Companies: DPLM   

'Between late 1999 and late 2002, we divested ten businesses for about £90m and gave back about £70m to shareholders,' explains Bruce Thompson, CEO of restructured specialist distributor Diploma. The company now supplies instrumentation to the research laboratories of universities as well as big pharmaceutical and biotech ventures. It also delivers hydraulic seal kits to repair and maintenance clients, and high performance wiring and seals products into the defence, aerospace and electronics markets. In a resilient half to March, profits before tax, goodwill, and a £2.2m one-off gain on a property sale rose 6.5% to £4.9m, on flat continuing sales of £36.4m (£36.6m). Headline pre-tax profits sparked up from £4.8m to £6.9m, as margins were marked up from 11.2% to 12.1%. Diploma also demonstrated some nifty cash management, reporting a first-half operating inflow of £4.4m (£3.7m). Period-end net cash danced up £3.2m to £30.1m, so there's cash there to do deals. Adjusted EPS edged ahead from 11.1% to 15p. In the year to September, Diploma posted pre-tax profits of over £10m on sales of £74m. This year, broker Evolution Beeson Gregory is going for £10.3m and EPS of 31.4p. Diploma has good long term growth prospects and on a p/e of 11.7 looks good value. Though net assets are only 245p a share, we still urge readers to buy.