Distribution group DCC continues to generate strong profit growth with pre-tax profits up almost 24 per cent in the first half of the year to €32.1 million. Shareholders benefit from the strong performance with the half-year dividend up 20 per cent to 7.74 cents.
The growth in profits came despite a fall in operating margins in four of DCC's five operating divisions, especially in the energy divisions where the euro's fall against the dollar and the rise in oil and gas prices cut operating margins by a third. But DCC chief executive Jim Flavin said the fall in margins was not something about which the group was concerned.
He said the fall in operating margins in the food distribution operations from 5.5 per cent to 5 per cent was entirely due to the fall of the euro against sterling. Food is now DCC's smallest division with sales of €87.4 million in the first half and operating profits of €4.3 million.
Mr Flavin said DCC had no plans to sell the food division and said it had increased its profits by 18 per cent per year over the past seven years and would have done the same in the first half had it not been for the currency factor.
Energy, healthcare and information technology are DCC's three main divisions. The energy division increased turnover by 82 per cent to €254.3 million due to an increase in volumes and the increase in oil prices. Operating profits were 22 per cent higher at €5.7 million. Mr Flavin said in the energy business a doubling in turnover does not mean a doubling in profits and added that the contribution per tonne is the key measure. The Sercom IT distribution businesses increased sales in the first half by 61 per cent to €327.9 million. A higher level of sales of lower margin products meant that operating profits were up 36 per cent to €11.6 million. The healthcare division lifted both sales and operating profits with sales 27 per cent higher on €97.8 million and operating profits almost 29 per cent higher on €9.8 million.
With €13.5 million in net cash at the end of the half-year, DCC is in good shape for further acquisitions. Mr Flavin said that DCC is on the lookout for further acquisitions and these will probably be in the healthcare and areas in continental Europe.
