DCC shares jump on break-up plan

DCC, the FTSE 100 conglomerate, has announced a major restructuring to focus on its energy business and sell off healthcare and technology units valued at about £2 billion.
The Dublin-based company has pledged to return cash raised from the break-up to shareholders in a move that prompted its shares to jump 14.78 per cent or 734p to £57.
The group has been operating three separate divisions for ten years and will now focus on its energy services after analysts noted a simplification of its structure would lift its market valuation.
DCC already generates70 per cent of its earnings before interest, tax, depreciation and amortisation from its energy division, which provides consulting services and energy products to customers in a range of sectors, with a focus on commercial and industrial clients.
The group has said it will now sell its healthcare division before the end of next year and is examining options for its technology division, which is a distributor for Apple and Microsoft products in the UK.
The healthcare division at DCC comprises its Vital business, which sells products and devices to hospitals and GPs, and its health and beauty business, which manufactures nutritional supplements and beauty products for the likes of Vitabiotics and Estee Lauder.
Donal Murphy, the chief executive of DCC, said: “In the energy sector we are building a unique, multi-energy, sustainable business focused on supporting our customers with their energy transition. Our strategy will deliver strong profit growth, high returns and a significant reduction in our customers’ carbon emissions.”
Analysts at Jefferies have estimated that DCC’s health and technology operations could be worth about £1.3 billion and £800 million respectively. Healthcare’s operating profit came in at £38.1 million for the first half of the financial year, while the technology unit generated operating profit of £38.5 million.
Meanwhile, DCC spent £130 million on acquisitions for its energy units, with the purchase of Wirsol, a solar panel and battery storage business in Germany, and Acteam ENR, a French solar panel business. The energy business includes Flogas, a supplier of liquid petroleum gas.
Updating investors on its half-year performance, DCC reported revenues were down by 3 per cent to £9.3 billion for the six months ended September 30, while profit before tax rose by 1 per cent from £129.7 million to £131.0 million.
Analysts at Jefferies described the update as the “catalyst” for the group’s shares that the market had been expecting.
Sylvia Barker, an equity analyst at JP Morgan, said the update had “certainly delivered” on hopes of an improvement in its share price.
In a note, Jefferies said: “We have previously highlighted group complexity is weighing on the shares and view this as the hard catalyst the equity story needed that should unlock value.”