DCC shares performed sluggishly despite strong performance results

DCC shares performed sluggishly despite the group reporting a strong performance for its seasonally less important first half. The company says it remains on course for another full year of profit growth, writes Geoff Precival.

The Dublin-based support services group reported a 14.4% year-on-year increase in adjusted operating profit — for the six months to the end of September — to £122.5m (€137m), with revenue ahead by 16.4% at €1.62bn.

Adjusted earnings per share were up 16% at 95.5p and the group increased its interim dividend, for shareholders, by 10% to 40.89p.

The core DCC liquid petroleum gas division reported revenue of $502m, 36.5% ahead on a year-on-year basis. Revenue in the retail and oil division which has also benefited from big acquisitions rose 15.5% to £4.3bn, with operating profit up 8% at £42.2m.

The technology arm, again driven by acquisitions, saw near 20% revenue growth, while profits rose nearly 26%.

“The business has performed strongly, with each of our divisions recording good growth, albeit in the seasonally less significant first half of the year,” said group chief executive Donal Murphy.

DCC’s share price is up nearly 20% to date this year. It was marginally down, by around 1.4% for much of yesterday before closing up nearly 1% despite the good results.

Nevertheless, Davy has upped its price target for the stock to £82.50. It is currently trading around £72.

Merrion says it feels the DCC stock is fully valued at the moment and reiterated its ‘hold’ recommendation.

DCC’s first half typically accounts for just around 30% of its full-year group earnings before interest, tax and amortisation.

The group has committed around £550m on acquisition spend since the start of 2017, expanding its presence outside Europe and into Asia and the US.

Last week’s agreement to buy US fuels business Retail West is likely to give it a readymade, market-leading position in the fuels distribution business in much of the US and management is hungry for more.

“The group continues to have the ambition and capacity for further development and, importantly, as DCC increases in scale and geographic reach, also has the opportunity to build substantial market positions in its chosen sectors,” said Mr Murphy.


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