Profit rise at DCC tempered by poor healthcare performance

Business services group DCC has recorded a slight rise in profits for the first half, but growth was tempered by a poor performance in the company's healthcare division.

Pre-tax profits rose by 1.6 per cent to €35.2 million, based on turnover up 11.3 per cent at €1.03 billion. Earnings per share rose by 7.1 per cent to 39.46 cents.

The results came in ahead of most analysts' forecasts, and were described by group chief executive and deputy chairman Mr Jim Flavin as "very satisfactory".

"The longer term outlook remains very encouraging," said Mr Flavin, adding that DCC's activities were "a lot more recession-proof than other business areas". The company has awarded a dividend of 10.2 cents, up 10 per cent on the same period last year.

Mr Flavin said that the stock had benefited from the board's share buyback strategy, indicating earlier that this policy was still in place.

DCC saw increased profits in every part of its business apart from healthcare, where operating profit declined by 41 per cent to €6.3 million. The performance was severely affected by the interruption of a supply contract with a Taiwanese manufacturer of powered mobility products. The company has also suffered from tighter spending in the Irish hospital market.

DCC has initiated legal proceedings against the Taiwanese supplier, which will be heard in the UK high court. The company is "proceeding aggressively" in this regard, according to Mr Morgan Crowe, managing director of DCC's healthcare division,

Mr Flavin said that the "difficulty" was "very modest" in the context of the overall group. The company has launched a replacement mobility range under a new brand name.

DCC's energy division, the largest within the group, posted operating profits of €10.1 million, an increase of 23.6 per cent on the first half of 2001. This does not include a contribution from British Gas LPG, the gas supply company DCC purchased earlier this month for €64.5 million in cash.

Mr Flavin said that DCC was seeking to make acquisitions in both the oil and gas markets in Britain, noting that "there are probably more acquisition opportunities within the oil business".

When this month's acquisition is considered, DCC holds a 21 per cent share of the £400 million sterling (€628 million) British gas market lying outside the gas grid.

Within the company's information technology arm, operating profits grew marginally, increasing by 3.2 per cent to €13.6 million. A key driver here was Microsoft's X-Box games console, for which DCC holds distribution rights.

The company's food distribution arm saw better growth, with operating profit increasing by 13.4 per cent to €5.8 million.

DCC's remaining activities, which include Manor Park homebuilders, recorded a sound performance over the half, with operating profits growing by 153.9 per cent to €5.3 million.

Merrion Stockbrokers analyst Ms Niamh Brodie described the overall results as "solid", reiterating a positive recommendation on the stock.

Goodbody Stockbrokers has also maintained a "buy" rating.

Shares closed up eight cents last night at €10.38, still well down on the 2002 high of €13.25.