INDUSTRIAL holding company DCC is gearing up for further acquisition activity and is planning to progressively buy out the minority shareholdings in most of its subsidiary companies.
Over £67 million was spent in acquisitions and capital expenditure last year and chief executive Mr Jim Flavin said that he would be comfortable with a similar level of expenditure in the current year.
DCC yesterday reported solid growth with pre tax profits up 14.1 per cent to £28.9 million while turnover increased 24 per cent to £347.9 million. Mr Flavin said that DCC would look to make "in fill" acquisitions in its computer services business in the UK and would look at opportunities in Europe with the aim of becoming "a pan European distributor."
In the short term, DCC plans to increase its stake in the Robert Roberts and Kelkin food distribution from 80 per cent to 100 per cent and in Sharptext and Micro P from 87 per cent to 89 per cent with an option to go to 100 per cent after 2 1/2 years.
DCC also plans to increase its stake in Printech from 75 per cent to 88 per cent and eventually aims to get 100 per cent of all the subsidiaries in its core business. Shareholdings in non core businesses such as Capco and John Hinde will eventually be sold off.
Mr Flavin would not comment on what DCC will be paying to buy out the minority shareholdings, which are mostly held by the management of the various companies, with the exception of Printech where Scottish Provident remains a shareholder after rejecting DCC's original offer for the company. Discussions with the minority shareholders on the terms of the buyouts are in progress.
While the overall results from DCC are reasonably good, they are a mixed bag. There were good increases in operating profits and turnover in its food and healthcare divisions, virtually and growth in the energy division while strong sales growth in the computer services division was accompanied by only a marginal increase in operating profits.
Sales in the food division were up 19.6 per cent to £174 million, with operating profits up 24.6 per cent to £8.2 million. Sales in the energy division were up marginally to £107.4 million while operating profits inched ahead to just under £9 million.
Mr Flavin said, however, that the energy division, Flogas and Emo Oil, is a strong cash generator and surplus cash flow from this division can be diverted into the development of the healthcare and computer services business.
In the computer services division, sales jumped 51 per cent to £165.1 million while operating profits were ahead only 3 per cent to £7.8 million. This division suffered from a poor final quarter performance from Printech which undershot its profit target by £1 million.
The healthcare division, however, was buoyant with sales up 29 per cent to £37.7 million and operating profits up 45.3 per cent to £3.3 million. "Other interests mainly 49 per cent owned Manor Park Homebuilders and 25 per cent owned Heiton also made important contributions with turnover from these interests jumping from £16.9 million to £44.1 million with operating profits up 38.6 per cent to £3.5 million. Mr Flavin repeated that DCC has no plans whatsoever to bid for Heiton.
Commenting on the resignation during the year of director Mr David Gavagan, Mr Flavin said that Mr Gavagan had been paid compensation for loss of service.
He declined, however, to reveal the compensation ahead of the publication of the group's annual report.
DCC's results were in line with forecasts and the shares were unchanged on 248p. A final dividend of 4.19p per share is being paid, bringing the total dividend to 6.9p, a 12 per cent increase on the previous year.
