Companies: DPLM   

We profiled global distribution venture Diploma, focused on the life sciences, seals, and controls sectors, a year ago at 735.5p. And under chief executive Bruce Thompson, the group has dished out superb numbers for the year to September.

On 15% top-line growth to £128.2m, ‘adjusted’ pre-tax profits jumped 19% to £20.4m and operating margins crept from 14.8% to 15.1%. ‘Free’ cashflow was a major highlight, burgeoning by 104% to £24.3m with coffers fattened through land sale proceeds and a £4.5m improvement in operating cash flow to £20.9m – all enabling a 15% total dividend hike to 23p.

Another excellent year reflected strong growth in the North American businesses, which benefited from currency movements on translation with the Canadian/US dollars strengthening, as well as a focus on buoyant European sectors such as defence, aerospace, motor sport and environmental.

Thompson predicts more modest organic progress this year, which means further high-quality acquisitions will be needed to maintain growth rates. Diploma already has a good acquisitive track record and closed the year with a bumper £36.7m cash pile, which means it can move easily when the right businesses cross its path.

Late acquisitive successes include HKX, a provider of hydraulic kits for the installation of attachments on excavators that has delivered exceptional growth and the post-year end £6m acquisition of CBISS, a supplier of continuous emission monitoring systems for waste incineration plants, has strengthened the UK environmental business.

Profitability, great cash generative characteristics, and the potential for further earnings-enhancing deals all underpin investment in Diploma. We remain buyers.