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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