21st Jan 2015 11:03
LONDON (Alliance News) - Diploma shares were down on Wednesday after the company reported its revenue growth was held back by the strength of sterling again in the first quarter of its financial year.
The FTSE 250-listed technical products and services company, which makes seals and controls, along with instrumentation and services for the life sciences market, said group revenue for the first quarter to the end of December rose 4% year-on-year, in line with its expectations and on track with its guidance for underlying growth. On a constant currency basis, revenue for the group rose 14% year-on-year.
The impact of translating its results into sterling in the first quarter echoed Diploma's results for its financial year to the end of September 2014, when it said its revenue took a GBP17.7 million hit from the strength of sterling. For the full year, it said revenue was GBP305.8 million.
The group said the revenue from its acquisitions made in the last financial year fell 2% due to currency headwinds, with the benefits from the appreciation of the dollar offset by depreciation in other trading currencies, though the company did not define which ones. On a constant currency basis, revenue contributed by its acquisitions increased 12%.
Operating margins for the company were flat year-on-year, Diploma said, with the anticipated weaker margin in its Life Sciences business offset by margins in its Seals business.
In the Life Sciences business, revenue rose 3%, or 14% on a constant currency basis, with a strong contribution from the recently-acquired TPD business in Ireland. For its Seals business, revenue rose 9%, or 25% in constant currencies, on the back of strong performances from the businesses it acquired last year and from robust growth in the US arm.
For its Controls division, revenue fell 3% due to weaker demand in Europe, though the group said signs of improvement have been seen since the turn of the year.
Diploma shares were down 0.9% on Wednesday, with loss slightly pared back after it had fallen around 2% earlier in the morning.
Shore Capital said the 4% underlying revenue growth in the quarter was slightly below its guidance for full-year revenue growth for the company of 6%.
But the broker said there remains time for Diploma to build momentum, and it expects the traditional build up in its Seals business to materialise over the spring and summer months, improving the rate of underlying growth for the year.
Shore had a Neutral rating on the stock with a 759 pence price target.
By Sam Unsted; [email protected]; @SamUAtAlliance
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