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Diploma shares the FTSE 100’s top gainer after the firm raised its recommendation

Diploma shares were the biggest gainer in the FTSE 100 on Monday afternoon after the tech products supplier raised its annual outlook.

The company, which sells seals, cables and industrial hoses, now expects sales to grow by 16 percent at constant currency levels for the financial year, compared with 11 percent as originally forecast.

Diploma also expects an operating margin of 20.5 percent thanks to recent acquisitions and «strong underlying performance.»

Forecast: Diploma, which sells seals, cables and industrial hoses, now expects its turnover to grow by 16 per cent for the financial year at constant currency levels

Following the announcement, Diploma’s share price jumped 5 per cent to £40.98 by early Monday afternoon, making it the FTSE 100’s strongest performer.

Over the past five years, the company’s stock has soared 170 percent thanks to steadily growing sales and profits.

In the six months to March, the London-based firm reported a 10 per cent rise in turnover to £638.3m, while adjusted operating profit rose 14 per cent to £125.4m.

Diploma was equally bolstered by acquisitions, particularly within its Seals sector division, and volume-driven organic growth.

It has bought six businesses since last September, including US-based Plastic and Rubber Group, DICSA and Peerless Aerospace Fastener, which were acquired for around £236m.

Trading was further boosted by market share gains in its controls division and a robust performance from its life sciences arm in Canada and Australia.

Demand in the first market was supported by hospitals adopting technologies for use in the fields of urology, gynecology and endoscopy, while in the second territory, on the contrary, the sale of genetic preconception screening.

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Johnny Thomson, chief executive of Diploma, said: «Our momentum is encouraging going into the second half and supporting our upgrade to full-year guidance.»

He added: “Diploma has a long history of double-digit EPS (earnings per share) growth on healthy revenues. Our current performance and upgrades reaffirm our confidence in providing sustainable quality mixes.”

Russ Mould, chief investment officer at AJ Bell, said: “The supply of widgets, cables and other technical items to keep factories and labs running may not set pulses racing, but it supports extremely strong returns for the company over the long term.

«Much of its recent growth has come from acquisitions – which may ring alarm bells – but fundamentally this has been a key part of Diploma’s successful strategy for a long time.»

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