Diploma Plc · LSE:DPLM
Diploma — Investor Presentation (December 2014)
44 slides from Diploma's investor presentation, December 2014
Slide 1: Corporate Presentation December 2014
Corporate Presentation December 2014
Slide 2: Contents
Corporate Presentation Contents 1. Group Overview 2. Life Sciences Sector LIFE SCIENCES 3. Seals Sector SEALS 4. Controls Sector 5. Growth Outlook CONTROLS Appendix: 2014 Results 01
Slide 3: 1. Group Overview
1. Group Overview
Slide 4: Group Overview - Sectors
Corporate Presentation 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 30% of revenues 39% of revenues 31% of revenues A BALANCED AND DIVERSE PORTFOLIO OF BUSI
Slide 5: Group Overview - Geography
Corporate Presentation Group Overview - Geography North America Europe Rest of World 49% 43% 8% of revenues¹ of revenues¹ of revenues¹ 26% US 23% UK 23% Canada 20% Continental Europe Life Sciences Seals Controls Healthcare Aftermarket Controls Environmental Industrial OEM ¹By destination 04
Slide 6: Our Business Model
Corporate Presentation 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 cu
Slide 7: Our Growth Strategy
Corporate Presentation Our Growth Strategy 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 facilities > Synergies manag
Slide 8: Our Corporate Objectives
Corporate Presentation Our Corporate Objectives STRONG DOUBLE-DIGIT UPPER QUARTILE PROGRESSIVE DIVIDEND GROWTH EPS GROWTH TSR GROWTH 2014 36.1 2014 469 2014 17.0 2013 34.8 2013 434 2013 15.7 2012 33.1 2012 306 2012 14.4 +20% p.a. +36% p.a. +17% p.a. 2011 27.9 2011 199 2011 12.0 2010 18.9 2010 171 20
Slide 9: Financial KPIs
Corporate Presentation Financial KPIs Five Year Trends 2010 2011 2012 2013 2014 Revenue £183.5m £230.6m £260.2m £285.5m £305.8m Total growth +15% +26% +13% +10% +7% Organic growth +11% +17% +6% +4% +8% Operating margin 17.5% 19.6% 20.3% 19.0% 18.5% Working capital (% revenues) 15.4% 16.1% 16.5% 16.7
Slide 10: Acquisition Spend
Corporate Presentation Acquisition Spend (£) 16.5m • Life Sciences – Chemzyme, 31.6m 28.2m DSL (20%) • Seals – Ramsay, Kentek (80%), HPS (49%), AB Seals 22.3m • Controls – SFC, Sacee 12.2m 11.0m 8.0m 7.9m 0.3m 2.2m 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 80% of TPD acquired shortly after y
Slide 11: Market Consensus and Financial Calendar
Corporate Presentation Market Consensus and Financial Calendar Year ending 30 Sept Actual Actual Consensus* Announcements 2013 2014 2015 AGM and First Quarter Revenues £286m £306m £338m Statement 21 January 2015 Operating Margin 20.3% 18.5% 18.4% Half Year Results 11 May 2015 Adjusted PBT £52.8m £56
Slide 12: 2. Life Sciences Sector
2. Life Sciences Sector
Slide 13: Life Sciences Segmentation
Corporate Presentation Life Sciences Segmentation Healthcare 30% of group revenues 80% Diploma Healthcare Group (“DHG”) supplies medical devices and related consumables and services to the healthcare 334 employees industries in Canada and Australia 67% Canada Environmental 19% Europe The a1-group su
Slide 14: Healthcare – Principal Businesses
Corporate Presentation 16 Healthcare – Principal Businesses Clinical Diagnostics Electrosurgery MI Surgery GI/Endoscopy How doctors determine Where surgeons operate Where surgeons employ Where surgeons use disease and monitor with modern scalpels that new technologies for imaging equipment to health
Slide 15: TPD Acquisition
Corporate Presentation TPD Acquisition > DHG acquired 80% of Technopath Distribution (“TPD”) shortly after the year end > TPD is an established supplier to Biotech, Clinical and Medical markets in Ireland and the UK with revenues of ca. €15m > TPD shares key suppliers with DHG in Canada and also add
Slide 16: Life Sciences Business Model
Corporate Presentation 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 special
Slide 17: Life Sciences - Potential for Growth
Corporate Presentation Life Sciences - Potential for Growth > In Healthcare, increase share in specialised segments of growing Canadian market LIFE SCIENCES > Extend into other medical disciplines with new products and technologies > Build critical mass in Australian and UK & Ireland markets and the
Slide 18: 3. Seals Sector
3. Seals Sector
Slide 19: Seals Segmentation
Corporate Presentation Seals Segmentation Aftermarket 60% Next day delivery of seals, seal kits, O-rings, gaskets, filters 39% of group revenues and cylinder components for the repair of heavy mobile machinery 604 employees Industrial OEMs 68% North America Supply of seals, O-rings and custom moulde
Slide 20: Aftermarket – Products & Applications
Corporate Presentation 20 Aftermarket – 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 > R
Slide 21: Aftermarket Business Model
Corporate Presentation 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 t
Slide 22: Industrial OEMs – Products & Applications
Corporate Presentation 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 APPL
Slide 23: Industrial OEMs Business Model
Corporate Presentation 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 t
