DCC: Mild winter to hurt profits

DCC’s share price remained relatively buoyant yesterday despite the Dublin-based support services group lowering its full-year operating profit and earnings guidance.

The group, which last year switched its share listing to London and its reporting currency to sterling, said via a trading update, that while overall third-quarter group operating profit was ahead on a year-on-year basis, it now expects full-year group operating profit for the year to the end of March, to be up by 7% to10%.

In November, at the time of its half-year results, DCC guided for operating profit growth, assuming “normal” winter weather conditions, of 15%. The group also anticipates full-year adjusted earnings per share growth to be in the 7%-10% range, instead of the previously guided 13% growth bracket.

The reason for the lowering in guidance was the impact of the mild weather in December and January on the DCC Energy unit, which contributes nearly 60% of group annual profits. Management added that the warm weather effect was mitigated by the implementation of a range of operational efficiencies and acquisition synergies.

However, the update noted DCC Energy’s operating profit in the third quarter was both behind the prior year and behind budget, with volumes and margins adversely impacted by the milder weather conditions across northern Europe, particularly in December.

The quarter to the end of March ranks as the most significant in DCC’s financial calendar and is heavily influenced by its energy division. The group said its full-year guidance is set against “the assumption that there will be normal weather conditions for the balance of the quarter”.

DCC’s good group showing in its third quarter was primarily driven by strong growth in its SerCom (IT-related product distribution) and DCC Healthcare divisions.

The group said it retains its strong equity base and has committed £85m (€62m) to acquisition expenditure during its current financial year to date.

DCC’s share movement (up by over 1.3% yesterday) and analyst reaction remained positive yesterday.

“&The one-off nature of this weather impact should be kept in context and we maintain our view that the stock offers long-term value,” Goodbody Stockbrokers’ David O’Brien said.


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