Slide 1: Preliminary Announcement
21 November 2016 Preliminary Announcement Year ended 30 September 2016
Slide 2: Contents
Contents Introduction and Overview Financial Results Business Review Outlook and Prospects Preliminary Announcement 01
Slide 3: Introduction and Overview
DIPLOMA PLC Introduction and Overview
Slide 4: Group Overview
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 Seals Controls 29% of revenues 44% of revenues 27% of revenues Suppliers of consumables, Suppliers of s
Slide 5: Group Overview: Well diversified by geography
Group Overview Well diversified by geography North America revenues European revenues Rest of World revenues (by destination) by sector (by destination) by sector (by destination) by sector 42% of revenues 23% US 19% Canada 48% of revenues 23% UK 25 Continental % Europe 10% of revenues Life Sciences
Slide 6: The Diploma Investment Case
The Diploma Investment Case Clearly defined strategy, consistent track record We focus on essential products and services, funded by GDP+ Organic customers’ operating rather than capital budgets, giving revenue growth resilience to revenues Attractive Our attractive operating margins are sustained
Slide 7: Overview of 2016
Overview of 2016 Strong results and excellent free cash flow • Hard won underlying organic revenue growth across generally challenging markets; currency tailwind in final quarter • Boosted by good contribution from acquisitions: – £33m invested this year; ca.£90m invested over last 3 years – These a
Slide 8: Financial Results
Financial Results
Slide 9: Overview of Results
Overview of Results Year ended 30 September x 2016 2015 Revenue £382.6m £333.8m +15% Adjusted operating profit £65.7m £60.3m +9% Adjusted operating margin 17.2% 18.1% Adjusted profit before tax £64.9m £59.6m +9% Free cash flow £59.0m £40.3m +46% Acquisition spend £32.7m £37.8m Net cash funds £10.6m
Slide 10: Financial Highlights
Financial Highlights Strong results and excellent free cash flow • Revenue and adjusted operating profit increased by 15% and 9% respectively; adjusted EPS increased by 10% • Acquisitions added 8% to Group revenues; currency movements increased revenues by 4%; underlying revenue growth of 3% • Adjus
Slide 11: Revenue Bridge
Revenue Bridge Year ended 30 September £m 400 +£8.4m +£26.6m £382.6m +£13.8m 350 £333.8m 300 250 200 FY15 Translational FX Acquisitions Underlying FY16 FY15 & FY16 Preliminary Announcement 10
Slide 12: Profit Before Tax
Profit Before Tax Year ended 30 September x 2016 2015 £m £m Revenue 382.6 333.8 +15% Adjusted operating profit 65.7 60.3 +9% Adjusted operating margin (%) 17.2% 18.1% Interest expense (0.8) (0.7) Adjusted profit before tax 64.9 59.6 +9% Acquisition related charges (10.3) (7.4) Fair value remeasureme
Slide 13: Adjusted Operating Margin Bridge
Adjusted Operating Margin Bridge Year ended 30 September % 18 18.1% 17 17.2% -100bps +20bps -30bps +20bps 16 15 14 13 12 FY15 Transactional FX Acquisitions Sector mix FY15 Seals FY16 FY15 & FY16 reorganisation Preliminary Announcement 12
Slide 14: Taxation and Earnings per Share
Taxation and Earnings per Share Year ended 30 September x 2016 2015 Adjusted profit before tax (£m) 64.9 59.6 Reported taxation (14.9) (14.4) Adjustments (1.8) (1.3) Adjusted tax (16.7) (15.7) Effective adjusted tax rate 25.7% 26.3% Earnings per share (pence) Adjusted 41.9p 38.2p +10% Basic (Reporte
Slide 15: Free Cash Flow
Free Cash Flow Year ended 30 September 2016 2015 £m £m Adjusted operating profit 65.7 60.3 Depreciation 4.5 3.5 Working capital 6.3 (1.9) Pension and share schemes, net 0.1 0.2 Operating cash flow, before acquisition expenses 76.6 62.1 +23% Interest paid, net (0.6) (0.5) Tax paid (17.6) (15.4) Capit
Slide 16: Net Cash
Net Cash Year ended 30 September x 2016 2015 £m £m Free cash flow 59.0 40.3 Acquisition cash paid (32.0) (37.2) Deferred consideration (0.7) (0.6) Dividends (21.4) (19.9) 4.9 (17.4) Net cash brought forward 3.0 21.3 Exchange adjustments 2.7 (0.9) Net cash funds at 30 September 10.6 3.0 Comprising: C
