Diploma PLC · LSE:DPLM
Diploma — Investor Presentation (February 2016)
47 slides from Diploma's investor presentation, February 2016
Slide 1: Corporate Presentation February 2016
Corporate Presentation February 2016
Slide 2: Contents
Contents Life sciences Seals Controls 1. Group Overview 2. Life Sciences Sector 3. Seals Sector 4. Controls Sector Appendix 1: 2015 results Appendix 2: Recent acquisitions 1
Slide 3: 1. Group Overview
1. Group Overview
Slide 4: Group Overview: Balanced portfolio of businesses
Group Overview Balanced portfolio of businesses Diploma PLC is an international group of specialised businesses supplying technical products and services to the following industries: Life sciences 31% of revenues Seals 42% of revenues Controls 27% of revenues 3
Slide 5: Well diversified by geography
Group Overview Well diversified by geography North America Europe Rest of World 46 25 46 23 23 8% % US % UK Life Sciences % % Seals Continental Controls of revenues1 21% Canada of revenues1 % Europe of revenues1 ¹By destination 4
Slide 6: Our Business Model
Our Business Model We want to make ourselves essential to our customers 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 cu
Slide 7: Our Growth Strategy
Our Growth Strategy Value enhancing acquisitions accelerate growth ACQUIRE BUILD GROW • Fit with Group’s • Investment to build • Businesses maintain their business model a solid foundation distinct sales and • Marketing led with strong for growth: marketing identity customer relationships – New faci
Slide 8: Acquisitions
Acquisitions Targeted acquisition spend of £25-30m p.a. Acquisition Spend (£) £37.8m Life Sciences – TPD (80%) Seals – Kubo (100%); Swan Seals (100%); Kentek (10%) 7
Slide 9: Our Corporate Objectives
Our Corporate Objectives Track record of delivering strong returns for shareholders STRONG DOUBLE-DIGIT UPPER QUARTILE PROGRESSIVE DIVIDEND EPS GROWTH TSR GROWTH GROWTH 2015 38.2 2015 270 270 2015 18.2 2014 36.1 2014 274 2014 17.0 2013 34.8 2013 253 2013 15.7 +15% p.a. +22% p.a. +15% p.a. 2012 33.1
Slide 10: Financial KPIs
Financial KPIs Five Year Trends 2011 2012 2013 2014 2015 Revenue £230.6m £260.2m £285.5m £305.8m £333.8m Total growth +26% +13% +10% +7% +9% Organic growth +17% +6% +4% +8% +1% Operating margin 19.6% 20.3% 19.0% 18.5% 18.1% Working capital (% revenues) 16.1% 16.5% 16.7% 17.2% 17.0% Free cash flow £2
Slide 11: Market Consensus and Financial Calendar
Market Consensus and Financial Calendar Year ending 30 Sept 2014 2015 2016 Actual Actual Consensus* Announcements Trading Update Revenues £306m £334m £356m March 2016 Half Year Results Operating Margin 18.5% 18.1% 17.7% 16 May 2016 Adjusted PBT £56.2m £59.6m £62.2m Trading Update 31 August 2016 Adju
Slide 12: The Diploma Investment Case
The Diploma Investment Case Clearly defined strategy, consistent track record GDP+ ORGANIC We focus on essential products and services, funded by customers’ REVENUE GROWTH operating rather than capital budgets, giving resilience to revenues Our attractive operating margins are sustained through the
Slide 13: 2. Life Sciences Sector
2. Life Sciences Sector
Slide 14: Life Sciences Segmentation
Life Sciences Segmentation Healthcare Diploma Healthcare Group (“DHG”) 85% 31% of group revenues supplies medical devices and related consumables and services to the healthcare industries in Canada, Australia and Ireland & the UK 387 employees Environmental 59% Canada The a1-group supplies environme
Slide 15: Healthcare Principal Businesses
Healthcare 16 Principal Businesses Clinical Diagnostics Electrosurgery MI Surgery GI/Endoscopy How doctors Where surgeons Where surgeons Where surgeons use determine disease operate with modern employ new imaging equipment and monitor health scalpels that use technologies for to diagnose and through
Slide 16: Life Sciences Business Model
Life Sciences Business Model > Quality manufacturer-branded products sourced under long term distribution agreements > Multi-year customer contracts for consumables and service underpin ca. 70% of revenues > Full service solutions provided by highly qualified technical specialists > Network of train
Slide 17: Life Sciences Potential for Growth
