Diploma Plc · LSE:DPLM
Diploma — Investor Day (June 2023)
138 slides from Diploma's investor day presentation, June 2023
Slide 1: Diploma Delivers: Welcome
DIPLOMA DELIVERS Welcome Johnny Thomson Group CEO
Slide 2: Our key messages for today
01 Welcome Our key messages for today 1 Differentiated value-add service distribution model Sustainable 2 Brilliant people in a powerful Quality decentralised culture Compounding 3 Massive potential for organic growth Just getting started 2 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 3: Organisational chart
01 Welcome Organisational chart Johnny Elena Thomson LoCastro Group CEO SVP, Life Sciences North America Alessandro Ted Dan David Rich Donna Jill Chris Steve Phil Lala Messmer Brown Goode Galgano Catley Tennant Davies Sargeant Pratt CEO, CEO, CEO, CEO, CEO, Group HR Group Group CFO Group Group Inter
Slide 4: Agenda
01 Welcome Agenda 2.00pm Welcome 4.00pm Scale 0 1 Value-add business model 2:15pm Value-add 02 Powerful decentralised Group 2:45pm Exciting Growth 4:30pm Delivering Value Responsibly 0 1 Organic growth 02 Complementary acquisitions 4:45pm Sustainable Quality Compounding 3:30pm Coffee break 5:00pm Q&
Slide 5: Strong foundations
01 Welcome Strong foundations Value-add Growth People Acquisitions Performance distribution Differentiated Strong growth Accountable, Successful Decades of product / customer over decades commercial acquisition track compounding service people in record performance decentralised delivery culture 5 D
Slide 6: Value-add
01 Welcome Value-add The rule of 6: Critical to Deep customer technical needs support Loyalty = Share of wallet growth Opex Adding focused VALUE-ADD value to the Reputation product = Market share growth Confident pricing Low Responsive component customer = Strong margins cost service 6 Diploma PLC I
Slide 7: Secret sauce: powerful decentralised culture
01 Welcome Secret sauce: powerful decentralised culture Our purpose is to Customer-centric create, innovate and deliver We are driven to add value value-add solutions Accountable for a better future We are all empowered to succeed Grow together We collaborate to create success and opportunity Do the
Slide 8: Strategy: building high quality scalable businesses for sustainable organic growth
01 Welcome Strategy: building high quality scalable businesses for sustainable organic growth Organic growth in 3 buckets: 1 End 2 Geographic 3 Product GROW markets penetration extension Complementary acquisitions to drive future organic growth Value-add business model at scale SCALE Powerful decent
Slide 9: Achievements... a great start...
01 Welcome Achievements... a great start... > Developed / entered new markets > Strengthened the businesses’ teams, systems, facilities > Developed US presence from 25% to 45% > Focused the portfolio > Extended product capability > High performing leadership team > Acquired 30 businesses driving org
Slide 10: Exciting growth (1): end market exposure
01 Welcome Exciting growth (1): end market exposure 5 year % of Group revenue forecast CAGR* Clinical Diagnostics 7% 2018 Data, Digital & Telecoms 10% ca. 20% Electrification 10% Industrial Automation 9% Infrastructure 11% 2023 Renewables 9% ca. 35% Water Management 7% Growth Tailwind / Greater Resi
Slide 11: Exciting growth (2,3): geographic and product white space
01 Welcome Exciting growth (2,3): geographic and product 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 & Hydraulics Pumps / Valves Life
Slide 12: Complementary acquisitions
01 Welcome Complementary acquisitions Strong track record: Healthy pipeline: £840m deployed Huge white space Fragmented markets 30 quality businesses Well developed processes and capability 15% organic growth Purchaser of choice 16% returns Future organic growth / Great returns 12 Diploma PLC INVEST
Slide 13: Scaling the decentralised Group
01 Welcome Scaling the decentralised Group Controls Seals Life Sciences 15 Business International Windy City Wire International North American Life Units Controls Seals Seals Sciences Interconnect Windy City Wire UK Aftermarket US Aftermarket Canada 5 Sector Specialty Fasteners European OEM US OEM A
Slide 14: Delivering Value Responsibly
01 Welcome Delivering Value Responsibly Diversity, Colleague Equity Engagement & Inclusion Waste Supply Reduction Delivering Chain for our People Delivering Doing Health & Climate for the Business Action Environment Delivering Responsibly Safety Value Responsibly Positive Impact Revenue 14 Diploma P
Slide 15: Sustainable quality compounding
01 Welcome Sustainable quality compounding Revenue 2019-22 £m CAGR: 23% 3-year Model 2007-18 7% 5% 1,013 CAGR: 12% Organic growth1 787 545 538 485 452 23% 10%+ 383 Total growth2 334 306 286 260 231 184 160 172 141 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 EBIT margin1 18% 17%+ 15-year CAGR: 14% A
Slide 16: Diploma Delivers: Value-add
DIPLOMA DELIVERS VALUE-ADD Ted Messmer Sector CEO, North American Seals
Slide 17: Value-Add: Distribution with a difference
