Slide 1: Half Year Announcement
Half Year Announcement Six months ended 31 March 2016 16 May 2016
Slide 2: Contents
Contents Life sciences Seals Controls 1. Introduction and Overview 2. Financial Results 3. Business Review and Outlook 4. Appendix Half Year Announcement 01
Slide 3: 1. Introduction and Overview
1. Introduction and Overview
Slide 4: 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 5: Overview of Half Year
Overview of Half Year Robust performance, acquisition led growth • Revenue and adjusted profit before tax increased by 10% and 4% respectively • Growth driven by acquisitions which added 9% to Group revenues; underlying revenue increased by 2% • Adjusted operating margin again impacted by transactio
Slide 6: 2. Financial Results
2. Financial Results
Slide 7: Half Year Results
Half Year Results Six months ended 31 March x 2016 2015 Revenue £179.1m £163.2m +10% Adjusted operating profit £30.8m £29.6m +4% Adjusted operating margin 17.2% 18.1% Adjusted profit before tax £30.4m £29.3m +4% Free cash flow £23.0m £12.4m +85% Acquisition spend £30.2m £35.0m Net debt £17.8m £14.9m
Slide 8: Financial Highlights
Financial Highlights Robust performance bolstered by strong contribution from acquisitions • Revenue and adjusted profit before tax increased by 10% and 4% respectively; adjusted EPS increased by 5% • Acquisitions added 9% to Group revenues; currency movements reduced revenues by 1%; underlying reve
Slide 9: Revenue Bridge
Revenue Bridge Six Months ended 31 March Half Year Announcement 08
Slide 10: Profit Before Tax
Profit Before Tax Six Months ended 31 March x 2016 2015 £m £m Revenue 179.1 163.2 Adjusted operating profit 30.8 29.6 Adjusted operating margin (%) 17.2% 18.1% Net interest expense (0.4) (0.3) Adjusted profit before tax 30.4 29.3 Acquisition related charges (4.8) (3.7) Gain on sale of properties 0.3
Slide 11: Adjusted Operating Margin Bridge
Adjusted Operating Margin Bridge Six Months ended 31 March 18.5% 18.0% 18.1% 17.5% 17.2% 17.0% -110bps +20bps -10bps +10bps 16.5% 16.0% 15.5% HY15 Transactional FX Acquisitions Sector mix Operating leverage HY16 FY15 & HY16 Half Year Announcement 10
Slide 12: Taxation and Earnings per Share
Taxation and Earnings per Share Six Months ended 31 March x 2016 2015 Adjusted profit before tax (£m) 30.4 29.3 Reported taxation (7.1) (7.3) Adjustments (0.8) (0.6) Adjusted tax (7.9) (7.9) Effective adjusted tax rate 26.0% 27.0% Earnings per share (pence) Adjusted 19.5p 18.6p +5% Basic (Reported)
Slide 13: Free Cash Flow
Free Cash Flow Six Months ended 31 March 2016 2015 £m £m Adjusted operating profit 30.8 29.6 Depreciation 2.0 1.4 Working capital (1.0) (6.8) Pension and share schemes, net - 0.2 Operating cash flow, before acquisition expenses 31.8 24.4 +30% Interest paid, net (0.3) (0.2) Tax paid (8.7) (7.3) Capit
Slide 14: Net Debt
Net Debt Six Months ended 31 March x 2016 2015 £m £m Free cash flow 23.0 12.4 Acquisition cash paid (29.5) (34.7) Deferred consideration (0.7) (0.3) Dividends (14.4) (13.3) (21.6) (35.9) Net cash brought forward 3.0 21.3 Exchange adjustments 0.8 (0.3) Net Debt at 31 March (17.8) (14.9) Comprising: C
Slide 15: Acquisitions
Acquisitions Strong acquisition performance and promising pipeline • Acquisitions are an integral part of the Group’s growth strategy • £30.2m spent on acquisitions during the year: – £8.2m on 100% of WCIS – extending the Seals business to Australasia region – £21.0m on 100% of Cablecraft – expandin
Slide 16: Acquisitions
Acquisitions Total expenditure exceeds £80m since January 2014 Financial year Acquisition spend Life Sciences Seals Controls 2016 £30.2m WCIS - Australia Cablecraft – UK Ascome - France 2015 £37.8m TPD - Ireland Kubo – Switzerland & Austria Swan Seals – UK 2014 £16.5m Chemzyme – Australia Kentek – F
Slide 17: Shareholders’ Funds
Shareholders’ Funds 31 Mar 30 Sept x 2016 2015 £m £m Tangible assets and investments 24.7 24.7 Goodwill and intangible assets 167.6 129.5 Net working capital 67.5 59.9 Trading capital employed - reported 259.8 214.1 Working capital (% revenues) 18.0% 17.0% ROATCE 21.2% 23.9% Retirement benefit oblig
Slide 18: 3. Business Review
3. Business Review
Slide 19: Our Sectors: Revenue by Sector and Destination
Our Sectors Revenue by Sector and Destination LIFE SCIENCES SEALS CONTROLS 387 employees 764 employees 334 employees 31% of group revenues 42% of group revenues 27% of group revenues Canada Europe Rest of World North America Europe Rest of World UK Continental Europe Rest of World 13% 7% 8% 30% 32%
Slide 20: Life Sciences Segmentation
Life Sciences Segmentation Healthcare 85% Diploma Healthcare Group (“DHG”) supplies medical devices and related consumables and services to the healthcare industries in Canada, Australia and Ireland & the UK Environmental The a1-group supplies environmental 15% analysers, containment enclosures, emi
Slide 21: Life Sciences Operating Results
Life Sciences Operating Results Six months ended 31 March 2016 2015 Revenue £52.5m £52.0m +1% Adjusted operating profit £9.3m £10.3m -10% Adjusted operating margin 17.7% 19.8% • Underlying revenues increased by 6% after adjusting for currency (no acquisition impact) • Gross margins in Healthcare red
