DCC raises expectations after solid third quarter
Support services company DCC said on Tuesday that group operating profit for its third quarter was “strongly ahead” of the prior year.
The FTSE 100 firm said that, notwithstanding the disruption and uncertainty caused by the global Covid-19 pandemic, it recorded strong organic operating profit growth in the three months ended 31 December, while also benefiting from acquisitions completed in the prior year.
It said that, assuming normal weather conditions for the rest of the financial year, it expected that the year ending 31 March would see good growth in operating profit, ahead of current market consensus expectations.
The board said the DCC LPG operation recorded good operating profit growth in the third quarter, as it continued to experience reduced volume demand from commercial and industrial customers, reflecting the continuing impact of varying levels of restrictions in each market in which it operates.
However, cylinder and domestic demand remained “robust”, and the favourable mix impact of this demand drove modest organic profit growth.
The business also benefited from the first-time contribution from the acquisitions of NES Group in the United States, completed in September, and Budget Energy in Ireland, acquired in April.
DCC Retail and Oil delivered good organic operating profit growth, with the company explaining that although volumes continued to be impacted by lower commercial, industrial and transport demand due to Covid-19 restrictions, that impact was less severe than earlier in the financial year.
The businesses in Britain and Scandinavia delivered strong performances in the quarter, benefiting from good procurement and cost control, as well as growth in non-fuel income, lubricants and roadside services.
DCC Technology recorded strong organic operating profit growth in the third quarter, although trading conditions in the business-to-business sectors, such as the pro AV category, remained “challenging” due to continued restrictions.
However, working-from-home, consumer and audio products saw “very strong” demand across both the UK and Ireland and the division’s international operations, in particular through the ‘etail’ and non-traditional retail channels.
DCC Healthcare delivered an “excellent” performance, the board reported, with operating profit “well ahead” of the prior year.
The company’s health and beauty solutions operation saw “very strong” demand for nutritional products across all geographic markets, which drove strong organic growth.
It said the business also benefited from the first-time contributions of the prior year acquisitions of Ion Labs and Amerilab Technologies in the US, which were performing well.
DCC Vital also generated “very good” organic profit growth.
While elective medical procedures and consultations were still being impacted by the pandemic, the business had continued to successfully respond to the changing product and service needs of the healthcare systems of Britain and Ireland.
“The outlook for all economies in which the Group operates remains very uncertain, with restrictions generally now increasing again,” the board said of the company’s outlook.
“However, DCC's diverse and resilient business model and the essential nature of the group's products and services has seen it respond well to the challenges of the pandemic and trade robustly.”
At 0847 GMT, shares in DCC were 1.94% higher at 5,825p.