Diploma Plc · LSE:DPLM
Diploma — H1 2013 Earnings Presentation
35 slides from Diploma's earnings presentation, May 13, 2013
Slide 1: Half Year Announcement
Half Year Announcement Six months ended 31 March 2013 13 May 2013
Slide 2: Table of Contents
01 Table of Contents 1. Group Overview LIFE SCIENCES 2. Summary of Half Year Results SEALS 3. Financial Results CONTROLS 4. Business Review and Outlook
Slide 3: 1. Group Overview
. DIPLOMA PL 1. Group Overview
Slide 4: Group Overview - Sectors
03 Group Overview - Sectors Diploma PLC is an international group of specialised businesses supplying technical products and services to the following industries: Life Sciences Seals Controls 34% of revenues 36% of revenues 30% of revenues A BALANCED AND DIVERSE PORTFOLIO OF BUSINESSES BY SECTOR
Slide 5: Group Overview - Geography
04 Group Overview - Geography North America Europe Rest of World 53% of revenues¹ 38% of revenues¹ 9% of revenues¹ 26% US 22% UK 27% Canada 16% Continental Europe Life Sciences Seals Controls Healthcare Aftermarket Controls Environmental Industrial OEM ¹By destination
Slide 6: Our Business Model
05 Our Business Model Essential Products Essential Solutions Essential Values = recurring income and = sustainable and = agility and responsiveness stable revenue growth attractive margins > Focus on essential > Highly responsive > Entrepreneurial culture products and services customer service > Dec
Slide 7: Principal Corporate Objectives
06 Principal Corporate Objectives EPS growth TSR growth Dividend growth +20% p.a. +21% p.a. +22% p.a. 2012 33.1 2012 262 2012 14.4 2011 27.9 2011 170 2011 12.0 2010 18.9 2010 147 2010 9.0 2009 14.8 2009 86 2009 7.8 2008 16.0 2008 71 2008 7.5 Adjusted 0 EPS 10 in pence 20 30 40 TSR index, 0 end 100 S
Slide 8: Financial KPIs
07 Financial KPIs Five Year Trends 2008 2009 2010 2011 2012 Revenue £156.2m £160.0m £183.5m £230.6m £260.2m Total growth +25% +2% +15% +26% +13% Organic growth +8% -12% +11% +17% +6% Operating margin 17.0% 16.0% 17.5% 19.6% 20.3% Working capital (% revenues) 17.2% 17.6% 15.4% 16.1% 16.5% ROTCE 22.4%
Slide 9: 2. Summary of Half Year Results
2. Summary of Half Year Results
Slide 10: Summary of Half Year Results
09 Summary of Half Year Results Six months ended 31 March 2013 2012 Revenue £139.7m £127.1m +10% Adjusted operating profit £27.0m £26.4m +2% Adjusted operating margin 19.3% 20.8% Adjusted profit before tax £26.9m £26.2m +3% Free cash flow £12.1m £9.7m +25% Adjusted earnings per share 17.0p 16.1p +6%
Slide 11: Financial Highlights
10 Financial Highlights > Revenue increased by 10% to £139.7m; underlying revenue increased by 2% after adjusting for currency and acquisitions > Adjusted operating margin of 19.3% - in line with expectations and reflecting impact of Investment for Growth programme > Adjusted PBT increased by 3% to
Slide 12: Operational Highlights
11 Operational Highlights > Strong performance from Life Sciences, particularly Healthcare > Modest growth in Seals against very strong comparatives > Challenging conditions in Europe for Controls; small reduction in underlying revenues > Positive contributions from new businesses acquired last year
Slide 13: Investment for Growth Programme
12 Investment for Growth Programme Cash investment (£m) 2012 2013 2014 Total > At end of half year, £3.3m of planned £5m investment made in Facilities 1.5 1.6 - 3.1 facilities and IT IT infrastructure 0.2 0.9 0.8 1.9 > Additional management resource 1.7 2.5 0.8 5.0 now in place in major businesses A
Slide 14: 3. Financial Results
. . DIPLOMA? LC 3. Financial Results
Slide 15: Profit Before Tax
14 Profit Before Tax Six months ended 31 March 2013 2012 £m £m Revenue 139.7 127.1 +10% Adjusted operating profit 27.0 26.4 +2% Operating margin 19.3% 20.8% Net interest expense (0.1) (0.2) Adjusted profit before tax 26.9 26.2 +3% Acquisition related charges (2.8) (2.7) Fair value remeasurements (0.
Slide 16: Underlying Results
15 Underlying Results Six months ended 31 March Adjusted Revenue operating profit £m £m As reported – HY2013 139.7 27.0 Forex Translation & transaction - - 139.7 27.0 Acquisitions Rayquick (0.5) (0.1) J Royal, Abbeychart, Amfast and DSL (9.9) (1.3) Swiss divestment 0.8 - 130.1 25.6 Increase/(decreas
Slide 17: Taxation
16 Taxation Six months ended 31 March 2013 2012 £m £m Adjusted profit before tax 26.9 26.2 IFRS taxation (7.1) (7.5) Adjustments (0.5) (0.4) Adjusted tax (7.6) (7.9) Effective adjusted tax rate 28.3% 30.2% Earnings per share Adjusted 17.0p 16.1p +6% Basic (IFRS) 14.7p 13.9p +6%
Slide 18: Free Cash Flow
17 Free Cash Flow Six months ended 31 March 2013 2012 £m £m Adjusted operating profit 27.0 26.4 Depreciation 1.2 1.0 Working capital (4.2) (7.4) Pension and share schemes, net 0.4 0.3 Operating cash flow 24.4 20.3 +20% Interest paid, net (0.2) (0.2) Taxation (8.9) (8.7) Capital expenditure (2.6) (1.
