FTSE 250 support services company Diploma (DPLM) gains 12.9% to £12.08 as it pleases the market with a strong set of full year results.
The company, which supplies technical products and services, saw its revenue increase by 18% to £451.9m and its pre-tax profit rise by 24% to 366.8m for the year ending 30 September.
Stockbroker Numis describes the results as ‘outperforming expectations’.
Diploma’s basic earnings per share are up 24% to 42p and it has hiked the dividend per share by 15% to 23p, implying a dividend yield of 2.1%.
The company has enjoyed growth across its three sectors. Life sciences’ underlying revenue increased by 4% as new technology was introduced and delayed projects were put back online.
Its seals division also increased its revenue by 4% as industrial activity in the US picked up. The company’s controls division grew by 14%, driven by new project activity and recovery in some of its markets.
Diploma spent £20.1m on acquisitions in the past financial year, slightly down on the prior two years. The company is targeting £30m per year on acquisitions which Numis believes could increase earnings by 4% for 2018 and 11% in 2019.
Numis says Diploma is a disciplined buyer which has helped it sustain a high return on average capital employed. This grew from 21.6% in 2016 to 24% in 2017.
Due to Diploma’s stellar performance this year, analysts have upgraded their forecasts partly due to its acquisitions. Numis now expects revenue growth of 5% in life sciences versus its previous forecast of 4%. The company’s seals division is forecast to increase revenue 6% versus 5%.
The company is trading on 22.9-times 2018’s 52.7p of earnings according to Numis forecasts.
