Diploma's underlying first half profits slipped 5 per cent to £12.4m, but the specialist distribution group still returned a solid performance in tough trading conditions, and the shares rose over 3 per cent on the results. And despite spending £10.2m on acquisitions, the company retained a cash rich balance sheet as free cash flow in the six-month period improved from £5.4m to £7.1m.
Diploma supplies specialised products to the life sciences, seals and controls industries and exposure to the current economic malaise has been limited because a high proportion of income is generated from selling essential products funded by operating rather than capital budgets. Even so, the seals division faced tough trading in the US, not so much on the repair and maintenance side but due to lower demand from original equipment manufacturers which were impacted by destocking by their customers. Operating profits slipped 7 per cent to £2.5m, but adjusting for currency effects and acquisitions, this actually represented an underlying fall of 18 per cent.
Profits in Diploma's controls division suffered, too, falling by 9 per cent to £4.8m. The business generates around 60 per cent of revenues within the UK and operating margins - down from 15.6 per cent to 14.9 per cent - were dented by sterling's weakness as a significant number of products are sourced from outside the UK. In addition, revenus were weak in motorsport due to a series of cost cutting measures, including in Formula One, and cutbacks in sponsorship by the major car makers.
Broker Panmure Gordon expects full-year pre-tax profits of £25.2m and EPS of 14.7p (£27.5m and 16.4p in 2008).
for a guide to the terms used in IC results tables
For more analysis of company results as they're released, go to www.investorschronicle.co.uk/results
| DIPLOMA(DPLM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 120p | MARKET VALUE: | £136m | |
| TOUCH: | 122-125p | 12-MONTH HIGH: | 192p | LOW: 92p |
| DIVIDEND YIELD: | 6.3% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 107p* | NET CASH: | £5.5m | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 85.3 | 11.5 | 6.4 | 2.5 |
| 2009 | 88.0 | 9.7 | 5.0 | 2.5 |
| % change | +3 | -16 | -22 | - |
Ex-div:20 May Payment:17 Jun *Includes intangible assets of £84m or 74p a share | ||||
