Diploma revenue, profits rise amid 'tougher environment'

19th Nov 2024 09:13

(Sharecast News) - Controls, seals, and life sciences distributor Diploma reported a 14% rise in revenue in its preliminary results on Tuesday, to £1.36bn, as adjusted operating profit increased 20% to £285m.

The FTSE 100 company said organic revenue growth for the 12 months ended 30 September was 6%, supported by volume-led gains and structural tailwinds, while acquisitions contributed an additional 10% to reported growth.

Its adjusted operating margin improved by 120 basis points to 20.9%, reflecting operational efficiencies, disciplined cost management, and accretive acquisitions.

Free cash flow increased 21% to £197.9m, with free cash flow conversion reaching 101%.

Adjusted earnings per share rose 15% to 145.8p, while the total dividend for the year increased by 5% to 59.3p per share.

The company said it invested £293m in seven acquisitions during the year, including the £243m purchase of Peerless, which it said had performed strongly.

Additionally, Diploma sold three non-core businesses after the year-end for £45m.

The acquisitions delivered a 20% return on adjusted tangible capital employed (ROATCE) in their first year, contributing to an overall group ROATCE of 19.1%, up 100 basis points.

Revenue diversification supported resilience across the group's divisions.

Controls led with 10% growth, driven by market share gains and favourable structural trends.

Life Sciences grew 6% in stabilised markets, while Seals delivered a resilient 1% growth despite challenging conditions.

Diploma said it was continuing to scale effectively, opening three new state-of-the-art facilities in the UK and Europe, bringing the total to 10 over the last five years.

The company said it remained focussed on sustainable growth, with strengthened management development initiatives and progress against its 'Delivering Value Responsibly' targets.

For the 2025 financial year, Diploma said it expected organic growth of about 6%, with acquisitions contributing an additional 2% to reported revenue.

The firm forecast an operating margin of around 21% at constant currency, supported by a healthy acquisition pipeline and strong balance sheet with £880m in committed facilities.

Its board recommended a final dividend of 42p per share, bringing the full-year dividend to 59.3p, subject to shareholder approval at the annual general meeting on 15 January.

If approved, the final dividend would be paid on 31 January.

"Thanks to my brilliant colleagues for another excellent year," said chief executive officer Johnny Thomson.

"Whilst some markets have been a little tougher this year, the quality of the team, our businesses, and the diversified portfolio, have driven a strong performance.

"I am pleased with our organic growth, our margin progress, and the acquisitions we've made."

Thomson said the company's discipline had been "equally important", delivering returns, cash flows, and selling some non-core businesses.

"It's been another great year to add to our long-term compounding track record and, while it's a tougher environment, I'm feeling positive about the year ahead, and our long term prospects."

At 0854 GMT, shares in Diploma were down 4.28% at 4,342p.

Reporting by Josh White for Sharecast.com.