DCC mulls further US acquisitions after €54m Florida deal
Dublin group reports strong interim performance as profits rise despite fall in sales
DCC’s Donal Murphy. Photograph: Cyril Byrne
DCC, the diversified fuels-to-technology group, is eyeing further US acquisitions in the booming health and nutritional products market, after it closed a $60 million (€54.5 million) deal to buy Ion Laboratories in Florida last week.
Donal Murphy, the chief executive of Dublin-headquartered, London-listed DCC, said it believes the fragmented market for making health and nutritional products on contract for big US retailers “could be a good growth area” for the Irish group.
“It’s banging our sweet spot,” said Mr Murphy, who was speaking on Tuesday after DCC reported solid interim results. “We would like to deploy more capital in that sector.”
DCC posted a strong first-half financial performance on Tuesday, with group operating profit up 14.5 per cent and growth reported in all its divisions. Overall revenue fell 1.7 per cent over the six-month period to £7.3 billion (€8.5 billion), however, with DCC Retail & Oil showing a decline in volumes on weaker UK activity.
Revenue excluding DCC LPG and DCC Retail & Oil saw an increase of 11.7 per cent to £2.1 billion, although it declined modestly organically, driven by a decline in revenue in the technology business in the UK.
Adjusted earnings per share were up 3 per cent to 110.2 pence and the interim dividend increased by 10 per cent to 49.5 pence per share.
The Ion deal gives DCC possession of a growing business whose client base includes Walmart, CVC, Walgreens, 7Eleven and Amazon. It makes products including powdered sports supplements and oils extracted from hemp.
“A few years ago we set about starting to expand in the US,” said Mr Murphy. DCC originally entered the health and beauty products sector. DCC first entered the market in February 2018 when it bought a company in Montana, and has been looking for additional acquisitions since.
“We had a long list of companies to look at. We got into serious discussions [with Ion] over the last few months and we completed the deal last week,” said Mr Murphy.
Earlier on Tuesday when announcing the deal alongside its results, he told investors that the acquisition “is a material step” in the strategy to build “a business of scale in the world’s largest health supplements and nutritional products market”.
“The US market is highly innovative, fragmented and growing strongly and, we believe, presents an exciting opportunity for the group to develop, both organically and through acquisition, a leading market position,” he said.
DCC said the group expected its full-year results, which cover the period until March 31st, 2020, would be broadly in line with current market expectations.
“Notwithstanding the continuing uncertain macroeconomic outlook impacting the UK economy, and the technology business in particular, the group believes that the year ...will be another year of good operating profit growth and further development and will be broadly in line with current market consensus expectations,” he said.
DCC said the challenges in its UK technology business, which supplies electronic goods such as laptops and tablets to retailers, is a “demand issue” rather than an issue related to its market share.
“UK technology has just gotten more difficult,” said Mr Murphy.
The slippage in UK technology sales upset some investors and DCC’s share price finished the session down 6.2 per cent.