02 Value-Add: Distribution with a difference Value-add Critical to Deep customer technical needs support Opex Adding focused VALUE-ADD value to the product Low Responsive component customer cost service 17 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 18: Specialised products critical in customers' value chains
02 Value-Add: Distribution with a difference Specialised products critical in customers’ value chains… Low Opex Critical component cost focused to customer needs 18 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 19: Delivered in a value-add service wrapper
02 Value-Add: Distribution with a difference ...delivered in a value-add service wrapper Deep Adding value Responsive technical support to the product customer service 19 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 20: Value-add
02 Value-Add: Distribution with a difference Value-add The rule of 6: Critical to Deep customer technical needs support Loyalty = Share of wallet growth Opex Adding focused VALUE-ADD value to the Reputation product = Market share growth Confident pricing Low Responsive component customer = Strong ma
Slide 21: Seals Sector
SEALS SECTOR
Slide 22: Seals value-add
02 Value-Add: Distribution with a difference Seals value-add PRODUCTS • Seals and O-rings • Gaskets • Industrial hoses & couplings • Hydraulic hoses • Pneumatic components SERVICES • Designing solutions • Technical support • Cutting/moulding • Convenience (stock, customisation, kitting, speed) BUSIN
Slide 23: Value-add: US MRO – VSP Technologies
VALUE-ADD US MRO – VSP TECHNOLOGIES 23 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 24: Seals Sector: US MRO - VSP Technologies
02 Value-Add: Distribution with a difference CASE STUDY Seals Sector: US MRO - VSP Technologies Products • Fluid sealing: gaskets International North American Seals Seals • Cross selling: O-rings, hoses UK Aftermarket US Aftermarket Services • Designed and customized technical solution European OEM
Slide 25: Value Add at VSP
02 Value-Add: Distribution with a difference Value Add at VSP 25 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 26: VSP: conclusion
02 Value-Add: Distribution with a difference VSP: conclusion • A complete solutions provider • Mission critical products • Technical solutions • Reputation drives customer loyalty and high gross margins • Material value creation for the customer: ‒ Over $200m documented savings ‒ Enhanced environmen
Slide 27: Life Sciences Sector
LIFE SCIENCES SECTOR Elena LoCastro SVP, Life Sciences North America
Slide 28: Life Sciences value-add
02 Value-Add: Distribution with a difference Life Sciences value-add PRODUCTS • Diagnostic equipment and instruments • Medical devices and equipment – surgical, endoscopy, critical care products • Related consumables, reagents, and control products SERVICES • Access to market-leading product portfol
Slide 29: Life Sciences: critical role in the value chain
02 Value-Add: Distribution with a difference Life Sciences: critical role in the value chain Suppliers: Customers: OEMs Hospitals, clinics, laboratories & Innovative products research facilities • Diploma occupies a critical position in the healthcare value chain ‒ For suppliers: customer relationsh
Slide 30: Value-add: Life Sciences Canada
VALUE-ADD LIFE SCIENCES CANADA 30 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 31: Life Sciences Sector: Canada
02 Value-Add: Distribution with a difference CASE STUDY Life Sciences Sector: Canada Products • Capital (ca.10-20%) & consumables/service (ca.80-90%) Life Sciences • Surgical, medical and diagnostics equipment and instrumentation • Related consumables Canada Australia Services • Technical sales advi
Slide 32: Somagen: specialised diagnostics products
02 Value-Add: Distribution with a difference Somagen: specialised diagnostics products Cancer Allergy & Cellular Pathology Clinical Chemistry / Fertility IVF Autoimmunity Core Laboratory • Early detection of • Allergy blood tests => • Best-in-class automation • Accuracy of Hba1C • Assisted reproduct
Slide 33: Somagen: strong long-term relationships
02 Value-Add: Distribution with a difference Somagen: strong long-term relationships Why customers choose us Why suppliers choose us Scientific foundation, consultive selling Market and customer access Trusted partner Deep market and regulatory insight Scale across Canada Commercialisation support B
Slide 34: Somagen: conclusion
02 Value-Add: Distribution with a difference Somagen: conclusion • Market leader in Canadian diagnostics • Highly skilled talent • World-class technical expertise critical to: ‒ Innovative portfolio ‒ Strong, long-term customer relationships ‒ Best-in-class supplier partnerships • Competitive positi
Slide 35: Controls Sector
CONTROLS SECTOR David Goode Sector CEO, International Controls 35 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 36: Controls value-add
