Diploma is not immune from the current global economic malaise, but most of the products the company supplies relate to essential operational products rather than capital spending. So the demand for specialist technical products and services to the life sciences, seals and controls industries has fared better than most.
And while there has been some inevitable slowdown in demand, Diploma has been quick to rein in costs, so much so that headcount was reduced by 10 per cent to around 800 employees, with salary costs falling 6 per cent. All this has helped to boost free cash flow by a third to £23.5m, while operating margins were a creditable 16 per cent (17 per cent last year).
Diploma's life sciences division provided the most impressive performance, pushing operating profits up from £8.6m to £10.6m and margins up from 19.1 per cent to 21.2 per cent. However, after stripping out acquisitions and the weakness of sterling, revenue was broadly flat. The seals division was also boosted by these same factors which helped revenues rise 13 per cent to £48.2m. However, this masked weaker trading activity from the construction and industrial end markets and on an underlying basis divisional revenues fell by over 20 per cent. Overall, currency gains added £14.8m to group turnover and £2.4m to operating profits.
Panmure Gordon expects 2010 pre-tax profits of £25m and EPS of 14.5p (2009: £25.5m/15.6p).
| DIPLOMA(DPLM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 170p | MARKET VALUE: | £ 193m | |
| TOUCH: | 169-170p | 12-MONTH HIGH: | 175p | LOW: 90p |
| DIVIDEND YIELD: | 4.6% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 107p* | NET CASH: | £21.3m | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 111 | 17.2 | 10.5 | 4.0 |
| 2006 | 128 | 31.2 | 21.1 | 4.6 |
| 2007 | 141 | 22.3 | 12.7 | 5.4 |
| 2008 | 156 | 21.1 | 11.4 | 7.5 |
| 2009 | 160 | 20.5 | 10.8 | 7.8 |
| % change | +3 | -3 | -5 | +4 |
Ex-div:25 Nov Payment:13 Jan *Includes intangible assets of £82m or 72p a share | ||||
