Diploma : Trading Statement

DIPLOMAPLC

12 CHARTERHOUSE SQUARE, LONDON EC1M 6AX

TELEPHONE: +44 (0)20 7549 5700

FACSIMILE: +44 (0)20 7549 5715

FOR IMMEDIATE RELEASE

24 March 2014

DIPLOMA PLC

TRADING UPDATE

Diploma PLC, the international group of businesses supplying specialised technical products and services, is today issuing a trading update for the six months ending 31 March 2014, ahead of going into its close period.

First Half Trading

The Group's revenues for the half year, on an underlying basis after adjusting for currency effects and acquisitions, are expected to increase by ca. 7% against prior year comparatives.

The underlying performance has been strong across the businesses. The largest contribution to revenue growth has been from Controls, where trading activity has improved significantly in both the UK and Germany and revenues are expected to increase by ca. 10% on an underlying basis. In Life Sciences, good growth has been achieved in both the Healthcare businesses, where strong consumable revenues have offset weaker capital revenues and in the European Environmental businesses; on an underlying basis, revenues are expected to increase by ca. 7%. Seals has continued to deliver steady revenue growth, with underlying revenues expected to increase by ca. 4%.

Acquisitions remain an integral part of the Group's growth strategy and substantial resources have been focused on strengthening and converting the pipeline of opportunities. During the period, the Group has spent ca. £12m on acquisitions, completing the acquisition of 80% of Kentek Oy, adding three small bolt-on businesses to the European Seals and Controls operations and purchasing certain minority interests in the Australian Healthcare businesses. Although the acquisition spend has increased relative to the prior year, lengthy transaction and due diligence processes continue to delay the completion of opportunities in the acquisition pipeline.

Despite the strong underlying performance, significant movements in exchange rates have adversely impacted the results of the overseas businesses when translated into UK sterling. With ca. 75% of the Group's revenues generated outside the UK and with a modest contribution from acquisitions, reported Group revenues for the Half Year are likely to increase by ca. 5% and adjusted profit before tax is expected to be similar to the comparable period.

Free cash flow in the half year has been strong, benefiting from lower capital expenditure as the Group's Investment for Growth programme reduces.  Net cash funds at 31 March 2014 are expected to be ca. £7m.

Outlook for the Year

At the current exchange rates, the significant appreciation in UK sterling will continue to impact the Group's reported results on translation.  As an indication, the impact on the prior year results of applying the current exchange rates would have been to reduce full year revenues and adjusted operating profits by ca. £14m and ca. £3m, respectively. 

In addition to the impact on a translation basis, the Group's Healthcare businesses will be increasingly impacted on a transactional basis by the substantial depreciation of the Canadian and Australian dollar against the US Dollar and the Euro, which are the currencies in which their products are mostly purchased.  Gross margins in these businesses will soften during the second half of the year as our currency hedging contracts start to expire, though local management are working with suppliers and customers to mitigate the impact.

The Group's businesses continue to deliver strong underlying performance across all three sectors and there will be a modest contribution from acquisitions completed during the year.  However, results are being held back by the significant adverse currency movements and the Board therefore expects that adjusted profit before tax for this financial year is likely to be at a similar level to last year.

The Group's results for the six months ending 31 March 2013 will be announced on Monday, 12 May 2014.

Conference Call:

A conference call for analysts and investors will take place at 8.00am (GMT) this morning; please contact Tulchan Communications for details.

Note:  A copy of this Statement, together with further information about Diploma PLC, may be viewed on its website at www.diplomaplc.com

NOTE TO EDITORS:

Diploma PLC is an international group of businesses supplying specialised technical products and services to the Life Sciences, Seals and Controls industries.

Diploma's businesses are focussed on supplying essential products and services which are funded by the customers' operating rather than their capital budgets, providing recurring income and stable revenue growth.

Our businesses then design their individual business models to closely meet the requirements of their customers, offering a blend of high quality customer service, deep technical support and value adding activities. By supplying essential solutions , not just products, we build strong long term relationships with our customers and suppliers, which support attractive and sustainable margins.

Finally we encourage an entrepreneurial culture in our businesses through our decentralised management structure. We want our managers to feel that they have the freedom to run their own businesses, while being able to draw on the support and resources of a larger group.  These essential values ensure that decisions are made close to the customer and that the businesses are agile and responsive to changes in the market and the competitive environment.

The Group employs ca. 1,250 employees and its principal operating businesses are located in the UK, Germany, US, Canada and Australia.

Over the last five years, the Group has grown adjusted earnings per share at an average of ca. 17% pa through a combination of organic growth and acquisitions.  Diploma is a member of the FTSE 250 with a market capitalisation of ca. £850m.

Further information on Diploma PLC, together with a copy of this Announcement, is available at www.diplomaplc.com