Diploma Plc · LSE:DPLM
Diploma — FY2013 Earnings Presentation
41 slides from Diploma's earnings presentation, Nov 18, 2013
Slide 1: Preliminary Announcement
Preliminary Announcement Year ended 30 September 2013 18 November 2013
Slide 2: Contents
02 Contents 1. Group Overview LIFE SCIENCES 2. Summary of 2013 Results 3. Business Review SEALS 4. Financial Highlights CONTROLS 5. Outlook and Prospects
Slide 3: 1. Group Overview
1. Group Overview
Slide 4: Our Business Model
04 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 customer service > Dec
Slide 5: Group Overview - Sectors
05 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 33% of revenues 37% of revenues 30% of revenues A BALANCED AND DIVERSE PORTFOLIO OF BUSINESSES BY SECTOR
Slide 6: Group Overview - Geography
06 Group Overview - Geography North America Europe Rest of World 53% 38% 9% of revenues¹ of revenues¹ of revenues¹ 27% US 22% UK 26% Canada 16% Continental Europe Life Sciences Seals Controls Healthcare Aftermarket Controls Environmental Industrial OEM ¹By destination
Slide 7: Our Growth Strategy
07 Our Growth Strategy ACQUIRE BUILD GROW > Fit with Group’s > Investment to build > Businesses maintain business model a solid foundation their distinct sales > Marketing led with for growth: and marketing identity strong customer > New facilities > Synergies managed relationships and IT systems wi
Slide 8: Five Year Performance
08 Five Year Performance EPS growth TSR growth Dividend growth +17% p.a. +39% p.a. +16% p.a. 2013 34.8 2013 525 2013 15.7 2012 33.1 2012 371 2012 14.4 2011 27.9 2011 240 2011 12.0 2010 18.9 2010 207 2010 9.0 2009 14.8 2009 121 2009 7.8 Adjusted0EPS in10 pence 20 30 40 TSR index, 0 end Sept 200 2008
Slide 9: 2. Summary of 2013 Results
2. Summary of 2013 Results
Slide 10: Overview of Results
10 Overview of Results Year ended 30 September 2013 2012 Revenue £285.5m £260.2m +10% Adjusted operating profit £54.3m £52.8m +3% Adjusted operating margin 19.0% 20.3% Adjusted profit before tax £54.3m £52.6m +3% Free cash flow £31.6m £32.7m -3% Adjusted earnings per share 34.8p 33.1p +5% Total divi
Slide 11: Financial Highlights
11 Financial Highlights > Revenue up by 10%; after adjusting for currency and acquisitions/divestment, underlying revenue up by 4%, with stronger second half up 6% > Adjusted operating margin of 19.0% largely reflecting additional costs from investment in businesses > Adjusted PBT up 3% to £54.3m; A
Slide 12: Underlying Revenue Trends
12 Underlying Revenue Trends 6% 6% 5% 4% 2% 0% Q1 Q2 HY Q3 Q4 FY UNDERLYING REVENUE TRENDING TO GDP+ GROWTH
Slide 13: Operational Highlights
13 Operational Highlights > Strong double-digit growth across Life Sciences businesses reflecting benefits of prior year investments; underlying growth of 15% > Modest underlying growth of 2% in Seals against very strong comparatives; trending towards “GDP plus” growth rates > Acquisition of Kentek
Slide 14: Investment for Growth Programme
14 Investment for Growth Programme Actual Actual Forecast 2012 2013 2014 Total £m £m £m £m Expenditure Capital 1.3 2.0 0.5 3.8 Revenue cost 0.4 0.7 0.4 1.5 1.7 2.7 0.9 5.3 Comprising Facilities 1.5 1.9 0.2 3.6 IT infrastructure 0.2 0.8 0.7 1.7 1.7 2.7 0.9 5.3 Impact on Income Statement Additional ma
Slide 15: Investment for Growth
15 Investment for Growth > To end of 2013, £3.4m invested in modern and expanded facilities for RT Dygert and All Seals in the US, Vantage and Hercules in Canada and IS-Group in the UK > Further £1.0m invested in powerful new ERP systems at M Seals, Hawco, a1- envirosciences and DHG (Somagen); in 20
Slide 16: Acquisition Development
16 Acquisition Development Financial Acquisition Life Sciences Seals Controls Year Spend (£m) 2009 12.2 Meditech - Canada RT Dygert - US BGS (80%) – Australia 2010 11.0 Somagen (8%) - Canada All Seals - US ET Fisher - Germany AMT (25%) – Canada 2011 28.2 Carsen Medical - Canada J Royal – US Amfast –
Slide 17: Financial KPIs
17 Financial KPIs Five Year Trends 2009 2010 2011 2012 2013 Revenue £160.0m £183.5m £230.6m £260.2m £285.5m Total growth +2% +15% +26% +13% +10% Organic growth -12% +11% +17% +6% +4% Operating margin 16.0% 17.5% 19.6% 20.3% 19.0% Working capital (% revenues) 17.6% 15.4% 16.1% 16.5% 16.7% ROTCE 19.0%
