The Investment Column: DCC

SHARES IN DCC, the distributor of Dell computers, have drifted this year, largely because it is Irish. Investors have been afraid that the growth of the Irish economy is unsustainable and Dublin-based DCC, which also distributes oil, healthcare products and food, will suffer. Fears that the millennium bug will cause a slowdown in IT have compounded the problem.

Yesterday's half-year results were a rejoinder to DCC's detractors. Organic sales growth touched 17 per cent as the group enjoyed the continuing strength of the Celtic economy. And even now, DCC is enjoying buoyant demand from the IT sector.

With IBM and Dell placing greater logistical demands on DCC, the group has established a separate supply-chain management business, SerCom. While sales are increasing here, continued investment saw it post a slight loss in the period.

Gearing is at a comfortable 29 per cent, enabling the group to continue its bolt-on acquisition strategy.

On the downside, DCC faces difficulties in energy distribution, where the sharp rise in the oil price saw margins almost halve.

Analysts expect pre-tax profits of 70m euros (pounds 109m) and earnings of 67c in the full year, putting the shares, up 17.5p at 460p yesterday, on a forward price-earnings ratio of just 11. They are too cheap.

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