Slide 19: Net Funds
18 Net Funds Six months ended 31 March 2013 2012 £m £m Free cash flow 12.1 9.7 Acquisition cash paid (1.5) (14.7) Deferred consideration - (0.8) Dividends (11.7) (9.6) (1.1) (15.4) Net funds brought forward 7.9 12.2 Exchange adjustments 0.5 0.2 Net funds 7.3 (3.0) Comprising: Cash funds 14.3 11.7 Bo
Slide 20: Shareholders' Funds
19 Shareholders’ Funds 31 Mar 30 Sept 2013 2012 £m £m Goodwill 83.1 79.8 Acquisition intangible assets 31.4 32.2 Investment 0.7 0.7 Tangible assets 14.7 13.0 129.9 125.7 Net working capital 52.6 44.4 Trading capital employed 182.5 170.1 Retirement benefit obligations (5.1) (5.4) Deferred tax, net (1
Slide 21: 4. Business Review and Outlook
4. Business Review and Outlook
Slide 22: Our Sectors
21 Our Sectors Revenue by Sector and Destination LIFE SCIENCES SEALS CONTROLS 34% of group revenues 36% of group revenues 30% of group revenues 300 employees 513 employees 315 employees 72% Canada 77% North America 58% UK 15% Europe 13% Europe 34% Europe 13% Rest of World 10% Rest of World 8% Rest o
Slide 23: Life Sciences Segmentation
22 Life Sciences Segmentation Healthcare Environmental Diploma Healthcare Group The a1-group supplies (“DHG”) supplies medical environmental analysers, devices and related 15% containment enclosures, consumables and services emissions monitoring to the healthcare systems and gas detection industries
Slide 24: Life Sciences Operating Results
23 Life Sciences Operating Results Six months ended 31 March 2013 2012 Revenue £46.7m £39.7m +18% Operating profit £11.0m £9.3m +18% Operating margin 23.6% 23.4% > DHG revenue growth of 14% in Canadian dollars and UK sterling after adjusting for acquisition of DSL in 2012 > Environmental revenue gro
Slide 25: Life Sciences Sector Developments
24 Life Sciences Sector Developments > Steady growth in consumable and service sales in core Healthcare businesses in Canada > Significant progress in new AMT Surgical division – addition of new suppliers has given access to new growth segments > Vantage benefited from investments last year and deli
Slide 26: Seals Segmentation
25 Seals Segmentation Aftermarket Industrial OEMs Next day delivery of Supply of seals, O-rings seals, seal kits, O-rings, 45% and custom moulded gaskets and cylinder and machined parts components for the 55% to manufacturers of repair of heavy mobile specialised industrial machinery equipment TWO R
Slide 27: Seals Operating Results
26 Seals Operating Results Six months ended 31 March 2013 2012 Revenue £50.5m £48.0m +5% Operating profit £9.1m £9.9m -8% Operating margin 18.0% 20.6% > Underlying Seals revenues broadly flat against very strong comparatives - 19% growth in 2012, 30% in 2011 > Decrease in operating margin of 260 bps
Slide 28: Seals Sector Developments
27 Seals Sector Developments > In the Aftermarket businesses, modest decrease against very strong prior year comparatives > Steady growth in traditional markets, but reduced sales to sub-distributors and to rental fleets > Performance in international markets mixed > In the Industrial OEM businesses
Slide 29: Controls Segmentation
28 Controls Segmentation Interconnect Fluid controls Wiring, harness Temperature, pressure components and 30% and fluid control fasteners used in products used in the specialised applications 70% Food, Beverage and in Aerospace, Defence, Catering industries Motorsport, Energy, Medical and Industrial
Slide 30: Controls Operating Results
29 Controls Operating Results Six months ended 31 March 2013 2012 Revenue £42.5m £39.4m +8% Operating profit £6.9m £7.2m -4% Operating margin 16.2% 18.3% > Underlying revenue decreased by 5% after adjusting for currency and acquisitions of Abbeychart, Amfast and Rayquick > Operating margins reduced
Slide 31: Controls Sector Developments
30 Controls Sector Developments > The Interconnect businesses experienced modest decrease in revenues in challenging European markets > Aerospace & Defence showed continued good growth with Amfast performing well; Energy and Medical markets remain growth opportunities > Motorsport reduced against st
Slide 32: Our Acquisition Growth Strategy
31 Our Acquisition Growth Strategy ACQUIRE BUILD GROW > Fit with Group’s > Investment to build a > Businesses maintain business model solid foundation for their distinct sales growth: and marketing identity > Marketing led with strong customer > New facilities and IT > Synergies managed relationship
Slide 33: Acquisition Developments
32 Acquisition Developments > Acquisitions remain an integral part of the Group’s strategy, designed to: > Accelerate organic growth > Extend into related strategic markets > Acquisition spend ebbs and flows depending on market conditions: > Average ca. £16m p.a. over 5 years > Highs of £32m in 2007
Slide 34: Outlook and Prospects
33 Outlook and Prospects Group Life Sciences Seals > Resilient business model > Continuing to perform > Expected to make further > Good geographic spread strongly and to benefit progress against less from investments last year demanding comparatives > Strong balance sheet and robust cash flow Contro
Slide 35: Contact
Contact Bruce M Thompson Tel: +44 (0) 20 7549 5700 Fax: +44 (0) 20 7549 5715 Chief Executive Officer Email: investors@diplomaplc.com Nigel P Lingwood 12 Charterhouse Square Group Finance Director London EC1M 6AX Tulchan Communications David Allchurch Martin Robinson Tel: +44 (0) 20 7353 4200 Email: