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FTSE 100 conglomerate DCC has fired the starting gun on a three-way split of its business, announcing plans to sell its healthcare operations and technology division after a strategic review.
DCC said on Tuesday it would break itself up to focus on its energy business, sending its shares up more than 14 per cent for a market capitalisation of £5.6bn.
The Dublin-based group, which employs more than 16,000 people in 21 countries, said energy was its “largest growth opportunity”, buoyed by the transition to lower carbon power. Its energy business includes commercial solar power, liquid fuel distribution and service stations.
It said the plan would simplify its operations, maximise shareholder value and lead to faster growth in all three of its divisions, while returning cash to shareholders.
“While diversity was always a very important part of our business model, it’s become very clear over the last couple of years that the greatest opportunity that we have is in the energy sector,” said chief executive Donal Murphy.
The energy business was benefiting from a push by commercial customers to cut carbon emissions and by different countries’ efforts to increase their domestic energy security and mitigate “volatile” international supply lines, Murphy said.
Analysts at Jefferies wrote that the break-up plan was the “catalyst we had asked for”. They estimated the value of the healthcare business at £1.3bn and technology at around £800mn.
The first step will be a sale of the healthcare business, which makes diagnostic devices as well as nutritional supplements and beauty products.
DCC said it expected this to be completed in 2025, with Murphy adding that he anticipated interest from private equity firms and trade bidders.
The group also said it would review “strategic options” for its technology division, which makes audiovisual and other products, within two years. But Murphy told the Financial Times that a sale was intended.
He said on Tuesday that the company was “integrating” two of its technology subdivisions in an effort to boost the unit’s value. “We’ll do a strategic review, but clearly we will divest that business once we’ve realised that value,” Murphy said.
Murphy, a 26-year veteran of the company, said he did not expect DCC to think about moving its listing “in the short term” because energy operations were much smaller in the US than in Europe.
He added it would be wrong to assume the break-up would lead to the loss of DCC’s place in the FTSE 100, noting that the energy division accounted for more than two-thirds of overall profits.
The break-up plan was announced alongside interim results, which showed revenues of £9.3bn in the six months to September 30 — down 3 per cent on the same period a year ago. Adjusted operating profit rose 4.7 per cent to £259.3mn, with £182.7mn from the energy business, £38.1mn from healthcare and £38.5mn from technology.