Slide 18: 3. Business Review
3. Business Review
Slide 19: Our Sectors
19 Our Sectors Revenue by Sector and Destination LIFE SCIENCES SEALS CONTROLS 33% of group revenues 37% of group revenues 30% of group revenues 319 employees 513 employees 300 employees 71% Canada 76% North America 58% UK 16% Europe 13% Europe 34% Europe 13% Rest of World 11% Rest of World 8% Rest o
Slide 20: Life Sciences Segmentation
20 Life Sciences Segmentation Healthcare 85% Diploma Healthcare Group (“DHG”) supplies medical devices and related consumables and services to the healthcare industries in Canada and Australia Environmental 15% The a1-group supplies environmental analysers, containment enclosures, emissions monitori
Slide 21: Life Sciences Operating Results
21 Life Sciences Operating Results Year ended 30 Sept 2013 2012 Revenue £93.2m £78.4m +19% Operating profit £20.9m £18.0m +16% Operating margin 22.4% 23.0% Free cash flow £14.4m £13.3m +8% > DHG underlying revenue growth of 15% after adjusting for DSL acquisition and currency > a1-group underlying r
Slide 22: Life Sciences Sector Developments
22 Life Sciences Sector Developments > Steady growth in consumable and service sales in core Healthcare businesses in Canada > Vantage completed integration programme with move to new facility; Strong growth of new MI Surgery business in AMT > Major supplier added at DSL shortly after acquisition; A
Slide 23: Seals Segmentation
23 Seals Segmentation Aftermarket 55% Next day delivery of seals, seal kits, O-rings, gaskets and cylinder components for the repair of heavy mobile machinery Industrial OEMs Supply of seals, O-rings and custom 45% moulded and machined parts to manufacturers of specialised industrial equipment TWO R
Slide 24: Seals Operating Results
24 Seals Operating Results Year ended 30 Sept 2013 2012 Revenue £106.1m £99.9m +6% Operating profit £19.5m £20.4m -4% Operating margin 18.4% 20.4% Free cash flow £15.9m £13.7m +16% > Aftermarket businesses – slightly positive against very strong prior year comparatives (2012: 14%; 2011: 26%) > Indus
Slide 25: Seals Sector Developments
25 Seals Sector Developments > In Aftermarket, continued development of Webstore application with on-line sales up by 30% this year > Investment in two new seal machining centres and increased engineering resource to improve service offering and broaden product line > In Industrial OEM, investment i
Slide 26: Kentek Acquisition
26 Kentek Acquisition > In early November, contracts signed for acquisition of 80% of Kentek Oy for maximum consideration of £11.2m > Kentek is a specialised distributor of filters and related products for heavy Helsinki mobile machinery and industrial St Petersburg equipment applications Tallinn Mo
Slide 27: Controls Segmentation
27 Controls Segmentation Interconnect 70% Wiring, harness components and fasteners used in specialised applications in Aerospace, Defence, Motorsport, Energy, Medical and Industrial Fluid controls Temperature, pressure and fluid 30% control products used in the Food, Beverage and Catering industries
Slide 28: Controls Operating Results
28 Controls Operating Results Year ended 30 Sept 2013 2012 Revenue £86.2m £81.9m +5% Operating profit £13.9m £14.4m -3% Operating margin 16.1% 17.6% Free cash flow £11.9m £10.0m +19% > Underlying revenues decreased by 3% after adjusting for currency and acquisitions of Abbeychart, Amfast and Rayquic
Slide 29: Controls Sector Developments
29 Controls Sector Developments > In Interconnect, new warehouse facility for IS-Group gives appropriate environment for technically biased company plus substantial capacity for growth > Amfast integrated into Clarendon; strong performance in premium aircraft seats and interiors > Rayquick acquisiti
Slide 30: 4. Financial Highlights
4. Financial Highlights
Slide 31: Profit Before Tax
31 Profit Before Tax Year ended 30 September 2013 2012 £m £m Revenue 285.5 260.2 +10% Adjusted operating profit 54.3 52.8 +3% Operating margin 19.0% 20.3% Net interest expense - (0.2) Adjusted profit before tax 54.3 52.6 +3% Acquisition related charges (5.6) (6.4) Fair value remeasurements (0.2) (0.
