Interim Results
Diploma PLC
22 May 2001
DIPLOMA PLC
NEWS RELEASE
22 May 2001
INTERIM RESULTS FOR 6 MONTHS ENDED 31 MARCH 2001
HIGHLIGHTS
Six months ended Year ended
31 March 30 September
2001 2000 2000
Group Sales £51.1m £46.9m £93.6m
Operating profit from continuing businesses,
before exceptionals £4.9m £3.9m £7.6m
Profit before tax and before exceptionals £6.1m £5.3m £10.4m
Profit before tax after exceptionals £4.7m £10.7m £8.5m
Earnings per share* 10.4p 17.9p 10.5p
Adjusted earnings per share* 16.0p 7.1p N/A
Dividends per share 5p 5p 12p
Net assets per share** 219p 205p 211p
- Sale of Special Steels businesses for £11.1m substantially completes
Corporate re-structuring programme
- Operating profit from continuing businesses, before exceptionals, up
25% to £4.9m from £3.9m
- Pre-tax profits (before exceptionals and minorities) up 15% to £6.1m
from £5.3m
- Operating cash flow good with continuing businesses generating
£4.6m.
- Net cash balance at end of period increased to £32.2m representing
128p per share.
* Earnings per share for the six months to 31 March 2000 are based on the old
Diploma PLC's 50.3m issued shares. Earnings per share for the year to 30
September 2000 reflect the reduction in the number of issued shares to 25.2m
new Diploma PLC shares as part of the Scheme of Arrangement implemented in
April 2000.
** Assets per share for 31 March 2000 relate to the old Diploma PLC's 50.3m
issued shares.
For further information please contact:-
Bruce Thompson, Chief Executive Officer
Diploma PLC 020 7638 0934
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2001
CHAIRMAN'S STATEMENT
STRATEGIC & FINANCIAL OVERVIEW
With the sale of the principal Special Steels businesses in March 2001, we
have now substantially completed the corporate re-structuring programme,
designed to re-focus the Group on growing specialised distribution businesses.
Over £90m has been generated from divested businesses of which ca. £60m has
been returned to shareholders and ca. £30m retained for funding future growth.
For the continuing operations, now focused on Specialised Distribution, first
half performance was strong. In the six months ending March 31, 2001,
turnover at £51.1m was 9% increased over the comparable period (£46.9m).
Operating profit from the continuing activities, before exceptionals,
increased by 25% to £4.9m (£3.9m). Interest received and profits from
operations divested in the period totalled £1.2m (£1.4m) leaving a profit
before tax, exceptional items and minority interests up 15% to £6.1m (£5.3m).
Pre-tax margins (before exceptionals) increased to 11.9% from 11.3%. Cash
flow from operating activities was good with continuing businesses producing £
4.6m.
Towards the end of the period, the divestments of Henry Whitham & Son Ltd. and
Carbon & Alloy Metals Inc. were completed. These disposals, along with the
sale of certain properties and several minor adjustments relating to prior
divestments, generated net exceptional losses of £1.1m but cash receipts of £
11.5m. The net cash balance at the end of March 2001 was £32.2m or 128p per
share.
Unadjusted earnings after tax and minority interests were £2.7m or 10.4p per
new Diploma share, against £9.0m or 17.9p per old Diploma share (n.b. the
number of shares in issue reduced from 50.3m old Diploma shares to 25.2m new
Diploma shares as part of the April 2000 Scheme of Arrangement). After
excluding exceptional items, adjusted earnings after tax and minority
interests were £4.1m (£3.6m) or, expressed in earnings per share terms, 16.0p
per new Diploma share (7.1p per old Diploma share).
We intend to make an interim dividend payment of 5.0p (5.0p) per new Diploma
share on 2 July 2001, to shareholders on the register at 1 June 2001.
Consideration to any increase to the total dividend for the year will be given
at the time of the final payment.
SPECIALISED DISTRIBUTION
Specialised Distribution comprises the new core of distribution businesses
focused on growth markets including Pharmaceutical, Biotechnology, Aerospace,
Motorsport and RMO supplies (repair and maintenance operations). Combined
sales of these businesses increased by 15% to £35.5m (£30.8m) with operating
profits up by 19% to £5.7m (£4.8m). Return on sales was an average of 16% and
an annualised return of 59% was generated on the £19m of capital invested in
these operations.
Life Sciences
This business area, centred on Anachem, supplies the Pharmaceutical &
Biotechnology industries with a range of analytical instrumentation,
consumables and related services. Sales and operating profits increased 14%
and 12% respectively over the comparable period.
