DCC shares rise despite 'very difficult' year in technology division

DCC remains on the acquisition trail as it reported annual profits growth despite facing down a slew of challenges, including “a very difficult” year in its UK technology division, a mild winter, and the low crude oil price that slowed volumes at its energy division sales.

Shares in the London-listed firm rose over 4% at one stage yesterday to trade close to a new high of £63.80.

That means the shares have climbed by almost 50% from a year ago, valuing the fuels, healthcare, and technology mini-conglomerate at almost £5.68bn (€7.21bn).

Darren McKinley, analyst at Merrion Capital, said that DCC shares were among “the best performing” of Irish-domiciled firms this year.

“The key thing is the margins grew significantly in the energy division,” he said as DCC is now not only sourcing fuel from ports but also selling it through to retailers and benefiting for the time being from the crash in global oil prices.

DCC completed last year its biggest ever acquisitions of French-based firms LPG supplier Butagaz and the unmanned forecourts and motorway outlets of Esso Retail France.

On a continuing operations basis, group revenues, however, were flat at £10.6bn for the year to the end of March, but operating profit climbed over 35% to £300.5m in the year.

Operating profit at its healthcare operations, which include making creams and liquids for the beauty industry, rose to £45m from £39.7m a year earlier.

Its DCC Technology operations posted a drop in operating profit to £35.1m from £49.3m, as a big UK supplier slashed its sales, while “weaker than anticipated demand for tablet computing, smartphone and gaming products” in the UK also dampened revenues. It said its technology businesses in Ireland and on the continent posted growth.

DCC said it was likely to continue to expand through acquisitions.

“An integral part of the group’s strategy is the maintenance of a strong and liquid balance sheet to leave it well placed to take advantage of development opportunities as they arise,” the company said.

The potential for growth through acquisitions led to Davy Stockbrokers raising its price target to £72. Goodbody Stockbrokers said DCC will get more out of its Butagaz purchase, while Invsetec Ireland said DCC’s net debt was lower than expected.