DCC's spectacular results had analysts searching for superlatives, writes SUZANNE LYNCH
IT’S AN impressive performance by any standard.
Yesterday, DCC posted a 20 per cent jump in profits – 27 per cent when currency exchange rate translations are taken into account. While the profit was driven for the most part by the company’s energy division, which in turn was boosted by an exceptionally cold winter for the second consecutive year, the performance of virtually all five divisions was ahead of most analysts’ expectations.
As chief executive Tommy Breen put it yesterday – “this is not a bounce back story . . . the company has had 16 consecutive years of growth”.
It’s hard to argue with him. DCC’s results had analysts searching for superlatives yesterday.
So what’s the secret? DCC has long been preaching the wisdom of diversification. The company markets and distributes products across five sectors – energy, IT, healthcare, food and beverages and environmental services.
But exactly how diverse is the business? A breakdown of the figures shows that DCC is not so much five separate divisions, as two major businesses, with three smaller units added on. In the year to the end of March 2010, DCC Energy and SerCom accounted for 80 per cent of overall operating profit. Healthcare accounted for 11 per cent of profits, with the environmental and food and beverage units comprising 5 per cent and 4 per cent respectively.
Breen was quick to emphasise yesterday that DCC is still committed to all its divisions.
He said the company is continuing to look at acquisition prospects across the businesses, though acquisitions would only be considered in the light of return on capital rather than as a way of expanding a particular sector.
Like other Irish-quoted companies, DCC is increasingly internationally-focused – almost 70 per cent of profits last year derived from UK activities, with a further 13 per cent deriving from international business.
Shareholders won’t be complaining, however, with a total dividend of 67.44 cent per share, announced for the year, up 8.2 per cent on the previous year.
DCC’s other trump card is its enviable balance sheet.
Net debt of €54 million means it is in prime position to act on its stated strategic aim – pursing acquisition opportunities.
The policy of strategic bolt-on acquisitions has been a key factor in DCC’s success.
Its sound financial position means that this policy looks set to continue.
DCC: 2009 results
Revenue :€6,725 m (+5.1%)
Pre-tax Profit:€164.9 m (+ 19.7%)
Operating Profit:€192.8m (+6.9%)
Adjusted earnings per share:177.98 cent (+5.2%)
Full year dividend:67.44 cent (+8.2 %)
SUMMARY
DCC beat analysts’ expectations with a stellar set of financial results yesterday. Pretax profit at the building support services company rose by 20 per cent, or 27 per cent on a constant currency basis, to €164.9 million. The company’s energy division was the main driver of profits, with operating profits increasing by 12.3 per cent to €113.1 million. Adjusted EPS was €177.98 cent, while the company proposed a full year dividend of 67.44 cent.
