. So we're able to put capital to work at high returns within renewable clean energy areas, talked about the biofuels earlier in terms of the returns that we're getting, and that's leveraging existing infrastructure. But as we invest in solutions for our customers, it's similar infrastructure than to what we're doing today. So we're investing in putting infrastructure on our customer sites from an LPG perspective. We may be investing in slightly different infrastructure, whether it's a heat pump, whether it's combined heat and power system for a customer again, getting higher returns on those investments.

Yes. And Hollie, if I may. The -- I mean, a couple of other just points on this. I mean, I suppose if you look right across the DCC Group, we have varying different growth profiles across all of our investments. So we're used to balancing that return versus growth opportunity and kind of trajectory in terms of how we think about investing capital in DTC. I think in particular, in newer energy technologies, 1 of the great benefits we have is that we service 9 million customers today. So we actually see maybe earlier than other people a little bit what the pull from the customer is likely to be. So that gives us great confidence. I mean, we're definitely not a venture investor in terms of trying to seed a brand-new technology in the market. But I think one of our learnings from the Norway on the EV side, one of the learnings there would be that we began to see customer behavior changing. And we then made investments. I think we're probably now having gained that insight, prepared to put investment in a little bit earlier because we see the pull from the customer. So that goes for the solar side of things, it goes for heat pumps also. So I think having that data, having the job so far in terms of entering some of these newer markets, and we'd expect that to continue.

Okay. Next question is on EV charging. So Tom Truckle from Jefferies and Oscar Val Mas from JPMorgan, both had questions around our strategy for EV charging rollout and the pace of capital investment required. And as a follow-on to that question, Allan Smylie and [ David ] is also asking about how we think about the mix of customer charging habits so at home, at the office versus our retail stations?

Maybe I'll start at the end. And I think through the session earlier today, we talked about some of the really live examples across our mobility business and the work that we're doing with Shell now in Denmark to bring charging services, not just to the 4 core but the home, to parking locations, public locations, that's a really good example of where we can leverage the strength of the relationships that we have both with our retail, our mobility customers and indeed, with our B2B customers and our B2C customers to give total charging solutions to our customers. And that's why leveraging our capability across that we have across our energy business is so important that we can serve customers, be they other for court, be they at a home, be they at work or indeed in public locations. So that's a -- I think it's a really good example of where we're leveraging the strength of our customer base. But EV and EV investment is hugely important to us going forward. We see the service stations being a very important part of the EV ecosystem, what we're doing in Norway. And having a business in Norway is a huge advantage to DCC because it's the market with the highest penetration of EV. We're seeing real live examples of how customer behavior is changing through the adoption of EV. And then we can take that into the other markets that we operate within. And at least demand that's delivering it every day. So maybe, Eddie, you'd like to talk a little bit more about that.

Donal, I like I think in Norway, we've got real example of what's actually happened in the market. And I've always been a believer in service stations have evolved over a very long time from a very large number of service stations down to fewer. And there's natural investment cycles as you start to change infrastructure. So I think from a capital way point of view, we're actually seeing that we can invest in our EV infrastructure as the customers come because they're coming to specific locations in the early adoption phase that come into more. So what we are doing is replacing our fuel natural CapEx with EV CapEx. We're switching the investment from -- and you saw the picture of what [ Lars ] showed on the video, we would have started with EV chargers on the left-hand side and parking spots. As the customer density grew, we move it to the front of the shop and eventually under canopy. And once you have the investment in the initial power infrastructure actually put in the points or fueling points or charging points that's a very low CapEx. So I'm pretty confident that we can evolve our network within our current CapEx and we can accelerate as Kevin said, where we see opportunity we know where the customer is going to come in urban locations transient okay. So we've gone early in Norway. We're going early in Denmark. Yes, that CapEx is ahead of the curve, but it's not significant in terms of the total cash flow opportunity within DCC Energy or even within mobility. And then I think [ Lars ] touched on another example, which is a piece of real estate in the center of Oslo. We have a sort of a loose concept that we saw 7 stories above that site. We go and talk to real estate agents and suddenly, we can release NOK 80 million of capital, reinvest NOK 20 million and retain 2 floors of retail space and EV charging and parking, and that enhances the profitability of that location. But what's really interesting for me is those real estate agents are now talking to us about 3 or 4 other developments that they actually have, where we could actually expand our mobility opportunity in their infrastructure. So I think CapEx is 1 thing, but I think there's more opportunity in releasing value and extending our offer with partners. So I think we'll be in good shape for a very long time to come.

