DCC profit falls 11% in the first half

Business services group DCC has reported an 11 per cent drop in pre-tax profits for the first half of the year, with weak results from the company's IT and food division the principal drivers behind the decline.

The company has flagged a better second half however, with chief executive and deputy chairman Mr Jim Flavin foreseeing "good underlying growth" in what is traditionally its busier sales period.

Mr Flavin was also bullish on expansion over the medium term, indicating that DCC would like to spend up to €500 million on bolt-on acquisitions over the next three years. Citing British oil distribution operations as the most probable takeover targets, Mr Flavin said DCC was also interested in IT distributors, hospital suppliers and health-food companies in Britain and Ireland.

The group as it stands made a profit of €31.2 million before tax in the six months ending on September 30th, while turnover dropped by 4 per cent to €9,75.1 million over the same period. Operating profits rose by 3.4 per cent to €41.2 million.

As expected, the euro's strength against sterling had a negative impact on the numbers, with sales up 1.4 per cent on a constant currency basis, and underlying operating profits 5.6 per cent ahead.

The results came on mixed performances across the group's divisions, as strength within energy, healthcare and housebuilding helped to minimise the impact of less-buoyant trading elsewhere.

Operating profits within the firm's IT operations fell back by 27 per cent to €10.6 million, as intense price competition among suppliers cancelled out otherwise healthy sales growth.

A slowdown in the Irish grocery and food service sectors was meanwhile blamed for a 14 per cent contraction in food operating profits, which fell to €5 million.

By contrast, operating profits in energy grew by 29 per cent to €13 million, while the company's share in Manor Park Homebuilders delivered the bulk of €6.1 million in profits, up 40 per cent on 2002.

Healthcare profits climbed by 29 per cent to €6.5 million.

The numbers as a whole came in slightly ahead of analysts' forecasts, particularly in light of a profit warning delivered by the company at its annual general meeting in July.

DCC will award a dividend of 11.75 cents per share, up 15 per cent on the first half of 2002 in light of "high ongoing cash generation". The company had net cash of €32.1 million at the end of September.

DCC shares shed 45 cents to close at €10.95 last night as investors engaged in profit-taking.