Slide 22: Life Sciences Sector Developments
Life Sciences Sector Developments • In Canada, DHG revenues increased by 4% despite budget pressures throughout Provincial healthcare systems • Good growth in surgical products businesses (AMT and Vantage) offset reduced revenues in clinical diagnostics Life sciences (Somagen) • In Australia, DHG re
Slide 23: Seals Segmentation
Seals Segmentation Aftermarket 55% Next day delivery of seals, seal kits, O-rings, gaskets, filters and cylinder components for the repair of heavy mobile machinery Industrial OEMs Supply of seals, O-rings and custom moulded and machined parts 45% to manufacturers of specialised industrial equipment
Slide 24: Seals Operating Results
Seals Operating Results Six months ended 31 March 2016 2015 Revenue £79.2m £64.8m +22% Adjusted operating profit £13.4m £12.0m +12% Adjusted operating margin 16.9% 18.5% • Underlying revenues broadly flat after adjusting for acquisitions and currency: • North America – 3% reduction against strong co
Slide 25: Seals Sector Developments – North America
Seals Sector Developments – North America > Hercules Aftermarket Seals revenues in the US and Canada broadly flat against strong comparatives > Specific growth initiatives gaining traction, including buying portals for rental fleets and addition of new product lines; Seals Webstore revenues continue
Slide 26: Seals Sector Developments – EMEA
Seals Sector Developments – EMEA > FPE Seals continued to make progress in developing Aftermarket Seals business in EMEA region; now fully operational from new facility in Darlington > Bulldog revenues held back by delayed product shipments Seals from production operations recently relocated to Tamp
Slide 27: WCIS Acquisition
WCIS Acquisition Extending the Seals business into the Australasia region • 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 a
Slide 28: Controls Segmentation
Controls Segmentation Interconnect 75% Wiring, harness components and fasteners used in specialised applications in Aerospace, Defence, Motorsport, Energy, Medical and Industrial Fluid Controls Temperature, pressure and fluid control products used in the Food, 25% Beverage and Catering industries A
Slide 29: Controls Operating Results
Controls Operating Results Six months ended 31 March 2016 2015 Revenue £47.4m £46.4m +2% Adjusted operating profit £8.1m £7.3m +11% Adjusted operating margin 17.1% 15.7% • Underlying revenues reduced by 1% after adjusting for currency and acquisitions • Acquisitions (Cablecraft and Ascome) added 3%
Slide 30: Controls Sector Development
Controls Sector Development • Interconnect revenues from IS-Group and Filcon reduced by 5%; modestly improving trend in second quarter • Sales resources have been realigned and new business Controls development programmes introduced • Specialty Fasteners businesses increased revenues by 12%, followi
Slide 31: 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 32: Current Trading and Outlook
Current Trading and Outlook Challenging trading conditions, further acquisition opportunities targeted • The Group has a proven business model and growth strategy: – Resilient “GDP plus” organic revenue growth and sustainable attractive margins – Carefully selected, value-enhancing acquisitions acce
Slide 33: 4. Appendix
4. Appendix
Slide 34: 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 FY 2015 figures Half Year Announcement 3
Slide 35: Group Overview: 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 FY 2015 figures Half Year Announcement 34
Slide 36: 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 37: 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 38: Our Corporate Objectives
Our Corporate Objectives Track record of delivering strong returns for shareholders STRONG DOUBLE-DIGIT UPPER QUARTILE PROGRESSIVE DIVIDEND GROWTH EPS GROWTH TSR 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 39: Financial KPIs: Five Year Trends
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 40: Foreign Exchange: Translational Impact
Foreign Exchange Volatility of UK£ continues to impact results on translation Translational Impact (base currency GBP) Change over Change over 1 year 3 years 2.2000 USD (3.2%) (5.3%) 2.0000 CAD (1.1%) 20.5% Exchange Rates EUR (8.7%) 6.7% 1.8000 USD AUD (3.8%) 28.3% CAD 1.6000 EUR 1.4000 AUD 1.2000 1
Slide 41: 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 1.5000 1 year 3 years CAD 2.1% 27.3% 1.4000 AUD (0.7%) 35.5% Exchange Rates 1.3000 1.2000 CAD AUD 1.1000 1.0000 0.9000 Sep Sep Sep Sep Sep Mar 2011
Slide 42: TPD Acquisition
TPD Acquisition Strong performance since acquisition • 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 o
Slide 43: Kubo Acquisition
Kubo Acquisition Acquisition integrating well • 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 specialises i
Slide 44: Specialty Fasteners
Specialty Fasteners Specialty Fasteners business is being built within Controls Clarendon 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 manufact
Slide 45: 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