Slide 32: Underlying Results
32 Underlying Results Year ended 30 September Adjusted Revenue operating profit £m £m As reported – FY2013 285.5 54.3 Forex Translation (1.8) (0.3) Transaction - 0.3 283.7 54.3 Acquisitions Rayquick (1.3) (0.4) Abbeychart, Amfast, DSL, J Royal (11.4) (1.5) Divestment a1-envirosciences (Switzerland)
Slide 33: Taxation
33 Taxation Year ended 30 September 2013 2012 £m £m Adjusted profit before tax 54.3 52.6 IFRS taxation (13.7) (14.4) Adjustments (1.1) (0.7) Adjusted tax (14.8) (15.1) Effective adjusted tax rate 27.3% 28.7% Earnings per share Adjusted 34.8p 33.1p +5% Basic (IFRS) 30.7p 27.9p +10%
Slide 34: Free Cash Flow
34 Free Cash Flow Year ended 30 September 2013l 2012 £ml £m Adjusted operating profit 54.3 52.8 Depreciation 2.5 2.1 Working capital (1.1) (5.2) Pension and share schemes, net 0.2 0.5 Operating cash flow 55.9 50.2 +11% Interest paid, net (0.2) (0.3) Taxation (14.8) (13.7) Capital expenditure (4.6) (
Slide 35: Net Funds
35 Net Funds Year ended 30 September 2013 2012l £m £ml Free cash flow 31.6 32.7 Acquisition cash paid (1.6) (21.5) Deferred consideration (0.6) (0.8) Dividends (17.6) (14.3) 11.8 (3.9) Net funds brought forward 7.9 12.2 Exchange adjustments (0.4) (0.4) Net funds 19.3 7.9 Comprising: Cash funds 19.3
Slide 36: Shareholders' Funds
36 Shareholders’ Funds As at 30 September 2013i 2012 £mi £m Goodwill 78.5 79.8 Acquisition intangible assets 26.7 32.2 Investment 0.7 0.7 Tangible assets 14.7 13.0 120.6 125.7 Net working capital 47.8 44.4 Trading capital employed 168.4 170.1 Retirement benefit obligations (4.7) (5.4) Deferred tax,
Slide 37: 5. Outlook and Prospects
DIPLOMA PLC rt 5 Outlook and Prospects
Slide 38: The Diploma Investment Case
38 The Diploma Investment Case We focus on essential products and services, funded by GDP+ ORGANIC customers’ operating rather than capital budgets, giving REVENUE GROWTH resilience to revenues Our attractive operating margins are sustained through the ATTRACTIVE quality of customer service, the dep
Slide 39: Outlook
39 Outlook Group Life Sciences Seals > Resilient business model > Continued growth across > Trending to GDP plus > Good geographic spread all businesses after prior growth rates after several year investments years of very strong > Strong balance sheet and growth cash flow Controls Acquisitions THE
Slide 40: Potential for Growth
40 Potential for Growth HEALTHCARE SEALS CONTROLS OVERALL > Increase share in > Aftermarket share > Further penetrate > Increased focus on specialised segments gains through superior specialised market newer developing of growing Canadian marketing and sectors in Europe markets, particularly Healthc
Slide 41: Contact
Contact Bruce M Thompson Tel: +44 (0) 20 7549 5700 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