DCC produced an excellent set of results this week but still the group's shares remain on a hefty discount to the support services sector that DCC likes to see itself compared with.
At the beginning of the year, DCC got itself reclassified by the Footsie people from the distribution to the support services sector.
Distribution was seen as dull and boring - definitely not a sexy business - and, anyway, the ratings of support services companies were substantially higher.
But DCC seems to be finding it difficult to shake off the dull and dusty "distribution" image - hardly helped by being listed under the distribution sector by the Financial Times and still being described by company broker Davy as a distribution company in the broker's weekly research book!
Unfortunately for Jim Flavin, DCC actually does a lot of business "distributing" items as diverse as petrol and gas, computer products and various healthcare products - not to mention its food business, which can hardly be described as anything other than distribution.
DCC's food interests take in the Allied Foods chilled distribution business, Woodford Bourne wines, the Kelkin health foods operation and the KP snack foods joint venture with United Biscuits.
Food is a tidy business for DCC. Operating profits were up 18 per cent in the first half and a lot of cash is generated from the business, so maybe there is no reason to sell it.
But DCC has made it clear that food is not really a core part of its business and there are no plans to expand that business.
But if expansionist food/drink companies such as IAWS or Cantrell & Cochrane (C&C) came-a-courting DCC's food business (an ideal fit for both IAWS and C&C), it could release a good dollop of cash that DCC could use to expand its core business.
The entire food distribution business in the Republic is going through a rationalisation process, with fewer but larger players.
The major multiples are increasingly reducing their numbers of suppliers and, in the long term, the prospect for smaller players such as the DCC food businesses may become more difficult.
