The last time I wrote about DCC plc (DCC), the London-listed but ‘Irish international sales, marketing and support services group’, was back in early November HERE. My observation back then was that its observation in ‘four divisions: LPG, Retail & Oil, Technology and Healthcare’ and hence great performance over the last 26 years meant that ‘I really should consider buying some’. Well I still haven’t...and the stock is still at around the sixty quid level. So what am I thinking today?
Well it certainly is a solid set of year to the end of March numbers. It is no disgrace to see operating profit up by 7.3% to £530 million, a strong return on capital employed of 17.1% and ‘excellent free cash flow performance...FCF% of 130%’. Of course there are plenty of special COVID-19 era issues which benefited some of these metrics last year. After all free cash rose by nearly 40% year-on-year. Still, with net debt (including lease creditors) at just over £150 million, a fraction of a near £6 billion market cap, the balance sheet is very strong. No surprise then that the dividend was increased by 10%, leaving the yield at just under 2.7%.
In terms of its divisions, the Healthcare and Technology businesses unsurprisingly grew profitability the most at 35% and 11% respectively year-on-year. They now account for about 30% of overall profitability, respectively citing ‘very strong organic growth in nutritional products and benefit of expanded presence and enhanced capability in the US’ and ‘higher margin B2B sectors’. Meanwhile the LPG and Retail/Oil sectors had modest profit gains of up to 2%, observing ‘traded resiliently notwithstanding the difficult trading conditions within the commercial and industrial sectors’ and ‘Covid-19 restrictions led to weak commercial and transport volumes, with good demand in the domestic and agricultural sectors’. Overall it is more than workable though. Geographically, 43% of sales are in Continental Europe, just shy of 40% of sales are in the UK/Ireland and the rest in RoW. Sitting today on a c. x11 EV:ebit multiple with the aforementioned strong balance sheet and okay yield again gives a positive view for potential investors.
The now 27 year long numbers show 14.2% average operating profit growth, a 13.9% average dividend increase and free cash flow conversion of 104%...and I can see how it can keep this rolling forward for total return investors. Other watchers will no doubt be excited by a ‘net Zero own emissions target by 2050 or sooner...20% CO2 reduction target 2025...MSCI AAA ESG rating retained’. Overall my thoughts are akin to my ones last mentioned in November: when am I going to buy this stock? A bad day below the current sixty quid level seems about right to me. In short, BUY.
Filed under: DCC, First Derivatives, gold, Nexus Infrastructure, USOP, TomWinnifrith.com
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