Diploma PLC (LON:DPLM), the international group supplying specialised technical products and services, today issued a trading update for the year ending 30 September 2019.
Group
Trading has remained in line with our expectations with good underlying growth in Life Sciences and Controls and softer activity in the Industrial OEM Seals markets, as indicated at the Half Year. Reported revenues are expected to grow by ca. 13%, comprising underlying revenue growth of ca. 5% and with ca. 6% being contributed from acquisitions, net of disposals. Revenues are also likely to benefit from a ca. 2% currency tailwind.
Operating margin is expected to be modestly ahead of last year, benefitting from tight control of costs and operating leverage from growth in revenues.
Life Sciences
Underlying revenues are expected to be up ca. 7% with continued good growth across most Healthcare business areas and a strong contribution in the second half from the Environmental businesses.
Seals
Underlying revenues are expected to be ca. 1% ahead of last year with good progress within the Aftermarket businesses offsetting the slowdown in trading activity in the Industrial OEM Seals businesses, particularly in the US, against very strong comparatives. VSP has also made an encouraging contribution since joining the Group in July this year.
Controls
Underlying revenues are expected to be up ca. 7% with further strong growth from deeper penetration of Fasteners into the Aerospace market; we are starting to see slightly weaker activity in the largely UK based Interconnect and Fluid Controls businesses reflecting the impact from a delayed Brexit, but we are encouraged by positive developments in our Continental European businesses.
Financial position
The Group’s balance sheet remains strong and the business model is highly cash generative. Working capital at the year end will have improved to ca. 16% of revenues largely reflecting a reduction of inventories held at the Half Year to meet strategic priorities. At 30 September 2019 the Group is expected to be in a modest net debt position, following a stronger period for acquisition spend.
Acquisitions
The Group has spent ca. £65m on acquisitions in this financial year. We are pleased with the transition of VSP into the Group and are excited by its future growth potential. The Group remains disciplined in its approach to acquisitions and is in active discussions regarding further bolt-on opportunities.
Johnny Thomson, Group Chief Executive Officer commented:
“Diploma continues to have a good year. We are on track to deliver strong underlying growth with positive contributions from acquisitions and modest margin progression. We are delighted to welcome VSP into the Group – a great business and an excellent strategic fit. Despite more uncertain global markets, our growth opportunities are exciting, our business model remains resilient and successful, and my colleagues and I continue to build on these foundations for the future.”
The Group’s results for the year ending 30 September 2019 will be announced on 18 November 2019.
Notes:
1. This trading update is based upon unaudited management accounts and has been prepared solely to provide additional information on trading to the shareholders of Diploma PLC. It should not be relied on by any other party for other purposes. Certain statements made in this update are forward-looking statements. Such statements have been made by the Directors in good faith using information available up until the date that they approved this Statement. Forward-looking statements should be regarded with caution because of the inherent uncertainties in economic trends and business risks.
2. Diploma PLC uses alternative performance measures as key financial indicators to assess the underlying performance of the Group. All references in this Statement to “underlying” revenues refer to reported results on a constant currency basis and before any contribution from acquired or disposed businesses.
3. A copy of this Statement, together with further information about Diploma PLC, may be viewed on its website at www.diplomaplc.com
