DCC shares tumble as it warns profits may disappoint market

Shares in business services group DCC plummeted yesterday after the company warned shareholders that it might not meet profit expectations for this year.

DCC chief executive and deputy chairman Mr Jim Flavin declined to describe the statement, delivered at the firm's annual general meeting, as a profit warning but acknowledged that the company was sounding a "slightly cautionary note".

Mr Flavin blamed the downbeat forecast on a decline in profits within the firm's IT operations over the first quarter, citing faltering demand in an increasingly competitive market.

IT accounted for just less than one-third of the €111.1 million DCC made in operating profits last year. A continuation of current trading in the IT division may reduce the firm's profit growth rate to mid-single digits this year, Mr Flavin warned.

He said the IT business had been "more difficult" in recent months.

Most analysts had previously been expecting growth in the region of 10-11 per cent.

Mr Flavin also highlighted some weakness in DCC's food division, suggesting that trade had been damaged by declining consumer demand in the State.

Shareholders were offered reassurance on the underlying strength of DCC's business however, hearing that the company had achieved "good profit growth" in the first quarter, particularly within energy activities.

"Overall the group is in a strong position, both commercially and financially," Mr Flavin said, stressing DCC's intention to pursue "acquisition and development opportunities".

Mr Flavin said DCC had not been badly hurt by the euro's strength against sterling but admitted that problems could arise if highs recorded in the single currency some weeks ago had been maintained.

Merrion Stockbrokers analyst Ms Niamh Brodie said DCC had presented investors with a "worst-case scenario" on profits so that unwanted surprises could be avoided later in the year.

The fundamental basis of the company's business remains firm, according to Ms Brodie.

Speaking to reporters after the meeting, Mr Flavin described DCC's approach as "careful".