Interim Results - 6 Months to 31 March 2000
Diploma PLC
16 May 2000
DIPLOMA PLC
INTERIM RESULTS FOR 6 MONTHS ENDED 31 MARCH 2000
Diploma PLC, the specialised distribution group, today announces its interim
results for the six months ended 31 March 2000.
Highlights Six months ended Year ended
31 March 30 September
2000 1999 1999
Group Sales £46.9m £125.3m £241.9m
Profit before tax and £5.3m £5.6m £11.0m
exceptionals
Profit before tax after £10.7m £7.8m £20.2m
exceptionals
Earnings per share* 17.9p 11.5p 32.0p
Adjusted earnings per 7.1p 7.2p 14.0p
share*
Net assets per share* 205p 170p 187p
- Continued re-shaping of the Group to focus on growth opportunities and
release shareholder value
- Considerations at above, or the top end of estimates, achieved in
divesting mature subsidiaries - two year programme has now generated £75m
- Return of £50.3m of capital (£1.00 per share) to shareholders, completed
just after the half year in April 2000
- Continued focus on the new core of Specialised Distribution businesses
with investments in new products, geographic expansion, e-commerce and
management development, to provide the foundation for growth
*Per share figures are based on the old Diploma PLC's 50.3m issued shares. In
April 2000, a substantial return of capital was made by means of a Scheme of
Arrangement. For every 2 old Diploma PLC shares, shareholders received 1 new
Diploma PLC share and £2.00 in cash. The number of shares in issue has been
reduced to 25.2m new Diploma PLC shares.
For further information please contact:-
Christopher Thomas, Chairman or
Bruce Thompson, Chief Executive Officer
Diploma PLC 020 7638 0934
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2000
CHAIRMAN'S STATEMENT
We have continued to re-shape the Group to focus on growth opportunities and
release shareholder value. Considerations at above, or at the top end of
estimates have been achieved in divesting mature subsidiaries, and
shareholders have received direct benefit in a tax effective manner through
the return of capital.
Following the major divestments, for the six months ending 31st March 2000,
turnover at £46.9m was less than half that of the comparable period (£125.3m).
Operating profit from the continuing activities (before head office charges)
was level at £4.3m, while interest and property rental received, broadly
balanced profits from divested operations. Profit before tax, exceptional
items and minority interests reduced by 5% to £5.3m (£5.6m). Cash flow was
good with operating activities producing £5.4m in the half year.
During the half year, the divestments of the SEI Macro Group and Robert Lee
were completed. These divestments, along with the sale of certain properties,
generated cash receipts of £44.5m in the half year and net exceptional gains
of £5.8m. The net cash balance at the end of March 2000 was £69.0m before the
return of capital.
Unadjusted earnings after tax and minority interests were £9.0m or 17.9p per
share, against £5.9m or 11.5p per share for the comparable period. After
excluding exceptional items, adjusted earnings after tax and minority
interests were £3.6m (£3.7m) or expressed in earnings per share terms
7.1p(7.2p).
After the end of the half year, in April 2000, the planned return of surplus
capital was completed by means of a Scheme of Arrangement. For every 2
Diploma shares, shareholders received 1 new Diploma share and £2.00 in cash.
This achieved the result of returning £50.3m of surplus capital to
shareholders, while reducing the number of shares in issue to 25.2m shares.
The costs involved in implementing the Scheme were £0.4m.
Broadly adjusting the results to take out interest received on the subsequent
return of capital and profits on businesses divested in the period, earnings
per new ordinary share before exceptional items would be 10.1p.
We intend to make an interim dividend payment of 5.0p per share on 3rd July
2000, to the holders of the 25.2m new Diploma ordinary shares on the register
at 5th June 2000. This payment of £1.3m compares with the £2.3m payment at
the prior half year, which represented 4.5p for each of the 50.3m shares then
in issue.
