Diploma: Shares in FTSE 100 firm rocket after profit upgrade
Shares in FTSE 100 firm Diploma rocketed on Tuesday after the firm upgraded full-year guidance and delivered a strong performance for the first six months of its financial year.
In its half-year report, the company, which distributes specialised technical products and services, noted a 14 per cent jump in revenue to £728.5m.
Organic revenue growth – increasing sales and profits through internal efforts and existing resources, as opposed to external measures – hit nine per cent, compared to five per cent for the same period last year.
This helped drive a 25 per cent jump in operating profit to £156.9m, as its profitability margin improved by 190 basis points.
Earnings per share were up 23 per cent to 80.2p. Shares surged over 17 per cent during early trading to 4,939.98.
The firm’s interim dividend increased to 18.2p per share, up five per cent from the previous period.
The London-listed business said it expects an operating profit margin for the year of approximately 22 per cent, up from 21 per cent. Organic revenue growth was expected to hit eight per cent, up six per cent previously pencilled in.
Analysts hail Diploma’s diversification
Akhil Patel, analyst at Shore Capital, said: “Diploma’s business model is based on offering technical sales advice under exclusive supply agreements for essential/critical opex-driven products.
“Noting, customer switching costs are high. The Group is also now much more resilient and well-diversified given its expansion into attractive end markets, which are backed by long-term structural growth drivers.”
The firm’s Control Segment – which deliver a range of products for technically demanding applications, including aerospace, infrastructure, energy, medical and rail – led growth increases./
Life Sciences grew six per cent. Its Seals segment, which supplies sealing and fluid power products and solutions into aftermarket repairs, with the firm citing a “resilient performance in challenging markets.”
Johnny Thomson, Diploma’s chief executive said: “The results are very strong. They demonstrate our sustainable quality compounding with excellent earnings growth at fantastic returns on capital. We have a differentiated business model with a well-diversified portfolio of high-quality businesses, allowing us to deliver compounding growth in good times and bad.
“Despite the uncertain environment I feel confident in our ability to deliver on our upgraded guidance this year. And I’m really excited about our longer-term prospects too.”