02 Value-Add: Distribution with a difference Controls value-add PRODUCTS • Premium low voltage and other wire & cable • Electrical interconnect: connectors, sleeving, harnesses • Specialty adhesives • Aerospace-grade fasteners • Components for automation robots and CNC machines SERVICES • Convenienc
Slide 37: Value-add: Industrial Automation - TIE
VALUE-ADD INDUSTRIAL AUTOMATION - TIE
Slide 38: Controls Sector: Industrial Automation - TIE
02 Value-Add: Distribution with a difference CASE STUDY Controls Sector: Industrial Automation - TIE International Windy City Wire Products • Refurbished CNC parts and repair services Controls • Full suite of robotics aftermarket solutions: parts, repairs, field service and robot refurbishment Inter
Slide 39: TIE: differentiated aftermarket capability
02 Value-Add: Distribution with a difference TIE: differentiated aftermarket capability Value-add proposition based on: Refurbished part program Broken equipment part / core Core received • Unmatched inventory: >100k parts, inc. Tagged & 1 registered hard-to-find parts and older vintages 2 CUSTOMER
Slide 40: TIE: a compelling value proposition for customers
02 Value-Add: Distribution with a difference TIE: a compelling value proposition for customers Cost effective, high quality aftermarket solutions which: Loyalty 96% which drives Revenue from • Minimise downtime Share of wallet growth repeat customers • Extend useful asset lives • Improve customer RO
Slide 41: TIE: conclusion
02 Value-Add: Distribution with a difference TIE: conclusion • Differentiated aftermarket capability and value-add based on breadth of inventory, technical expertise, speed to market • High barriers to entry • Compelling customer value proposition: drives retention, market share gains and sustainabl
Slide 42: Our Value-add
02 Value-Add: Distribution with a difference Our Value-add The rule of 6: Critical to Deep customer technical needs support Loyalty = Share of wallet growth Opex Adding focused VALUE-ADD value to the Reputation product = Market share growth Confident pricing Low Responsive component customer = Stron
Slide 43: Diploma Delivers: Exciting Growth
DIPLOMA DELIVERS EXCITING GROWTH David Goode Sector CEO, International Controls
Slide 44: Growth strategy: key messages
03 Exciting Growth Growth strategy: key messages • Massive growth potential: organic growth is our priority • Revenue diversification strategy drives organic growth, builds scale, increases resilience • Complementary acquisitions are driving great organic growth at excellent returns ORGANIC • Our tr
Slide 45: Growth strategy reminder
03 Exciting Growth Growth strategy reminder Organic growth in 3 buckets: 1 END 2 GEOGRAPHIC 3 PRODUCT GROW MARKETS PENETRATION EXTENSION Complementary acquisitions to drive future organic growth Value-add business model at scale SCALE Powerful decentralised Group at scale DELIVER VALUE RESPONSIBLY 4
Slide 46: Journey to great execution
03 Exciting Growth Journey to great execution • B2B sales processes • Complementary technical / key account management with: ‒ Better hunting / business development capability ‒ Strategic sales leadership • Co-ordinated multi-business sector opportunities • Group strategy function to position for en
Slide 47: Controls Sector
CONTROLS SECTOR 47 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 48: Controls: a Sector transformed
03 Exciting Growth Controls: a Sector transformed FY 2022 REVENUE £493m • Positioned behind structurally growing end markets • From UK concentrated to internationally diversified 48% • WCW acquisition in the US H1 23 pro forma % of Group revenue • Streamlined to 6 key scalable product business units
Slide 49: Controls: a Sector transformed
03 Exciting Growth Controls: a Sector transformed BEFORE NOW Positions in Aerospace, BUCKET 1: Defence, Industrial • Exciting new market entries: Data & Digital Infrastructure, Energy, END MARKETS Automation • Increasing exposure to high growth segments e.g. Electrification UK concentrated (2018: 75
Slide 50: Exciting end market potential
03 Exciting Growth Exciting end market potential Electrification Data & Digital Automation Energy Aerospace & Infrastructure defence • Electrification of • Roll out of 5G / 6G • Growing, ageing • Infrastructure • Civil aerospace transport installed base investment recovery, fleet DYNAMICS • Data cen
Slide 51: Geographic penetration potential
03 Exciting Growth Geographic penetration potential USA UK & EUROPE Interconnect Interconnect Regional bases Regional bases established, Fasteners established, very small Fasteners very small market share market share Industrial Automation Industrial Automation Market entry Windy City Wire National
Slide 52: Product range extension
03 Exciting Growth Product range extension Build out Two done (Adhesives and Industrial Automation) and material new continuing to build out / could be more? product lines Continuous product Sustains value-add and drives future share gains innovation Cross-selling Co-ordinated approach to end market
Slide 53: Controls Sector: Specialty Adhesives
