DIPLOMA PLC
SECOND INTERIM MANAGEMENT STATEMENT
IN RESPECT OF YEAR ENDING 30 SEPTEMBER 2012
Diploma PLC, the international group of businesses supplying specialised technical products and services, is today issuing its second Interim Management Statement which relates to the period from 1 April 2012 to date.
Trading Summary
Revenues for both the year to date and for the third quarter were 13% ahead of the comparable period in 2011 benefitting from recent acquisitions, together with continuing strong trading in the Group's North American Seal businesses. After adjusting for currency effects and acquisitions, underlying revenues for the year to date increased by 7%. The underlying increase in third quarter revenues was 5% against a strong prior year comparative.
The incremental investment being made in facilities, IT and management to support future growth, as described in the Half Year Report, has begun to impact operating margins which, as anticipated, are now slightly below the record level reported in the first half of the year.
In Seals, revenues for the year to date are 28% ahead of the prior comparable period, benefiting from the contribution from J Royal acquired in December 2011. Underlying growth in Seals continues to be strong, but the rate of growth has slowed somewhat from that seen in the first half of the year. In Life Sciences, revenue growth for the year to date has been 4%, with strong growth in consumable revenues in the Canadian Healthcare businesses, but held back by the phasing of capital sales. In Controls, revenue growth for the year to date has been 6%, reflecting the benefit from recent acquisitions, together with a small improvement in trading activity in Germany, although this has been offset by a softening in activity across some of the UK markets.
Acquisition of Diagnostic Solutions
On 6 June 2012, the Group completed the acquisition of 80% of Diagnostic Solutions Pty Ltd ("DSL"), from Ms E de Gooyer and Mr P West for cash consideration of £3.0m (A$4.8m); the outstanding 20% of shares are subject to put and call options exercisable from October 2014 at an agreed multiple of earnings before interest and tax. DSL, which is based in Melbourne, Australia, supplies a range of consumables and instruments used in the diagnostic testing of blood, tissue and other samples in the pathology laboratories across Australia. Its activities are very similar to the Group's existing Somagen business in Canada and will be complementary to the Group's existing BGS business in Australia.
Financial Position
The Group's cash flow has continued to be strong and as anticipated at the half year, growth in working capital has slowed and overall working capital should begin to fall in the final quarter of the year.
Since 31 March 2012, the Group has invested a further £6.6m on acquisitions net of cash acquired, taking the total spend on acquisitions to £22.1m for the year to date. As a result of this additional investment the Group continues to be in a small net debt position at the end of July 2012 (31 March 2012: £3.0m net debt). However, the Group remains well funded with bank facilities of £20m and an option to extend these facilities to £40m.
There have been no other material changes in the financial position of the Group in the period since the publication of the Half Year Report for the six months ended 31 March 2012.
Outlook
The Board remains confident that the Group will report further good progress in the second half of the year.
