Pandemic’s fallout could expand DCC’s M&A horizon

THE fallout from the Covid19 pandemic should play to DCC’s strengths as the diversified distribution group looks to expand and broaden its geographical range with acquisitions, according to chief executive Donal Murphy.

The Irish group, which is already active in 20 countries across Europe, North America and Asia, distributes fuel, electronics and health and beauty products.

DCC has spent £3.3bn (€3.68bn) on acquisitions in the last 26 years. It currently has £1.7bn (€1.9bn) of cash on its balance sheet and £350m of committed facilities. Its net debt to ebitda (earnings before interest, tax, depreciation and amortisation) ratio is just 0.1 times.

It also committed yesterday to paying a final dividend of 95.79p per share, up 2.6pc on the figure last year. Shares in the company, which are listed in London, were up 5.7pc by late morning, giving DCC a £6.2bn (€6.9bn) market capitalisation.

Pressure

“We’ve always maintained a strong balance sheet because we believe the best time to be buying businesses is when it’s not a sellers’ market,” Mr Murphy told the Irish Independent.

“Clearly the current environment will put a lot of pressure on people and that should play into our strong spot.

“We’ve more platforms for capital deployment than we’ve ever had.

“We’re very proactive in terms of looking for the opportunities, but we do want to extend a bit geographically. We’ll continue to build out the business geographically into new markets and within the markets that we’re in.”

The group committed £170m (€190m) to acquisitions in the period. It bought US firm Amerilab Technologies in March for $85m. Amerilab is a contract manufacturer of effervescent nutritional products.

Proactive: Donal Murphy It also bought contract manufacturer Ion Labs in Florida. Mr Murphy was speaking as DCC published a strong set of full-year results for the 12 months to the end of March. The group’s revenue slipped 3.1pc to £14.7bn, while its adjusted operating profit was 7.3pc higher at £494.3m (€552.3m). The company said that it has continued to trade robustly and profitably during the pandemic. While fuel sales have declined, sales of health products have risen. Sales of some technology items also performed well. DCC is a major distributor of heating oil, commercial fuel and owns petrol stations in France and Sweden. It is also a major LPG distributor. Mr Murphy said the collapse in oil prices in recent weeks is ultimately beneficial for the group, but has an overall marginal impact. “It’s not that material,” he said. “Lower oil prices, from where we sit, are better for our customers – it’s cheaper for them, it reduces credit risk so we kind of like lower oil prices. It can also be helpful from an M&A perspective because it puts pressure on the big oil companies.” Mr Murphy said that fuel demand in Sweden, where there was no mandatory lockdown, had remained relatively stable during the past number of weeks. In France, where there was a stringent lockdown, there was a big impact on fuel demand, he said.