Diploma Plc · LSE:DPLM
Diploma — H1 2020 Earnings Presentation
31 slides from Diploma's earnings presentation, May 11, 2020
Slide 1: Half year results and COVID-19 update
11 May 2020 Half year results and COVID-19 update Half year ended 31 March 2020 Consistently delivering value
Slide 2: Agenda
Agenda 01 Overview and COVID-19 update 02 Financial results 03 Business review and strategy 04 Summary and outlook 05 Q&A 2
Slide 3: Half year results
Half year results Robust growth with good contribution from acquisitions Constant Underlying Adjusted Adjusted Available currency revenue operating EPS liquidity revenue growth margin growth +10% +1% 17.6% +6% £66m Another strong Diploma performance 3
Slide 4: COVID-19 impact
COVID-19 impact • Group revenue since H1 remains reasonably resilient, down ca. 16% in April vs. last year ➢ Underlying revenue fell by ca. 28% ➢ Strong contribution of ca. 11% from acquisitions • Life Sciences seeing greatest impact but Healthcare revenues deferred not lost • Resilience in Seals/Co
Slide 5: Resilient business model
Resilient business model Essential, value-add products and services Decentralised structure: accountable, agile leadership Strong positions in attractive markets Well diversified by customer and end market Critical to customer needs Serving into opex budgets rather than capex Cash generative busines
Slide 6: COVID-19 response
COVID-19 response GOVERNANCE WORKFORCE MANAGEMENT Policy and guidelines to support rapid Prioritising employee wellbeing and local business responses job preservation Aligned and agile decision-making Flexing working practices to manage with shared learnings our overheads FINANCIAL MANAGEMENT SOCIAL
Slide 7: Financial Results
Financial Results Consistently delivering value 7
Slide 8: Financial Highlights
Financial Revenue Adjusted Highlights operating profit Robust performance, £283.6m £49.9m softened by COVID-19 2019: £260.4m 2019: £45.6m pandemic +9% +9% • Underlying revenue growth Adjusted Free of 1% operating margin cash flow • Adjusted operating margin broadly unchanged 17.6% £21.8m • Strong fr
Slide 9: Profit before tax
Profit before tax Half Year ended 31 March 2020 2019 £m £m Revenue 283.6 260.4 +9% Adjusted operating profit 49.9 45.6 +9% Adjusted operating margin (%) 17.6% 17.5% Interest expense (1.5) (0.1) Adjusted profit before tax 48.4 45.5 +6% Profit on disposal of property 1.1 - Acquisition related charges
Slide 10: Free cash flow
Free cash flow Half Year ended 31 March 2020 2019 £m £m Adjusted operating profit 49.9 45.6 Depreciation 6.0 2.6 Increase in working capital (13.1) (16.9) Previous CEO transition costs paid - (1.3) Pension and share schemes, net 0.2 0.1 Operating cash flow, before acquisition expenses 43.0 30.1 +43%
Slide 11: (Net bank debt)/cash funds
(Net bank debt)/cash funds Half Year ended 31 March 2020 2019 £m £m Free cash flow 21.8 14.0 Acquisition cash paid (13.6) (6.4) Deferred consideration paid - (1.1) Proceeds from borrowings, net 14.0 - Dividends paid (23.4) (20.5) (1.2) (14.0) Increase in bank borrowings (14.0) - Exchange and other a
Slide 12: Liquidity
Liquidity • Available liquidity of ca. £66m; cash funds at 31 March £25.9m + undrawn committed RCF £40m expires in June 2022 • Borrowings at 31 March include Term Loan of £35.8m repayable in July 2021; option to extend to July 2022 • Cash collected in April 2020 of ca. £55m; ca. 63% of outstanding r
Slide 13: Shareholders’ funds
Shareholders’ funds 31 March 2020 30 September 2019 £m £m Goodwill and acquisition intangible assets 254.6 251.1 Tangible and other intangible assets 31.1 29.4 Net working capital 113.8 96.6 Trading capital employed - reported 399.5 377.1 Working capital as % of revenue 17.6% 16.5% ROATCE 22.0% 22.9
Slide 14: Current trading
Current trading APRIL 2020 – UNDERLYING GROWTH RATES CONVERSION Seals Controls Group drop through, after -16% -34% mitigating actions 25 % Life Sciences Acquisitions -39% +11 % GROUP UNDERLYING APRIL REVENUE: -28% GROUP ACTUAL APRIL REVENUE: -16% 14
Slide 15: Business Review and Strategy
Business Review and Strategy Consistently delivering value 15
Slide 16: The Group
The Group Well diversified by Sector and geography Revenue by Sector Revenue by geography* 12% 26% 43% 42% 46% 31% Seals Controls Life Sciences North America Europe Rest of World *b y d e s ti n a ti o n 16
Slide 17: Strategy Overview
Strategy Overview Focussed on five core business model competencies for success at scale Talent development a priority, now embedded in local business management Technology capability developing with care New facility in Louisville on track to be fully operational in calendar year Creating informal
Slide 18: Seals
Seals Further progress despite softer industrial markets SECTOR PERFORMANCE Half year ended 31 March 2020 2019 • Softer industrial markets driving broadly flat underlying revenues Revenue £123.0m £102.4m +20% • NA Aftermarket businesses strong Adjusted operating profit £20.1m £17.1m +18% • Challengi
Slide 19: Controls
Controls Resilient performance despite some market challenges SECTOR PERFORMANCE Half year ended 31 March 2020 2019 • Underlying revenue flat with weaker Revenue £88.2m £86.9m +1% industrial segment and lapping Brexit stocking affecting UK businesses Adjusted operating profit £15.8m £15.5m +2% • Cla
Slide 20: Life Sciences
Life Sciences Strong H1 performance with exciting post-COVID-19 potential SECTOR PERFORMANCE Half year ended 31 March 2020 2019 • Underlying revenue growth +2% Revenue £72.4m £71.1m +2% • Strong consumable revenues in Healthcare Adjusted operating profit £14.0m £13.0m +8% • Capital revenues impacted
Slide 21: Summary and Outlook
Summary and Outlook Robust first half performance Unprecedented uncertainty of COVID-19 Resilient business model; strong balance sheet and liquidity Decentralised model able to respond and adapt quickly to crises Well prepared to return to delivering our strategy and performance objectives 21
Slide 22: Q&A
Q&A Consistently delivering value
Slide 23: Appendix
Appendix Consistently delivering value 23
Slide 24: 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 25: 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 26: 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 27: Seals
Seals Segmentation North America Aftermarket North America and Industrial OEM MRO 49% of revenues 16% of revenues Next day delivery of seals for the Supplier of high quality repair of heavy mobile machinery; gaskets and fluid sealing and the supply of sealing products products and customized to manu
Slide 28: Controls
Controls Segmentation Interconnect Fluid controls 62% of revenues 15% 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 29: 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 30: Making a difference
Making a difference Our social response is built around three key stakeholder groups: Colleagues Customers Communities Our priority is the health, We continue to support Make a difference in our safety & wellbeing of our our customers & suppliers local communities colleagues • All Diploma businesses
Slide 31: 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 Olivia Peters Guy Bates Tel: +44 (0) 20 7353 4200 Consistentl