Shares in FTSE 250 group Diploma dropped on Wednesday morning after it confirmed operating margins had reduced and Northern European markets had been affected by trading conditions in the region.

The specialised technical products and services provider said that in the three months ended December 31st, which is seasonally the quietest quarter of the year, group revenue was 14% ahead of the comparable period last year.

On an underlying basis, after adjusting for currency effects and acquisitions, revenues increased by 5.0% against strong prior year comparatives.

In a statement the group said: "As anticipated, operating margins reduced as the group continued to implement its programme of planned investments to support the future growth of the business.

"The group has a robust balance sheet and has a proven track record of strong cash generation."

Free cash flow in the fourth quarter was around £3.0m, reflecting capital expenditure incurred in completing two business relocations in the UK and Canada. Net cash funds increased to about £11.0m at the year-end.

By sector, Life Sciences revenues were 17% ahead of the comparable period last year, boosted by the contribution from DSL, acquired in June 2012 and from strong sales of consumables, which more than offset slightly weaker capital revenues.

In the Seals sector, revenues increased by 12%, benefiting from the acquisition of J Royal towards the end of December 2011. As expected, underlying Seals revenue growth has moderated against a very strong comparative last year. In the Controls sector, revenues benefited from the small acquisitions completed last year and were 11% ahead of the comparable period.

The share price fell 2.6% to 524p by 11:30.

NR

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