Diploma delivers in face of currency headwinds

16th Nov 2015 07:36

(ShareCast News) - Technical instruments-to-wiring maker Diploma reported a 4% jump in full year pre-tax profits to £51.8m although the weaker Australian and Canadian dollars impacted on results.Revenues were up 9% to £333.8m, while free cash flow rose 7% to £40.3m.Weaker industrial markets in the second half of the year, particularly in Canada where there has been a cut in demand for natural resources, led to underlying revenues and adjusted operating profits increasing by only 1%, the company said.It added that adverse currency movements reduced the results of Diploma's overseas businesses when translated into sterling by £8.1m."Gross margins in the healthcare businesses, which represent around 25% of group revenues, continued to be impacted on a transactional basis by the continuing depreciation of the Canadian and Australian dollars," the company said."These two currencies have now depreciated in excess of 30% over the past two years against the currencies in which they purchase their products, predominantly the US dollar."The company's currency hedging contracts and some supplier price concessions provided some mitigation, but currency effects reduced healthcare gross margins by 2.8% in 2015.There will remain pressure on healthcare gross margins well into next year, with further depreciation of these two currencies requiring the forward currency hedge contracts to be replaced at more unfavourable exchange rates.Chief executive Bruce Thompson said economic headwinds would "continue to constrain organic growth in the group's principal markets in North America and Europe" although the prospects for further acquisitions remain promising."While the board remains cautious on the current macroeconomic backdrop, we remain confident that the group's resilient business model with a diverse geographic spread of activities and strong financial position, together with a more favourable environment for acquisitions will provide a good platform to deliver further growth in the coming year," he said.