Interim Results
Diploma PLC
12 May 2003
12 May 2003
Announcement of Interim Results for Half Year ended 31 March 2003
Unaudited Audited
Half year ended Half year ended Year ended
31 March 2003 31 March 2002 30 Sept 2002
Turnover from continuing businesses £36.4m £36.6m £73.7m
Operating profit from continuing businesses,
before exceptional items and goodwill
amortisation £4.4m £4.1m £8.9m
Profit before tax, exceptional items and
goodwill amortisation £4.9m £4.6m £9.9m
Profit before tax, after exceptional items £6.9m £4.8m £10.1m
Adjusted earnings per share 15.0p 13.5p 29.4p
Basic earnings per share 23.8p 15.2p 31.2p
Dividends per share 5.0p 5.0p 14.0p
Net assets per share 245p 221p 225p
• Profit before tax, exceptional items and goodwill amortisation up 6.5%
from £4.6m to £4.9m; operating margin of 12.1%.
• Disposal of first seven acres of Stamford land completed contributing
to exceptional profits of £2.2m; development planning for a further 20
acres continues.
• Earnings per share, after adjusting for exceptional items and goodwill
amortisation, up 11.1% at 15.0p; basic earnings per share 23.8p.
Unchanged interim dividend of 5.0p per share.
• Strong operating cash flow of £4.4m and proceeds of £2.7m from sale of
properties; net funds of £30.1m at end of period.
• Resource focused on searching out and reviewing potential acquisition
opportunities to expand the Group's activities.
Commenting on the Half Year results, Bruce Thompson, Diploma's Chief Executive
said:
'The Group has demonstrated the resilience of its operating businesses in
difficult market conditions.
These characteristics are likely to continue in the second half of the year.'
For further enquiries please contact:
Bruce Thompson, Chief Executive Officer 020 7638 0934
Nigel Lingwood, Group Finance Director 020 7448 4875
Ian Seaton, Bankside Consultants 020 7444 4157
Heather Salmond, Bankside Consultants 020 7444 4148
NOTE TO EDITORS:
Diploma PLC is a specialised international distribution group of businesses
operating in three sectors:
Life Sciences - supply of Instrumentation, Consumables and Service to the
research laboratories of the major pharmaceuticals and biotechnology companies,
universities and research institutions. Principal companies are Anachem in the
UK and a1 - technologies in Germany.
Seals & Components - a next day delivery service for hydraulic seal kits,
cylinder components and gaskets, supplied to repair and maintenance operations
(RMOs) serving a broad range of mobile machinery aftermarkets. Principal
companies are Hercules Bulldog Sealing Products in North America and FPE in the
UK.
Interconnect - supply of high performance wiring, thermal shrink components,
fasteners and interconnect products into Defence, Aerospace, Motorsport and
Commercial Electronics markets throughout Europe. Principal companies are IS
Rayfast and Clarendon in the UK and Sommer in Germany. IS Motorsport, based in
the UK, also has a start-up operation in the US.
Within each of these sectors, the Diploma businesses serve industry segments
with long term growth potential and with the opportunity for sustainable
superior margins through the quality of customer service, depth of technical
support and value adding activities.
In the year to 30 September 2002, Diploma reported sales of £74m and pretax
profits of over £10m.
________________________________________
HALF YEAR REVIEW TO 31 MARCH 2003
In the six months to 31 March 2003, the Group continued to demonstrate the
resilience of its operating businesses in difficult market conditions. Sales of
the continuing businesses were broadly flat at £36.4m (2002 : £36.6m), but
profit before amortisation of goodwill, exceptional items and tax increased 6.5%
to £4.9m from £4.6m. After goodwill amortisation and exceptional items, profit
before tax increased to £6.9m from £4.8m last year, reflecting an exceptional
profit of £2.2m made on the sale of property.
