DCC in good position to expand

DCC is in a good position to further expand its energy and environmental divisions through acquisition, according to one analyst.

Merrion Stockbrokers said in a research note, yesterday, following up a visit to a number of British-based subsidiary sites within the DCC Energy division, that downward value movements could make it easier for the Dublin-headquartered support services/distribution group to rack up further growth through acquisition in the short to medium term.

At the beginning of this year, DCC bought the Burnley-based motor fuel vendor, Cooke Fuel Cards, for over €10m. Its last big buy – agreed in May, but only completed earlier this month – was for Shell Oil’s Danish-based distribution business; but it’s in Britain where the group is looking to really grow.

Regarding Merrion’s British visit, analyst Killian Jones said: “Acquisition outlook continues to be focused on the energy and environmental divisions. It was noted that over the past number of weeks and months, there has been a thawing from the vendor side – not yet down to appropriate valuation levels but people are once again talking about selling businesses which had not been the case for a period of time. Discipline was again highlighted on the acquisition front – DCC could do plenty of deals in which it could add volume to a number of its divisions but the focus remains on doing the right deals rather than just adding volume for the sake of it.”

Although DCC refuses to comment on analyst reports, the group has said in the past that it is keen to increase its share of the British fuel distribution market from its current level of 12% to 20% in time.

One of the ISEQ’s best performing stocks over the past few days, DCC enjoyed another good day yesterday – its share price up by a further 1.17% – or 18c – at €15.63.

Mr Jones added that within the energy division of the group, the GB Oils business is looking to double in size over the coming years; from 4bn litres of product to 8bn litres – both through consolidating acquisition moves and continued organic growth. There is also continued focus on geographic expansion into the European market following the move into Denmark in May, he said.