The sales of the more traditional capital products to the pharmaceutical
sector were relatively static overall but there were strong contributions from
the sale of mass spectrometry equipment and from Anachem's ReactArray process
optimisation software. The pipettes and laboratory plastics business scored
modest gains in a highly competitive environment by continuing to
differentiate the products through promotional activity and a strong linkage
to product calibration and servicing.
Growth was generated from the newer genomics products supplied under the a1
Biotech brand in the UK and Germany and sales were boosted by the completion
of a large single order to supply a number of High Throughput genomic systems
for use in the largest DNA screening project in Europe. The environmental
business, which focuses on the detection and analysis of air and water
pollutants, recorded strong sales in the period of its portable gas detection
range and successfully introduced a new generation of water quality
analysers.
Interconnect
The IS Group, comprising Rayfast and Sommer, and Abacon are distributors of
high performance wiring, thermal shrink fit components and interconnect
products supplied into high technology applications including Aerospace,
Motorsport and Defence. Sales and operating profit in these businesses
increased by over 20%.
Rayfast had an exceptionally strong first half with strong trading activity
across most end-user markets. Sommer showed continued progress with good
sales and order growth and the establishment of sales locations in Munich and
Berlin. Abacon made a small profit contribution in the half year.
Investment was made in the infrastructure for these operations to support
growth, with the consolidation of Sommer's physical operations into a single
new facility completed in March 2001 and Rayfast expanding into adjacent
leased facilities.
Seals and Components
Hercules, the principal company in this business area, is a catalogue-based
distributor of hydraulic seals and seal kits, supplied for repair and
maintenance applications into a broad range of mobile machinery markets in
North America. In US$ terms, sales were flat and operating profits fell back
by 17%, though the stronger UK/US exchange rate mitigated the impact to some
extent.
The slowdown in the US undoubtedly had an impact with mobile equipment fleets
under-utilised and being repaired less frequently. Hercules broadly
maintained market share but this has been at the expense of somewhat lower
margins, with increased promotional activity, lower freight rates and targeted
response to competitive price discounting. FPE has made steady progress with
modest increases in sales and profit in a UK market which has held up better
than the US but is still not buoyant. All FPE's physical distribution
facilities have now been centralised at one facility and investment has been
made in new seal catalogues and product line extensions.
DISCONTINUED AND NON-CORE BUSINESSES
These businesses together had broadly flat sales of £15.6m (£16.1m) but
generated operating profits of £0.8m compared with a loss of £0.3m in the
comparable period principally due to an improvement in the oilfield equipment
markets served by the Special Steels activities.
As with previous divestments, the up-turn in the business cycle improved the
saleability of the companies affected. In March 2001, the sale was completed
of Henry Whitham & Son Ltd and the 80% shareholding in Carbon & Alloy Metals
Inc. for a cash consideration of £11.1m. The consideration will be subject to
an adjustment based on net asset value at completion. The attributable net
assets at completion were estimated to be £12.5m. All relevant goodwill had
already been written off through the Group's profit and loss account.
PROSPECTS
The divestment of the Group's lower margin, more mature businesses on
declining profit trends is now substantially complete. We are now able to
concentrate our efforts on the further development of the new core of
Specialised Distribution businesses with potential for long term growth.
Retained cash balances of over £30m or 128p per share give the resources for
investing in organic growth and in funding complementary acquisitions in our
new core business areas.
A strong performance in the first half of the year provides a good foundation
for achieving full year profit estimates, despite the general economic
uncertainty in our major markets and the lost profit contribution from
divested businesses in the second half.
On a personal note and after contributing some thirty-odd years of line
management to our company, I am today stepping down from an executive role but
will continue as the non-executive chairman. I do so in the confidence that
the executive management of the company is in very good hands.
