Diploma remains on target as European strength boosts revenue growth

Diploma on Wednesday reported trading in line with expectations and said it is on track to deliver double-digit annual revenue growth thanks to a strong showing from its life sciences and controls divisions.

The technical products supplier said reported revenue was expected to come in around 13% higher than last year's figure of £134.7m for the 12 months ended 30 September, with underlying revenue set to grow by 5%, a further 6% being contributed by acquisitions and a 2% benefit from currency tailwinds.

Underlying revenues from the life sciences division are expected to be up by 7% after good growth across most healthcare business areas and the environmental businesses, while the controls division's revenue is also set to rise 7% after positive trading developments in Continental Europe more than offset weakness in the UK.

Diploma said underlying revenue from the seals division is expected to be 1% ahead of last year after good progress within the US against very strong comparatives, while VSP has also made an encouraging contribution since joining the group in July this year.

Meanwhile, the operating margin is expected to be modestly ahead of last year, benefiting from tight control of costs and operating leverage from growth in revenues.

Diploma said its balance sheet remains strong, with working capital at the year end set to have improved to around 16% of revenues, though the group is still expected to be in a modest net debt position following a stronger period for acquisition spend.

The company spent £65m on acquisitions during the year and said "active discussions" regarding further bolt-on opportunities are ongoing.

Chief executive Johnny Thomson said: "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."

Diploma shares were up 0.65% at 1,562.03p at 0809 BST.