Diploma sees strong first half as it hunts for further acquisitions

Technical products and services provider Diploma issued its half-year results on Monday, reporting increases in revenue and adjusted operating profit of 8% and 9% to £234.9m and £40.6m, respectively.

The FTSE 250 firm said its underlying revenue improved 7% year-on-year for the six month period to 31 March, while currency movements decreased revenues by 4% and businesses acquired made a contribution of 5%.

Its adjusted operating margins improved by 10 basis points to 17.3%, which the board said was in line with full year 2017.

Diploma’s adjusted profit before tax increased 9% to £40.4m, while adjusted earnings per share were ahead 12% to 26.7p, reflecting the benefit of a reduction in the firm’s US tax rate.

The board claimed “robust” free cash flow of £17.7m, after an £11.2m investment in working capital, and said it had net cash funds of £17.7m at the end of March.

It increased the interim dividend by 10% to 7.7p per share, which was said to reflect confidence in the group's growth prospects.

On the operational front, Diploma said underlying revenues in Life Sciences increased 9%, led by a “strong performance” from its healthcare businesses, with good growth in consumable product sales and new product introductions.

In Seals, underlying revenues were ahead 9%, with strong revenues in the North American aftermarket and industrial original equipment manufacturer businesses, and improved growth in international markets in the second quarter.

For its Controls division, Diploma said underlying revenues increased by 3% against a “very strong” comparative last year.

“Diploma has continued to deliver robust growth in revenues and earnings,” said chief executive Richard Ingram.

“During the first half of the year the Group's businesses have taken advantage of the continuing strong global trading environment and delivered a good performance despite currency headwinds.”

Ingram said acquisitions remained an “integral part” of the group's growth strategy, although the generally stronger trading conditions in most markets had constrained acquisition activity in the first half of the year.

“However, the pipeline of acquisition opportunities remains healthy and work is continuing to bring some of these to completion before the end of the fiscal year.

“This background, combined with a proven business model and strong balance sheet, provides the board with confidence that the group will make further progress this year and will continue its excellent track record of value creation for shareholders.”