03 Exciting Growth CASE STUDY Controls Sector: Specialty Adhesives International Windy City Wire Products • Specialty adhesives and sealants Controls • Thermal management products • Specialty silicones Interconnect Windy City Wire Specialty Fasteners UK Wire & Cable Services • Technical sales, speci
Slide 54: Specialty Adhesives: Techsil
03 Exciting Growth CASE STUDY Specialty Adhesives: Techsil Identified as a strategically attractive product adjacency in growing markets Excellent progress to date Significant future opportunity Organic growth + Acquisitions to drive organic growth in all 3 buckets • 20% CAGR post-acquisition • Two
Slide 55: Controls Sector: Windy City Wire
03 Exciting Growth CASE STUDY Controls Sector: Windy City Wire International Windy City Wire Products • Premium quality , low voltage wire and cable Controls • Unique offerings: SmartWire, Rackpack Field Systems Solutions Interconnect Windy City Wire Specialty Fasteners UK Wire & Cable 49% Services
Slide 56: Windy City Wire
03 Exciting Growth Windy City Wire 56 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 57: Seals Sector
SEALS SECTOR 57 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 58: Seals: excellent progress
03 Exciting Growth Seals: excellent progress FY 2022 REVENUE £331m • Diversified end market exposures • Stronger geographical base 34% • Product: broadening from Seals / Hydraulics to Fluid Power H1 23 pro forma % of Group revenue • Implemented distribution platform for NA Seals in Louisville FY 202
Slide 59: Seals: excellent progress
03 Exciting Growth Seals: excellent progress BEFORE NOW BUCKET 1: • Structural growth markets: Pharma, Medical, Food & Beverage US construction focus END MARKETS • Early stage: Wind and Water • Strong Infrastructure position BUCKET 2: • Built out quality Australian business Subscale in UK and Austra
Slide 60: Exciting end market potential
03 Exciting Growth Exciting end market potential Energy / Environmental Infrastructure Water Renewables safety • Wind farm growth • Security of industrial • US infrastructure bills • New infrastructure facilities DYNAMICS • Solar farms and • European Green Deal and leak reduction MARKET connected in
Slide 61: Geographic penetration potential
03 Exciting Growth Geographic penetration potential USA UK & CONTINENTAL EUROPE Louisville opens up US opportunity Scale in UK but still modest markets shares for Aftermarket Little exposure to industrial centres Positions in Scandinavia and Switzerland in OEM and MRO West Coast, Midwest and Texas O
Slide 62: Product extension
03 Exciting Growth Product extension Seals Gaskets Hoses & Hydraulics Pneumatics Other (relatively new) (new) (new) (new) • Expand existing products geographically • Take gaskets to all markets • Opportunities in new entry product ranges: Hoses, Hydraulics and Pneumatics • Cross selling across the S
Slide 63: Seals Sector: UK Aftermarket – R&G Fluid Power Group
03 Exciting Growth CASE STUDY Seals Sector: UK Aftermarket – R&G Fluid Power Group International North American Products • Industrial hose, fittings and assemblies Seals Seals • Hydraulic hose, fittings, assemblies and components • Compressors, seals, gaskets, flange insulation kits UK Aftermarket U
Slide 64: R&G Fluid Power Group
03 Exciting Growth CASE STUDY R&G Fluid Power Group Outstanding opportunity to diversify into fluid power and build scale in UK Excellent progress to date Significant opportunity Organic growth + Acquisitions to accelerate organic growth in all 3 buckets • End markets: diversified across • Five bolt
Slide 65: Life Sciences Sector
LIFE SCIENCES SECTOR 65 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 66: Life Sciences: great progress
03 Exciting Growth Life Sciences: great progress FY 2022 REVENUE £189m • Increased clinical diagnostics exposure • Developed European footprint 18% • Product portfolio expansion: 500 products launched H1 23 pro forma % of Group revenue since 2018 FY 2022 OPERATING FY 2022 OPERATING • New end market
Slide 67: Life Sciences: great progress
03 Exciting Growth Life Sciences: great progress BEFORE NOW BUCKET 1: • Increased exposure to high growth diagnostics sector • Surgical backlogs provide multi-year tailwinds Narrow range of end markets END MARKETS • Next generation technologies create opportunities: gene therapy, molecular diagnosti
Slide 68: Exciting end market potential
03 Exciting Growth Exciting end market potential In Vitro Diagnostics Med Tech Scientific Modern solutions Innovation transforms Exploring new Diploma contribute to improved healthcare end markets patient diagnosis Precision medicine AI adapted platforms Biopharma in endoscopy Neurology diagnostics
Slide 69: Geographic penetration
03 Exciting Growth Geographic penetration Canada/Australia Northern Europe UK / US Established Just starting Future opportunity • Strong positions • Some med-tech presence • Significant future potential • Attracting new suppliers • Limited diagnostics to date • Only in specialised value- add segment
Slide 70: Product portfolio management
