DCC has acquisitions war chest of up to €1bn, says CEO

DCC, the diversified fuels-to-technology group, which reported strong annual results on Tuesday, has capacity on its balance sheet to make acquisitions of up to £900 million (€1.04 billion), according to its chief executive, Donal Murphy.

Mr Murphy was commenting after the London-listed Irish company, which is involved in sectors including energy, healthcare and the distribution of consumer electronics, reported a 20 per cent jump in operating profits.

DCC said it spent £370 million on acquisitions in the year to the end of March, while it also announced £90 million in new acquisitions across its LPG (liquid petroleum gas), technology and retail and oil businesses on Tuesday.

Mr Murphy said the group does not have a preference for larger over smaller bolt-on acquisitions. But he suggested it is interested, in particular, in expanding its LPG operations in the US.

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“If you look at our balance sheet, we could spend the guts of £900 million on acquisitions... we’ve plenty of financial firepower,” said Mr Murphy. “But we don’t feel pressure [from investors] to spend [that much].”

New territories

He suggested that the group, which is in the LPG business in 10 countries, is more interested in further deals in those countries, rather than expanding its footprint to new territories.

“I’d hope that you’d see us deploy more capital in the US,” he said. DCC employs about 1,000 staff in the US, across all of its operating divisions.

“We’re a tiny player [in the US]. There are 4,000 LPG operators in the US. That market ticks a lot of boxes for us.”

While DCC has smaller interests in the clean energy sector, such as electric car charging points in its fuel forecourt networks and supplying wood pellets, he said it is unlikely to jump headfirst into supplying renewable energy products to its customers.

“There is a lot of uncertainty around some of those products. They are dependent on government subsidies and the subsidies can change.”

In its results announcement, DCC said adjusted operating profit on continuing operations rose 20.1 per cent to £460.5 million, with adjusted earnings per share on continuing activities up 12.8 per cent to 358.2 pence.

Pretax profits

Revenue from continuing operations was £15.2 billion, a 16 per cent rise year on year. Pretax profits were up too, rising from £316.4 million in the year ended March 31st 2018 to £326.7 million in 2019.

DCC is proposing a 13.7 per cent increase in the year’s final dividend, which will see total dividend for the year rise by 12.5 per cent and represent 25 years of dividend growth since the company’s 1994 listing.

Mr Murphy said it had been a year of significant progress for DCC. “I am particularly pleased that each division recorded very strong growth in operating profit and traded in line with expectations, given the mild weather conditions experienced during the year.”

Its £370 million of acquisitions over the year included the technology division’s purchase of US-based Jam, and pro AV products distributor Stampede.

Among the deals announced on Tuesday were its first material follow-on acquisition in the US, Pacific Coast Energy; and technology division’s acquisition of Comm-Tec in Germany and Amacom in the Netherlands.

Looking ahead, DCC said it expects the coming year to be one of profit growth and development.