Adjusted earnings per share, which are stated after excluding exceptional items
and goodwill amortisation, increased 11.1% to 15.0 pence compared with 13.5
pence in the first half of last year. Basic earnings per share were 23.8 pence
compared with 15.2 pence in the comparable period.
The Directors have declared an interim dividend of 5.0 pence per share (2002 :
5.0 pence) payable on 23 June 2003 to shareholders on the register on 23 May
2003.
It was with great sadness that we learnt in April of the sudden death of our
colleague, Bill Reid. Bill had been a non-Executive Director of the Company for
nine years and contributed significantly to the substantial restructuring of the
Group which has been achieved in recent years.
BUSINESS DEVELOPMENT
The Group continues to concentrate its efforts on investing in and expanding its
Specialised Distribution activities in growth segments within Life Sciences,
Seals & Components and Interconnect. During the period, considerable resource
has been applied to searching out and reviewing potential acquisition
opportunities. The Board is encouraged by the potential to expand the Group
through acquisition.
LIFE SCIENCES
The Life Sciences businesses, centred on Anachem, saw sales reduced to £12.8m
from £13.6m in the comparable period. The sales shortfall arose from the
retrenchment of a1- biotech activities in response to severe funding constraints
in many biotechnology companies. Sector gross margins however improved with the
lower proportion of a1-biotech sales and overheads were reduced, leading to a
modest increase in operating profits.
Within Anachem, Consumables and Service again delivered a steady performance and
now represents ca. 60% of sector sales. Combined product and service supply
under Anachem programmes, such as the LeaseSure and Premium Care extended
contracts, are particularly attractive to major industrial customers in the
current business climate.
By contrast, new investment in Instrumentation remained weak throughout the
sector, with continuing hesitation among pharmaceutical and biotechnology
companies to commit to higher value instrument purchases.
The Environmental business in the UK and Germany (now 20% of sector sales) made
good progress and increased sales by 25% with products from both established and
new suppliers contributing to this impressive growth.
SEALS & COMPONENTS
The results of the North American focused Seals & Components businesses were
adversely impacted by the depreciation of the US dollar. Sector sales were
£13.3m, down 4% from £13.9m of sales in the comparable period. Overall, sector
profits were broadly flat in sterling terms after bearing a loss of £0.1m from
currency translation.
Hercules Bulldog Sealing Products delivered 6% growth in US dollar terms, in its
first six months as a merged entity. The access to Bulldog's gasket product
line and to its international customers outside North America, reduced exposure
to a fragile US domestic economy. Transaction levels remain high in the US
domestic businesses though with lower average order sizes. Customers in an
uncertain economy are ordering product requirements on an as needed basis,
rather than risk placing stock on shelves.
Good progress has been made in developing the new IT system which is due to go
live in the second half of the year and which will enable closer integration of
back office systems and purchasing.
FPE, in the UK, recorded solid growth in sales and operating profit as the
benefits of reorganisation and a strong sales focus were delivered.
INTERCONNECT
The Interconnect businesses, which benefited from a full half year contribution
from Clarendon, achieved sales of £10.3m, up 13% compared with £9.1m last year.
Operating profits increased by a similar percentage.
The core IS Rayfast business increased sales to defence industry customers and
saw some improvement in the civil aircraft interiors business. There were
continued pressures on margins driven by competitive activities, supplier price
rises and the strength of the Euro. Despite these pressures, IS Rayfast
delivered modest sales and profit growth.
The motorsport activities, comprising IS Motorsport and Clarendon (together ca.
20% of sector sales) recorded modest sales increases in a time of significant
change in the Formula 1 motorsport series. Demand has been impacted, with fewer
teams competing and rule changes introduced to reduce costs and create a more
competitive race series. Against this, our businesses have benefited from the
success of certain UK customers in supplying the US CART and IRL series.
Sommer (ca. 30% of sector sales) grew sales by 9% in Euro terms and maintained
operating profits in a severely depressed German market. The primary
contribution to Sommer's growth was the development of the Bavarian region
through the expansion of resources in Munich. Dowatronic has been absorbed
successfully and has given improved access to customers in the space and defence
markets.
