DCC shares slip as earnings miss takes shine off green transition

Shares in DCC, the Irish fuel-to-technology distribution group, fell on Tuesday as full-year earnings growth slightly missed market expectations, taking the focus off how it is now generating more than a third of profits from business aimed at the green transition.

The FTSE 100-listed conglomerate’s shares closed 2.3 per cent lower at £57.70 in London, having traded down by as much as 5.3 per cent during the session.

DCC’s adjusted operating profit grew by 4.1 per cent to £682.8 million (€794.3 million) in the year through March, falling short of the consensus call among analysts for a figure of £688 million.

The group’s key DCC Energy division, spanning home heating to fuel forecourt networks across Scandinavia, France, Britain and Ireland, saw its profits increase 9.9 per cent to £503 million.

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While the volume of fuel sold declined 2.4 per cent on the year as a result of a mild winter on both sides of the Atlantic, its green transition services, renewables and other business grew, helped by acquisitions. This part of DCC Energy, which includes low-carbon biofuels and solar panel and heat pump distribution, contributed 35 per cent of the division’s profits last year, up from 22 per cent two years earlier.

DCC, led by chief executive Donal Murphy, also revealed it has acquired UK-based Next Energy, an installer of heat pumps, insulation and solar panels for older British homes, for an enterprise value of £90 million.

Operating profit in the group’s healthcare division fell by 4 per cent to £88.1 million, driven by a drop in demand for its health and beauty products in the first nine months of the financial year amid the cost-of-living crisis. Still, the unit’s medical devices business, DCC Vital, recorded solid profit growth.

DCC Technology’s operating profit slid 13.6 per cent to £91.7 million in what the company described as a “challenging market” for audiovisual equipment and consumer gadgets.

[ DCC share price rise powers FTSE 100 to record trading session ]

Some 52 per cent of group earnings last year came from non-fossil fuels. The group is proposing a 5 per cent increase in the final dividend to 133.53p per share, which, when added to the interim dividend of 63.04p per share, gives a total dividend for the year of 196.57p per share. DCC has increased its dividend in each of its 30 years as a public company.

“The performance of the group during the year yet again demonstrates the resilience in DCC’s business model, the benefit of our diverse sectors of energy, healthcare and technology, our strong market positions and, most importantly, that we invest in what the world needs every day,” said Mr Murphy.

Mr Murphy told The Irish Times that the company has the capacity to spend “up to £1 billion” on acquisitions, but is focused on spending £400 million on deals a year. It has committed £490 million to 17 new acquisitions over the past 12 months.

He said the company has no intention of following the lead of many other corporates in committing money to a share buyback programme, even as its shares trade 25 per cent below the average price target of analysts. “We think there are lots of opportunities for the deployment of capital and, in fact, we’re hardly getting that question any more from shareholders because they like what we’re doing with the capital,” he said.

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