Diploma growth softens slightly in second quarter

In a trading statement covering the six months to 31 March, the FTSE 250 company said group revenues are expected to increase 8% on the prior year, softening from the 10% growth produced in the first quarter.

The pound's rebound has created a 4% headwind in the period, much as in the first quarter, meaning at constant exchange rates, revenues up roughly 12%, from 14% in the first quarter. Of this, underlying growth was around 7%, with acquisitions during the last twelve months adding the other 5%.

Sales from Diploma's businesses in the life sciences sector, which include suppliers of equipment for hospital laboratories, operating rooms and private laboratories in Canada, Australia and Britain, generated revenues that were up 16% year-on-year, versus 20% in the first quarter. There was a strong contribution from Abacus dx, the Australian diagnostic business acquired in April last year.

On an underlying basis, life sciences revenues are expected to be up circa 8%, reflecting much stronger capital sales and against a weak comparative.

In the seals sector, where a range of seals, filters, gaskets, cylinders, components are supplied for use in heavy mobile machinery and specialised industrial equipment, revenues were up roughly 4%, or 8% on an underlying basis.

The main driver for seals was strong trading activity across the North American businesses, where underlying revenues are expected to grow by about 12%. International seals revenues improved in the second quarter and are expected to grow by around 3% in the first half, after flat growth in the first quarter, with stronger trading in the European businesses being partly offset by weaker performances in Russia and Australia.

In the controls sector, which specialises in wiring, connectors, fasteners and control devices used in applications in aerospace, defence, motorsport, energy, medical, rail and industrial, is expected to report revenues up 6% or 3% on an underlying basis against a very strong comparative last year.

Adjusted operating margin at the group level remains in line with the comparable period last year, as in the first quarter.

Net cash funds stood just above £16m at 31 March, while Diploma has access to a £60m revolving credit facility and said it continued to have a healthy pipeline of acquisition opportunities.