Diploma’s (DPLM) first update since the retirement of long-serving chief executive Bruce Thompson shows improvements in underlying revenues across all the business segments, with an overall constant-currency growth rate of 12 per cent. Adjusted EPS increased by the same margin, partly as a consequence of the overhaul of corporate tax in the US, while the group, a provider of specialised technical products, also managed to increase the underlying operating margin by 10 basis points to 17.3 per cent.
Negative currency translations constrained reported revenues, although this was largely offset by a strengthening trading environment. The latter dynamic resulted in a £7.5m increase in inventory levels, as group businesses sought to lock in competitive prices and secure inputs as a number of supply chains approached full capacity. The proportion of working capital to revenue increased by 80 basis points to 15.8 per cent, which fed through to a 14 per cent reduction in free cash flow to £17.7m – working capital demands are likely to remain heightened throughout the second half.
Analysts at Numis increased forecasts and now expect adjusted pre-tax profit of £82.6m, giving EPS of 54.5p in the year to September 2018 (from £77.5m and 49.8p in 2017).
| DIPLOMA (DPLM) | ||||
| ORD PRICE: | 1,229p | MARKET VALUE: | £1.39bn | |
| TOUCH: | 1,228-1,229p | 12-MONTH HIGH: | 1,270p | LOW: 1,010p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 231p* | NET CASH: | £17.7m | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 217 | 32.9 | 21.0 | 7.0 |
| 2018 | 235 | 35.4 | 23.0 | 7.7 |
| % change | +8 | +8 | +10 | +10 |
| Ex-div: | 24 May | |||
| Payment: | 13 Jun | |||
| *Includes intangible assets of £167m, or 147p a share | ||||
