- Strong first-half growth
- Robust underlying demand
- Full-year outlook increased
As we have said before, boring can be beautiful, and one company which exemplifies this is specialist distribution group Diploma (DPLM) which today raised its sales and earnings outlook again, sending analysts back to their spreadsheets.
The shares opened at £43.40, a gain of 11% on Friday’s close, before settling back at £41.88 for a gain of 7.3% putting them firmly at the top of the FTSE 100 leader board.
POSITIVE FIRST-HALF PERFORMANCE
Diploma operates three divisions: Controls, which supplies components including specialised wiring, Seals and Life Sciences, which includes consumables and instrumentation.
In the six months to the end of March, the firm grew its revenue by 10% to £638 million, with organic growth contributing 5% and acquisitions contributing 8% while foreign exchange moves produced a 3% headwind.
Like-for-like sales in Controls rose 7% thanks to market share gains and ‘structural tailwinds’, with the Windy City Wire subsidiary showing strong volume-led growth, while Life Sciences sales were up 5%. Seals sales were up just 1% although the firm expects a stronger second half now the destocking process is past and customers have gone back to their normal patterns of ordering.
Diploma made six acquisitions during the period for a total of £284 million, the largest of which – US-based Peerless Aerospace Fastener – cost £236 million but is expected to deliver an 8% increase in group earnings in its first year.
The company also invested in its existing business with three new state-of-the-art distribution facilities opened to support future sales in the UK and Europe.
MORE UPGRADES
Thanks to positive momentum in underlying demand and the contribution from recent acquisitions, the group now expects full-year constant-currency sales to increase 16% against its previous forecast of 11% and 13% growth in the first half, with organic growth contributing 6% and 10% coming from acquisitions.
Operating margins are now seen around 20.5% against a previous forecast of 19.7% and an actual margin of 19.6% in the first half, while basic EPS (earnings per share) are expected to increase by around 15% for the full year.
Today’s upgrade means analysts are going to have to go back to their spreadsheets for the second time in six months after the firm raised its outlook last November after publishing its 2023 results.