PROPERTY
As indicated in the last Annual Report, in November 2002 the Group sold seven
acres of its property near Stamford in the East Midlands with planning
permission for residential development. Proceeds of sale, before expenses, were
£2.6m. The Group has submitted planning applications for two further parcels of
land totalling twenty acres within its Stamford property.
FINANCE
The improved operating margin of 12.1% against the comparable figure last year
of 11.2%, reflects the benefits from management action taken last year to
consolidate certain of the businesses and achieve a lower cost basis.
The depreciation of the US dollar against sterling significantly outweighed any
benefit from the appreciation of the Euro and adversely impacted sales and
operating profits by £1.1m and £0.1m respectively against the comparable period
last year.
The Group continues to generate strong operating cash inflow, which in the first
half of the year was £4.4m compared with £3.7m in the first half last year. The
improved cash flow reflected tight control over working capital. Additional
cash proceeds of £2.0m were realised from the disposal of property, net of
investment in tangible fixed assets. Interest receivable of £0.5m remained
unchanged from last year.
At 31 March 2003, the Group's net cash funds had increased by £3.2m to £30.1m.
CURRENT TRADING
The Group has demonstrated the resilience of its operating businesses in
difficult market conditions. These characteristics are likely to continue in the
second half of the year. In such an environment, careful management of human
and financial resources is essential and is a strength of the Group.
Bruce Thompson
Chief Executive Officer
12 May 2003
GROUP PROFIT AND LOSS ACCOUNT
for the Half Year ended 31 March 2003
Unaudited Unaudited Audited
31 March 2003 31 March 2002
Before goodwill Goodwill and Total Before Goodwill and Total Year ended
and exceptional exceptional goodwill and exceptional 30 Sept
items items exceptional items 2002
(note 3) items (note 3) Total
£m £m £m £m £m £m £m
Turnover (note 2)
Continuing 36.4 36.4 36.6 36.6 73.7
operations
Discontinued 0.6 0.6 1.0 1.0 1.9
operations
37.0 37.0 37.6 37.6 75.6
Operating profit
(note 2)
Continuing 4.4 (0.2) 4.2 4.1 (0.1) 4.0 8.3
operations
Discontinued - - - - - - -
operations
4.4 (0.2) 4.2 4.1 (0.1) 4.0 8.3
Non-Operating
items
(note 3)
Continuing
operations -
Profit on - 2.2 2.2 - 0.9 0.9 1.1
disposal of fixed
assets
Discontinued - - - - (0.6) (0.6) (0.6)
operations -
Provision for
loss on closure
of business
Profit on sale of - - - - - - 0.3
businesses
4.4 2.0 6.4 4.1 0.2 4.3 9.1
Interest income 0.5 - 0.5 0.5 - 0.5 1.0
Profit on ordinary
activities before 4.9 2.0 6.9 4.6 0.2 4.8 10.1
tax
Taxation (note 4) (1.5) - (1.5) (1.4) 0.2 (1.2) (2.8)
Profit on ordinary
activities after 3.4 2.0 5.4 3.2 0.4 3.6 7.3
tax
Minority interests - - (0.1)
Profit for the 5.4 3.6 7.2
financial period
Dividends (note (1.1) (0.9) (3.0)
10)
Retained profit 4.3 2.7 4.2
for the period
Earnings per 5p
share (note 5)-
On basic and 23.8p 15.2p 31.2p
diluted earnings
On adjusted 15.0p 13.5p 29.4p
earnings
GROUP BALANCE SHEET
as at 31 March 2003
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2003 2002 2002
£m £m £m
Fixed assets
Intangible assets: Goodwill 4.7 5.3 4.8
Tangible assets 9.7 10.9 9.8
14.4 16.2 14.6
Current assets
Stocks 13.8 15.6 14.8
Debtors 13.3 14.3 12.2
Cash and bank deposits 31.3 26.6 27.7
58.4 56.5 54.7
Creditors: Amounts falling due within one year (16.5) (20.5) (17.3)
