DCC, the energy and business services group today improved its full year outlook and said in an interim management statement, that trading in January was "excellent," because of harsh weather conditions which boosted its DCC Energy division and also a good performance in SerCom Distribution.

DCC said it now expects both operating profit and adjusted earnings per share - - on a constant currency basis - - for the year to March 2010 will be between 5-10% ahead of the previous year.

Goodbody analyst Dan Cavanagh, commented today:"DCC has issued a strong qualitative IMS for Q310 (three months to December), with the four key points being: (i) Energy performing strongly - Favourable weather conditions through the end of December, together with integration synergies from prior deals, lead to “strong operating profit growth” during the quarter; (ii) SerCom performing as expected - Trading in SerCom distribution (c.85-90% of the division) was stronger than previously expected, driven by an “excellent” performance in the British operations, which compensated for the expected decline in SerCom Solution (c.10-15%). At a divisional level, performance is broadly inline with expectations; (iii) Acquisitions ramping up - In the first nine months of FY10, DCC deployed €113m to acquisitions, the majority of which (€94m / 83%) was targeted to the Energy division.

This level of spend exceeds FY09 (€102m) and we would expect further deals to be completed in the remainder of FY10; and, (iv) Improved guidance leads to an 8% increase in our forecasts - Driven by the Q3 momentum and the “excellent” January trading, management has increased its guidance from the -5-10% range issued at the interim stage in November, to earnings now expected to be “modestly ahead of the prior year”. Accordingly, we are upgrading our FY10 operating profits forecasts by c.8% to €186m (previously €173m), which will give +3% growth yoy (vs. -5% previously), which filtered down to a provisional adjust EPS of 170-171c (previously 157.5c).

Based on our provisional EPS, DCC is currently trading on a FY10 PE of under 12x, with a dividend yield of 3% and we believe that the market will react positively to this statement. Finally, management confirmed that the FY10 results will be published on 18 May.Shanks Group, the European-wide waste management operator, issued its own IMS this morning, where it noted that at a group level overall trading had been “satisfactory.” Of more direct relevance to DCC’s Environmental division were the comments on Shank’s UK operation, where current performance was in-line with expectations and future growth continues to be driven by a favourable regulation, which will reduce the amount of waste sent directly to landfill. No update was provided on the unsolicited approach from a private equity player received in early December and with talks continuing, a further announcement will be made if and when appropriate. Current market consensus shows Shanks’s earnings broadly flat yoy into FY10. For DCC, in this morning’s IMS (see above), it was noted that the Environmental division (c. 4% of group earnings) saw a strong recovery in earnings, albeit from a modest level."

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