In the life sciences unit, through which Diploma supplies instrumentation and related services to the healthcare and environmental industries, sales rose 5 per cent to £78.4m - that pushed adjusted operating profit up 5 per cent to £18m. Group turnover was also boosted by three acquisitions in the year - J Royal in the US, Abbeychart and Amfast in the UK, and DSL in Australia. Diploma continued to improve its cash flow, too, which rose by 31 per cent at £32.7m - free cash flow in the seals division almost doubled to £13.7m.
Moreover, after increased capital investment of £3.5m, acquisition costs of £22.3m and dividend payments of £14.2m, Diploma was still left with a net cash balance. Further investment is planned in the coming year, with £3m earmarked for new and enlarged facilities and another £2m scheduled for information technology.
Numis Securities expects adjusted pre-tax profit of £57.2m for 2013, giving EPS of 35.2p (from £52.6m and 33.2p for 2012).
|ORD PRICE:||448p||MARKET VALUE:||£507m|
|TOUCH:||445-450p||12-MONTH HIGH:||504p||LOW: 295p|
|DIVIDEND YIELD:||3.2%||PE RATIO:||16|
|NET ASSET VALUE:||146p*||NET CASH:||£7.9m|
Diploma has a resilient business supplying essential products to specialist markets and - while a forward PE ratio of 13 isn't especially cheap - the group's robust growth profile should drive the shares higher. Buy.
Last IC view: Buy, 447p, 14 May 2012