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DCC: The energy and services conglomerate, DCC, has reported
pre-tax profits of €189.6m for the year ending March 2011, an 18% rise on the
previous year. Revenues jumped by 29.1% to €8.680 billion with all five of the
company's divisions reporting operating profit growth.
DCC reported that it continued to see difficult economic and trading conditions
in some of its markets, despite that it still managed to increase its group
operating profit by 15.5% on a constant currency basis to €230m.
The company said the outlook for next year is framed against an uncertain
economic environment, particularly in the UK. It said that its energy division
has been impacted by what was the mildest April on record with temperatures much
higher than last year.
Commenting on the results, Tommy Breen, chief executive said: "DCC had a very
strong year with all five divisions reporting operating profit growth. Group
operating profit increased by 15.5% on a constant currency basis to €230
million. The Group's result was achieved against a continuing backdrop of
difficult economic and trading conditions in certain of our markets and having
delivered particularly strong operating profit growth of 12.8% and 22.4%, on a
constant currency basis, in the two preceding years.
Return on total capital employed increased to 19.9% from 18.4%.
Adjusted earnings per share increased by 10.5% on a constant currency basis.
Reported adjusted earnings per share increased by 14.1% to 203.15 cent,
reflecting the positive impact of the 4% strengthening of the average
sterling/euro exchange rate in the year on the translation into euro of the
significant proportion (2011: 77%) of DCC's profits that are denominated in
sterling.
The Board is recommending a 10.0% increase in the final dividend."
Goodbody analyst; David O’Brien, commented: - - "DCC has
reported a strong set of FY11 (March end) results this morning, with all
divisions reporting growth. Operating profits increased by 19% to €229.6m,
broadly in line with forecasts of €228.5m and marginally ahead of management
guidance.
Adjusted earnings of 202.5c increased by over 14% versus guidance for
+13%. The Energy Division (60% of Group profits) had another strong year, with
operating profit of €137.3m (+21% yoy driven by an unseasonably cold winter)
slightly shy of our forecasts for €139.5m due to mild weather conditions in Q4.
As a result of the latter, organic volumes declined by 1% yoy. Sercom (20% of
Group profits) recorded operating profit growth of 13% (€46m) versus our
expectations of a 7% increase, driven by market share gains in the PC market and
an increased product offering. As we noted coming into the results, Sercom was
the division most under scrutiny by investors given the weakness in the
consumer. Therefore, we take comfort from both the resilient performance and the
outlook, which guides for 'very strong growth' in operating profit in FY12,
driven by acquisitions and further organic growth.
Management anticipates underlying operating profit for FY12 to be broadly
in line with FY11, which is consistent with our forecasts at a Group level, so
no material changes. However, we anticipate that Sercom will contribute more to
profits than previously forecast, with Energy contributing less (as the one-off
benefit from cold weather is fully stripped out). We would view this as a
favourable shift in mix as it differentiates Sercom from its peer group which
have reported weak results, while estimates for energy could prove conservative
if we get another harsh winter. Forecasts also exclude the Pace deal, which is
subject to competition clearance, and any further deals.
Overall, these results confirm the strength of the DCC business model with
another strong year of returns generation, with ROCE of 19.9% versus 18.7% in
FY10. At 11x forward earnings we maintain our positive stance and reiterate our
BUY recommendation."
Cutting Greece's Credit Ratings: Jean-Michel Six, managing director and chief economist at Standard & Poor's (EMEA) believes that the the Greek government has done alot to improve their fiscal situation and expects the ECB to hike rates two more times this year:
United Drug: The drugs and healthcare services company, United Drugs,
today reported results for the six months to end of March with revenue up 5% to
€894m, while operating profits rose by 6% to 37m.
The company reported a pre-tax profit €32.7m, - 4% ahead of 2010.
United Drug CEO Liam FitzGerald said: "United Drug has made considerable
progress during the period to further internationalise the business as we
develop our range of outsourced healthcare services. Our US businesses accounted
for over 20% of operating profit in the first six months of 2011 and in total
our businesses outside of Ireland contributed over 65% of profits. This has been
particularly important in the period as these increased contributions have more
than offset the impact that the continued challenging regulatory climate has on
revenues in some of our Irish businesses."
UD also announced that it is planning to operate a limited share buy-back
programme of up to 5m shares (€11.6m based on the share price at close of
business on 5 May 2011). This approximates to the number of shares issued over
the last year under the company’s various share schemes most of which have now
been discontinued. The buy-back programme will commence on 24 May and run until
the requisite number of shares have been acquired or the start of the next close
period for the company.
Goodbody's Liam Igoe commented:
- - "United Drug’s interim
results were exactly in-line with our forecasts, both in terms of EPS and
dividends. Operating profit was 4% behind our forecasts, though this was largely
offset by a lower than forecast interest charge. Strong growth in its
international businesses, especially in the US, means that two-thirds of the
company’s profits now emanate outside Ireland (20% from the US).
As we expected, strong organic growth, supplemented by acquisitions
delivered a very good performance from the Sales, Marketing & Medical Division
and Packaging & Speciality Division. Net debt at the interim stage amounted to
€115m or 1.3x EBITDA. The strong balance sheet will facilitate further
acquisitions in both the US and Europe, as well as the planned buy-back of 5m
shares (cost c€11.6m). The company anticipates that operating profit will be
ahead of last year on a constant currency basis.
Having regard for the H1 outcome and currency assumptions, at first
glance, we are likely to trim our forecast for the HSC Division by c€2m, partly
offset by a lower interest cost assumption, which would imply FY11 EPS growth
0.9% versus 2.5% previously.
