- Group posts strong first half results
- Sales bolstered by organic growth and price hikes
- Full year targets maintained
Shares in industrial and life sciences equipment supplier Diploma (DPLM) fell 4% to £24.96 even though the firm delivered an upbeat first half report and stuck to its recently raised guidance.
‘We are not complacent about the economic outlook, but the second half has started really well and we are confident in our upgraded full year guidance’, commented chief executive Johnny Thomson.
SOLID UNDERPINNINGS
For the six months to March the company registered a 23% increase in revenues to £448.5 million thanks to 16% underlying growth.
As well as seeing continued positive demand for its products, the firm passed through a 5% price hike to offset higher copper costs.
The company said it successfully navigated supply chain challenges along with inflation in materials and labour costs, increasing its operating margin by 0.2% to 18.4% during the half.
The controls business delivered a 28% increase in revenues thanks to an ‘excellent’ contribution from WCW, while sales in the seals business rose 15% helped by ‘accelerated market share gains’ in the North American after-market.
Life sciences revenues were slightly disappointing, falling 2% on an underlying basis excluding last year’s Covid-related revenues, due to renewed lockdowns this year in Australia and Canada.
However, life sciences sales are expected to return to positive growth in the second half.
BUILDING FOR FUTURE GROWTH
On top of its resilient underlying revenues, the firm continues to use its strong free cash flow generation to buy high-quality scalable businesses to underpin future organic growth.
LJR Electronics was acquired in January for £21 million, expanding the group’s offering in the US controls market, while R&G Fluid Power was acquired in April, after the period end, for £100 million to build scale in the UK seals market.
Finally, Irish life sciences and med-tech distributor Assuscience was acquired for £51 million, increasing the group’s exposure to the high-growth diagnostics market at an attractive multiple.
The firm said the second half had got off to a good start and it was confident in the materially-upgraded full-year guidance it issued in April.
Underlying revenue continues to increase at low double digits, and while growth will moderate in coming quarters as comparison get tougher new acquisitions will ensure sales momentum remains positive.
