Diploma trading update

An international group of businesses supplying specialised technical products and services. They operate globally in three distinct sectors - Life Sciences; Seals and Controls. I have a holding in my growth portfolio (epic code: DPLM). 

Diploma released their trading update today before the close of their interims.  The interims are expected to be ~9% ahead of last year, due to the businesses acquired during the past year.  Organic growth was ~2%, but this was off-set by the effect of adverse currency movements. 

This performance is lower than in the first quarter, when total sales were 12% ahead and up 4% on a like-for-like basis. 

Management state that after spending  ~£34m on completing the acquisitions of TPD (Life Sciences) in October 2014 and Kubo (Seals) in early March 2015, they expect to have net debt of ~£18m at 31 March 2015, compared with cash balances of £21.3m at 30 September 2014.  So with dividends paid out of approximately £13m, that would imply free cash flow of £7.7m; that compares unfavourably with the £14.8m generated at the interim stage last year.  One should never read too much into FCF generation over short periods, but this is certainly worth keeping an eye on.

The share price was down marginally today at 809p, but has shown a 12.8% increase over the past 12 months on the back of a strong fundamental performance.