Interim Management Statement

RNS Number : 2912Z

Diploma PLC

12 January 2011

 



DIPLOMA PLC

                                           12 CHARTERHOUSE SQUARE, LONDON EC1M 6AX

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FOR IMMEDIATE RELEASE

12 January 2011

DIPLOMA PLC

FIRST INTERIM MANAGEMENT STATEMENT

IN RESPECT OF THE YEAR ENDING 30 SEPTEMBER 2011

Diploma PLC, the international group of businesses supplying specialised technical products and services, is today issuing its first Interim Management Statement of its new financial year, ahead of the Company's AGM to be held today at Brewers Hall, Aldermanbury Square, London, EC2V 7HR at 12.00 midday. This Statement relates to the period from 1 October 2010 to date and therefore includes the first quarter's trading.

Trading

In what is traditionally the quietest trading quarter of the financial year, activity across the Group's market segments has continued at similar levels to the final fiscal quarter of FY2010. Against a weak comparative, Group revenues in the quarter ended 31 December 2010 are 25% ahead of the comparable period in FY2010. Underlying revenues, after adjusting for currency effects and acquisitions, increased by ca. 17% against the comparable period last year.  Margins also strengthened, largely driven by operational leverage.

In the Life Sciences sector, revenues are 17% ahead of the comparable period last year with growth driven by the acquisition of the Healthcare business, BGS, a further strengthening in the C$ relative to UK sterling and a strong performance from the European Environmental business. 

Revenues in the Seals sector, which have benefited from the recent acquisition of All Seals and from strengthening in the US$, increased by almost 50% against the prior year comparative. The recovery in the Seals market, which began to emerge in the second fiscal quarter of FY2010, continues to be driven by the performance of the OEM businesses in both the US and Europe, as well as by a strengthening Aftermarket.

In the Controls sector, revenues increased by ca. 13% on the comparable period last year. Both the UK and German businesses experienced softer Defence markets, but continue to benefit from strong trading activity in the broader General Industrial markets.

Acquisition of Carsen Medical Inc

As previously announced, the Group completed the acquisition on 21 December 2010 of Carsen Medical Inc ("CMI"), a leading distributor of medical devices and related consumables and services to GI Endoscopy suites in hospitals and private clinics across Canada. The initial cash consideration paid for the business, which was met from the Group's existing cash resources, was £14.2m (C$22.5m), before acquisition costs. The addition of CMI to Diploma's Healthcare business in Canada will provide considerable opportunity for accelerating growth and increasing penetration in the GI Endoscopy market, by offering a more complete range of products to existing and new customers.

Acquisition of Minority Interests

On 7 January 2011, pursuant to the Sale and Purchase Agreement dated 28 July 2007 for the acquisition of AMT Vantage Inc, the Group acquired 4% of the outstanding shares from a minority shareholder for consideration of £2.0m (C$3.1m). The Group, whose shareholding in AMT has now increased from 75% to 79%, is in discussion with the remaining minority shareholders in AMT regarding the purchase of their shares.

Financial Position

As indicated in the FY2010 Annual Report, working capital as a percentage of revenue at 30 September 2010 was unusually low compared with historic trends. However, with continuing strong trading activity, working capital has returned to levels both more appropriate to support current activity and consistent with seasonal historic trends. In the first fiscal quarter, the Group generated free cash flow of ca. £2m and after expenditure on acquisitions of ca. £15m, the Group's cash balances at 31 December 2010 were ca. £17m. In January 2011 the Group paid dividends to minority shareholders of £2.1m. The Group maintains an unutilised three year committed multi-currency facility of £20m which was renewed in November 2010.

There have been no other significant changes in the position of the Group in the period since the publication of the Annual Report for the year ended 30 September 2010.

Outlook

The continuing strength in revenues and operating margins, together with contributions from recent acquisitions, provides confidence that the Group should achieve good progress in 2011. 

The next update on trading is expected to be issued in March 2011, prior to entering the close period in respect of the Half Year results for the six months ending 31 March 2011.

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.   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. 875 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. 14% p.a. through a combination of organic growth and acquisitions.  The current market capitalisation is ca. £330m.

 

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