Slide 1: Full year results and strategy update
18 November 2019 Full year results and strategy update Year ended 30 September 2019 Consistently delivering value
Slide 2: Agenda
Agenda 01 Overview 02 Financial results 03 Business review and outlook 04 Strategy update 05 Q&A 2
Slide 3: Full year results
Full year results Strong growth and margin progression Revenue Underlying Adjusted Adjusted Dividend growth revenue operating EPS per share growth margin +12% +5% +30bps +14% +14% Another strong Diploma performance 3
Slide 4: Financial Results
Financial Results Consistently delivering value 4
Slide 5: Financial Highlights
Financial Revenue Adjusted Highlights operating profit Another good £544.7m £97.2m performance 2018: £485.1m 2018: £84.9m +12% +14% • Robust underlying revenue growth of 5% Adjusted Free • Improvement in adjusted operating margin cash flow operating margin of 30bps • Strong free cash flow of 17.8% £
Slide 6: Revenue Bridge FY 2019
Revenue Bridge FY 2019 Robust underlying growth of 5% +£24.4m +£26.2m £544.7m +£9.0m +5% +5% £485.1m +2% FY 2018 Translational FX Acquisitions, net Underlying FY 2019 FY 2018 & FY 2019 6
Slide 7: Profit before tax
Profit before tax Year ended 30 September 2019 2018 £m £m Revenue 544.7 485.1 +12% Adjusted operating profit 97.2 84.9 +14% Adjusted operating margin (%) 17.8% 17.5% Interest expense (0.7) (0.1) Adjusted profit before tax 96.5 84.8 +14% Previous CEO transition costs - (2.1) Acquisition related charg
Slide 8: Free cash flow
Free cash flow Year ended 30 September 2019 2018 £m £m Adjusted operating profit 97.2 84.9 Depreciation 5.4 4.8 Increase in working capital (9.4) (5.1) Previous CEO transition costs paid (1.3) (0.8) Pension and share schemes, net 0.4 0.5 Operating cash flow, before acquisition expenses 92.3 84.3 +9%
Slide 9: Net (debt)/cash
Net (debt)/cash Year ended 30 September 2019 2018 £m £m Free cash flow 56.5 60.5 Acquisition cash paid (77.2) (20.1) Deferred consideration (1.1) (0.3) Dividends (30.1) (27.0) (51.9) 13.1 Net cash brought forward 36.0 22.3 Exchange and other adjustments 0.8 0.6 Net (debt) / cash funds (15.1) 36.0 Co
Slide 10: Acquisitions
Acquisitions Pipeline healthy but remains competitive Acquisitions are an integral part of the Group’s strategy Acquisition spend* • £78.3m* spent on acquisitions £78.3m during the year • Newly acquired businesses broaden products and services VSP Technologies £57.2m supplied • Pipeline healthy, but
Slide 11: Shareholders' funds
Shareholders’ funds Year ended 30 September 2019 2018 £m £m Tangible and other intangible assets 29.4 25.5 Goodwill and acquisition intangible assets 251.1 182.1 Net working capital 96.6 75.2 Trading capital employed - reported 377.1 282.8 Working capital (% of revenue) 16.5% 15.1% ROATCE 22.9% 24.5
Slide 12: Business Review
Business Review Consistently delivering value 12
Slide 13: The Group
The Group Well diversified by Sector and geography Revenue by Sector Revenue by geography* 11% 27% 40% 40% 49% 33% Seals Controls Life Sciences North America Europe Rest of World *b y d e s ti n a ti o n 13
Slide 14: Seals
Seals Segmentation North America US Aftermarket Industrial OEM 30% of revenues 27% of revenues Next day delivery of seals, Sealing products, custom Primary growth drivers sealing products and cylinder moulded and machined parts components for the repair of supplied to manufacturers of General econom
Slide 15: Seals
Seals Further progress despite softer industrial markets • Underlying Sector revenue growth of 1% • Good opening contribution from VSP Technologies acquired in July 2019 • Solid growth from International seals and US Aftermarket • Acquisition of DMR Seals in the UK • US Industrial OEM revenues weake
Slide 16: Controls
Controls Segmentation Interconnect Fluid controls 63% of revenues 16% of revenues Wiring, cable, harness Temperature, pressure and components and cable fluid control products used in accessories used in specialised Food, Beverage and Catering technical applications in industries. Aerospace, Defence,
Slide 17: Controls
Controls Strong performance in positive end markets • Underlying Sector revenue growth of 9% • Acquisitions of Gremtek (Interconnect France) and FS Cables (CCA) • Another excellent year for Specialty Fasteners • Margins +10bps benefiting from operational leverage • Good contribution from Interconnec
Slide 18: Life Sciences
Life Sciences Segmentation Healthcare Environmental 85% of revenues 15% of revenues Clinical diagnostics Environmental analysers, instrumentation, consumables containment enclosures and and services supplied to emission monitoring systems. hospital pathology and life sciences laboratories for the te
Slide 19: Life Sciences
Life Sciences Strong trading and operating leverage • Underlying Sector revenue growth of 7% • Acquisition of Sphere in bariatrics (obesity) in Australia • Good performance across Healthcare and Environmental businesses • Very strong margin progression +120bps from leverage and cost control • Expand
Slide 20: Summary and Outlook
Summary and Outlook Another strong set of results Uncertain political and economic environment Resilient and successful business model Optimistic about acquisition pipeline Full year expectations positive and unchanged 20
Slide 21: Focus for Growth
Focus for Growth Strategy update Consistently delivering value
Slide 22: Building on strong foundations