03 Exciting Growth Product portfolio management WELL ESTABLISHED DIPLOMA DIPLOMA EARLY GROWTH FUTURE POTENTIAL Cancer Screening Molecular Diagnostics Genomics Infectious Disease Therapeutic Drug Newborn Screening Monitoring Pathology Molecular Pathology Urology & Gynaecology Clinical Chemistry Neuro
Slide 71: Life Sciences Sector: Canada
03 Exciting Growth CASE STUDY Life Sciences Sector: Canada Products • Capital (ca.10-20%) & consumables/service (ca.80-90%) Life Sciences • Surgical, medical and diagnostics equipment and instrumentation • Related consumables Canada Australia Services • Technical sales advice Europe • Logistics, ins
Slide 72: Canada
03 Exciting Growth CASE STUDY Canada A brilliant example of a business using its core strengths to diversify Excellent progress to date Significant opportunity Organic growth in all 3 buckets • Differentiated endoscopy expertise and technical capability • Post-sales service across Fujifilm portfolio
Slide 73: Complementary acquisitions to drive future organic growth
DIPLOMA DELIVERS COMPLEMENTARY ACQUISITIONS TO DRIVE FUTURE ORGANIC GROWTH Steve Sargeant Group Corporate Development Director
Slide 74: M&A: overview
03 Exciting Growth M&A: overview 01 • Why we make acquisitions Strong track • What are our criteria record • How we help acquired businesses drive value • Value creation track record • Significant white space and fragmented markets 02 • Enhanced process and team successfully delivering Healthy • Dip
Slide 75: Strong track record
STRONG TRACK RECORD <
Slide 76: We make acquisitions to drive future organic growth
03 Exciting Growth We make acquisitions to drive future organic growth Why? • Fragmented markets • Accelerate strategic execution • Build scale • Broaden diversity for resilience • Generate good returns with our capital • Enhance our management expertise 76 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 77: Acquiring high quality companies
03 Exciting Growth Acquiring high quality companies Structured approach… …accelerated execution 30 Core business characteristics ACQUISITIONS SINCE 2019 • Value add / high gross margin • Organic growth and scale potential • Capable management teams we can back END GEOGRAPHIC PRODUCT MARKETS PENETRAT
Slide 78: We help acquired businesses develop and grow
03 Exciting Growth We help acquired businesses develop and grow… • Management expertise • Professionalise sales approach to drive organic growth • 3 buckets: end market, geography, product • Identify and drive cross-selling synergies across the group • Better margins and cash management • Environmen
Slide 79: Strong track record of creating value
03 Exciting Growth ...which has driven a strong track record of creating value Accelerated 2019 to date execution 2015 - 2018 2019 to date INVESTMENT Average Deals per Year 2 8 £840m ORGANIC GROWTH SINCE ACQUISITION £30m £120m 15% Average Annual Spend (Excluding Windy City Wire) AVERAGE ROATCE £15m
Slide 80: Our largest acquisition has performed extremely well
03 Exciting Growth Our largest acquisition has performed extremely well NEW END MARKETS GEOGRAPHIC EXPANSION Building automation, data centres Controls into the US Acquired: October 2020 and digital antenna infrastructure Highlights EBIT x2.8 in year 3 20%+ ROATCE in year 3 • US presence Operating p
Slide 81: Our second largest acquisition is also ahead of expectations
03 Exciting Growth Our second largest acquisition is also ahead of expectations Acquired: April 2022 GEOGRAPHIC EXPANSION PRODUCT EXTENSION Scale in the UK Fluid Power • Aftermarket value-add proposition • Above cost of capital and earnings accretive from year 1 • UK scale • 15% organic growth • Sig
Slide 82: Bolt-ons are accelerating growth at great returns
03 Exciting Growth Bolt-ons are accelerating growth for our business units. . . at great returns 20 AVERAGE SIZE AVERAGE MULTIPLE YEAR 1 AVERAGE ROATCE BOLT ONS* £4m 5x 20% • Acquired Techsil in August 21; revenue £10m • Clarendon was a largely UK-focused distributor – first step into Specialty Adhe
Slide 83: Healthy pipeline
HEALTHY _PIPELINE. DIPLOMA AUC
Slide 84: Future potential: white space + fragmented markets
03 Exciting Growth Future potential: white space + fragmented markets 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 & Hydraulics Pumps / Valves Lif
Slide 85: A great team and rigorous processes
03 Exciting Growth A great team and rigorous processes • Multiple channels SOURCING • Structured collaboration with Sectors and businesses • Increased volume of direct inbound • Origination and execution managed by Corporate Development PROCESS • Sectors / businesses own the deal and relationship •
Slide 86: A winning proposition for sellers
03 Exciting Growth A winning proposition for sellers “Diploma provided “Diploma invest for the long complete transparency term. The decentralised throughout the process, model is the same as ours, negotiations were fair, and giving management teams their approach gave me the the autonomy to make sen
Slide 87: Leading to a growing and healthy pipeline
