Second-half rally pushes profits at DCC to €99.6m

Business services group DCC saw pre-tax profits rise by 2 per cent to €99.6 million last year, as a solid second half helped offset tougher conditions in the first six months.

DCC chief executive and deputy chairman, Mr Jim Flavin, said the half ending March 31st had been "excellent" for the company. He predicted "ambitious organic and acquisition growth" for the current year.

DCC was in "active" acquisition talks in almost all of its businesses, Mr Flavin said. He indicated that deals this year would be mainly bolt-on acquisitions.

The firm is in a strong position financially, with net cash standing at €62.7 million at the end of March, up from €20.1 million at the same point a year earlier. It also recently arranged a debt facility of €212 million in the US private placement market.

As well as pursuing acquisitions, the company is likely to use some cash to buy back its own shares this year. It spent €25 million on share buybacks last year.

Shares in DCC responded well to the results, which were ahead of most analysts' expectations and are likely to prompt a round of upgrades. The stock was ahead 3 per cent at €12.80 by the close.

DCC will award a final dividend of 20.65 cents, lifting the full-year dividend to 32.4 cents - an increase of 15 per cent on 2003.

The full-year outcome came on turnover of €2.198 billion, down 2 per cent on the previous year, although 2 per cent stronger in constant-currency terms.

The fall came as sales dropped in DCC's healthcare, IT and food divisions and were static in energy. This was balanced by a sharp improvement across the rest of the company.

Operating profits at group level were ahead by almost 9 per cent at €120.9 million before a net exceptional charge of €8.2 million relating in part to DCC's successful legal challenge over a breach of contract with Taiwanese supplier, Pihsiang.

The company has yet to receive the damages of £12.2 sterling (€18.3 million) handed down in the case, but Mr Flavin said he was optimistic that the losing party would pay the award soon.

A breakdown of the operating results shows that oil and gas profits were up 8.4 per cent at €45.8 million. Asked about the current strength in oil prices, Mr Flavin said a sudden spike in the market was less problematic for the firm than a slow increase, which can be harder to pass on to the customer.

Operating profits in the group's previously-troubled IT distribution division were down 3.1 per cent at €31.3 million.

Mr Flavin said the IT business was improving, with profits up 15 per cent in constant-currency terms in the second half.

Business was more anaemic in DCC's food and beverage division as a slower grocery and convenience food trade hit the bottom line. Operating profits fell by 7.5 per cent to €10.9 million.

Healthcare operating profits were ahead by 19.1 per cent at €13.6 million for the year, while the environmental division reported profits of €5 million, up from €3.2 million in the previous year.

Manor Park Homebuilders, a consistent performer for DCC, contributed an operating profit of €15.2 million, up from €9.6 million in 2003.