Building on strong foundations Niche value-add distribution People: passionate, accountable, customer-centric Strong positions in attractive markets Resilient business model Successful acquisition history Strong financial performance and balance sheet Focus on developing our strengths 22
Slide 23: Significant growth opportunity
Significant growth Large market potential opportunity Global Gaskets Global Seals • Strong positions in key local markets $20bn $40bn • Underpenetrated in biggest developed economies • Further penetration with existing product General In Vitro portfolio Surgery Diagnostics • Adjacent product opportu
Slide 24: Value-add proposition
Value-add proposition Essential Products Essential Solutions Essential Values Critical to Responsive Decentralised model customers needs customer service Deep technical Opex budgets Customer-orientated support Added value Accountable for Range of end markets services performance execution Sustainabl
Slide 25: Our markets are evolving
Our markets are evolving… • Competition • Talent brain-drain • Impact of • Geopolitical increasing technology uncertainty TREND • Disruption • Productivity from automation 1. Strengthen our 2. Develop our Organisational Capability 3. Focus our OUR APPROACH Core Competencies Growth on core to further
Slide 26: Our Group is evolving
Our Group is evolving… Market Cap 5 +Scale +Scale years ago Today In 5 years +Complexity +Complexity £800m +Competition +Opportunity ca.£2bn +Competition +Opportunity £?bn Our approach will be…. Strengthen our Core Develop our 1. Competencies 2. Organisational 3. Focus our Growth Capability Focus on
Slide 27: 1. Strengthen our Core Competencies
1. Strengthen our Core Competencies End Markets Supply chain Operational Route to Commercial Product management excellence market discipline Talent Technology Facility 27
Slide 28: 2. Develop our Organisational Capability
2. Develop our Organisational Capability Talent Technology TECHNOLOGY Facility FACILITY • Organisational design to • Priorities: ERP, facility • Facility/inventory enable agility, alignment & management, sales management processes accountability channels • Machining and automation • Developing our t
Slide 29: 3. Focus our Growth
3. Focus our Growth Structural trends in our Sectors Under-penetrated in large core Existing end markets markets Pragmatically taking advantage of scale Core Highly fragmented markets with acquisition opportunities Product Significant adjacent product Geographic category diversification diversificat
Slide 30: Seals
Seals Addressable market • Structural growth opportunities • Further North America penetration 15% ➢ Louisville facility: broader US Aftermarket reach 40% Addressable ➢ Aftermarket scale advantages Asia Seals Americas • Focus on core developed international economies £20bn EMEA • Product adjacencies
Slide 31: Controls
Controls Interconnect addressable market • Underpenetrated European market Europe Market Share $1.3bn 7% ➢ Foothold for Interconnect in France Cabling addressable market (Gremtek) Europe Market Share ➢ Developing Interconnect Germany $800m 4% (Sommer) Specialty fastener addressable market Europe Mar
Slide 32: Life Sciences
Life Sciences Top 10 Device Areas • High growth budget segments 18% In Vitro Diagnostics (IVD) Size of market ➢ Diagnostics, preventative, speciality 16% Cardiology 14% surgical Diagnostic Imaging 12% ➢ Niche, innovative, technology based 10% Opthalmics solutions beyond mass market 8% General & Drug
Slide 33: Acquisitions
Acquisitions Market Key target attributes Acquisition spend (£m) • Fragmented markets • Value-add servicing • Adjacent product range component 78.3 • Industrial cycle creates • Organic growth potential 37.8 32.7 opportunity • Capable and established 20.1 20.4 management teams 2015 2016 2017 2018 201
Slide 34: Environmental, Social, Governance (ESG)
Environmental, Social, Governance (ESG) 34
Slide 35: Financial model
Financial model Revenue Growth Adj. Operating Margin FCF Conversion 10% + 17% + c. 90% Net Debt / EBITDA Dividend Cover ROATCE < 2x 2x adj EPS 20% + Consistent compounding value creation 35
Slide 36: Consistently delivering value
Consistently delivering value Retain high quality, resilient fundamentals of the business model Focus on our core competencies Focused organisational development Focused growth strategy Considerable growth runway at sustainably high margins Consistent and sustainable shareholder value creation 36
Slide 37: Appendix
Appendix Consistently delivering value 37
Slide 38: End Markets
DIPLOMA: CONSISTENTLY DELIVERING VALUE Essential Products Essential Solutions Essential Values End Markets Supply chain Operational Route to Commercial Product management excellence market discipline Talent Technology Facility Robust organic Sustainable Consistently Value enhancing Value growth high
Slide 39: Financial KPIs
Financial KPIs Five year trends 2019 2018 2017 2016 2015 Revenue £544.7m £485.1m £451.9m £382.6m £333.8m Total growth +12% +7% +18% +15% +9% Underlying growth +5% +7% +7% +3% +1% Adjusted operating margin 17.8% 17.5% 17.3% 17.2% 18.1% Working capital (% revenues) 16.5% 15.1% 15.0% 16.6% 17.0% Free c
Slide 40: Contact details
Johnny Thomson Chief Executive Officer Nigel P Lingwood Group Finance Director Tel: +44 (0) 20 7549 5700 Email: investors@diplomaplc.com Web: www.diplomaplc.com 12 Charterhouse Square London EC1M 6AX Tulchan Communications Martin Robinson David Allchurch Tel: +44 (0) 20 7353 4200 Email: diploma@tulc