SPECIALISED DISTRIBUTION
Specialised Distribution comprises the businesses operating in the areas of
Life Sciences, Seals and Components and Interconnect Products. Although
performance varied in the different business segments, combined Divisional
sales increased by 7% to £30.8m (£28.8m) with operating profits of £4.8m
(£4.7m).
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 were somewhat lower than the comparable period,
primarily due to shortfalls in the sale of capital equipment to the more
established sectors. The core Pharmaceutical sector, in particular, continues
to be affected by delayed customer expenditure during industry consolidation.
Recent actions to upgrade its product portfolio should put Anachem in an
improved position as market growth resumes.
A positive development has been Anachem's growing presence in the emerging
sector of Bio-instrumentation. Anachem has quickly built a portfolio of new
instrumentation and software products to service this segment. This has been
the lead product line in the start up operation in Germany, A1 Biotech, which
is developing well in line with plans.
Seals & Components
Hercules, the principal company in this business area, is a catalogue based
distributor of hydraulic seals and other components, supplied for repair and
maintenance applications into a broad range of mobile machinery markets in
North America, as well as to selected industrial OEM's.
Hercules has achieved a 12.5% growth in sales over the comparable period, and
30% growth in operating profits, within a market which generally has performed
strongly. The launch of a range of new catalogues in early 2000, along with
associated sales and marketing initiatives, should position Hercules well for
continued growth when the market returns to more normal levels of demand.
In the period, the remaining 7% minority interest in Hercules was acquired.
In the UK, FPE has continued to perform steadily in a tight market. Again,
considerable time and resources have been invested in the first set of FPE's
UK/European catalogues which were launched in April 2000.
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.
The IS Group has produced modest growth in sales and operating profits over
the comparable period. In Germany, Sommer has performed well in a recovering
German manufacturing sector, delivering sales and profit increases and
establishing a broader geographic coverage in Germany. Rayfast was held back
in the UK by continuing difficult market conditions but made further progress
in selling to a range of continental European territories. Abacon made a small
operating loss following increases in inventory provisions.
More broadly, progress has been made in expanding, with a broader range of
products, into the chosen focus sectors of Aerospace, Motorsport and Defence.
SPECIAL STEELS & BUILDING PRODUCTS
The continuing Special Steels and Building Products companies again showed a
loss at the operating level of £0.5m, compared with a loss of £0.4m in the
comparable period, on sales reduced to £12.4m from £15.8m.
Special Steels
The Special Steels businesses of Henry Whitham, AG Alloys and Carbon & Alloy
Metals all made operating losses in the half year, but showed some improvement
compared with the second half of FY99.
Healthy oil prices combined with modest increases in OPEC oil production have
created improved confidence among the oil majors, but they are still
exercising caution in their exploration and production investment programmes.
Growth in global capital expenditure on oilfield equipment, is forecast this
year to be only 10-15% above the very depressed levels of last year.
The recovery will vary geographically depending on the relative cost of
extracting the oil as well as on risk levels. Carbon & Alloy Metals, focused
on Houston-based customers serving the Gulf of Mexico, has already experienced
some improvement and in recent months has moved back into modest
profitability. By contrast, Henry Whitham and AG Alloys which are more
dependent on the North Sea, are still experiencing reduced levels of demand.
The emphasis remains on cost reduction.
Building Products
Robert Lee contributed £0.2m of operating profit before its divestment in
January 2000 and Williamson Cliff operated at break-even levels over the half
year.
DISCONTINUED BUSINESSES
In October 1999, the sale of the SEI Macro Group was completed for a basic
consideration of £37.5m. This has generated a surplus over net assets in the
half year of £6.0m from which has been deducted £1.4m of goodwill already
written off to reserves, yielding a net exceptional gain of £4.6m. £1.6m of
the consideration was retained in an interest bearing escrow account, to be
released in four tranches over a twelve month period. To date, two of the
payments have been made as scheduled. Certain assets, principally properties,
with a net book value of £3.3m, were retained in the Group for eventual sale.
