Diploma passes gruelling test

The adjusted operating margin tightened by 0.4 percentage points to 18.1 per cent, but stayed within its five-year average, reflecting careful cost control and a decent showing from acquisitions. Indeed, new arrivals delivered sales growth of 11 per cent, compared with organic underlying revenue growth of just 1 per cent.

Both Diploma's life sciences and seals businesses grew underlying revenue by 4 per cent as they overcame tepid trading environments. That included swelling cost controls in hospitals weighing on demand for the group's medical devices and consumables, while cutbacks in mining and oil and gas industries depressed US industrial spending in the second half.

Despite these challenges, boss Bruce Thompson reaffirmed his confidence that new products and customers should ensure that Diploma's growth continues to outpace GDP. He also plans further acquisition spending of £25m to £30m in the year ahead to help achieve the group's double-digit growth target. The 7 per cent rise in free cash flow to £40m should help to finance investments.

Broker Numis Securities expects adjusted pre-tax profit of £63m in the year to September 2016, giving adjusted EPS of 40p, up from £59.6m and 37.2p in FY2015.