Life Sciences Potential for Growth > Increase share of specialised segments of Healthcare markets in Canada and Australia LIFE SCIENCES > Build presence in the UK and Ireland from TPD base and explore opportunities more broadly in Europe > Extend into other specialised medical disciplines with new p
Slide 18: 3. Seals Sector
3. Seals Sector
Slide 19: Seals Segmentation
Seals Segmentation Aftermarket Next day delivery of seals, seal kits, 55% 42% of group revenues O-rings, gaskets, filters and cylinder components for the repair of heavy mobile machinery 764 employees Industrial OEMs 63% North America Supply of seals, O-rings and custom 30% Europe moulded and machin
Slide 20: Aftermarket Products & Applications
Aftermarket 20 Products & Applications AFTERMARKET Products Next day delivery of seals, seal kits, O rings, gaskets, filters and cylinder components for the repair of heavy mobile machinery, eg: > Bulldozers & excavators Applications > Dump trucks > Agricultural tractors > Refuse collection trucks >
Slide 21: Aftermarket Business Model
Aftermarket Business Model > One-stop source for replacement seals and seal kits for all main brands of heavy mobile machinery > Next day delivery from central Clearwater, Florida warehouse using UPS and Fedex – order by 8pm, delivery by 10.30am the following morning > Seals typically sourced from s
Slide 22: Industrial OEMs Products & Applications
Industrial OEMs Products & Applications PRODUCTS APPLICATIONS Small engines Water meters Paint spray equipment Irrigation Household Medical equipment appliances equipment > Seals > O-rings > Custom moulded and machined parts Essential products for specialised industrial applications 21
Slide 23: Industrial OEMs Business Model
Industrial OEMs Business Model > Design engineering of seals in conjunction with OEM > Sourcing of proper compound, quality manufacturing, adherence to specifications, competitive cost > Product testing and approval process > Ex-stock availability of seals and sub-assemblies to match production sche
Slide 24: Seals Potential for Growth
Seals Potential for Growth > In Aftermarket, continue to gain share in the North American market through superior marketing and product development SEALS > Build and expand the group of Industrial OEM Seals businesses in North America and internationally > Build larger, broader-based Seals businesse
Slide 25: 4. Controls Sector
4. Controls Sector
Slide 26: Controls Segmentation
Controls Segmentation Interconnect Wiring, harness components and 75% 27% of group revenues fasteners used in specialised applications in Aerospace, Defence, Motorsport, Energy, Medical and Industrial 334 employees Fluid Controls 60% UK Temperature, pressure and fluid 32% Europe control products use
Slide 27: Controls Markets
Controls 26 Markets Aerospace & 27% Defence Food & 19% Beverage Motorsport 15% Energy & 8% Utilities Medical & 4% Scientific Industrial 27% Focus on technically demanding applications 26
Slide 28: Controls Interconnect Products
Controls 27 Interconnect Products 1. Specialised wiring 1 2 3 4 2. Moulded parts 3. Fasteners 4. Multicore cables 5. Identification 6. Relays & switches 5 6 7 8 7. Tubing 8. Termination devices 9. Connectors 10. Backshells 9 10 11 12 11. Screening braid 12. Bonding leads A broad range of specialised
Slide 29: Controls Added Value Services
Controls 28 Added value Services Connector assembly Ident sleeve printing Kitting Cable prototyping Tube cutting Wire spooling Added value services cement relationships with customers 28
Slide 30: Controls Business Model
Controls Business Model > Focus on refurbishment, upgrade and maintenance programmes for equipment in service > Support major new build programmes where smaller quantities are required from stock e.g. for prototype or initial build stages > High performance, manufacturer-branded products sourced und
Slide 31: Controls Potential for Growth
Controls Potential for Growth > Extend Interconnect product line and further penetrate specialised markets in Europe > In Specialty Fasteners build on strong positions in Civil CONTROLS Aerospace and Motorsport and expand in niche industrial markets > Continue to reposition Fluid Controls business t
Slide 32: Appendix 1: 2015 Results
4a | Appendix 1: 2015 Results
Slide 33: Overview of Results
Overview of Results Year ended 30 September x 2015 2014 Revenue £333.8m £305.8m +9% Adjusted operating profit £60.3m £56.7m +6% Adjusted operating margin 18.1% 18.5% Adjusted profit before tax £59.6m £56.2m +6% Free cash flow £40.3m £37.8m +7% Acquisition spend £37.8m £16.5m Net cash funds £3.0m £21
