Given its financial year ended on 31 March, preliminary numbers for DCC (DCC) scarcely reflect the brave new world in which businesses find themselves. But in an encouraging sign of its resilience, the fuel-to-medical products conglomerate surpassed consensus earnings expectations for the period by 4 per cent, and vindicated any investors who have bought into the shares since they collapsed to a five-year low on 17 March.
As with everything else in life, what comes next is unclear. Last year, adjusted operating profit rose 7.3 per cent to £494m, in large part thanks to higher volumes and wider margins in the liquefied petroleum gas business, DCC’s largest single contributor to profits. Since the start of April, revenues are down on the prior period, as lower commercial and industrial demand has outweighed solid domestic and cylinder trading across the US, France and Britain. Cost controls have also helped to prop up what is typically a lighter period for profits.
The effects of Covid-19 have also led to both spikes and declines in demand across the wider distribution portfolio. DCC’s healthcare unit – which generated £60.5m in adjusted operating profits last year – is reportedly well up on the prior period, as new-found consumer hunger for nutritional products has more than compensated for a dip in demand for surgical and primary care goods. Profits from the technology and retail and oil businesses are said to be lower, but recovering.
This picture was considered stable enough to justify a 2.6 per cent increase in the final dividend to 95.8p a share, which arrived on another brutal day for income hunters. Remarks from chief executive Donal Murphy that the group “is in a very strong position to navigate through this period of uncertainty” are also among the most bullish you are likely to find so far this year.
Central to Mr Murphy’s optimism is the balance sheet, which despite DCC’s acquisitive track record carries next to no leverage and boasts over £2bn in liquidity should the group call on the remaining £350m on its overdraft facility. And while travel restrictions look set to curtail near-term “development activity” – aka bolt-on deals – management strongly suggested that smaller distributors in the US health supplements and nutritional products sector are a target.
FactSet-compiled consensus forecasts are for earnings per share of 339p for the year to March 2021, rising to 367p in FY2022.
| DCC (DCC) | ||||
| ORD PRICE: | 6,294p | MARKET VALUE: | £6.19bn | |
| TOUCH: | 6,292-6,306p | 12-MONTH HIGH: | 7,548p | LOW: 3,463p |
| DIVIDEND YIELD: | 2.3% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 2,527p* | NET DEBT: | 14%** | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 10.4 | 203 | 190 | 97.2 |
| 2017 | 12.3 | 248 | 227 | 112.0 |
| 2018 | 13.1 | 260 | 259 | 123.0 |
| 2019 | 15.2 | 327 | 280 | 138.4 |
| 2020 | 14.8 | 311 | 250 | 145.3 |
| % change | -3 | -5 | -11 | +5 |
| Ex-div: | 28 May | |||
| Payment: | 23 Jul | |||
| *Includes intangible assets of £2.1bn, or 2,161p a share **Includes lease liabilities of £307m | ||||