Net current assets 41.9 36.0 37.4
Total assets less current liabilities 56.3 52.2 52.0
Provisions for liabilities and charges (0.5) (1.8) (0.6)
55.8 50.4 51.4
Capital and reserves
Called up equity share capital 1.1 1.1 1.1
Capital redemption reserve 0.2 0.2 0.2
Profit and loss account 54.2 48.7 49.6
Equity shareholders' funds 55.5 50.0 50.9
Equity minority interests 0.3 0.4 0.5
55.8 50.4 51.4
GROUP CASH FLOW STATEMENT
for the Half Year ended 31 March 2003
Unaudited Unaudited Audited
Year ended
31 March 31 March 30 Sept
2003 2003 2002 2002 2002
£m £m £m £m £m
Net cash inflow from operating activities (note 6) 4.4 3.7 9.9
Returns on investments and servicing of finance
Interest received 0.5 0.5 1.0
Taxation
UK corporation tax paid (1.0) (0.7) (2.1)
Overseas tax paid (0.3) - (0.8)
(1.3) (0.7) (2.9)
Capital expenditure and financial investment
Purchase of tangible fixed assets (0.7) (0.6) (1.3)
Proceeds from the sale of tangible fixed assets 2.7 2.2 3.0
2.0 1.6 1.7
Acquisitions and disposals
Acquisition of businesses (0.2) 0.1 (2.2)
Equity dividends paid (2.0) (1.8) (3.0)
Cash inflow before use of liquid resources and financing 3.4 3.4 4.5
Management of liquid resources
(Increase)/decrease in short term deposits (1.2) 5.5 2.6
Financing
Return of capital - (8.5) (8.5)
Increase/(decrease) in cash in the period (note 7) 2.2 0.4 (1.4)
STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES
for the Half Year ended 31 March 2003
Unaudited Unaudited Audited
Year ended
31 March 31 March 30 Sept
2003 2002 2002
£m £m £m
Profit for the financial period 5.4 3.6 7.2
Currency translation adjustment on foreign currency net investments 0.3 0.3 (0.7)
Tax on foreign exchange adjustment - (0.1) 0.3
Total recognised gains and losses for the period 5.7 3.8 6.8
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the Half Year ended 31 March 2003
Unaudited Unaudited Audited
Year ended
31 March 31 March 30 Sept
2003 2002 2002
£m £m £m
Profit for the financial period 5.4 3.6 7.2
Dividends (1.1) (0.9) (3.0)
Retained profit for the period 4.3 2.7 4.2
Currency translation adjustment on foreign currency net (0.4)
investments, net of tax
0.3 0.2
Return of capital - (8.5) (8.5)
Net increase/(reduction) in shareholders' funds 4.6 (5.6) (4.7)
Equity shareholders' funds at beginning of year 50.9 55.6 55.6
Equity shareholders' funds at end of period 55.5 50.0 50.9
NOTES TO THE FINANCIAL STATEMENTS
for the Half Year ended 31 March 2003
1 ACCOUNTING POLICIES
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's published accounts for the
financial year ended 30 September 2002.
2 ANALYSIS OF RESULTS
Operating profit
before goodwill
amortisation,
exceptional items Profit/(loss) before
Turnover and taxation interest and taxation
31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept
2003 2002 2002 2003 2002 2002 2003 2002 2002
£m £m £m £m £m £m £m £m £m
By Business
Segment
Specialised 36.4 36.6 73.7 4.4 4.1 8.9 6.4 4.9 9.4
Distribution
Discontinued 0.6 1.0 1.9 - - - - (0.6) (0.3)
operations
37.0 37.6 75.6 4.4 4.1 8.9 6.4 4.3 9.1
By Geographic
Area
United Kingdom 20.2 20.0 39.9 2.7 2.4 5.5 4.7 3.2 6.6
Rest of Europe 3.8 3.7 7.6 0.6 0.5 0.9 0.6 0.5 0.9
North America 12.4 12.9 26.2 1.1 1.2 2.5 1.1 1.2 1.9
Continuing 36.4 36.6 73.7 4.4 4.1 8.9 6.4 4.9 9.4
operations
Discontinued 0.6 1.0 1.9 - - - - (0.6) (0.3)
operations
37.0 37.6 75.6 4.4 4.1 8.9 6.4 4.3 9.1
Turnover by geographical area is stated by origin which, with the exception
of North America, is not materially different from turnover by destination.