Thanks, Eddie. We've got a number of questions on energy transition policy framework, particularly in Europe. So how do you see that impacting DCC?

Yes. And policy, obviously, is hugely important in terms of the progress that's going to be made through energy transition. And we'd like to see policy getting more ambitious from every government's perspective because the changes that are required to get to a net zero world are immense and government policy is going to be very important in supporting that change to a net zero environment. Today, policy is different in every single country that we operate within. That again, plays the DCC strength in our devolved model, country-focused teams in each of the markets that we operate within. And just to give you an example, 2 countries side by side Norway and Sweden. In Norway, government policy is all down the electrification route. In Sweden, it's very much down the biofuels route. So we've got to adapt to the policy in each of the different countries that we operate within. But we're working really hard with governments to lobby for acceleration in policies to drive energy transition. We talked about bio and how we'd like to see more bio incentivized within the markets. we'd like to see greater availability of incentives for customers to transition to all renewable sources. And DCC will bring the products and services to the customers but we can't do it in isolation. Government policy is going to be hugely important in terms of driving that agenda.

Yes. And I think, Hollie, we see it moving faster in some locations. We see moving slightly slower in other locations. I think from our perspective. And if you take DCCs, overarching sustainability agenda, I think, I mean, our agenda is very much aligned with the overall policy framework of driving transition we get frustrated sometimes because sometimes the policymakers actually struggle to agree and even some of the things like science-based targets, the SBTi frameworks for the oil and gas sector, for example, have again been pushed out now to the end of 2023, and that makes it difficult for people like us. But everything we're doing from a sustainability perspective. is consistent with the ambitions of SBTi and trying to drive real meaningful change into the energy sector. So I think everything we're doing on this side from DCC's perspective is to try to push and engage and accelerate where we can.

Okay. And last question for today. What is the greatest opportunity for DCC through energy transition? .

Well, I think there's so many opportunities, Hollie, for us through energy transition. And I think -- and hopefully, everyone today really saw the future direction of the group. And for me, I think the reshaping of our business through the next decade is going to be very important that we have a business that's much more focused on our health care, on our technology on our clean energy on our renewable areas. And if we can deliver on that, I think that's very valuable from a shareholder perspective. But if you look through all aspects of energy transition, it is the multi-energy solutions that we can provide to our customers. it's the increase in the lifetime value that we're going to get through our customers through energy transition. So there's lots for us to do. The pace of change, very hard to call, but I've no doubt regardless of that pace of change. And I hope that it's going to be faster than everyone thinks. But that pace of change, we will be able to deal with that. We will be able to grow our business through energy transition and DCC's new energy strategy, I have no doubt is a winning strategy.

Thanks, Donal. That was the last question, and we're all out of time. I'll hand back for any closing remarks.

Thanks, Hollie. So look, just to say thank you to everyone for joining us here today. Hopefully, you found today very insightful. There's lots of new information for you that we have provided today. There will be even more information for you. We're providing a very detailed information pack with an awful lot of the research that we have done that's helped us through this event today and helped us in shaping our new energy strategy. So we will have over the next couple of weeks, lots of opportunity to engage with all our shareholders. We have an analyst invent tomorrow evening. So we'll be able to deal with lots of more detailed questions. No doubt you'll have a lot more detailed questions for us. We look forward to seeing everyone in person over the coming couple of weeks. And again, just to say, thank you. Thank you, Hollie. Thank you, Kevin. Thank you, Eddie, for participating today, and thank you all for joining us. Goodbye.