19th May 2015 10:31
LONDON (Alliance News) - Distribution company DCC Group PLC Tuesday struck a EUR464 million deal to acquire French liquefied petroleum gas company Butagaz SAS from Royal Dutch Shell PLC as it also posted a rise in pretax profit for the year to the end of March and predicted strong earnings growth in the current year.
FTSE 250-listed DCC said the acquisition of Butagaz, which operates in the liquefied petroleum gas cylinder and small bulk market segments, will provide its DCC Energy business with a substantial presence in the French market. It said Butagaz holds a 25% share of the French LPG market. The deal will increase the scale of DCC's existing liquefied petroleum gas business to around 1.2 million tonnes from 700,000 tonnes now.
"The acquisition of Butagaz represents a major step forward in DCC's ambition to build a very significant presence in the global LPG market. As the leading LPG brand in France with a strong heritage and reputation for customer service, Butagaz is an excellent strategic fit for DCC Energy's existing LPG business," said Tommy Breen, DCC's chief executive.
The final consideration that DCC will pay for Butagaz will depend on the target's balance sheet when the deal completes. DCC said it would have paid EUR404 million, excluding debt, based on Butagaz's balance sheet at the end of 2014. It expects the deal to complete in the final quarter of 2015.
DCC said it will partly fund the acquisition by placing at least 4.2 million shares, which would raise GBP184.3 million based on its closing price of 4,390 pence on Monday. The remainder of the funding required for the acquisition will come from existing cash resources.
Shares in DCC rose sharply on the news and were up 11% to 4,855.00 pence in late morning trade, comfortably the best performer in the FTSE 250 index.
The acquisition came as DCC said its pretax profit for the year ended March 31 rose to GBP163.3 million from GBP151 million a year earlier, as cost cutting more than offset a decline in revenue to GBP10.6 billion from GBP11 million.
The revenue decline was driven by its DCC Energy business, where revenue fell by 7.5% due to the lower oil prices, which offset a rise in volume to 10.8 billion litres from 10.2 billion a year earlier. Operating profit in the Energy business increased to GBP119.4 million from GBP110.5 million.
The group's oil distribution business performed well, outside of the mild winter weather conditions which hit trading, while its liquefied petroleum gas business also did well, with good growth in sales to commercial and industrial customers in the UK and Ireland and a boost from trading in the Benelux region. DCC Energy also made progress on its Retail and Fuel Cards business, with robust growth in the UK and Sweden, along with the acquisition of the Esso retail petrol station business in France.
Revenue from the rest of the business, excluding DCC Energy, rose 6.5%. Revenue from the DCC Technology business rose 3.8%, with good growth in its Continental Europe and Supply Chain Services business, plus a strong performance in its UK & Ireland reseller customer channel. This was partly offset by a weaker market for tablet and mobile devices in the UK against tough year-before comparables.
Revenue in its smaller DCC Healthcare business rose 20%, thanks to robust performances from its DCC Vital pharmaceuticals and medical devices distribution business and from its DCC Health & Beauty Solutions arm, which provides outsourced services to nutrition and beauty brand companies.
DCC Environmental also performed well, with revenue up 9.9% despite a hit from the sustained weakness in commodity prices.
DCC said it will hike its final dividend by 10%, bringing its total dividend for the year to 84.54 pence per share, from 76.85 pence a year earlier.
"DCC remains ambitious to continue the growth and development of its business. The group's strategy has always included maintaining a strong and liquid balance sheet to leave it well placed to take advantage of opportunities as they arise," said Breen.
"At this very early stage, the group anticipates that both operating profit and adjusted earnings per share from continuing activities will be very significantly ahead of the prior year," Breen added.
By Sam Unsted; [email protected]; @SamUAtAlliance
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