In North America, turnover of £3.1m (out of £12.4m) is to customers based
outside Europe and North America.
NOTES TO THE FINANCIAL STATEMENTS
for the Half Year ended 31 March 2003
3 GOODWILL AND EXCEPTIONAL ITEMS
Goodwill Except. Goodwill Except. Goodwill Except.
amortistn items Total amortistn items Total amortistn items Total
31 Mar 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar 30 Sept 30 Sept 30 Sept
2003 2003 2003 2002 2002 2002 2002 2002 2002
£m £m £m £m £m £m £m £m £m
Operating
profit
Continuing (0.2) - (0.2) (0.1) - (0.1) (0.3) (0.3) (0.6)
operations
(a)
Non operating
items
Profit on
disposal of
fixed assets - 2.2 2.2 - 0.9 0.9 - 1.1 1.1
(b)
Provision for
loss on
closure of - - - - (0.6) (0.6) - (0.6) (0.6)
business (c)
Profit on - - - - - - - 0.3 0.3
sale of
businesses
(d)
(0.2) 2.2 2.0 (0.1) 0.3 0.2 (0.3) 0.5 0.2
Tax credit on - - - - 0.2 0.2 - 0.2 0.2
exceptional
items
(0.2) 2.2 2.0 (0.1) 0.5 0.4 (0.3) 0.7 0.4
(a) Costs of £0.6m were incurred last year in completing a restructuring of
the Group's US operations. In addition a provision of £0.3m, retained in
respect of certain liabilities relating a defined pension scheme, was
released to profit last year.
(b) The profit on disposal of fixed assets arises from the sale of seven
acres of land in Stamford, East Midlands and from the sale of a small
freehold property in Glasgow relating to a previously divested business.
(c) A provision of £0.6m was made last year to meet the cash costs of
closing the business of Williamson Cliff.
(d) A profit of £0.3m arose last year from the proceeds received on closure
of a pension scheme relating to a divested company.
4 TAXATION
The taxation charge on profit before exceptional items for the six months
ended 31 March 2003 of £1.5m (2002: £1.4m) is based on the estimated
tax rate for the full year.
There is no taxation charge associated with the exceptional items (2002: credit
£0.2m).
NOTES TO THE FINANCIAL STATEMENTS
for the Half Year ended 31 March 2003
5 EARNINGS PER ORDINARY SHARE
Basic and diluted earnings per share
Basic and diluted earnings per ordinary share are calculated on the basis
of the weighted average of ordinary shares in issue during the period of
22,647,911 (2002: 23,588,117) and the profit for the financial period,
after minority interests, of £5.4m (2002: £3.6m). There were no
potentially dilutive shares.