Slide 17: Acquisitions
Acquisitions Strong acquisition performance and encouraging pipeline • Acquisitions are an integral part of the Group’s growth strategy • £32.7m spent on acquisitions during the year: – £21.3m on Cablecraft – expanding product range & markets in the Controls businesses – £8.4m on WCIS – extending th
Slide 18: Acquisitions: Total expenditure over last years
Acquisitions Total expenditure of ca.£90m over last 3 years Life Seals Controls Sciences Acquisition spend 2016 • WCIS – Australia & • Cablecraft – UK New Caledonia • Ascome – France £32.7m Acquisition spend 2015 • TPD – Ireland • Kubo – Switzerland & Austria £37.8m • Swan Seals – UK Acquisition spe
Slide 19: Shareholders' Funds and ROATCE
Shareholders’ Funds and ROATCE As at 30 September x 2016 2015 £m £m Tangible assets and investments 25.4 24.7 Goodwill and intangible assets 169.8 129.5 Net working capital 63.4 59.9 Trading capital employed - reported 258.6 214.1 Working capital (% of revenue) 16.6% 17.0% ROATCE 21.1% 23.9% Retirem
Slide 20: Business Review
Business Review | | | | T i | I i | | I
Slide 21: Life Sciences Segmentation
Life Sciences Segmentation Healthcare 83% 57% Diploma Healthcare Group (“DHG”) supplies medical devices and related consumables and services to hospitals, private clinics and laboratories 13% 17% Environmental 30% The a1-group supplies environmental analysers, containment enclosures, Canada emission
Slide 22: Life Sciences Operating Results
Life Sciences Operating Results Year ended 30 Sept 2016 2015 Revenue £109.9m £103.1m +7% Adjusted operating profit £19.6m £21.0m -7% Adjusted operating margin 17.8% 20.4% • Underlying revenues increased by 4%; currency movements increased revenues by 3% • Gross margins in Healthcare reduced by 350bp
Slide 23: Life Sciences Sector Developments
Life Sciences Sector Developments • Continued pressure on Healthcare budgets from softer economic environment in Canada and Australia • In Canada, revenues broadly flat with growth in Surgical products offsetting reduced capital spend in Clinical Diagnostics • In Australia, strong growth from positi
Slide 24: Medivators disposal
Medivators disposal Vantage sold product line to Cantel • Vantage completed sale of Medivators endoscope reprocessor product line in September 2016 to Cantel Medical Corporation • Gross consideration of £2.8m (net consideration of £2.2m after expenses of sale and integration costs) • Vantage facilit
Slide 25: Seals Segmentation
Seals Segmentation Aftermarket 53% 56% Next day delivery of seals, sealing products, filters and cylinder components for the repair of heavy mobile machinery 10% Industrial OEMs 34% 47% Supply of sealing products and custom moulded and machined parts N.America to manufacturers of specialised industr
Slide 26: Seals Operating Results
Seals Operating Results Year ended 30 Sept 2016 2015 Revenue £166.6m £139.6m +19% Adjusted operating profit £28.2m £24.8m +14% Adjusted operating margin 16.9% 17.8% • Underlying revenue growth of 1% after adjusting for acquisitions and currency • Acquisitions added 12% to revenue - WCIS, Kubo and Sw
Slide 27: North American Seals Sector Developments
North American Seals Sector Developments • Core Aftermarket seal and gasket revenues broadly flat in sluggish Construction market; reduction in attachment kit revenues • Strengthening of senior sales and marketing management and new growth initiatives gaining traction • Increased focus on national r
Slide 28: International Seals Sector Developments
International Seals Sector Developments • International Seals businesses in EMEA and Australasia now account for ca.40% of Seals Sector revenues; underlying revenues increased by 5% • FPE Seals – GDP plus growth with second half improvement in activity levels; new facility now the core operational h
Slide 29: WCIS Acquisition