Slide 24: Seals - Potential for Growth
Corporate Presentation Seals - Potential for Growth > In Aftermarket, continue to gain share in the North American market through superior marketing and product development SEALS > Increase the global footprint for Aftermarket – particularly in Europe and Asia Pacific > Build and expand the group of
Slide 25: 4. Controls Sector
4. Controls Sector
Slide 26: Controls Segmentation
Corporate Presentation Controls Segmentation Interconnect Wiring, harness components and 70% 31% of group revenues fasteners used in specialised applications in Aerospace, Defence, Motorsport, Energy, Medical and Industrial 312 employees Fluid Controls 58% UK Temperature, pressure and fluid 30% 34%
Slide 27: Controls – Market Segmentation
Corporate Presentation 26 Controls – Market Segmentation 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
Corporate Presentation 27 Controls – 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 B
Slide 29: Controls - Added Value Services
Corporate Presentation 28 Controls - 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
Corporate Presentation 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-brand
Slide 31: Controls - Potential for Growth
Corporate Presentation Controls - Potential for Growth > In Interconnect, further penetrate specialised market sectors in Europe CONTROLS > Broaden the range of high performance products and added value services > In Fluid Controls, reposition the businesses to take advantage of structural market ch
Slide 32: 5. Growth Outlook
5. Growth Outlook
Slide 33: The Diploma Investment Case
Corporate Presentation The Diploma Investment Case 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 quality ATTRACTIVE of custo
Slide 34: Next Phase of Growth
Corporate Presentation Next Phase of Growth GDP+ ORGANIC Trending back towards “GDP+” levels REVENUE GROWTH ATTRACTIVE Targeting operating margins in the range 18-19% over the MARGINS business cycle ACQUISITIONS TO Improving acquisition environment, good pipeline and ACCELERATE GROWTH additional res
Slide 35: Appendix: 2014 Results
Appendix: 2014 Results
Slide 36: Overview of Results
Corporate Presentation Overview of Results Year ended 30 September x 2014 2013 Revenue £305.8m £285.5m +7% Adjusted operating profit £56.7m £54.3m +4% Adjusted operating margin 18.5% 19.0% Adjusted profit before tax £56.2m £54.3m +3% Free cash flow £37.8m £31.6m +20% Acquisition spend £16.5m £2.2m Y
Slide 37: Financial Highlights
Corporate Presentation Financial Highlights > Underlying revenue and adjusted > Adjusted profit before tax and operating profit both increased by 8%, adjusted EPS increased by 3% and 4% after adjusting for currency effects respectively to £56.2m and 36.1p and acquisitions > Free cash flow increased
Slide 38: Profit Before Tax
Corporate Presentation Profit Before Tax Year ended 30 September x 2014 2013 £m £m Revenue 305.8 285.5 +7% Adjusted operating profit 56.7 54.3 +4% Adjusted operating margin (%) 18.5% 19.0% Net interest expense (0.5) - Adjusted profit before tax 56.2 54.3 +3% Acquisition related charges (6.4) (5.6) F
Slide 39: Foreign Exchange
Corporate Presentation Foreign Exchange Translational Impact Average rates in UK Sterling 2014 2013 US$ 1.66 1.56 +6% C$ 1.80 1.59 +13% Euro 1.23 1.19 +3% A$ 1.81 1.58 +15% Transactional Impact Average rates in US Dollars 2014 2013 C$ 1.09 1.02 +7% A$ 1.09 1.01 +8% 38
Slide 40: Adjusted Operating Margin
Corporate Presentation Adjusted Operating Margin + Tight control of operating costs in the Healthcare businesses Transactional currency effects in Canadian Adjusted operating and Australian + margin Healthcare businesses Operational leverage from benefits of Investment for Growth 18.5% Acquisitions
Slide 41: Free Cash Flow
Corporate Presentation Free Cash Flow Year ended 30 September x 2014 2013 £m £m Adjusted operating profit 56.7 54.3 Depreciation 2.5 2.5 Working capital (4.6) (1.1) Pension and share schemes, net 0.4 0.2 Operating cash flow, before acquisition expenses 55.0 55.9 -2% Interest paid, net (0.3) (0.2) Ta
Slide 42: Cash
Corporate Presentation Cash Year ended 30 September x 2014 2013 £m £m Free cash flow 37.8 31.6 Acquisition cash paid (16.4) (1.6) Deferred consideration (0.1) (0.6) Dividends (18.4) (17.6) 2.9 11.8 Cash brought forward 19.3 7.9 Exchange adjustments (0.9) (0.4) Cash at 30 September 21.3 19.3 41
Slide 43: Shareholders’ Funds and ROATCE
Corporate Presentation Shareholders’ Funds and ROATCE As at 30 September x 2014 2013 £m £m Goodwill 80.2 78.5 Acquisition intangible assets 28.6 26.7 Tangible assets and investments 14.6 15.4 Net working capital 54.2 47.8 Trading capital employed - reported 177.6 168.4 Retirement benefit obligations
Slide 44: Contact
Contact Bruce M Thompson Chief Executive Officer Nigel P Lingwood Group Finance Director Tel: +44 (0) 20 7549 5700 Fax: +44 (0) 20 7549 5715 Email: investors@diplomaplc.com Web: www.diplomaplc.com 12 Charterhouse Square London EC1M 6AX Tulchan Communications: David Allchurch Martin Robinson Tel: +44