Diploma's (DPLM) full-year figures, specifically a 3 per cent increase in underlying revenues, reinforce our view that organic growth remains elusive. Nonetheless, the distributor of technical products including medical devices has been successfully generating value for shareholders through a targeted acquisition programme - an integral element of its business model. Acquisitions completed in the 12 months under review cost £32.7m, but their worth can by gauged by the 8 per cent growth they contributed to the reported top line.
Targeted businesses generally supply specialist products and services which are funded by clients' operating rather than capital budgets. They also tend to have lower operating margins than Diploma, so profits tend to lag revenues for the acquired assets - at least initially. The group's seals business (44 per cent of revenues) continues to integrate acquired assets, which, along with negative currency effects linked to the healthcare segment's Australian and Canadian operations, fed through into a 90 basis point reduction in the group operating margin.
Numis expects profits of £72.1m for the September 2017 year-end, leading to EPS of 45.5p (up from £64.9m and 40.5p in FY2016).
| DIPLOMA (DPLM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 913p | MARKET VALUE: | £1.03bn | |
| TOUCH: | 913p-915p | 12-MONTH HIGH: | 975p | LOW: 622p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 206p* | NET CASH: | £10.6m | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 260 | 46.0 | 27.9 | 14.4 |
| 2013 | 286 | 48.5 | 30.7 | 15.7 |
| 2014 | 306 | 49.8 | 31.4 | 17.0 |
| 2015 | 334 | 51.8 | 32.5 | 18.2 |
| 2016 | 383 | 54.0 | 33.9 | 20.0 |
| % change | +15 | +4 | +4 | +10 |
Ex-div: 1 Dec Payment: 25 Jan *Includes intangible assets of £171m, or 151p a share. | ||||
