The trend in recent times has been for technical components manufacturer Diploma (DPLM) to supplement modest organic growth with acquisitions. The first half of its 2017 financial year has been a departure from the norm. The group increased revenues by 6 per cent on an constant-currency, underlying basis, while acquisitions contributed just 1 per cent.
The top-line growth was driven by a 16 per cent jump in underlying revenues at the group's second-largest division, which deals in specialised wiring, connectors, fasteners and control devices. Some of this came from a low base in the comparative period, but new projects and a recovery in end markets helped. Although less impressive, revenue at both its life sciences and seals divisions were up 2 per cent on an underlying basis.
This does not mean that the acquisition-led strategy is set to slow down. While activity in the reported period was limited to paying £800,000 in deferred consideration and expenses, the group completed two acquisitions in April for a combined cost of £17.1m, expanding capabilities in both healthcare components and industrial seals for heavy machinery and other equipment. Management said the acquisition pipeline "remains encouraging".
Analysts at Numis are forecasting adjusted profit before tax of £74.5m, giving adjusted EPS of 47.2p in the year to September 2017 (up from £64.9m and 40.5p in FY2016).
DIPLOMA (DPLM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,100p | MARKET VALUE: | £1,24bn | |
| TOUCH: | 1099-1100p | 12-MONTH HIGH: | 1,187p | LOW: 736p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 217p* | NET CASH: | £14.8m | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2016 | 179 | 25.6 | 16 | 6.2 |
| 2017 | 217 | 32.9 | 21 | 7.0 |
| % change | +21 | +29 | +31 | +13 |
Ex-div: 25 May Payment: 14 Jun *Includes intangible assets of £168m, or 148p a share | ||||
