DCC has delivered a better-than-expected 20 per cent increase in first-half pretax profit and raised its earnings forecast for the full year, citing strong growth in its energy, IT and environmental divisions. The share price rose almost 6 per cent.
The Dublin-based company, whose businesses range from food to fuel and computers to healthcare, yesterday reported pretax profit of €40.4 million in the six months to the end of September. Revenue meanwhile was up 18 per cent, at €1.8 billion. The group's business is significantly weighted toward the second half.
Speaking after the results were published yesterday, chief executive Jim Flavin said the company had seen strong growth in all divisions except for its healthcare business and this was expected to improve in the second half of the year.
He said the board now expected operating profit to increase by a figure in the mid-teens in the full year. This compares with growth of 10.5 per cent in the year ended March 2006. Across the whole group well-flagged planning delays at Manor Park, the property business in which DCC has a 49 per cent stake, will hold back earnings per share, but the stronger performance at the other divisions will leave overall growth broadly flat.
Analysts welcomed the results and immediately upgraded their full-year earnings forecasts by about 5 per cent. In a note, Davy analyst Flor O'Donoghue said the company was in "great shape" and he expects operating profits to increase by around 15 per cent in the second half.
The shares, which had risen significantly in the run-up to the results, added another €1.25 yesterday to close at €23.25. DCC raised its dividend by 15 per cent.
The strongest performance came from the environmental division, where operating profit was up 64 per cent, boosted by acquisitions. DCC yesterday added to its portfolio in this area with the acquisition of a waste recycling business in the UK.
Operating profit was 45 per cent ahead at SerCom, the group's IT distribution business, which last year suffered from price deflation in the electronics industry.
Elsewhere energy sector profits were up 14 per cent on the prior period, while the healthcare and food and beverage units did not fare quite so well, recording small declines in profit. Mr Flavin said things were already picking up in healthcare, but the food sector is expected to continue to suffer from a slowdown in the wine market in the UK.
In addition analysts welcomed news that the value of Manor Park's assets had increased and that several planning decisions were imminent. Mr Flavin said the group was currently selling one of its own sites in Sandyford and may look to dispose or develop another in Tallaght.