There will be an adjustment to the consideration based on completion accounts
when finalised.
In January 2000, the sale of Robert Lee was completed for the sum of £5.2m
with an adjustment for actual net assets following completion. This sale has
generated an exceptional gain of £1.5m.
PROSPECTS
Following the return of capital, the Group is now more closely focused on a
smaller core of specialised distribution businesses with the potential for
long term profitable growth by supplying expanding sectors of the world
economy. Growth strategies are being implemented for this new core of
businesses with investments in new products, geographic expansion, e-commerce
and management development, to provide a strong foundation for long term
growth.
With approaching £20m of cash (80p per share), we have the resources to fund
organic growth, as well as the acquisition of suitable complementary
businesses in our core areas.
Christopher Thomas
Chairman
DIPLOMA HOLDINGS PLC - GROUP PROFIT AND LOSS ACCOUNT
Six months ended Six months ended Year ended
31 March 2000 31 March 1999 30 Sept 1999
Sales Profit Sales Profit Sales Profit
£m £m £m £m £m £m
Continuing operations:
Specialised
Distribution 30.8 4.8 28.8 4.7 57.9 9.4
Special Steels and
Building Products 12.4 (0.5) 15.8 (0.4) 26.4 (1.6)
Total continuing
operations 43.2 4.3 44.6 4.3 84.3 7.8
Discontinued
operations:
Electronic Components - - 61.9 0.7 122.5 1.7
Special Steels and
Building Products 3.7 0.2 18.8 1.4 35.1 2.8
46.9 125.3 241.9
Head office expenses (0.7) (0.7) (1.4)
Operating profit 3.8 5.7 10.9
Exceptional items:-
Disposals:-
Surplus of proceeds
Over net asset value 7.6 2.2 9.3
Goodwill previously
w/off to reserves (1.4) - (0.2)
Profit on disposals 6.2 2.2 9.1
Return of capital
costs (0.4) - -
Properties - write
down less profit on
sales (0.4) - 0.1
5.4 2.2 9.2
Profit before interest 9.2 7.9 20.1
Net interest
receivable/ ( payable) 1.5 (0.1) 0.1
Profit on ordinary
activities before tax 10.7 7.8 20.2
United Kingdom
taxation (1.3) (1.6) (3.4)
Overseas taxation (0.3) (0.2) (0.4)
(1.6) (1.8) (3.8)
Profit on ordinary 9.1 6.0 16.4
activities after tax
Minority interests (0.1) (0.1) (0.3)
Profit for the
financial period 9.0 5.9 16.1
Dividends (1.3) (2.3) (4.5)
Retained profit 7.7 3.6 11.6
Earnings per share:
On profit for the
financial period 17.9p 11.5p 32.0p
Elimination of
exceptional items,
net of tax and
minorities (10.8) (4.3p) (18.0p)
Adjusted 7.1p 7.2p 14.0
Dividends per share 2.5p* 4.5p 9.0p
*The equivalent of the 5p actually to be paid on the new shares of
Diploma PLC
DIPLOMA HOLDINGS PLC - GROUP BALANCE SHEET
31 March 2000 31 March 1999 30 Sept 1999
£m £m £m £m £m £m
Tangible fixed assets 16.7 28.9 21.1
Intangible fixed assets 1.4 - 0.8
18.1 28.9 21.9
Current assets
Stocks 18.6 45.7 339.8
Debtors 20.6 43.9 43.2
Tax recoverable after more
than one year - 0.5 -
Cash at bank and in hand 69.2 10.6 24.5
108.4 100.7 107.5
Creditors - amounts
falling due within one yr
Bank overdrafts 0.2 3.6 1.7
Bank loan 3.0 - 2.9
Taxation 4.2 2.8 1.7
Dividend payable 1.3 2.3 2.2
Other creditors 12.7 28.3 23.8
21.4 37.0 32.3
Net current assets 87.0 63.7 75.2
Total assets less current 105.1 92.6 97.1
