It has been a year since Diploma’s (DPLM) longstanding chief executive, Bruce Thompson, stepped down. Unfortunately, the tenure of his replacement, Richard Ingram, was a relatively brief affair, as he announced his departure alongside a rather encouraging trading update in August. Despite this disruption, the group, which provides specialised technical products and services, delivered double-digit earnings and dividend growth at its September year-end.
Having upgraded expectations in its August update, profit came in ahead of analysts' forecasts, thanks in part to the cut in the US corporate tax rate, although tightened cost controls meant profitability improved as sales increased, with the adjusted operating margin rising 20 basis points to 17.5 per cent. Group sales benefited from an improved contribution from the seals business, which grew revenues by 10 per cent on an underlying basis on the back of strengthening industrial activity.
Acquisition spend was lower than expected for the year, at £20.4m versus management's targeted level of £30m-£40m. Finance director Nigel Lingwood said this was due to business owners wanting to take advantage of strong markets rather than selling out, but analysts predicted a worsening economic outlook could lead to more owners looking to sell.
Analyst Numis is forecasting adjusted pre-tax profit of £93.1m, giving EPS of 62.2p in 2019 (up from £84.8m and 56.5p in FY2018).
| DIPLOMA (DPLM) | ||||
| ORD PRICE: | 1,384p | MARKET VALUE: | £1.57bn | |
| TOUCH: | 1,382-1,385p | 12-MONTH HIGH: | 1,483p | LOW: 1,039p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 257p* | NET CASH: | £36m | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 306 | 49.8 | 31.4 | 17.0 |
| 2015 | 334 | 51.8 | 32.5 | 18.2 |
| 2016 | 383 | 54.0 | 33.9 | 20.0 |
| 2017 | 452 | 66.8 | 42.0 | 23.0 |
| 2018 | 485 | 72.7 | 47.5 | 25.5 |
| % change | +7 | +9 | +13 | +11 |
| Ex-div: | 29 Nov | |||
| Payment: | 23 Jan | |||
| Includes intangible assets of £184m, or 162p a share | ||||
