Diploma shares hit record high on FY guidance upgrade

(Sharecast News) - Shares in Diploma hit a record high on Monday as the specialist product distribution business lifted annual guidance after a 17% rise in adjusted half-year earnings, boosted by acquisitions. The company now expects constant currency revenue growth of around 16%, up 5 percentage points from previous guidance, made up of 6% organic revenue growth and 10% from acquisitions. It also forecast a 15% rise in EPS.

Shares hit £43 in London trade before settling back to £41.19.

Diploma, which operates divisions supplying specialised wiring, seals and equipment for the medical industry, said operating margin is now tipped to rise to 20.5% from the first half's 19.6%.

Adjusted pre-tax profit came in at £115.2m in the six months to March 31, while revenue jumped 10% to £638.3m led by volume growth across its controls, seals and life sciences operations. Shareholders were rewarded with a 5% uplift in the interim dividend to 17.3p a share.

Recent acquisitions were the main contributor as Diploma splashed out £284m on six deals in the first half of the financial year, including Peerless for £236m and PAR Group for £38m.

Controls, which accounts of nearly half of group sales and provides things like wire and cabling, specialty fasteners, adhesive and industrial automation solutions, grew like-for-like sales 7% thanks to market share gains and 'structural tailwinds".

Life sciences sales rose 5% and seals sales were almost flat, although Diploma forecast a stronger second half as customer destocking was complete and normal ordering patterns had returned.

Reporting by Frank Prenesti for Sharecast.com