Diploma delivers growth

Specialist distributor Diploma (DPLM) delivered another impressive full-year performance, thanks to a solid contribution from its seals business where adjusted operating profits rose 37 per cent to £20.4m. Sales were particularly strong in the North American after-market business, which helped drive the adjusted operating margins there up from 18.6 per cent to 20.4 per cent. Add that to a hefty dividend hike and the shares remain attractive.

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).

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