Diploma acquisitions boost first-quarter growth, but currencies hit

21st Jan 2015 13:42

A first-quarter update from Diploma was solid but slightly shy of some analyst forecasts, with currency movements also hitting top-line numbers.Without including negative currency effects, overall revenues in the first quarter ended 31 December were up 14% on the equivalent period last year, aided by acquisitions including Technopath Distribution.The FTSE 250 technical products specialist said it enjoyed some benefit from the strong appreciation in the US dollar but that this was more than offset by further depreciation in other currencies compared to the prior year.Underlying turnover before currencies and acquisitions was just 4% higher, however.The North American industrial seals business is thriving, with revenues up 25%, or 9% at the underlying level, while life sciences grew steadily with revenues up 14% or 3% underlying.However, weaker demand in European markets hit the controls business, where reported revenues were only marginally ahead and down 3% on a like-for-like basis, also reflecting a relatively strong comparative period the previous year.Management said the group retained a robust balance sheet and generated free cash flow of circa £5m in the quarter.Net cash funds at 31 December were down from £21.3m at end-September to roughly £14m, after the October acquisition of 80% of Technopath for £11.1m cash, including debt acquired of £1.5m, as well as an initial cash payment in mid-December of £0.6m to acquire a further 10% of outstanding shares in Kentek.Shore Capital said the first-quarter growth was below its full-year expectation of a 6% increase in underlying revenues."However, there is time for momentum to build and we would expect the traditional seasonal improvement in the seals business during spring and summer to improve the rate of underlying growth."