DCC PLC (LON:DCC) said trading in its first quarter was “resilient” and ahead of its expectations, however, the firm said the figures were still behind the prior year due to “severe lockdown restrictions in place during April and May”.
In a trading update for the quarter ended June 30, the sales, marketing and support services group said operating profit in its DCC LPG division was behind year-on-year due to “weakness in commercial and industrial volumes”, particularly in the UK and Ireland, although more time spent at home by consumers meant domestic and retail cylinder demand was strong during the period across most of DCC LPG's markets.
READ: DCC increases dividend as trading remains solid in face of pandemic
Meanwhile, the company said its Retail & Oil division “performed well” in the quarter, with good performances from its British and Danish businesses reflecting what is said was “strong demand” form agricultural customers and vert strong demand in the domestic sector where customers sought to secure supply during the lockdown period.
DCC added that although overall volumes in the period were “well behind the prior year” due to reduced transport fuel demand, the positive mix impact of the strong domestic and agricultural performance, a gradual recovery in transport fuel volumes through the second half of the quarter and a “good cost performance” had delivered an operating profit was modestly ahead of the prior year.
The company’s technology business was also behind the prior year, although DCC said trading had “improved steadily through the quarter” as the division benefited from good underlying demand for consumer technology products in the ‘e-tail’ and non-traditional retail channels. However, the firm said B2B demand was “impacted more significantly”, particularly for products dependent on resellers or integrators being able to access business premises.
Elsewhere, DCC’s healthcare arm had performed strongly in the quarter, with operating profit well ahead of the previous year, while its health and beauty solutions business saw “strong demand” for nutritional products and benefited from the first-time contribution of Ion Labs and Amerilab which were acquired last year.
Finally, the group said its DCC Vital business had experienced “very strong demand” for coronavirus-related products, which offset the impact of substantially lower routine hospital procedures and in-person consultations.
Looking ahead, DCC said while the “sustained uncertain environment” caused by the pandemic is continuing to impact the economy, its “diverse and very resilient business model” meant it is “well positioned to continue its growth and development into the future”.
“All DCC business units have operated effectively during the quarter, ensuring our customers continue to receive the range of essential products and services we provide… Although a seasonally quieter period for the Group, I have been pleased with the performance of each of DCC's divisions during the quarter”, said DDC chief executive Donal Murphy.
“The improving performance through the quarter has meant we have recommenced selective organic development capital expenditure to ensure we are in a position to capture any opportunity for market share gains during this period”, Murphy said, adding that the company “remains active from an acquisitive development perspective”.
In a Friday note, analysts at Peel Hunt retained their ‘buy’ rating and 7,737p target price, saying given the essential nature of its services DCC “should quickly revert to ‘business as usual’ as restrictions are eased” and that it was a “rarity in the current market” with its continued dividend payments and M&A transactions.
The broker also said that as the company was in its seasonally quieter period, the greatest impact of the pandemic was “likely to coincide with the less important period for DCC”.
Shares in the company were 0.7% lower at 7,012p in late-morning trading.
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