Overseas success helps company put past behind it

ANALYSIS: Diversification and acquisitions strategy are key drivers of DCC's growth

DCC HAS, of late, been winning the praise of analysts, who like the look of the company’s diversified business model and its active acquisitions strategy.

The strategy has evidently paid off, with all five of DCC’s divisions turning a profit last year, and overall pretax profit jumping by 15 per cent to €189.6 million.

The impressive performance over the last few years is a welcome boost to a group keen to consign the “Jim Flavin affair” to history. DCC has also strongly rejected reports in a Sunday newspaper earlier this year that its British oil distribution business was overcharging customers.

One interesting trend which emerges from yesterday’s results is the increasingly international nature of DCC’s business. Like many of Ireland’s most successful PLCs, most of DCC’s profits are generated outside Ireland.

Seventy-two per cent of the company’s profits derive from operations in the UK, particularly its oil distribution businesses. DCC also has operations in continental Europe.

Similarly, a breakdown of the company’s shareholder register shows that approximately 33 per cent of DCC’s shareholder base (mostly institutional) is from Britain, 30 per cent is from North America while just 9.3 per cent is Irish.

DCC’s geographical spread will be of little concern to shareholders, who have been rewarded with an increase in dividend payment for the 17th consecutive year.

What will be of more concern is whether the company’s strong operating profit growth is sustainable. Although only five weeks into the new financial year, DCC Energy – which accounts for 60 per cent of the company’s profits – has already been impacted negatively by a mild April.

While DCC Energy is traditionally seasonally geared towards the second half of the year, it does illustrate how the business is contingent on a range of variables such as weather, currency exchange rates and commodity prices to varying degrees.

Most analysts agree that MA activity will continue to drive the company’s earnings. With relatively low net debt of €45 million, DCC is extremely well placed to pursue opportunities in this area.