Shares in industrial supplies firm Diploma (DPLM) gained 4% to a new all-time high of £17.70 after results for the full year to the end of September showed double-digit growth in revenues and earnings.

Total sales were up 12% to £545m thanks to underlying growth of 5%, a positive currency effect of 2% and a 5% contribution from acquisitions.

Operating profits before tax and acquisition costs were up 14% to £97.2m, with an increase of 30 basis points or 0.3% in the operating margin.


The Life Sciences business, which supplies specialist equipment to hospital operating theatres and clinical testing labs, grew like-for-like revenues by 7%.

The Clinical Diagnostics division grew turnover by 10% due to strong demand for cancer screening and ‘companion diagnostics’.

The Controls business, which supplies high-end industrial wiring, cables and controls for use in applications as diverse as Formula One cars, fighter jets and satellites, grew revenues by 9% including acquisitions.

Sales to the aerospace and defence industries were strong, while industrial sales saw a benefit in the first half as customers built up inventories ahead of the proposed 31 March Brexit but saw a slower second half as inventories were wound down.


On the other hand the Seals business, which supplies parts for heavy industrial equipment like construction machinery and wind turbines, grew sales by just 1% on a like-for-like basis.

US original-equipment (OEM) orders from industrial clients were ‘significantly impacted this year by a combination of softening US Industrial markets and operational issues arising on implementation of new ERP’.

The ERP (enterprise resource planning) system is meant to make it easier for customers to order kit and for Diploma to manage its supply system.

On top of this hiccup, the expansion of trade tariffs led to Diploma holding a much higher level of inventory than normal in order ‘to help customers mitigate the impact of tariffs, manage increased lead times from select suppliers and increased on-hand stock requirements to maintain service levels to customers’.


As we revealed here, Diploma has been one of the best-performing stocks in the FTSE 250 over the last 20 years with a gain to mid-September of 4,080%.

Despite the poor performance of the Seals unit, investors seem happy to push the stock to new all-time highs.

At today’s price the shares are trading on 32 times last year’s earnings of 54.7p per share. The earnings forecast for the year to September 2020 is 61.3p per share, or a 12% increase, putting the stock on a forward earnings multiple of 28 times against a multiple of 16 times for the FTSE 250 industrial goods and services sector according to Reuters.


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Issue Date: 18 Nov 2019