Interim Management Statement

RNS Number : 2854Q

Diploma PLC

02 August 2010

 



DIPLOMA PLC

                                           12 CHARTERHOUSE SQUARE, LONDON EC1M 6AX

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FOR IMMEDIATE RELEASE

2 August 2010

DIPLOMA PLC

SECOND INTERIM MANAGEMENT STATEMENT

IN RESPECT OF YEAR ENDING 30 SEPTEMBER 2010

Diploma PLC, the international group of businesses supplying specialised technical products and services, is today issuing its second Interim Management Statement which relates to the period from 1 April 2010 to date.  This follows the recent Trading Update, released on 8 July 2010.

Trading

The stronger trend in trading activity in most of the Group's market segments has continued during the second half of the year with revenues for the year to date, 12% ahead of the comparable period in 2009.  Underlying revenues for the ten months ended 31 July 2010, after adjusting for currency effects and acquisitions, increased by ca. 8% against the comparable period last year.  As the result of a continuing emphasis on control of operating costs, operating margins have improved on the same period last year.

In the Life Sciences sector, year to date revenues are 11% ahead of the prior year comparable period, with growth driven principally by the strong performance in the Canadian Healthcare businesses and boosted by the strength of the Canadian $ relative to UK sterling.  In the European businesses, orders have increased, but these have yet to lead to a material increase in invoiced sales.  Operating margins have continued to strengthen through a combination of stronger gross margins in the Canadian Healthcare businesses and the effect of prior year cost reductions in the European businesses.

The Seals sector businesses have seen a sharp rebound in revenues, with year to date revenues 19% ahead of the comparable period last year.  The recent recovery in US industrial activity has led to a significant increase in revenues from those businesses more focused on OEM markets, such as RTD Seals and HKX.  US domestic Aftermarket revenues have improved at a more modest rate, having fallen less during the recession.  In Europe, Canada and other international markets, the Seals businesses have benefited from stronger industrial activity and sales have improved sharply on the comparable period last year.  The same operational gearing characteristics of the Seals businesses, that led to a fall in operating margins last year, have this year contributed to a strong improvement in operating margins.

The Controls sector businesses have seen revenues for the year to date improve by 7% on the same period last year.  The UK businesses have experienced better trading conditions in industrial markets and have benefited from a major upgrade to chilling systems by a number of UK food retailing groups.  The Military Aerospace and Defence markets have remained robust, but at more subdued levels than in the first half of the year.

In Europe, the businesses have benefited from stronger industrial activity in Germany, with revenues continuing to show a positive trend over the comparable period last year. 

Financial Position

The Group's cash flow generation has continued to be strong although, as anticipated at the Half Year, working capital has begun to increase in line with the increase in underlying trading activity.  As at 29 July 2010, the Group's cash funds, after paying an interim dividend to shareholders of £3.2m, were in excess of £31.0m, compared with £28.4m reported at 31 March 2010.

The Group continues to retain a committed multicurrency credit facility of £20.0m which expires in November 2010.  The Group is currently in discussions regarding replacement facilities, which should be confirmed by the year end.

There have been no other material changes in the position of the Group in the period since the publication of the Half Year Report for the six months ended 31 March 2010.

Outlook

The improving trend in revenues and operating margins will allow the Group to achieve strong progress in 2010 on the prior year. 

In the longer term, continued progress will be dependent on a combination of a sustained recovery in the Group's key geographic markets and on the successful execution of its strategy to accelerate growth through acquisition.

Notes:

1.   This Interim Management Statement, which is based upon unaudited management accounts, has been prepared solely to provide additional information to the shareholders of Diploma PLC in order to meet the requirements of the UK Listing Authority's Disclosure and Transparency Rules.  It should not be relied on by any other party, for other purposes.  Certain statements made in this Statement 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.   The Group's results for the year ending 30 September 2010 are expected to be released in mid November 2010.

3.   A copy of this Statement, together with further information about Diploma PLC, may be viewed on its website at www.diplomaplc.com

For further enquiries please contact:
Bruce Thompson, Chief Executive Officer	020 7549 5700
Nigel Lingwood, Group Finance Director	020 7549 5705
Simon Bloomfield, Bankside Consultants	020 7367 8861

NOTE TO EDITORS:

Diploma PLC is an international group of businesses supplying specialised technical products and services to the Life Sciences, Seals and Controls industries.

Diploma achieves stable growth and attractive margins from its focus on supplying specialised technical products to markets which value high levels of customer service, technical support and value adding activities.  A high proportion of revenues are generated from essential products and services funded by operating, rather than capital budgets.

The Group employs ca. 825 employees and its principal operating businesses are located in the UK, Germany, US and Canada.

Over the last five years, the Group has grown adjusted earnings per share at an average of ca. 16% p.a. through a combination of organic growth and acquisitions.  The current market capitalisation is ca. £285m.                                             

 

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