DCC Plc (LSE:DCC) reported strong operating profit growth in its fiscal third quarter, supported by organic expansion and the initial contribution from its Austrian acquisition FLAGA. The update was well received by the market, with shares rising more than 2% on the day.
The group reaffirmed its full-year expectations for good operating profit growth, while highlighting continued strategic progress and active development across the business. Within DCC Energy, the Solutions division delivered solid operating profit growth, driven by a strong performance in Energy Products, although this was partly offset by tougher trading conditions in UK Energy Services. The Mobility division posted what analysts at RBC Capital Markets described as “excellent organic profit growth.” Weather patterns, which have a significant impact on heating demand in Energy Products, were broadly in line with the prior year.
At DCC Technology, operating profit on a continuing basis was broadly unchanged year on year. The North American operation returned to growth during the quarter following a challenging first half, a development viewed positively by RBC analysts ahead of a potential disposal. The company has committed £100 million to mergers and acquisitions so far this year, up from £59 million in the first half, and management said the pipeline of energy-sector acquisition opportunities remains robust. Progress on the planned disposal of the Healthcare division is also said to be on track.
Consensus forecasts put full-year operating profit at £622 million, closely aligned with RBC’s £621 million estimate, while underlying earnings per share consensus stands at 425 pence compared with RBC’s forecast of 430 pence. Despite the recent share price weakness following a tender offer, DCC closed at 4,640 pence on Tuesday, trading on a calendarised 2026 price-to-earnings multiple of 9.5 times, enterprise value to EBITDA of 5.9 times, a free cash flow yield of 7.1% and a dividend yield of 4.8%.
RBC continues to value DCC using a sum-of-the-parts approach, applying a 2027 EBITA multiple of 6.5 times to the Technology division, in line with peers, and 10 times to the Energy businesses, reflecting a 15% discount to peers due to the group’s conglomerate structure and relatively limited scale in renewables. The broker reiterated its “outperform” rating and 5,400 pence price target, implying around 16% upside.
Key risks highlighted include execution risk around the group’s merger and acquisition strategy, which has been central to its growth, as well as seasonality, given the sensitivity of LPG and Retail & Oil demand to weather conditions. Foreign exchange movements also remain an important factor, with around 45% of revenue and 55% of profit generated outside the UK.
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