Equity prospects

DCC

John Royden, Head of Research

Price£67.80

52 week high yield£72.60-£55.70

Net yield1.49%

Hist / pros per29.8-22.8

Equity market cap£6,053m

DCC is one of those companies that slipped into the FTSE100 without many people noticing. On the face of it, DCC is a distributor of heating oil, LPG, technology and healthcare products, and waste and employs 10,500 people across 15 countries. 

However, when you ask DCC what they do, they say that they are great at buying and managing low margin, high volume businesses with a propensity to destroy value via bloated working capital requirements. They also say that they are great at sales, marketing and distribution and that they share their IT and best practices across the businesses. They don’t leverage their unconnected client bases. 

Their attention to cashflow detail is impressive as is their ability to grow the top line with strong sales. They compete with high service levels which, in Energy, might involve attending an apartment block’s tenants’ meeting at 9pm or, in the case of Technology, means having great systems for dealing with returns. 

DCC have proved to be good at buying businesses and indeed continue to successfully consolidate their markets, as evidenced by their decade of 17% annual revenue growth, of which more than 10% per annum has been organic. 

 

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