Diploma PLC · LSE:DPLM
Diploma — H1 2024 Earnings Presentation
30 slides from Diploma's earnings presentation, May 13, 2024
Slide 1: Half Year Results for the Six Months Ended 31 March 2024
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2024 13 MAY 2024 DIPLOMA DELIVERS SUSTAINABLE QUALITY COMPOUNDING
Slide 2: Agenda
AGENDA 01 OVERVIEW 02 FINANCIAL PERFORMANCE 03 STRATEGY AND BUSINESS REVIEW 2 DIPLOMA PLC H1 24 RESULTS
Slide 3: Overview
01 OVERVIEW
Slide 4: Strong First Half, Full Year Upgrade
01 OVERVIEW STRONG FIRST HALF, FULL YEAR UPGRADE • Strong first half performance building on our long-term compounding track record • Revenue diversification initiatives delivering strong volume-led organic growth • Acquisitions driving growth at great returns: £284m invested in 6 new businesses1 th
Slide 5: Strong Performance
01 OVERVIEW STRONG PERFORMANCE Organic Revenue Adjusted operating Adjusted revenue growth growth profit margin EPS growth 5% 10% 19.6% 10% +80bps H1 23: 10% H1 23: 30% H1 23: 18.8% H1 23: 26% Free cash flow Leverage ROATCE Dividend growth conversion 76% 0.9X 18.0% 5% +20bps H1 23: 70% H1 23: 0.7X H1
Slide 6: People and Culture
01 OVERVIEW PEOPLE AND CULTURE • Brilliant people • Powerful decentralised culture is a differentiator • Scaling business and Group effectively • Building management capability • Creating networks and best practice sharing 6 DIPLOMA PLC H1 24 RESULTS
Slide 7: Financial Performance
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Slide 8: Revenue
02 FINANCIAL PERFORMANCE REVENUE Six months ended 31 March (3%) Organic growth: 5% +8% £638m FX +5% +7% +1% Acquisitions £583m Seals Life Sciences Controls H1 H1 2023 10% reported revenue growth 2024 Revenue diversification driving strong volume-led organic growth 8 DIPLOMA PLC H1 24 RESULTS
Slide 9: Adjusted Operating Profit & Margin
02 FINANCIAL PERFORMANCE ADJUSTED OPERATING PROFIT & MARGIN Six months ended 31 March £125m FX £110m Scaling Acquisitions investments Organic growth £125m £110m H1 H1 2023 2024 18.8% +110bps -70bps +50bps -10bps 19.6% 80bps operating margin expansion 9 DIPLOMA PLC H1 24 RESULTS
Slide 10: Income Statement
02 FINANCIAL PERFORMANCE INCOME STATEMENT Six months ended 31 March £m H1’24 H1’23 Change Revenue 638.3 582.8 +10% Adjusted Operating profit 125.4 109.7 +14% Operating margin (%) 19.6% 18.8% Interest expense (10.2) (11.0) Profit before tax 115.2 98.7 +17% Effective tax rate 24% 25% Adjusted Earnings
Slide 11: Cash Flow
02 FINANCIAL PERFORMANCE CASH FLOW Six months ended 31 March £m Adjusted Operating 53.8 5.2 Profit FX 21.6 12.1 Dividend 41.5 Net M&A Other 15.8 17.1 4.2 125.4 Interest Depreciation Net Working & tax Capex capital £66.3m Free cash flow Y/E HY 2023 2024 Net debt Net debt £254.7m £258.6m 0.9x 76% free
Slide 12: Balance Sheet Strengthened
02 FINANCIAL PERFORMANCE BALANCE SHEET STRENGTHENED Funding facilities (£m) • £555m RCF 800 • Debut USPP USPP RCF €250m @4.3% RCF extension option 600 • £506m cash and undrawn facilities at 31 March £m • Average maturity of 400 drawn debt 7.9 years • Pension buy-in 200 completed 0 2024 2024 2025 202
Slide 13: Putting Capital to Work
02 FINANCIAL PERFORMANCE PUTTING CAPITAL TO WORK PEERLESS PAR 4 QUALITY STRONG ACQUISITION ACQUISITION BOLT ONS TRACK RECORD £236m £38m £10m £1.3bn 1 invested in 40 business ca. 7x ca. 7x ca. 4x EBIT multiple EBIT multiple EBIT average multiple Organic growth £108m £13m £10m +16% annualised revenue
Slide 14: Increasing Guidance for FY24
02 FINANCIAL PERFORMANCE INCREASING GUIDANCE FOR FY24 • 5ppts revenue growth upgrade (at constant currency) Strong performance in to ca.16% underlying business – ca.6% organic – ca.10% acquisitions Contribution from • 80bps operating margin upgrade to ca.20.5% Peerless and PAR (half from strong unde
Slide 15: Strategy and Business Review
03 STRATEGY AND BUSINESS REVIEW
Slide 16: Building High Quality Scalable Businesses for Sustainable Organic Growth
03 STRATEGY AND PERFORMANCE BUILDING HIGH QUALITY SCALABLE BUSINESSES FOR SUSTAINABLE ORGANIC GROWTH Organic growth in 3 buckets: GROW 1 END MARKETS 2 GEOGRAPHIC 3 PRODUCT PENETRATION EXTENSION Complementary acquisitions to drive future organic growth SCALE Value-add business model at scale Powerful
Slide 17: Controls: Excellent Margin Progress