Adjusted earnings per share
Adjusted earnings per share is shown by reference to earnings before
goodwill amortisation, exceptional items and related tax. The Directors
consider that this gives a clearer indication of the underlying performance
of the Group. Earnings before goodwill amortisation, exceptional items and
related tax are calculated as follows:
31 March 31 March 30 Sept 31 March 31 March 30 Sept
2003 2002 2002 2003 2002 2002
pence per pence per pence per £m £m £m
share share share
Profit for the 23.8 15.2 31.2 5.4 3.6 7.2
financial year, after
minority interests
Goodwill amortisation 0.9 0.4 1.3 0.2 0.1 0.3
Exceptional items, net (9.7) (2.1) (3.1) (2.2) (0.5) (0.7)
of tax
Adjusted earnings 15.0 13.5 29.4 3.4 3.2 6.8
6 RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING
ACTIVITIES
31 March 31 March 30 Sept
2003 2002 2002
£m £m £m
Operating profit 4.2 4.0 8.3
Depreciation 0.5 0.7 1.3
Amortisation of goodwill 0.2 0.1 0.3
Decrease/(increase) in stocks 0.9 (1.0) (0.9)
(Increase)/decrease in debtors (1.1) (0.5) 1.1
(Decrease)/increase in creditors (0.1) 0.6 0.8
Decrease in provisions (0.1) (0.2) (0.7)
Costs incurred on business closure/sale, net (0.1) - (0.3)
Net cash inflow from operating activities 4.4 3.7 9.9
7 RECONCILIATION OF NET CASH FLOWS TO THE MOVEMENT IN NET FUNDS
31 March 31 March 30 Sept
2003 2002 2002
£m £m £m
Increase/(decrease) in cash in the period 2.2 0.4 (1.4)
Increase/(decrease)in short term deposits 1.2 (5.5) (2.6)
Change in net funds resulting from cash flows 3.4 (5.1) (4.0)
Increase in debt due within one year (0.4) (3.0) (0.8)
Exchange adjustment 0.2 - -
Net funds at start of year 26.9 31.7 31.7
Net funds at end of period 30.1 23.6 26.9
NOTES TO THE FINANCIAL STATEMENTS
for the Half Year ended 31 March 2003
8 ANALYSIS OF NET FUNDS
Other non-cash
1 October Cash flow movement Exchange 31 March
2002 movement 2003
£m £m £m £m £m
Cash at bank and in hand 1.9 2.2 - 0.2 4.3
Money market deposits 25.8 1.2 - - 27.0
27.7 3.4 - 0.2 31.3
Guaranteed Unsecured Loan Notes (0.8) - (0.4) - (1.2)
2001-2003
Net funds 26.9 3.4 (0.4) 0.2 30.1
The Guaranteed Unsecured Loan Notes 2001-2003 ('Notes') were issued as
consideration for the acquisition of Clarendon Engineering Supplies
Limited. In December 2002, a further £0.4m of Notes were issued as
additional and final consideration based on the performance of the company
during the year ended 30 September 2002. The Notes bear interest at 0.95%
below LIBOR. The Notes are redeemable at par at the discretion of the
Noteholder. All Notes outstanding on 31 December 2003 will be repaid by
the Company.
9 ACQUISITIONS
On 20 December 2002, the Group acquired a further 8% of the ordinary share
capital of its subsidiary, FPE Limited for £0.2m. The Group now owns 88%
of the issued share capital.
10 DIVIDENDS
The Directors have declared an interim dividend of 5.0p per share (2002 :
5.0p). The dividend charged to profit in 2002 included a credit of £0.2m in
respect of an over accrued final dividend on shares repurchased and
cancelled in December 2001.
11 EXCHANGE RATES
The following exchange rates have been used to translate the results of the
overseas businesses:
31 March 2003 31 March 2002 30 Sept 2002
US dollar 1.59 1.43 1.48
Euro 1.52 1.63 1.60
12 STATUS OF INTERIM REPORT
The Interim Report, which is unaudited, was approved by the Directors on 12
May 2003. It should be read in conjunction with the 2002 Annual Report,
which contains the most recent audited financial statements.
The financial information contained in this report does not constitute
statutory accounts. The figures for the financial year ended 30 September
2002 have been extracted from the Group's published accounts for that year
which have been reported on by the Company's auditors and delivered to the
Registrar of Companies. The report of the auditors was unqualified and did
not contain a statement under section 237 (2) or (3) of the Companies Act.
The figures for the half year ended 31 March 2002 were extracted from the
Interim Report which was unaudited.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 22nd November 2024
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