Diploma sees FY results in line after 'robust' H1

Diploma said on Wednesday that results for the full year should be in line with expectations following a "robust" first half.

In an update for the six months to 31 January 2019, the company said trading has remained robust, with good underlying growth across all sectors, particularly within controls. Underlying revenues are expected to be up 5% on the previous year, while reported revenues are expected to be up 10% at constant exchange rates, including a 4% contribution from acquisitions, net of disposals.

Meanwhile, operating margin is expected to be in line with the comparable period last year.

In the life sciences business, reported revenues are expected to grow around 5%, with particularly solid growth in Canadian Surgical and Endoscopy and Australian Diagnostics.

Diploma said the seals segment should see revenue growth of 4%, with a strong performance from North America in the second quarter offsetting a weaker first quarter, which was hit by initial delivery delays in the industrial original equipment manufacturing.

In the controls divisions, revenues are seen up around 8%, boosted by strong growth from deeper penetration into the aerospace market.

Chief executive officer Johnny Thomson said: "Diploma's performance in the first half has been robust. Despite the global macroeconomic uncertainties, the group remains on track to deliver good growth and modest margin progression for the full year in line with expectations.

"As I continue to learn more about the Diploma businesses, I am encouraged by the quality and passion of the people, the constant commitment to add value to our customers and the exciting prospects for continued growth."

RBC Capital Markets analyst Andrew Brooke said: "We continue to like Diploma for its strong positions in niche markets, its continued high returns and the ability to augment underlying growth with bolt-on/in-fill deals.

"However, we see the valuation (23.5x 19E PE) as starting to look stretched after the recent outperformance (+10% versus FTSE All share YTD) and already discounting further acquisition potential."

At 1010 GMT, the shares were down 0.6% to 1,412.44p.