DCC outlines its growth strategy as profits expand

Despite building up a cash hoard of more than €89 million after selling its entire Fyffes shareholding, distribution group DCC is not going on an acquisitions spree, chief executive Mr Jim Flavin has stated.

Speaking after DCC reported pre-tax profits of €139.2 million (€71.3 million when the Fyffes profits and other exceptionals are ignored), Mr Flavin said that DCC would continue to focus on bolt-on acquisitions, although the group would probably try and bring a greater geographic spread to its business.

Excluding the once-off gains from the sale of the Fyffes shares and its ITP subsidiary, DCC has continued its strong growth, with the €71.3m profits representing a 20.5 per cent increase. DCC, however, took a margin hit in its energy, food and IT distribution divisions, with overall operating margins down from 6.8 per cent to 5.6 per cent. The dividend has been increased by more than 20 per cent to 17.6 cents.

Higher oil prices were partly responsible for a near doubling in DCC's energy division to €369.8 million, although operating margins tumbled from 9.4 per cent to 5.4 per cent. Return on capital employed firmed from 32.5 per cent to 37.4 per cent. The energy division includes Flogas, Burmah, Emo Oil and Cawoods in Northern Ireland.

The Sercom IT distribution activities also suffered a fall in margins from 4.2 per cent to 3.8 per cent, even though operating profits rose from €15 million to €20.5 million. The healthcare operations, however, put in a bumper performance, with operating profits up from €9.8 million to €16 million and margins up from 8.5 per cent to 10.3 per cent.

The food division increased operating profits by 25 per cent to €8.9 million, but again margins were squeezed slightly from 5.9 per cent to 5.6 per cent. Manor Park Homebuilders, in which DCC has a 49 per cent stake, not surprisingly had a bumper year, with operating profits almost doubling to €4.6 million, while sales were 29 per cent higher on €26.5 million.

Mr Flavin said that DCC had no plans to sell its stake in Manor Park. The homebuilder has a landbank involving more than 7,000 house sites. "We are trying desperately to push ahead with more building," said Mr Flavin.