DCC shares jumped 13p to 348p after the industrial holding company reported a stronger than expected 22 per cent rise in pretax profits to £35.3 million for the year to end March.
Profits were enhanced by an exceptional gain of £4 million on the sale of its 24.5 per cent stake in Heitons, and strong growth in its computer and healthcare divisions. When the exceptional gain is stripped out, the underlying rise in pretax profits was 11 per cent.
Chief executive Mr Jim Flavin said DCC was confident of growth in each of its four divisions in the current year. DCC's financial strength and cash flows will support continued expansion and development activity, he said.
DCC's strategy is to develop its computer and healthcare divisions into strong international businesses and to expand its foods and energy business in the Irish market.
With an end March net debt of £3.5 million, a debt equity ratio of 3.5 per cent, and a free cash flow of £28 million (to end March), DCC is in a strong position to make acquisitions and investments in existing operations. While no acquisition is imminent the company was always looking at possible bolt on opportunities to raise its return on capital, Mr Flavin said. Last year DCC spent £23.1 million on acquisition and £11.7 million on capital projects, while disposals raised £15.4 million.
Earnings per share adjusted for the exceptional gain rose 17.4 per cent to 29.53p. Shareholders will receive a 15.9 per cent increase in dividends to 8p per share.
Operating profit's rose by 18.9 per cent to £33.3 million on turn over 17.2 per cent higher at £627.7 million. Operating cash flow rose by 26.6 per cent to £34.2 million. DCC operates in four divisions, computers, healthcare, foods and energy.
The computer division, DCC SerCom, contributed 30 per cent of operating profits. Turnover was up 22 per cent to £212 million, while profits rose by 36 per cent to £10 million leading to an improvement in operating margins to five per cent from 4.4 per cent. The return on capital employed was 38 per cent from 31.9 per cent.
The division includes Printech where DCC raised its stake from 75 per cent to 100 per cent, ITP, where DCC's stake increased from 44.5 per cent to 90 per cent, Sharptext, Micro P and Gem. It had a strong second half, benefitting from the consolidation of ITP within Printech, cost reductions and good demand in distribution businesses in Ireland and the UK.
With operating profits up 17.1 per cent to £9.1 million, the foods division accounted for 27 per cent of company profits. Turnover rose by 22 per cent to £221 million. Operating margins dropped to 4.1 per cent from 4.3 per cent which the divisional managing director, Mr David Sharpe, attributed to "a change in business mix". This division includes subsidiaries Robert Roberts, Kelkin healthfoods and Broderick as well as stakes in Allied Foods, Fyffes and KP Ireland.
The division was helped by the trend towards healthy eating, eating out and taking snacks, he said. Profits slipped at associate Allied Foods but the contribution to DCC increased because DCC raised its stake to the company. Costs at Allied Foods are being reduced to improve competitiveness and profitability, he said. The division will continue to increase sales across its customer base, he said.
The energy division accounted for 22 per cent of company profits. Despite a 17.7 per cent rose in turnover to £118 million, operating profits dropped 10 per cent to £7.3 million. Operating margins fell to 6.2 per cent to 8.1 per cent. LPG sales rose by four per cent but oil sales fell by 11 per cent.
Despite price increases the division failed to recoup higher product cost increases. Managing director Mr Kevin Murray expects the division, which generated strong cash flows, to "bounce back" this year.
In the healthcare division turnover was 38.6 per cent higher at £52.3 million, while operating profits rose 70 per cent to £5.1 million, pushing margins up to 9.8 per cent from eight per cent. The results were boosted by the first full year contribution from the high margin DMA business, the Wales based firm which makes mobility and rehabilitation products.
In the "other interests" category, turnover rose by nine per cent to £15.9 million, while operating profits were 0.7 per cent higher at £1.8 million. Manor Park Homebuilders, in which DCC has a 49 per cent stake, was the main component in this category.