03 STRATEGY AND PERFORMANCE CONTROLS: EXCELLENT MARGIN PROGRESS H1 2024 H1 2023 Change PERCENTAGE OF GROUP REVENUE* Revenue £288.1m £278.8m +3% 49% Organic growth +7% +13% Adjusted operating profit £69.9m £64.3m +9% SECTOR REVENUE MIX Adjusted operating margin 24.3% 23.1% +120bps H1 2024 highlights
Slide 18: Acquisition of Peerless
03 STRATEGY AND PERFORMANCE ACQUISITION OF PEERLESS The fundamentals we look for in every deal Diploma: The buyer of choice • Quality value-add business 30%+ margins • Strong organic growth CAGR of 9% • Preserving a legacy EBIT multiple • Excellent management team staying with the • Autonomy and acc
Slide 19: Seals: Resilient Performance
03 STRATEGY AND PERFORMANCE SEALS: RESILIENT PERFORMANCE H1 2024 H1 2023 Change PERCENTAGE OF GROUP REVENUE* Revenue £241.2m £198.4m +22% 35% Organic growth +1% +8% Adjusted operating profit £44.3m £35.7m +24% SECTOR REVENUE MIX Adjusted operating margin 18.4% 18.0% +40bps H1 2024 highlights • Resil
Slide 20: R&G: Journey Since Acquisition
03 STRATEGY AND PERFORMANCE R&G: JOURNEY SINCE ACQUISITION Excellent progress to date Strong organic growth ca.10% CAGR since 2022 acquisition Margin progression from 13% to ca.18% Successful bolt-on strategy 9 bolt-ons at 4-5x multiples Significant pipeline of quality bolt ons PAR Group acquisition
Slide 21: Life Sciences: Consistent Delivery
03 STRATEGY AND PERFORMANCE LIFE SCIENCES: CONSISTENT DELIVERY H1 2024 H1 2023 Change PERCENTAGE OF GROUP REVENUE* Revenue £109.0m £105.6m +3% 16% Organic growth +5% +4% Adjusted operating profit £21.6m £20.9m +3% SECTOR REVENUE MIX Adjusted operating margin 19.8% 19.8% - H1 2024 highlights • Organi
Slide 22: Sustainable Quality Compounding
03 STRATEGY AND PERFORMANCE SUSTAINABLE QUALITY COMPOUNDING 1 2 3 4 5 6 CONSISTENT COMPOUNDING SUSTAINABLE CONSISTENT HIGH RESILIENCE STRONG ACQUISITIONS HIGH MARGINS STRONG CASH ROATCE ORGANIC CONVERSION GROWTH ✓ ✓ ✓ ✓ ✓ ✓ • Strong first half performance building on our long-term compounding track
Slide 23: Appendix
04 APPENDIX
Slide 24: Our Track Record
04 APPENDIX OUR TRACK RECORD 2019-23 2019-23 Reported revenue (£m) Adjusted EPS (pence) CAGR: CAGR: 22% 18% 2007-18 2007-18 CAGR: CAGR: 14% 12% 107.5 126.5 1,013 1,200 14.0 141 15 year revenue CAGR: 14% 15 year EPS CAGR: 15% 24 DIPLOMA PLC H1 24 RESULTS
Slide 25: Significant White Space
04 APPENDIX SIGNIFICANT “WHITE SPACE” US CANADA UK&I GERMANY FRANCE SPAIN OTHER EU ANZ CURRENT Controls Wire & Cable Addressable Market Interconnect Specialty Fasteners Specialty Adhesives Industrial Automation Seals Seals Gaskets Hoses & Fittings Pumps / Valves Life Diagnostics Sciences Surgical /
Slide 26: Disciplined Capital Allocation
04 APPENDIX DISCIPLINED CAPITAL ALLOCATION High teens ROATCE H1 24: 18.0% +20bps i ii iii iv Investment for Targeted acquisitions Returns to Balance sheet organic growth to drive future shareholders prudence organic growth Capital-light model Acquisitions deliver 20% Progressive dividend, Net debt /
Slide 27: Delivering Value Responsibly
04 APPENDIX DELIVERING VALUE RESPONSIBLY Delivering for the Environment Delivering for our People Doing Business Responsibly Climate Waste Diversity, Equity & Colleague Supply Health & Action Reduction Inclusion Engagement Chain Safety Scope 1 & 2 Waste sent to Women in senior Employee Survey Key su
Slide 28: Financial KPIs
04 APPENDIX FINANCIAL KPIS Five year trends 2023 2022 2021 2020 2019 5yr average growth Revenue £1,200.3m £1,012.8m £787.4m £538.4m £544.7m Reported growth +19% +29% +46% (1%) +12% 20% Organic growth +8% +15% +12% (7%) +5% 7% Adjusted operating margin 19.7% 18.9% 18.9% 16.2% 17.8% 18% Adjusted EPS g
Slide 29: Sector Revenue and Profit
04 APPENDIX SECTOR REVENUE AND PROFIT Revenue Organic growth H1 24 H1 23 H1 24 H1 23 £m £m Change % % Controls 288.1 278.8 +3% +7 +13 Seals 241.2 198.4 +22% +1 +8 Life Sciences 109.0 105.6 +3% +5 +4 Group 638.3 582.8 +10% +5 +10 Adjusted operating profit Adjusted operating margin H1 24 H1 23 H1 24 H
Slide 30: Balance Sheet
04 APPENDIX BALANCE SHEET £m, as at 31 March H1 24 H1 23 Goodwill and acquisition intangible assets 919.6 826.1 Tangible and other intangible assets 62.5 53.4 Net lease liabilities (6.6) (7.0) Net working capital 237.3 195.5 Trading capital employed - reported 1,212.8 1,068.0 ROATCE 18.0% 17.8% Reti