Slide 1: Half Year Announcement
Half Year Announcement Six months ended 31 March 2015 11 May 2015
Slide 2: Contents
Half Year Announcement Contents 1. Introduction and Overview LIFE SCIENCES 2. Financial Results SEALS 3. Business Review and Outlook CONTROLS 4. Appendix 1
Slide 3: 1. Introduction and Overview
1. Introduction and Overview
Slide 4: The Diploma Investment Case
Half Year Announcement The Diploma Investment Case 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 quality ATTRACTIVE of custo
Slide 5: Overview of Half Year
Half Year Announcement Overview of Half Year > Businesses acquired in past year added 10% to revenue; currency movements reduced revenues by 2% > Underlying revenue growth of 2%: > Seals - 8% growth with strong demand in North America > Life Sciences – 1% growth with tougher markets in Canadian Heal
Slide 6: 2. Financial Results
2. Financial Results
Slide 7: Half Year Results
Half Year Announcement Half Year Results Six Months ended 31 March x 2015 2014 Revenue £163.2m £148.6m +10% Adjusted operating profit £29.6m £27.8m +6% Adjusted operating margin 18.1% 18.7% Adjusted profit before tax £29.3m £27.6m +6% Free cash flow £12.4m £13.0m -5% Acquisition spend £35.0m £11.4m
Slide 8: Financial Highlights
Half Year Announcement Financial Highlights > Businesses acquired in past year added 10% to Group revenues; currency movements reduced revenues by 2%; underlying revenue growth of 2% > Adjusted operating margins remained robust at 18.1% > Adjusted PBT and EPS both increased by 6% to £29.3m and 18.6p
Slide 9: Revenue Bridge
Half Year Announcement Revenue Bridge £m 170 14.5 (3.0) 163.2 160 3.1 150 148.6 140 130 120 HY 2013 Underlying growth Acquisitions Exchange effects HY 2014 > Acquisitions added 10% to revenues; currency movements reduced revenues by 2%; underlying revenue growth of 2% 8
Slide 10: Foreign Exchange - Translational Impact
Half Year Announcement Foreign Exchange Translational Impact 2.20 Base UK£ USD 2.00 CAD EUR 1.80 AUD 1.60 1.40 1.20 1.00 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 > Strengthening of UK£ continues to impact results on translation 9
Slide 11: Foreign Exchange - Transactional Impact
Half Year Announcement Foreign Exchange Transactional Impact 1.40 Base US$ CAD 1.30 AUD 1.20 1.10 1.00 0.90 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 > Healthcare gross margins impacted by weakening CAD and AUD against US$ 10
Slide 12: Acquisitions
Half Year Announcement Acquisitions > Acquisitions are an integral part of the Group’s growth strategy > £35.0m spent on acquisitions during the year: > £11.0m on 80% of TPD – extends Healthcare business into new geographic market > £22.7m on 100% of Kubo - building a stronger European Seals busines
Slide 13: Adjusted Operating Margin
Half Year Announcement Adjusted Operating Margin + Operational leverage in Seals Transactional currency effects in Healthcare Adjusted operating businesses + margin Tight control of Reverse operational operating costs across the Group 18.1% leverage in Controls Acquisitions joining the Group with lo
Slide 14: Profit Before Tax
Half Year Announcement Profit Before Tax Six Months ended 31 March x 2015 2014 £m £m Revenue 163.2 148.6 +10% Adjusted operating profit 29.6 27.8 +6% Adjusted operating margin (%) 18.1% 18.7% Net interest expense (0.3) (0.2) Adjusted profit before tax 29.3 27.6 +6% Acquisition related charges (3.7)
Slide 15: Taxation and Earnings per Share
Half Year Announcement Taxation and Earnings per Share Six Months ended 31 March 2015 2014 Adjusted profit before tax £29.3m £27.6m Reported taxation (7.3) (7.2) Adjustments (0.6) (0.5) Adjusted tax (7.9) (7.7) Effective adjusted tax rate 27.0% 27.9% Earnings per share Adjusted 18.6p 17.5p +6% Basic
Slide 16: Free Cash Flow
Half Year Announcement Free Cash Flow Six Months ended 31 March x 2015 2014 £m £m Adjusted operating profit 29.6 27.8 Depreciation 1.4 1.2 Working capital (6.8) (6.6) Pension and share schemes, net 0.2 0.2 Operating cash flow, before acquisition expenses 24.4 22.6 +8% Interest paid, net (0.2) (0.1)
Slide 17: Net Debt
Half Year Announcement Net Debt Six Months ended 31 March x 2015 2014 £m £m Free cash flow 12.4 13.0 Acquisition cash paid (34.7) (11.3) Deferred consideration (0.3) (0.1) Dividends (13.3) (12.2) (35.9) (10.6) Cash brought forward 21.3 19.3 Exchange adjustments (0.3) (0.7) Net (Debt)/Cash at 31 Marc
Slide 18: Shareholders’ Funds
Half Year Announcement Shareholders’ Funds 31 Mar 30 Sept 2015 2014 £m £m Goodwill 91.3 80.2 Acquisition intangible assets 43.1 28.6 Tangible assets and investments 24.2 14.6 Net working capital 66.3 54.2 Trading capital employed - reported 224.9 177.6 Retirement benefit obligations (8.1) (4.3) Defe
Slide 19: 3. Business Review
3. Business Review
Slide 20: Our Sectors
Half Year Announcement Our Sectors Revenue by Sector and Destination LIFE SCIENCES SEALS CONTROLS 30% of group revenues 39% of group revenues 31% of group revenues 334 employees 604 employees 312 employees 67% Canada 68% North America 58% UK 19% Europe 24% