DCC has capacity to spend up to €500m on acquisitions

DISTRIBUTION AND services business, DCC, has the capacity to spend up to €500 million on acquisitions over the next three years, should the right opportunities arise, the group said yesterday.

DCC said yesterday that operating profits in the six months ended September 30th, the first half of its financial year, were up 20 per cent at €67.9 million from €56.5 million during the same period in 2009.

Earnings per share were up 15 per cent at 57.65 cent and the company is proposing to pay a dividend of 26.11 cent.

The group has five separate divisions: energy, which is focused on oil and gas distribution in Ireland, Britain and Europe; DCC Sercom, which distributes and sells computers and related goods in Europe; healthcare; environment services, and food and beverage.

The oil and gas distribution division, accounted for just over €30 million, or 44 per cent, of its operating profit. Sales were up 41.2 per cent at €4 billion, from €2.8 billion during the same period last year.

The group borrowed €284 million in March from US institutions, which increased its finance costs for the period to €7.4 million from €5.2 million.

Chief executive Tommy Breen said yesterday that it has cut its working capital requirements over the last 18 months. It also has a strong financial position. At the end of September, its net debt was €98.6 million while it had total equity of €852.8 million. Mr Breen said this means it has the financial scope it needs to continue to buy other existing businesses.

The group calculates that it can spend up to €500 million on such acquisitions over the next three years without stretching the ratio of debt repayments to earnings to the point where it increases the risks to the business.

Mr Breen said when it comes to acquisition, DCC’s primary concern is return on capital.

During the six-month period, DCC’s capital spending came to €27.4 million, which Mr Breen said was in line with its depreciation costs of €26 million. Its energy division accounted for €15 million of this, much of which was spent on replacing equipment and on developing new business.

In May, the group bought Pearts, a fuel distribution business in northeast England, for €15 million. In August, DCC Sercom bought Comtrade, a French distributor of consumer electronics for €11.4 million.

The group expects operating profits to grow 10 per cent overall this year.

DCC Interim results

Turnover: €4 billion +41.2%

Pre-tax profit: €€47.16 million +7%

EPS: 57.65 cent

Dividend: 21.66 cent