03 Exciting Growth Leading to a growing and healthy pipeline GROWING HEALTHY >2,000 AVERAGE SIZE: £20m Well diversified by sector /geography Life OPPORTUNITIES Sciences UK Seals US 50 NEAR-TERM ACTIVE OPPORTUNITIES Controls £1bn Continental Europe 87 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 88: We maintain our discipline
03 Exciting Growth We maintain our discipline Core business Strategic fit Financial criteria characteristics • Value-add / high gross margin • Accelerates one or more • 20% ROATCE potential organic growth buckets • Organic growth and scale • Leverage < 2x potential • Portfolio discipline: selective
Slide 89: Conclusion: Acquisitions driving future organic growth
03 Exciting Growth Conclusion: Acquisitions driving future organic growth – huge potential Our approach Exciting future • We acquire high quality companies • Considerable white space and fragmented that meet our business, strategic and markets financial goals • Well-developed processes and team • We
Slide 90: Conclusion
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Slide 91: Growth strategy: key messages
03 Exciting Growth Growth strategy: key messages • Massive growth potential: organic growth is our priority • Revenue diversification strategy drives organic growth, builds scale, increases resilience • Complementary acquisitions are driving great organic growth at excellent returns ORGANIC • Our tr
Slide 92: Diploma Delivers: Scale
DIPLOMA DELIVERS SCALE Jill Tennant Group HR Director
Slide 93: Scaling strategy: key messages
04 Scale Scaling strategy: key messages • Our value-add business model and empowered decentralised culture are differentiators • Improve the business value-add proposition at scale • Manage a bigger, decentralised Group successfully • Drive performance improvement • Scaling is a journey…so much to g
Slide 94: Building sustainable scale
04 Scale Building sustainable scale Business Target Core Key Value-Add operating competencies capabilities Service Model model Powerful Decentralised Structure Capability Culture Group 94 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 95: Business value-add service model
BUSINESS VALUE-ADD SERVICE MODEL
Slide 96: Our imperative to scale
04 Scale Our imperative to scale TO FROM £10m £200m Business Business • Strategic, structured leadership • Hands-on business leader • Broader management capability • Individuals wear many hats • Seamless, customer-led processes • Responsive service • Technology–enabled; data, • Manual automation • F
Slide 97: Our scaling framework
04 Scale Our scaling framework Example of a TOM EXTERNAL Target Operating Model (TOM) Addressablemarket Addressable market • Long-term vision • Structured plan Market 1 Market 2 Market 3 Market 4 Product and Value Add development Scaling plans Business Key account management E-commerce development •
Slide 98: Core competencies
04 Scale Core competencies Strengthening our core competencies: common to every business Route to Operational Supply chain Commercial Value-add market excellence management discipline Innovating and Strategic sales Customer fulfilment Strategic and holistic Dynamic commercial delivering products exe
Slide 99: Key capabilities: Talent
04 Scale Key capabilities: Talent Progress since 2018 General Management: key Capability: 50 appointments Fantastic colleagues to our success 1 1 Engagement index 5 79% Management attrition <10% 2 2 4 3 1 Long tenured, through acquisition 1 Finance Directors Gender balance 28% or internally promoted
Slide 100: Key capabilities: Technology
04 Scale Key capabilities: Technology Progress since 2018 • Increased technology capability • Managed pace: around 5 change programmes p.a. • >15 ERP/WMS implementations Technology • ca.10 e-ecommerce solutions • Early on technology journey • Each business has different needs Future focus • Continuo
Slide 101: Key capabilities: Facility
04 Scale Key capabilities: Facility Progress since 2018 • 15 facility moves completed Future focus • Continuous improvement Facility • Strategic footprint • Capacity for exciting growth • Improved customer fulfilment • Productivity • Environmental footprint and health & safety • Colleague engagement
Slide 102: Business case studies
BUSINESS CASE STUDIES
Slide 103: Seals Sector: Australian Seals
04 Scale CASE STUDY Seals Sector: Australian Seals International North American Products • Sales, pumps, valves and other fluid sealing products Seals Seals • Corrosion prevention/protection coatings and sealants UK Aftermarket US Aftermarket Services • Technical engineering expertise European OEM U
Slide 104: Scaling framework in action: Australian Seals
04 Scale Scaling framework in action: Australian Seals From AU$12m (FY18) Move to one To AU$70m (FY23e ) * business structure Small, sub-scale business Strong platform for growth • Low value-add • Critical mass: 3 acquisitions • Quality, value-add business • Concentrated • Integration • MD a former
Slide 105: Scaling framework in action: Australian Life Sciences
