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Acquisition-hungry DCC performing in line in third quarter

International sales, marketing and support services group DCC issued its interim management statement for the third quarter on Wednesday, saying that group operating profit for the period to 31 December was in line with expectations and ahead of the prior year.
The FTSE 100 firm said operating profit in DCC LPG was in line with expectations and the prior year, despite the headwind of an increasing cost of product.

It explained that the mild weather conditions experienced early in the quarter impacted heating-related volumes modestly, although that was largely offset by good cost control.

"As previously announced, the French business launched its consumer natural gas and electricity initiative during the quarter and continues to invest in the development of its offering," the DCC board said in its statement.

DCC Retail & Oil recorded good growth in operating profit, driven by strong organic profit growth in the Denmark and Fuel Card divisions.

The business in Britain reportedly performed in line with expectations.

DCC Healthcare recorded strong growth in operating profit.

The board said DCC Vital delivered good organic profit growth, particularly in medical devices, and also benefited from the acquisition of Medisource, which was completed during the prior year.

DCC Health & Beauty Solutions again delivered strong growth in nutritional products.

Operating profit in DCC Technology was ahead of the prior year, benefiting from acquisitions and a good organic performance from the UK and Ireland, DCC Technology's largest business, where strong growth was achieved in the key product areas of audio visual, smart home and enterprise.

"The French consumer products business remains challenging and a number of operational changes are underway to improve performance," the board said.

It added that the remaining continental European businesses continued to perform well, and traded in line with expectations.

"Notwithstanding the mild start to the fourth quarter, particularly in France, DCC expects that both operating profit and adjusted earnings per share will be well ahead of the prior year and in line with current market consensus."

The board said the year to date had also been "very active" from a development perspective.

Reflecting the announced acquisition activity, the group's cash spend on acquisitions in the current financial year was set to be approximately £670m.

That included a fresh announcement by DCC Healthcare on Wednesday, of the acquisition of Elite One Source Nutritional Services.

The board called it an "exciting step" in the expansion of DCC Health & Beauty Solutions.

"The acquisition is the business' first step into the growing US market, the world's leading healthcare and dietary supplements market.

"Based in Missoula, Montana, Elite is a provider of contract manufacturing and related services to leading specialist brands in the US consumer healthcare market."

DCC said the business, led by an experienced management team, employed 180 people and operated from well-invested facilities which complied with FDA cGMP and Health Canada standards, and were certified by leading third party regulatory bodies.

"The consideration, based on an enterprise value of $50m (£35m), was paid in cash on completion.

"Elite is expected to generate a return on capital employed of approximately 15% within the first two years of ownership."

The completion processes for the previously-announced acquisitions of Retail West, TEGA and Countrywide were progressing to plan, the board added, with all transactions expected to complete by the end of the current financial year.

"DCC remains ambitious to continue the growth and development of its business in existing and new geographies and retains a strong, well-funded and liquid balance sheet."

The board said it expected to announce its results for the year to 31 March on 15 May.

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