Monday 23 October 2017

Spin-offs not on cards for DCC, says ceo Breen

DCC boss Tommy Breen
DCC boss Tommy Breen
John Mulligan

John Mulligan

The chief executive of Irish-diversified FTSE-100 group DCC says he sees no reason to spin off any of the units in the £5.3bn (€6.1bn) company into separately-listed entities.

Tommy Breen conceded that its business units could each stand on their own feet, but said there were no plans to hive them off.

"It's not something we have any plans to do," he told the Irish Independent. "We have an obligation all the time to look at what delivers the right result for value-creation for shareholders, but we're pretty careful about doing that," he said.

"If you look at the value creation at DCC over the last 10 years, it would be hard to argue that there's a better way to do it than the way we have done it," Mr Breen added.

DCC's businesses stretch from oil and gas distribution to healthcare and technology sales, as well as waste management. Its group revenue last year was £10.6bn, while its operating profit was £300m.

The biggest is its energy division, with sales of £7.5bn in the last financial year and a £205m operating profit.

DCC released interim results this week, with its shares rocketing over 7pc at one stage after it told investors it would make more money this financial year than expected.

"When you look at the results you see all businesses moving forward and producing good returns on total capital employed, with the exception of the environmental division," said Mr Breen. "I think you'll see good improvement again given the organic growth that we've had in the environmental unit. I'm pretty happy with the shape of the group at the moment."

Mr Breen said that he believes the group management team adds value to the individual businesses in terms of driving development.

DCC has been a serial acquirer, but managed to do so by keeping its gearing extremely low. At the year end in March, its net debt to EBITDA ratio was just 0.2 times. Its return on capital employed in the period was 21pc.

Since its flotation in 1994 to March 2016, DCC has delivered total operating profits of £2.5bn for a compounded annual growth rate of 14pc. It has also paid £800m in dividends and share buybacks.

DCC reported first-half results this week. Its group operating profit in the period rose by one-third to £117.8m.Revenue was 10.5pc higher at £5.6bn. Excluding fuel sales, revenue was up 5.1pc at £1.47bn.

DCC is the biggest distributor of home heating oil in the UK, while it also owns forecourts and fuel distribution businesses in Scandinavia and France.

Last week, it announced that it is buying French natural gas distributor Gaz Europeen for €110m.

Last year, DCC paid €464m to buy French LPG distributor Butagaz.

DCC has also agreed to by Bray-based Medisource. It procures and sells so-called exempt medicinal products. Such products are imported to Ireland in order to meet requirements of specific patients.

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