24th Mar 2014 10:29
LONDON (Alliance News) - Diploma PLC shares fell more than 6% Monday after it said it had been hit hard by the recent rise in sterling as well as the fall in the Canadian and Australian dollar, meaning its key profit measure will only be flat this year.
In a trading statement, the company said its revenues in the six months to the end of March are expected to be up by about 7% on the year excluding the impact of acquisitions and at constant currencies. However, half-year revenues will only be up 5% including currency movements and acquisitions, while its adjusted pretax profit is expected to be flat on the year, Diploma said.
It makes about 75% of its revenues outside the UK.
"At the current exchange rates, the significant appreciation in UK sterling will continue to impact the group's reported results on translation," it said. "As an indication, the impact on the prior year results of applying the current exchange rates would have been to reduce full year revenues and adjusted operating profits by about GBP14 million and about GBP3 million, respectively."
Diploma's revenues were GBP285.5 million in the year to September 30, 2013, while its adjusted operating profit, which excludes acquisition related charges, was GBP54.3 million.
Its adjusted pretax profit for the six months to March 31, 2013 was GBP23.8 million, while the figure for the whole of that financial year was also GBP54.3 million.
Diploma said its healthcare business will increasingly be hit by the fall in the Canadian and Australian dollar against the US dollar and the euro, the currencies in which its products are mostly purchased.
"Gross margins in these businesses will soften during the second half of the year as our currency hedging contracts start to expire, though local management are working with suppliers and customers to mitigate the impact," it warned.
Ignoring the currency fluctuations, the company said it had performed well across its businesses. Underlying revenues at its controls business are expected to have risen about 10% in the first half as trading activity picked up significantly in the UK and Germany. Underlying revenues are expected to be up about 7% in its healthcare businesses and by about 4% in its seals division.
It spent about GBP12 million on acquisitions during the half.
"The group's businesses continue to deliver strong underlying performance across all three sectors and there will be a modest contribution from acquisitions completed during the year. However, results are being held back by the significant adverse currency movements and the board therefore expects that adjusted profit before tax for this financial year is likely to be at a similar level to last year," it said in its statement.
Diploma expects to put out its interim results on May 12.
Its shares were down 6.8% at 708.7105 pence Monday morning, the biggest decline on the FTSEc250.
By Steve McGrath; [email protected]; @SteveMcGrath1
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