2nd Sep 2015 06:24
LONDON (Alliance News) - Technical products and services company Diploma PLC on Wednesday said its revenue growth in the first nine months was held back by the slowdown in the oil and gas industry and sluggish European industrial markets and said its underlying operating margin will take a hit.
The FTSE 250-listed company said its revenue for the nine months to the end of September is expected to rise by around 9.0%, driven primarily by acquisitions but offset slightly by translational currency effects. But the group said the issues it has faced so far in its current financial year have continued to be an issue and said its underlying revenue growth, stripping out acquisitions and currency effects, will be around 1.0%.
Revenue growth in its life sciences business has been in line with its expectations, helped by stronger capital equipment sales, but for its seals business, North American trading activity has slowed in the second half due to an indirect hit to demand from the slowdown in the oil and gas industry and a reduction in demand for excavator attachment kits, Diploma said.
Its industrial sales business also saw soft trading in Europe and the US following a strong first half, while its controls business has seen market conditions broadly unchanged, with weak activity in the majority of European industrial markets.
Underlying operating margins for the group were generally solid, the company said, but a facility closure and relocation in the US seals business, along with lower margins from its newly-acquired businesses, means its group operating margin for the year will deteriorate by around 50 basis points compared to the first half.
In addition, while the weakening of the Canadian and Australian dollars against the US dollar has continued in the second half and has been mitigated by currency hedging, Diploma said this will have an impact on its operating margins in the healthcare business as hedging contracts expire and are replaced by more expensive agreements.
In a separate statement Wednesday, Diploma said Chief Operating Officer Iain Henderson will step down from the company following its annual general meeting in January. The company intends to spread his current responsibilities across its executive team and will not appoint a replacement chief operating officer.
By Sam Unsted; [email protected]; @SamUAtAlliance
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