DCC, the industrial holding company, continues to record good growth and the market has responded enthusiastically by pushing the share up 30p to 710p, an all-time high.
Profit before tax and exceptional items rose by 16.3 per cent to £36.7 million in the year ended March 31st 1998, broadly in line with predictions. Earnings per share have increased from 33.34p to 35.50p, somewhat better than expected. Shareholders are to benefit with a final dividend of 6.08p, making a total of 9.6p, representing a 20 per cent increase on the previous year.
Mr Jim Flavin, DCC's chief executive and deputy chairman, emphasised the group's "continuing strong organic profit growth".
Asked about Fitzwilton's view that holding companies are unfashionable, Mr Flavin said DCC was very focused and is "not a dealer in companies. . . we pick areas with above average growth". He also pointed to a number of holding companies which are successful, including GE. DCC is also actively involved in seeking acquisitions "that can provide synergies and additional scale". It spent £26.3 million on acquisitions last year. This year it plans to increase its shareholding in its subsidiaries Sharptext, Micro P and Gem to 100 per cent.
Group turnover rose by 15.3 per cent to £702.8 million last year. Return on capital employed (including goodwill) went up from 18.7 per cent to 20.0 per cent. Net cash balances increased from £3.5 million to £5.5 million.
Net interest costs, however, rose from £3.07 million to £3.5 million. This is attributed to higher net debt and higher sterling interest charges. Nevertheless, the interest cover improved from 11.3 to 11.5. Net operating cash flow increased by 16.9 per cent to £40.0 million.
Growth was achieved in its four divisions; computer, food, energy and healthcare. The comprehensive and very detailed results show the strongest growth was achieved in energy which experienced a 42.5 per cent rise in operating profit to £10.4 million, followed by the computer division with growth of 21.9 per cent to £12.2 million, healthcare with a 10.3 per cent gain to £5.7 million and food with an 8.1 per cent rise to £10.2 million.
DCC SerCom, which operates the computer division, saw a 31.4 per cent rise in turnover to £265.4 million. However, operating margins fell from 5.0 per cent to 4.6 per cent.
The distribution business in Britain and Ireland "again achieved excellent growth in Britain and Ireland".
DCC Energy had a 7.3 per cent growth in sales to £126.7 million while operating margins improved from 6.2 per cent to 8.2 per cent. Growth was achieved in both Ireland and Britain. Sales volumes were "satisfactory". A significant focus was placed on broadening the sources of supply of LPG and oil, and new supply arrangements are now in place, according to DCC.
DCC Foods increased sales by 4.3 per cent to £231 million and operating margins improved from 4.2 per cent to 4.4 per cent. This division, DCC said, continued to benefit from its focus on growing segments of the Irish food trade. Allied Foods "made progress". Fyffes "achieved an excellent increase of 20.1 per cent in earnings per share". Asked about the possibility of selling the shareholding in Fyffes, Mr Flavin said he was "very satisfied" with the investment.
DCC Healthcare increased its sales by 22.5 per cent to £64.1 million but operating profit margins were reduced from 9.8 per cent to 8.8 per cent. This reduction was due to increased investment in management structures, the impact of stronger sterling and costs associated with the establishment of DCC Shoprider in the US. Fannin, the hospital supply business in Ireland, also had lower margins.