Overall these results were a positive outcome for United Drug and represent a
return to growth. While this may be a tentative one at first, EPS growth is
forecast to accelerate from FY12."
Markets likely to remain under pressure as sovereign issues
persist: Davy's Barry Dixon comments - -
"Eurozone sovereign debt
issues intensified yesterday (May 9th) as S&P downgraded Greece's
sovereign debt by two notches and both Moody's and Fitch indicated a
similar move. Ten-year bond yields in Greece rose by 21bps, while
the Irish ten-year rose by 29bps – illustrating market fears as to
who will be next to seek to restructure its bailout terms.
Interestingly, in its commentary, S&P warned that while
official government creditors were increasingly likely to extend the
repayment period for Greece, they would also want to ensure that
private bondholders did likewise. Given that European banks are most
likely the largest holders of Greek debt, European financials were
among the poorest-performing sectors yesterday and likely to remain
under pressure until this issue is resolved.
The increased concerns over eurozone debt, combined with a
recovery in commodity prices following last week's rout, are having
a negative impact on the euro exchange rate with other major
currencies – a small plus that will help to sustain or improve the
export competitiveness of the region."
Commodities Outlook: Michael Preiss, chief equity strategist at Standard Chartered Bank, says commodity selloff last week has changed the momentum of the bull market:
Economic View 1: Stability at last in Irish residential rents;
Goodbody chief economist, Dermot O’Leary, comments - - "Having fallen by 27% from the peak at the beginning of 2008, residential rents
in Ireland have stabilised since the final quarter of 2010. This is the key
conclusion of the latest report from Daft.ie, released this morning. With such
an uncertain environment over recent months, what should we attribute this
stabilisation to?
While the preference to rent rather than buy is a key
influence, the stabilisation can also be attributed to improving supply/demand
dynamics in the major cities in the country, particularly Dublin. For example,
the stock of properties for rent in Dublin is now almost half of the peak level
reached in mid-2009, while rents have risen by c.5% since the middle of last
year. Similar trends can be seen in Ireland’s second biggest city too. Outside
of the main cities, the situation is still quite bleak, with rents continuing to
fall and yields at unsustainably low levels.
The average rental yield, according to Daft.ie, currently stands at 4.0%.
However, the range across the country is quite wide, going from 3.7% to 6.2%,
with the latter relating to the yield in Dublin City Centre. Therefore, our
long-held thesis that Ireland faces a two-speed housing market over the coming
years very much holds."
Economic View 2: Headwinds still remain for UK consumer despite April bounce; Dermot O’Leary
also added -- "After falling by 3.5% in March, UK same-store retail sales rose by 5.2% yoy in
April, according to BRC this morning. However, given the volatility in UK retail
sales over the past few months, due to weather, Easter and royal wedding
effects, it is more correct to smooth out this volatility using a three-month
average metric. On this basis, same store sales are effectively flat in the
February-April period relative to the same time frame in 2010. Total sales
(including new store openings) rose by 1.8% over the same period, following a 7%
yoy gain in April alone, aided by extra public holidays and favourable weather
trends.
With inflation standing at c.4%, a slight fall in the volume of retail sales
over the opening third of the year gives a more realistic picture of the UK
consumer, given the headwinds that it is currently facing."
US Markets
In New York Monday,
the Dow added 46 points or 0.36% to 12,685.
The S&P 500 rose 455 and the Nasdaq gained 0.55%
Asia
Markets
The
MSCI Asia Pacific Index gained 0.2% Tuesday.
Japan's Nikkei 225 gained 0.25%; China's Shanghai composite index rose 0.63%;
Australia's S&P/ASX 200 dipped 0.65% and the Bombay Stock Exchange's Sensex index
fell 0.22% in Mumbai.
The
BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009. The index
averaged 59% lower in 2009 than a year earlier.
On
Thursday, July 15, 2010, the index fell for the 35th straight session, by 9
points, or 0.537%, to 1,700 points,
Bloomberg report.
On Friday July16th, the BDI rose 20
points or 1.12% to 1,700 to break the 35-session losing streak.
On
Monday this week, the BDI rose 8 points or 0.60% at 1,348.
The Financial Times reported
earlier in January, that Australia’s flooding and fears of ship oversupply has
pushed down a gauge of the cost of hiring ships to carry coal, iron ore and
other dry bulk by nearly half since October to the lowest level since the
aftermath of the financial crisis. The Baltic Dry index, the widely watched
measure of dry bulk charter rates, fell to 1,453, nearly half the 2,784 peak
reached on October 27, 2010.
Crude oil for June 2011 delivery is
currently trading on the
Chicago York Mercantile Exchange (CME/Nymex) at $101.67 per barrel, down 88
cents
from Friday's close. In London, Brent for June delivery is trading on the
International
Commodities Exchange at $115.55. The North
Sea benchmark accounts for two-thirds of the global market.
The
margin between the US benchmark WTI (West Texas Intermediate) used on the New
York Mercantile Exchange and Brent is almost $14 - - it was announced late on Monday that margins on US
oil contracts would be raised by 25% to reduce speculation following last week's
dip.
The FT
said in early February that a surge in oil inventories in Cushing, Oklahoma,
where WTI is delivered into America’s pipeline system, has depressed the value
of the benchmark against other yardsticks. The
International Energy Agency said on Thursday that with “few relief valves” to
cut the stock overhang in Cushing, the price dislocation “may persist for months
[or years] to come”.