Christopher Thomas
Chairman
22 May 2001
DIPLOMA PLC - GROUP PROFIT AND LOSS ACCOUNT
Six months Six months Year ended
ended ended
31 March 2001 31 March 2000 30 Sept 2000
Note Turnover Profit Turnover Profit Turnover Profit
£m £m £m £m £m £m
Continuing operations 37.9 5.7 33.2 4.6 68.1 9.2
Discontinued operations 13.2 0.7 13.7 (0.1) 25.5 0.5
____ ____ ____ ____ ____ ____
2 51.1 6.4 46.9 4.5 93.6 9.7
____ ____ ____
Head office expenses (0.9) (0.9) (1.9)
Rental Income 0.1 0.2 0.3
____ ____ ____
Operating profit before 5.6 3.8 8.1
exceptional item
Exceptional item - 3a - - (7.0)
Goodwill provision
____ ____ ____
Operating profit after 5.6 3.8 1.1
exceptional item
Exceptional items - Non 3b (1.4) 5.4 5.1
operating
____ ____
____
PROFIT BEFORE INTEREST 4.2 9.2 6.2
Net interest income 0.5 1.5 2.3
____ ____ ____
PROFIT ON ORDINARY
ACTIVITIES BEFORE TAX 4.7 10.7 8.5
Taxation 4 (1.9) (1.6) (4.2)
____ ____ ____
PROFIT ON ORDINARY
ACTIVITIES AFTER TAX 2.8 9.1 4.3
Minority interests (0.1) (0.1) (0.2)
____ ____ ____
PROFIT FOR THE FINANCIAL 2.7 9.0 4.1
PERIOD
Dividends (1.3) (1.3) (3.0)
____ ____ ____
RETAINED PROFIT 1.4 7.7 1.1
____ ____ ____
EARNINGS PER SHARE:
On profit for the 10.4p 17.9p 10.5p
financial period
Elimination of 5.6p (10.8p) N/A
exceptional items
____ ____
Adjusted 16.0p 7.1p N/A
____ ____ ____
DIVIDENDS PER SHARE 5p 5p 12p
____ ____ ____
DIPLOMA PLC - GROUP BALANCE SHEET
31 March 31 March 2000 30 Sept 2000
2001
£m £m £m £m £m £m
Tangible fixed assets 12.8 16.7 16.3
Intangible fixed assets 1.7 1.4
1.4
____ ____ ____
14.5 18.1 17.7
Current assets
Stocks 13.0 18.6 21.3
Debtors 13.5 20.6 16.5
Cash at bank and in hand 32.2 69.2 19.2
____ ____ ____
58.7 108.4 57.0
____ ____ ____
Creditors - amounts falling due
within one year
Bank overdrafts - 0.2 0.1
Bank loan - -
Taxation 3.1 4.2 2.9
Dividend payable 1.3 1.3 1.8
Other creditors 12.7 12.7 14.4
____ ____ ____
17.1 21.4 19.2
____ ____ ____
Net current assets 41.6 87.0 37.8
____ ____ ____
Total assets less current 56.1 105.1 55.5
liabilities
Creditors - amounts falling due
after more than one year
Provisions 0.4 0.4 0.4
____ ____ ____
Net assets employed 55.7 104.7 55.1
____ ____ ____
Capital and reserves
Called-up share capital 1.3 2.5 1.3
Capital redemption reserve - 0.4 -
Share premium account - 12.7 -
Profit and loss account 53.7 87.5 52.0
____ ____ ____
Shareholders' funds 55.0 103.1 53.3
Minority interests 0.7 1.6 1.8
____ ____ ____
55.7 104.7 55.1
____ ____ ____
DIPLOMA PLC - GROUP CASH FLOW
Six months Six months Year
ended ended ended
31 March 2001 31 March 2000 30 Sept 2000
£m £m £m £m £m £m
Operating profit 5.6 3.8 8.1
Depreciation 0.9 1.0 2.0
Profit on sale of fixed assets (0.2) 0.2 -
(Increase) / decrease in stocks (1.4) 0.9 (1.0)
(Increase) in debtors (2.1) (1.6) (1.5)
Increase in creditors 1.8 1.1 2.7
____ ____ ____
Cash flows from operating activities 4.6 5.4 10.3
Investment returns and servicing of
finance
Net interest received 0.5 1.5 2.3
Taxation (1.3) (0.5) (2.3)
Capital expenditure
Purchase of tangible fixed assets (0.9) (1.4) (2.7)
Sale of tangible fixed assets 0.7 1.1 2.4
____ ____ ____
(0.2) (0.3) (0.3)
Acquisitions
Acquisition of shares in subsidiaries (0.8) (1.2) (1.1)
Disposals
Disposals proceeds 11.1 42.0 43.3
Net overdrafts in disposals 0.9 1.6 1.7
____ ____ ____
12.0 43.6 45.0
Equity dividends paid (1.8) (2.3) (3.6)
Management of liquid resources
Sale of current asset investments - - 3.0
____ ____ ____
Cash flows before financing 13.0 46.2 53.3
Financing
Return of capital - - (50.3)
Return of capital - exceptional cost - - (0.4)
Repayment of loan - - (3.3)
____ ____ ____
Movement in cash in period 13.0 46.2 (0.7)
Cash at beginning of period 19.2 24.5 24.5
Overdrafts at beginning of period (0.1) (1.7) (1.7)
Bank loans at beginning of period - (2.9) (2.9)
____ ____ ____
Net funds at beginning of period 19.1 19.9 19.9
Cash from increase in liquid resources - - 0.3
Currency translation variance 0.1 (0.1) (0.4)
Cash at end of period 33.6 69.2 19.2
Overdrafts at end of period (1.4) (0.2) (0.1)
Bank loans at end of period - (3.0) -
____ ____ ____ ____ ____ ____
Net funds at end of period 32.2 66.0 19.1
____ ____ ____
Notes to the Interim Accounts
1. The figures for the six months ended 31 March 2001 are for Diploma
Holdings PLC which was acquired by Diploma PLC under the Scheme of Arrangement
which came into effect on 17 April 2000.
