Diploma PLC, an international value-add distribution group, has issued a trading update for the three months ended 31 December 2023. The company reported a strong Q1 performance in line with expectations, maintaining momentum from the prior year. Organic revenue growth stood at 6%, driven by broad-based, volume-led growth across the group, with strong performances in Controls and Life Sciences, and robust performance in Seals. Reported revenue growth was 10%, with acquisitions contributing 8% and foreign exchange impacting by 4%. The company made three bolt-on acquisitions in Q1, totaling £9.5m at average multiples of around 4x EBIT, driving strong return on capital. The operating margin was strong and in line with expectations.
Diploma remains positive about the full-year outlook, with unchanged guidance, expecting organic revenue growth of approximately 5%, acquisitions announced to date to add around 6% to reported revenue growth, and a strong operating margin in line with the prior year at 19.7%. The company also anticipates free cash flow conversion of approximately 90%. Despite the uncertain economic outlook, the company's resilient business model and the strong start to the year have instilled confidence in the unchanged full-year guidance.
The company's decentralised model allows its specialist businesses to be agile and empowered to deliver tailored solutions for their customers. Diploma employs around 3,500 colleagues across its three sectors of Controls, Seals, and Life Sciences, with principal operating businesses in the UK, Northern Europe, North America, and Australia. Over the last fifteen years, the group has achieved an average annual growth of approximately 15% in adjusted earnings per share (EPS) through a combination of organic growth and acquisitions. Diploma is a member of the FTSE 100.
For further information, a conference call for analysts and investors was hosted by Johnny Thomson, Chief Executive Officer, and Chris Davies, Chief Financial Officer. The company's next scheduled update is the half-year results on 13 May 2024.