liabilities
Creditors - amounts
falling due after more
than one year
Bank loans - 3.0 -
Taxation - 1.1 -
Provisions 0.4 0.4 -
0.4 4.5 -
Net assets employed 104.7 88.1 97.1
Capital and reserves
Called-up share capital 2.5 2.5 2.5
Capital redemption reserve 0.4 0.4 0.4
Share premium account 12.7 12.5 12.7
Profit and loss account 87.5 70.0 78.3
Shareholders' funds 103.1 85.4 93.9
Minority interests 1.6 2.7 3.2
104.7 88.1 97.1
DIPLOMA HOLDINGS PLC - GROUP CASH FLOW
Six months ended Six months ended Year ended
31 March 2000 31 March 1999 30 Sep 1999
£m £m £m £m £m £m
Operating profit 3.8 5.7 10.9
Depreciation 1.0 2.0 4.0
Profit on sale of fixed
assets 0.2 0.1 -
Decrease in stocks 0.9 1.0 4.9
(Increase) / decrease in
debtors (1.6) 3.2 1.8
Increase / (decrease) in
creditors 1.1 (0.1) (0.7)
Cash flows from operating
activities 5.4 11.9 20.9
Investment returns and
servicing of finance
Net interest
received/(paid) 1.5 (0.1) 0.1
Dividends paid to minority
interests - (0.1) -
1.5 (0.2) 0.1
Exceptional item
Reduction in closure costs - 0.1 -
Taxation (0.5) (1.6) (5.6)
Capital expenditure
Purchase of tangible fixed
assets (1.4) (3.9) (5.5)
Sale of tangible fixed
assets 1.1 0.6 0.9
(0.3) (3.3) (4.6)
Acquisitions
Acquisition of subsidiaries (1.3)
and shares (1.2) -
Disposals
Disposals proceeds 42.0 2.1 20.1
Net (cash)/overdrafts in
disposals 1.6 - (2.2)
43.6 2.1 17.9
Equity dividends paid (2.3) (5.0) (7.3)
Cash flows before financing 46.2 4.0 20.1
Financing
Purchase of own share
capital - (0.1) (0.1)
Movement in cash in period 46.2 3.9 20.0
Cash at beginning of period 24.5 6.6 6.6
Overdrafts at beginning of
period (1.7) (3.8) (3.8)
Bank loans at beginning of
period (2.9) (2.8) (2.8)
Net funds at beginning of
period 19.9 - -
Currency translation
variance (0.1) 0.1 (0.1)
Cash at end of period 69.2 10.6 24.5
Overdrafts at end of period (0.2) (3.6) (1.7)
Bank loans at end of period (3.0) (3.0) (2.9)
Net funds at end of period 66.0 4.0 19.9
Notes to the Interim Accounts
1. These accounts are for Diploma Holdings PLC (previously named Diploma
PLC). Under the Scheme of Arrangement which came into effect after 31st March
2000, the new Diploma PLC acquired Diploma Holdings PLC.
2. Reconciliation of movement in shareholders' funds
Six months ended Six months ended Year ended
31 March 2000 31 March 1999 30 Sept 1999
£m £m £m
Retained profit 7.7 3.6 11.6
Purchase of own share - (0.2)
capital (0.1)
Goodwill written back on 1.4 - 0.2
disposals
Currency translation 0.1 0.1 0.2
variances
Proceeds of share issue - - 0.1
9.2 3.5 12.0
Shareholders' funds at 93.9 81.9 81.9
beginning of period
Shareholders' funds at end 103.1 85.4 93.9
of period
3. 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 1999. The financial
information for the full year 1999 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.
4. Post balance sheet event
On 25th April 2000, Diploma Holdings PLC paid £50.3m to its shareholders by
a return of capital.
Diploma PLC's Registered Office is at 20 Bunhill Row, London, EC1Y 8UD.
Tel: 020 7638 0934 Fax: 020 7638 7651. Registered Number 3899848
Friday, 22nd November 2024
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