2. Segmental Analysis before exceptional items
Six months Six months Year ended
ended ended
31 March 2001 31 March 2000 30 Sept 2000
Turnover Profit Turnover Profit Turnover Profit
£m £m £m £m £m £m
Continuing Operations
Specialised Distribution 35.5 5.6 30.8 4.8 63.6 9.4
Special Steels and Building 2.4 0.1 2.4 (0.2) 4.5 (0.2)
Products
____ ____ ____ ____ ____ ____
37.9 5.7 33.2 4.6 68.1 9.2
____ ____ ____ ____ ____ ____
Discontinued Operations
Electronic Components - - - - 1.0 0.1
Special Steels and Building 13.2 0.7 13.7 (0.1) 24.5 0.4
Products
____ ____ ____ ____ ____ ____
13.2 0.7 13.7 (0.1) 25.5 0.5
____ ____ ____ ____ ____ ____
Total Turnover 51.1 46.9 93.6
==== ==== ====
Head office expenses (0.9) (0.9) (1.9)
Rental Income 0.1 0.2 0.3
____ ____ ____
Operating profit before 5.6 3.8 8.1
exceptional items
==== ==== ====
3. a Exceptional item - Goodwill provision
As a result of an impairment review, goodwill previously written off to
reserves in respect of certain businesses was provided against; the amount of
the provision was credited to reserves with no net effect on Group net asset
value.
b Exceptional items - non-operating
Six Six
months months Year
ended ended ended
31 March 31 March 30 Sept
2001 2000 2000
Profit Profit Profit
£m £m £m
Disposals:-
- (Deficit)/Surplus of proceeds
over net asset value (1.6) 7.6 6.4
- Goodwill previously written off - (1.4) (1.4)
to reserves
____ ____ ____
(Loss)/Profit on disposals (1.6) 6.2 5.0
Cost of Scheme of Arrangement - (0.4) (0.4)
Profit/(loss) on sale of properties 0.2 (0.4) 0.5
____ ____ ____
(1.4) 5.4 5.1
==== ==== ====
4. Taxation
Six Six
months months Year
ended ended ended
31 March 2001 31 March 2000 30 Sept 2000
£m £m £m
On Operating Profit and 1.9 1.6 3.2
Interest
On Exceptional Items - - -
Exceptional item -
provision against ACT
recoverable - - 1.0
____ ____ ____
1.9 1.6 4.2
==== ==== ====
5. Reconciliation of movement in shareholders' funds
Six Six
months months Year
ended ended ended
31 March 31 March 30 Sept
2001 2000 2000
£m £m £m
Retained profit 1.4 7.7 1.1
Return of Capital - - (50.3)
Goodwill written back on disposals - 1.4 1.4
Goodwill on impairment review written back - - 7.0
Currency translation variances 0.6 0.1 0.8
Tax on currency translation (0.3) - (0.6)
____ ____ ____
1.7 9.2 (40.6)
Shareholders' funds at beginning of period 53.3 93.9 93.9
_____ ____ ____
Shareholders' funds at end of period 55.0 103.1 53.3
==== ==== ====
6. This interim report is unaudited, has not been reviewed by the
auditors and has been prepared using the accounting policies set out in the
Annual Report and Accounts for the year ended 30 September 2000. The financial
information for the full year 2000 has been extracted from the statutory
accounts of the Group on which the auditors gave an unqualified report. A
copy of those accounts has been filed with the Registrar of Companies.
Diploma PLC's Registered Office is at 20 Bunhill Row, London, EC1Y 8UD.
Registered Number 3899848
Tel: 020 7638 0934 Fax: 020 7638 7651
E-mail : Reception@diplomaplc.com
Web site : www.diplomaplc.com
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