Slide 34: Profit Before Tax
Profit Before Tax Year ended 30 September x 2015 2014 £m £m Revenue 333.8 305.8 +9% Adjusted operating profit 60.3 56.7 +6% Adjusted operating margin (%) 18.1% 18.5% Net interest expense (0.7) (0.5) Adjusted profit before tax 59.6 56.2 +6% Acquisition related charges (7.4) (6.4) Fair value remeasure
Slide 35: Revenue Bridge
Revenue Bridge Year ended 30 September £m 340 +£3.7m +£32.4m 330 £333.8m 320 310 300 £305.8m -£8.1m 290 280 270 260 250 240 FY 14 Exchange Acquisitions Underlying FY 15 FY14 & FY15 34
Slide 36: Exchange Rates
Foreign Exchange Strengthening of UK£ continues to impact results on translation Translational Impact (base currency GBP) Change over Change over 1 year 3 years 2.2 USD (7%) (6%) 2.0 CAD 12% 28% EUR 6% 8% 1.8 USD AUD 16% 39% CAD Exchange Rates 1.6 EUR 1.4 AUD 1.2 1.0 Sep Sep Sep Sep Sep Sep 2010 201
Slide 37: Adjusted Operating Margin Bridge
Adjusted Operating Margin Bridge Year ended 30 September 18.5% 18.5% +60bps 18.0% -20bps 18.1% -50bps +30bps 17.5% -60bps 17.0% 16.5% 16.0% FY 14 Transactional FX Transactional Acquisitions Sector mix Operating Seals Seals restructure FY 15 FX leverage reorganisation 36
Slide 38: Exchange Rates
Foreign Exchange Healthcare gross margins impacted by weakening CAD and AUD against US$ Transactional Impact (base currency USD) 1.50 Change over Change over 1 year 3 years CAD 20% 36% 1.40 AUD 25% 48% 1.30 Exchange Rates 1.20 CAD AUD 1.10 1.00 0.90 Sep Sep Sep Sep Sep Sep 2010 2011 2012 2013 2014 2
Slide 39: Free Cash Flow
Free Cash Flow Year ended 30 September 2015 2014 £m £m Adjusted operating profit 60.3 56.7 Depreciation 3.5 2.5 Working capital (1.9) (4.6) Pension and share schemes, net 0.2 0.4 Operating cash flow, before acquisition expenses 62.1 55.0 +13% Interest paid, net (0.5) (0.3) Tax paid (15.4) (13.0) Cap
Slide 40: Cash
Cash Year ended 30 September x 2015 2014 £m £m Free cash flow 40.3 37.8 Acquisition cash paid (37.2) (16.4) Deferred consideration (0.6) (0.1) Dividends (19.9) (18.4) (17.4) 2.9 Cash brought forward 21.3 19.3 Exchange adjustments (0.9) (0.9) Net cash funds at 30 September 3.0 21.3 Comprising: Cash b
Slide 41: Shareholders’ Funds and ROATCE
Shareholders’ Funds and ROATCE As at 30 September x 2015 2014 £m £m Goodwill 89.3 80.2 Acquisition intangible assets 40.2 28.6 Tangible assets and investments 24.7 14.6 Net working capital 59.9 54.2 Trading capital employed - reported 214.1 177.6 Retirement benefit obligations (9.8) (4.3) Deferred t
Slide 42: Appendix 2: Recent acquisitions
Appendix 2: Recent acquisitions
Slide 43: TPD Acquisition
TPD Acquisition Healthcare – Ireland and the UK • DHG acquired 80% of Technopath Distribution (“TPD”) for ca. £11m in October 2014; owner managers retain 20% with put and call options • TPD is an established supplier to Biotech, Clinical and Medical markets in Ireland and the UK with revenues of ca.
Slide 44: Kubo Acquisition
Kubo Acquisition Seals – Switzerland and Austria • Acquired Kubo in March 2015 for net cash consideration of ca. £23m • Long established, leading supplier of seals, O-Rings, gaskets and moulded rubber parts • Large and diverse base of industrial customers in Switzerland and Austria • Kubo specialise
Slide 45: WCIS Acquisition
WCIS Acquisition Seals - Australasia • Acquired WCIS in Australia in October 2015 for maximum consideration of ca. £10m • Established supplier of sealing products and associated services used in complex and arduous applications • Core product capability in soft and metallic gaskets and mechanical se
Slide 46: Specialty Fasteners
Specialty Fasteners Controls – UK and EMEA Clarendon is building a strong position in civil aircraft seating and interiors: • Innovative VMI solution installed this year within production cells of major customer • Supply contract also extended to additional manufacturing site with same customer • Bu
Slide 47: Contact details
Tel: +44 (0) 20 7549 5700 Bruce M Thompson Fax: +44 (0) 20 7549 5715 Chief Executive Officer Email: investors@diplomaplc.com Web: www.diplomaplc.com Nigel P Lingwood 12 Charterhouse Square Group Finance Director London EC1M 6AX Tulchan Communications David Allchurch Martin Robinson Tel: +44 (0) 20 7