04 Scale Scaling framework in action: Australian Life Sciences 105 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 106: Scaling framework in action: Windy City Wire
04 Scale Scaling framework in action: Windy City Wire 106 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 107: Business value-add service model conclusion
04 Scale Business value-add service model conclusion • Our differentiated value-add business model is critical to success • Our scaling framework creates bigger and better businesses with great customer propositions • The journey is consistent but not the same • It is incremental in nature • Achieve
Slide 108: Powerful decentralised Group at scale
POWERFUL DECENTRALISED GROUP AT SCALE 108 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 109: Powerful decentralised Group
04 Scale Powerful decentralised Group Our purpose is to Customer-centric create, innovate and deliver We are driven to add value value-add solutions Accountable for a better future We are all empowered to succeed Grow together We collaborate to create success and opportunity Do the right thing We ar
Slide 110: How we scale our decentralised Group
04 Scale How we scale our decentralised Group • Keep it focused • Decision making close to the customer • Flat structures – network, not hierarchy • Simple, consistent processes and frameworks • Simple, aligned goals and targets • Clear decision rights • Consistent rhythm • Clear communication Agili
Slide 111: Keep it focused: Portfolio Frameworks
04 Scale Keep it focused Portfolio Frameworks 2018 Growth Scaling £ 485m 3 buckets journey 20 individual businesses Performance Talent 2023 Financial DVR £1.2bn 15 strategic business units 1 Company compiled consensus 111 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 112: Role of the Group
04 Scale Role of the Group What Why Define and drive strategy Our businesses get: 1. Inspiration to grow – markets, Governance & frameworks products, geography 2. Investment to grow and scale Performance management & capital allocation 3. Commercial synergy Create networks 4. Development – Leadershi
Slide 113: Governance and 'Mood'
04 Scale Governance and ‘Mood’ Rigorous governance Emotional connection ‘Mood’, momentum and great execution 113 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 114: Diploma identity
04 Scale Diploma identity • Network of leaders • Sharing best practice • Collaborating on commercial opportunities • Sharing talent • Group incentives Local empowerment and power of the Group 114 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 115: Summary
04 Scale Summary 1. Powerful, decentralised model rooted in shared values 2. Clear principles to scale the Group 3. Simple framework and portfolio management to keep it focused 4. Enhanced by belonging to the Group – Diploma identity 5. Rigorous governance and mood management => execution Sustainabl
Slide 116: Diploma Delivers: Value Responsibly
DIPLOMA DELIVERS VALUE RESPONSIBLY Phil Pratt Group Sustainability Director
Slide 117: Making a meaningful difference in our way
05 Delivering Value Responsibly Making a meaningful difference in our way As a distributor, where we sell: Positive Impact Revenue As a distributor, where we buy: managing carbon emissions As a service business: looking after our people 117 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 118: Accessing the green-clean economy
05 Delivering Value Responsibly Accessing the green-clean economy Life Positive impact opportunities in structurally Controls Seals growing end markets Sciences Power • Renewables: design, quality control and sourcing of shaft seals for wind turbines in European OEM Seals Water • Water management: A
Slide 119: Diploma in the circular economy
05 Delivering Value Responsibly Diploma in the circular economy US UK AUSTRALIA TIE Industrial R&G Fluid Power Group Big Green Surgical Technical support and Supplier of replacement fluid power Providing re-usuable instruments refurbishment of industrial robots products enabling repair and for use i
Slide 120: We are delivering for the planet
05 Delivering Value Responsibly We are delivering for the planet Our carbon footprint 205,581tCO2e Initiatives in progress Scope 1 & 2 emissions Scope 3 emissions • Three sites have solar, seven under discussion 3% 97% • LED lighting across all sites by end of 2023 • Transitioning to renewable energ
Slide 121: We are delivering for our colleagues
05 Delivering Value Responsibly We are delivering for our colleagues • Employee survey response rate 86% • Engagement rate 79%* • 88% of colleagues believe their manager empowers them • Women representation in the senior management team has increased from 20% to 28% since 2020 • Female focus groups
Slide 122: Our Delivering Value Responsibly framework
05 Delivering Value Responsibly Our Delivering Value Responsibly framework Diversity, Colleague Equity Engagement & Inclusion Waste Supply Reduction Delivering Chain for our People Delivering Doing Health Climate for the Business Action Environment Delivering Responsibly & Safety Value Responsibly P