WCIS Acquisition Acquisition extends Seals into Australasia • Acquired WCIS in October 2015 for maximum consideration of ca. £10m • Core product capabilities in gaskets and mechanical seals, used in complex and arduous applications • Key Mining customers have faced difficult market conditions, holdi
Slide 30: Controls Segmentation
Controls Segmentation Interconnect 60% 76% Wiring, harness components and fasteners used in specialised applications in Aerospace, Defence, Motorsport, Energy, Medical and Industrial 9% Fluid Controls 24% 31% Temperature, pressure and fluid control products used in the Food, UK Beverage and Catering
Slide 31: Controls Operating Results
Controls Operating Results Year ended 30 Sept 2016 2015 Revenue £106.1m £91.1m 16% Adjusted operating profit £17.9m £14.5m 23% Adjusted operating margin 16.9% 15.9% • Underlying revenues increased by 4% after adjusting for currency and acquisitions of Cablecraft and Ascome • Strong underlying growth
Slide 32: Controls Sector Developments
Controls Sector developments • The Interconnect businesses delivered modest underlying growth – In the UK, strong performances in Aerospace, Defence and Motorsport markets offset weaker Industrial markets – In Germany, strong and growing position in supplying products used in Electricity network; mo
Slide 33: Cablecraft Acquisition
Cablecraft Acquisition Extension of Interconnect activities • Acquired Cablecraft in March 2016 for maximum net cash consideration of £26m • Leading supplier of cable accessory products used to identify, connect, secure and protect electrical cables • Supplies to range of industries including Electr
Slide 34: Outlook and Prospects
DIPLOMA PLC Outlook and Prospects
Slide 35: Current Trading and Outlook
Current Trading and Outlook Continued headwinds to organic growth, favourable acquisition environment • The Group has a strong and resilient business model, with a broad geographic spread of businesses • Growth strategy is supported by robust balance sheet and consistently high free cash flow • Stro
Slide 36: Appendix
DIPLOMA PLC Appendix
Slide 37: 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 stable revenue growth attractive margins responsiveness • Focus on essential • Highly responsive • Entrepreneurial pr
Slide 38: Our Growth Strategy
Our Growth Strategy Acquire Build Grow • Fit with Group’s • Investment to build • Businesses maintain business model a solid foundation their distinct sales • Marketing led with for growth: and marketing strong customer – New facilities identity relationships and IT systems • Synergies managed • Tra
Slide 39: Our Corporate Objectives
Our Corporate Objectives Track record of delivering strong returns for shareholders Strong EPS growth Upper quartile TSR growth Progressive dividend growth 2016 41.9 2016 316 316 2016 20.0 2015 38.2 2015 233 2015 18.2 2014 36.1 2014 236 2014 17.0 +26% p.a. +11% p.a. +8% p.a. 2013 34.8 2013 218 2013
Slide 40: Financial KPIs: Five Year Trends
Financial KPIs Five Year Trends 2012 2013 2014 2015 2016 Revenue £260.2m £285.5m £305.8m £333.8m £382.6m Total growth +13% +10% +7% +9% +15% Organic growth +6% +4% +8% +1% +3% Operating margin 20.3% 19.0% 18.5% 18.1% 17.2% Working capital (% revenues) 16.5% 16.7% 17.2% 17.0% 16.6% Free cash flow £32
Slide 41: Foreign Exchange: Translational Impact
Foreign Exchange Weaker UK£ in final quarter improves results on translation Translational Impact (base currency GBP) Change over Change over 2.2000 1 year 3 years USD 14.2% 19.8% 2.0000 CAD 15.9% -2.6% EUR 14.8% 3.4% 1.8000 Exchange Rates USD 1.6000 CAD EUR 1.4000 1.2000 1.0000 Sep-11 Sep-12 Sep-13
Slide 42: Foreign Exchange: Transactional Impact
Foreign Exchange Healthcare gross margins impacted by weakening CAD and AUD against US$ Transactional Impact (base currency USD) Change over Change over 1.5 1 year 4 years CAD 2% -34% 1.4 AUD 8% -36% 1.3 1.2 CAD AUD 1.1 1 0.9 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Preliminary Announcement 41
Slide 43: 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