Diploma (LSE:DPLM) shares rose more than 5% after the specialised distribution group delivered stronger-than-expected first-half results and raised full-year guidance for the second time this year.
Revenue increased 17% to £851.1 million in the six months to March, while adjusted operating profit climbed 33% to £208.9 million, slightly ahead of market expectations of around £206 million.
The group’s adjusted operating margin expanded by 300 basis points to 24.5%, supported by operating leverage, strong execution and favourable trading conditions across key end-markets.
Adjusted earnings per share rose 36% to 109.2 pence, while the interim dividend was increased 5% to 19.1 pence per share. Return on average trading capital employed improved by 360 basis points to 22.7%.
The Controls division delivered the strongest performance, recording 26% organic growth and margin expansion of 430 basis points to 33.5%. Organic growth in Seals reached 2%, while the Life Sciences division reported 4% growth.
Following the strong first-half performance, Diploma upgraded its full-year outlook for the second time in two months. The company now expects organic revenue growth of 12%, compared with previous guidance of 9%, while the anticipated contribution from acquisitions has been increased to 6% from 3%.
Management maintained its adjusted operating margin forecast at around 25% and said the revised outlook implies roughly a 6% upgrade to consensus adjusted operating profit expectations of £428 million.
“This is another strong update from Diploma, highlighting the strong momentum in the business,” Stifel analyst Sam Dindol commented. “The shares are trading on a one-year forward P/E of c.29.3x, slightly above the five-year average and within the range of quality compounding peers. We are Buyers and see upside from further compound growth.”
More about Diploma
Diploma PLC is an international specialised distribution group supplying products and services across the Controls, Seals and Life Sciences sectors. The company focuses on technically demanding applications and operates through a decentralised model serving customers across industrial, healthcare and infrastructure markets.
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