Slide 123: Our 2030 targets are embedded in the businesses
05 Delivering Value Responsibly Our 2030 targets are embedded in the businesses Our targets Delivering for Climate Action Net Zero –50% reduction in scope 1 & 2 the Environment Waste Reduction Zero waste to landfill Delivering Diversity, Equity & Inclusion 40% of SMT are women for our People Colleag
Slide 124: Significant progress made against all our priorities
05 Delivering Value Responsibly Significant progress made against all our priorities Delivering for the Environment Delivering for our People Doing Business Responsibly Climate Waste Reduction Diversity, Equity & Colleague Supply Health & Action Inclusion Engagement Chain Safety Scope 1 & 2 Waste se
Slide 125: Clear and simple governance
05 Delivering Value Responsibly Clear and simple governance Our Governance DVR strategy & Diploma PLC Board Oversight of DVR strategy and performance framework & Group CEO Oversight of climate related risks and opportunities • Regular Board updates Group DVR • Monthly performance meetings Governance
Slide 126: A significant opportunity
05 Delivering Value Responsibly A significant opportunity • Driving Positive Impact and Circular Economy Revenue • Managing towards significant emissions reductions by 2030 • Driving improvement across our DVR framework 126 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 127: Sustainable Quality Compounding
DIPLOMA DELIVERS Sustainable Quality Compounding Chris Davies Group CFO
Slide 128: The 'DNA' of a quality compounder
06 Sustainable Quality Compounding The ‘DNA’ of a quality compounder 1 2 3 4 5 6 COMPOUNDING CONSISTENT COMPOUNDING SUSTAINABLE CONSISTENT HIGH RESILIENCE QUALITY STRONG ACQUISITIONS HIGH MARGINS STRONG CASH ROATCE (X3) OUTCOMES ORGANIC CONVERSION GROWTH Strong Product Portfolio Low capital Low capi
Slide 129: Organic growth is our priority
06 Sustainable Quality Compounding 1 Organic growth is our priority… RESILIENT ACCELERATING 15-YEAR AVERAGE 6% 5% 5% 5% 3-YEAR AVERAGE 7% FY08-12 FY13-17 FY18-22 FY23 CONSENSUS 7% + Including GFC Including (-12%) pandemic (-7%) 129 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 130: Accelerated by complementary acquisitions
06 Sustainable Quality Compounding 2 …accelerated by complementary acquisitions CUMULATIVE INVESTMENT TO DATE ACCELERATING REPORTED £840m REVENUE GROWTH 15-YEAR CAGR 14% AVERAGE ORGANIC GROWTH SINCE ACQUISITION 15% 3-YEAR CAGR 23% AVERAGE ROATCE 16% FY23 CONSENSUS 20% + STRONG PIPELINE ca.50 opportu
Slide 131: Value-add solutions drive strong margins
06 Sustainable Quality Compounding 3 Value-add solutions drive strong margins Value-add Margin formula Opex Inflation Scale & Pricing reinvestment performance Our value-add model Scale brings benefits enables us to price to which are selectively 17%+ 17% cover inflation reinvested to sustain the mod
Slide 132: A highly cash generative business model
06 Sustainable Quality Compounding 4 A highly cash generative business model 90% Free cash flow conversion Significant capacity for self-funded inorganic growth Net Net Net debt Profit Capex Working debt Dividend debt after tax capital ca. 0.5x natural deleverage annually 132 Diploma PLC INVESTOR SE
Slide 133: Disciplined capital allocation priorities drive sustained high returns
06 Sustainable Quality Compounding 5 Disciplined capital allocation priorities drive sustained high returns i ii iii iv Invest for Targeted acquisitions Return to Maintain a prudent organic growth to drive future shareholders balance sheet organic growth Capital-light business Acquisitions deliver 2
Slide 134: Taken together, this drives resilience (x3)
06 Sustainable Quality Compounding 6 Taken together, this drives resilience (x3) Diversification Value-add Asset-light Growing end Geographic Product business model markets penetration extension Resilient revenue Resilient margins Resilient cash flows Accelerating and less cyclical 80-100%+ free cas
Slide 135: Underpinned by control
06 Sustainable Quality Compounding Underpinned by control Culture & tone Fit for purpose tools & frameworks Clear & simple policies Effective systems Executive / Board oversight Great Finance teams Three lines of defence External expertise 135 Diploma PLC INVESTOR SEMINAR JUNE 2023
Slide 136: Our financial model
06 Sustainable Quality Compounding Our financial model Ambitious… …with Discipline Organic revenue growth is our first priority Capital-light business model drives strong cash conversion 5% 90% Total revenue growth accelerated by quality acquisitions Capital stewardship focused on strong ROATCE 10%
Slide 137: Q&A and wrap up
DIPLOMA DELIVERS Q&A and wrap up
Slide 138: Our key messages for today
07 Wrap up Our key messages for today 1 Differentiated value-add service distribution model Sustainable 2 Brilliant people in a powerful Quality decentralised culture Compounding 3 Massive potential for organic growth Just getting started 138 Diploma PLC INVESTOR SEMINAR JUNE 2023