Companies: DPLM ��

Despite currency translation losses as a result of considerable North American sales, distribution business Diploma delivered underlying profits growth for the half to March and remains on the hunt for acquisitions.

Chief executive Bruce Thompson announced a 10% interim adjusted pre-tax profits rise to �10.7m, boosted by interest on a substantial cash pile (the headline profits drop reflected a comparison with 2006 figures that were fattened by property sale proceeds) and a 7% increase in revenues to �68.2m. Operating margins nudged north from 14.6% to 14.8% and investors were treated to a 1p dividend hike to 9p a share.

Robust top-line growth was mainly driven by the controls businesses, which distribute wiring, connectors and fasteners, and are benefiting from buoyant European defence and aerospace markets. Controls sales burgeoned 18% to �30m and margins grew from 14.5% to 15.3%, more than compensating for slower growth in the North American seals operations, which supply hydraulic seals, gaskets and cylinders for the heavy mobile machinery market. Seals suffered slower growth in the US industrial economy and the construction sector in particular – though sales grew in constant currency terms. In sterling, revenues retreated 4% and margins were reduced.

Within life sciences, where Diploma supplies consumables and instruments to the research and environment sectors as well as to laboratories, sales crept 4% higher and margins increased, with the performance boosted by the October acquisition of CBISS, a supplier of environment monitoring and control equipment.

Boasting �28.9m cash at the half year, Thompson said acquisitions ‘remain an area we are paying a lot of attention to. We’re looking at small bolt-on deals and medium-sized acquisitions, and we have a pipeline of six to 12 at any time.’

Diploma, originally profiled by Growth Company Investor at 735.5p, typically enjoys stronger second-half cash flows and remains well positioned for long-term growth. Comfortably ahead of our recommendation levels, the shares are not to be sold.

Diploma	LSE	�220.7m	974.50p	7.00p
Click here for interactive charting
Other company articles:
Diploma			14/05/2007
Diploma			15/11/2006
Diploma			09/05/2006
Diploma – cashflow, profits growth and assets			06/12/2005
Diploma			15/11/2005