DCC jumps on out­look, ac­qui­si­tions

Irish Examiner - - Business - Ge­off Per­ci­val

DCC shares shot up 4.5% yes­ter­day on the back of the sup­port ser­vices group an­nounc­ing im­proved firstquar­ter prof­its and fur­ther ac­qui­si­tions in the US and the UK.

The group’s in­ter­ests span en­ergy, health­care, and tech­nol­ogy. It said op­er­at­ing prof­its for the first quar­ter of its cur­rent fi­nan­cial year, cov­er­ing the three months to the end of June, were well ahead of the cor­re­spond­ing pe­riod last year with­out giv­ing ac­tual fig­ures.

First-quar­ter prof­its were largely driven by the con­tri­bu­tion from ac­qui­si­tions com­pleted in the prior year, and DCC re­it­er­ated its ex­pec­ta­tion for full-year profit growth for the 12 months to the end of next March. The group’s earn­ings are heav­ily weighted to­wards the se­cond half of its fi­nan­cial year.

The con­sen­sus view among an­a­lysts is for DCC to post earn­ings of £445m (€504m) for its cur­rent fi­nan­cial year.

DCC has also boosted its tech­nol­ogy di­vi­sion with the pur­chase of two com­pa­nies in the UK and US with a com­bined value of £110m. The ac­qui­si­tions of Buf­falobased pro­fes­sional au­dio­vi­sual prod­uct sup­plier Stampede and UK-based mo­bile prod­uct dis­trib­u­tor Kon­dor are ex­pected to gen­er­ate a re­turn on cap­i­tal em­ployed of about 15% in the first full year of own­er­ship.

“These are very ma­te­rial deals for DCC Tech­nol­ogy and will in­crease the size of the di­vi­sion on an earn­ings be­fore, tax, in­ter­est, de­pre­ci­a­tion and amor­ti­sa­tion ba­sis by around 30%,” said Davy an­a­lyst Al­lan Smylie.

The Stampede deal marks DCC Tech­nol­ogy’s first move into the north Amer­i­can mar­ket and both com­pa­nies are viewed as be­ing in at­trac­tive growth ar­eas. The US com­pany gen­er­ated rev­enues of $280m last year, while Kon­dor, which sells in the UK and main­land Europe, had sales of £110m in 2017. Both com­pa­nies em­ploy more than 200 peo­ple. DCC chief Donal Murphy said the Stampede deal will give the tech­nol­ogy di­vi­sion a plat­form for growth and de­vel­op­ment in north Amer­ica.

“De­spite the lim­ited weight­ing to­wards the first quar­ter, com­men­tary in the state­ment from DCC would sug­gest that the bias to our es­ti­mates re­mains to the up­side,” said Good­body an­a­lyst Gerry Hen­ni­gan.

“The ac­qui­si­tion of Stampede marks DCC’s first tech­nol­ogy en­try into the US and fol­lows sim­i­lar moves on the en­ergy and health­care sides and, in our view, is likely to be well re­ceived. At first glance, we es­ti­mate the two deals will en­hance [group] earn­ings by ap­prox­i­mately 3.5% on a full-year ba­sis,” he said.

In May, DCC re­ported 11% profit growth and 13% rev­enue growth for the year to the end of March.

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