DCC buys Norwegian petrol business, affirms profit guidance

Alongside a strong third quarter profit, DCC struck a deal to buy Esso’s retail petrol station network in Norway as part of its plan to extend its presence in Europe.

The FTSE 100 business support services outfit said it expects operating profit and adjusted earnings per share will be significantly ahead of the prior year and in line with expectations.

DCC Energy is to buy Esso Norge, the third largest network in Norway with about 20% of retail volumes, for 2.43bn Norwegian krone (about £235m) plus the value of stock in tank.

The acquisition, which comprises of 142 company-operated sites that have contracts to supply 108 Esso dealer owned stations, is subject to competition clearance from the Norwegian Competition Authority and is expected to complete by the end of 2017.

This builds on the recent acquisitions of Hammer, Medisource and Gaz Europeén and the company has committed to acquisition expenditure of about £430m, including the acquisition of Esso Norge, for the rest of the year.

Esso Norge, which is substantially asset backed, is expected to generate a return on invested capital employed of about 15% in the first full year of ownership.

DCC chief executive Tommy Breen said the acquisition was another material step in building the retail petrol station business in Europe.

“From a modest position three years ago, DCC Energy will, following completion, operate over 1,000 retail petrol stations and is ambitious to continue this development.

“The acquisition is consistent with our aim to operate world-renowned retail fuel brands and be an excellent partner for oil majors."

Meanwhile, an update on trading for the third quarter ended 31 December 2016 showed DCC Energy recorded “strong” growth in operating profit, due to organic volume growth in liquefied petroleum gas, retail and fuelcard, and oil, while heating-related volumes were in line with expectations as the colder conditions elsewhere offset the mild conditions in Britain.

DCC Healthcare traded in line with expectations due to its health and beauty solutions, although DCC Vital was, as the company anticipated, affected by trading headwind due to weak in sterling, particularly concerning pharmaceutical products.

Operating profit for DCC’s technology business was ahead of the previous year, following the acquisition of CUC, a cabling distribution business with operations in France and Germany, in 2015 and also from organic growth in its Britain and Ireland business.

While, DCC Environmental also delivered strong year-on-year organic growth, in both Britain and Ireland.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “A solid trading performance, combined with news that it will be acquiring Esso’s Norwegian petrol station network, has put gas in DCC’s tank this morning, with the shares rising 6.1%.

“The group’s ‘hub and spoke’ system, that sees much of the support network for its operations run out of Ireland, should mean the new network can be quickly integrated into the wider business and raises the potential for efficiency savings.”

Shares in DCC were up 6.77% to 6,806.80p at 0946 GMT.