Acquisitions boost sales at Diploma, but organic growth facing "headwinds"

11th May 2015 07:45

Diploma, the FTSE 250 technical products group, said acquisitions drove a solid increase in interim revenues, but warned investors it still sees "headwinds to organic growth".The life sciences, seals and controls outfit increased revenues by 10% year-on-year to £163.2m in the six months to 31 March.However, adjusted pre-tax profits rose by a lesser 6% to £29.3m due to a 60 basis-point fall in the adjusted operating margin to 18.1%.Business acquired over the last year added 10% to group revenues in the first half, as a 2% negative currency impact was outweighed by underlying growth of 2%.Revenues in the seals divisions were up 8% on an underlying basis, helped by strong demand in the North American markets.Life sciences revenues rose 1% as growth was held back by tough markets in Canadian healthcare as hospitals focused on cost control.Meanwhile, controls revenues were down 5% due to softer European industrial markets and strong prior-year comparatives.Free cash flow fell by 5% to £12.4m after a £2m increase in capital expenditure to £2.8m. The interim dividend was hiked by 7% to 5.8p per share, "reflecting confidence in the group's growth prospects", Diploma said.Chief executive Bruce Thompson said Diploma delivered a "robust performance [...] despite the challenges caused by weaker European industrial markets and volatile currency movements".He said: "While headwinds to organic growth remain in certain key markets, the acquisition pipeline remains encouraging and the group will continue to focus on bringing these opportunities to completion."The stock was down 3.8% at 815p by 08:28.