Diploma Regulatory News (DPLM)

DIPLOMA PLC

12 CHARTERHOUSE SQUARE, LONDON EC1M 6AX

TELEPHONE: +44 (0)20 7549 5700

FACSIMILE: +44 (0)20 7549 5715

FOR IMMEDIATE RELEASE

2 September 2015

DIPLOMA PLC

TRADING UPDATE

Diploma PLC, the international group of businesses supplying specialised technical products and services, is today issuing a Trading Update for the year ending 30 September 2015.

Trading Summary

Reported revenues for the year ending 30 September 2015 are expected to increase by ca. 9% with acquisitions incrementally contributing ca. 10% to Group revenue, offset by a reduction of ca. 2% in revenues from translational currency effects. The headwinds to organic growth identified at the Half Year have continued and in certain cases strengthened through the second half of the year and on an underlying basis, after adjusting for currency effects and acquisitions, Group revenues are expected to increase by ca. 1%.

In Life Sciences, revenue growth has strengthened as anticipated in the second half of the year, helped by stronger capital equipment sales; underlying revenue growth for the full year is expected to be ca. 3%. In Seals, trading activity in the North American Aftermarket business slowed in the second half of the year as demand was impacted indirectly by cut-backs in the Oil & Gas sector; there was also a significant reduction in demand for HKX's excavator attachment kits against a very strong prior year comparative. The Industrial OEM Seal businesses, both in Europe and the US also softened after a strong first half and full year underlying revenue growth for Seals is expected to be ca. 4%. In Controls, market conditions remain broadly unchanged from those experienced in the first half of the year with weak activity in most European industrial markets; underlying revenues are expected to be ca. 5% below FY2014.

Underlying operating margins have generally remained robust and broadly consistent with the first half of the year; however a facility closure and relocation in the US Seals business, together with the impact of the initial lower margins in the acquired businesses is expected to lead to a reduction of ca. 50bps in Group operating margin for the full year compared with the first half figure. The further weakening, in the second half of the year, of the C$ and A$ against the US$ has largely been mitigated by existing currency hedging contracts; however this weakening will impact next year's operating margins in the Group's Healthcare businesses as existing currency hedging contracts expire and are replaced by more expensive contracts.

Acquisitions

Acquisitions are a key part of the Group's growth strategy. In the year to date, the Group has spent ca. £38m on acquisitions, including the acquisition in July 2015 of a small Seals Aftermarket business in the UK. The pipeline for further acquisitions during the next six months remains promising.  

Financial Position

Free cash flow remains strong, although with increased capital expenditure, the Group's free cash flow for the year ending 30 September 2015 is likely to remain broadly similar to last year. The Group's balance sheet is robust with net cash funds at 30 September 2015 expected to be a small positive and supported by a £40m multi-currency revolving facility with an accordion option to increase this to £50m.

The Group's results for the year ended 30 September 2015 will be announced on Monday, 16 November 2015.

Conference Call:

A conference call for analysts and investors will take place at 8.15am (GMT) this morning. This conference call can be accessed by dialling +44 (0) 20 3139 4830 and pin code 56063221#. A replay of this call will be available by dialling +44 (0) 20 3426 2807 and pin code 661455# for a period of 30 days after the event.

Notes:

1. This Trading Update, which is based upon unaudited management accounts, has been prepared solely to provide additional information to the shareholders of Diploma PLC .It should not be relied on by any other party, for other purposes. Certain statements made in this Statement are forward-looking statements. Such statements have been made by the Directors in good faith using information available up until the date that they approved this Statement. Forward-looking statements should be regarded with caution because of the inherent uncertainties in economic trends and business risks.

2. A copy of this Statement, together with further information about Diploma PLC, may be viewed on its website at www.diplomaplc.com

NOTE TO EDITORS:

Diploma PLC is an international group of businesses supplying specialised technical products and services to the Life Sciences, Seals and Controls industries.

Diploma's businesses are focussed on supplying essential products and services which are funded by the customers' operating rather than their capital budgets, providing recurring income and stable revenue growth.

Our businesses then design their individual business models to closely meet the requirements of their customers, offering a blend of high quality customer service, deep technical support and value adding activities. By supplying essential solutions, not just products, we build strong long term relationships with our customers and suppliers, which support attractive and sustainable margins.

Finally we encourage an entrepreneurial culture in our businesses through our decentralised management structure. We want our managers to feel that they have the freedom to run their own businesses, while being able to draw on the support and resources of a larger group. These essential values ensure that decisions are made close to the customer and that the businesses are agile and responsive to changes in the market and the competitive environment.

The Group employs ca. 1,400 employees and its principal operating businesses are located in the UK, Northern Europe, North America and Australia.

Over the last five years, the Group has grown adjusted earnings per share at an average of ca. 20% p.a. through a combination of organic growth and acquisitions. Diploma is a member of the FTSE 250 with a market capitalisation of ca. £800m.

Further information on Diploma PLC can be found at www.diplomaplc.com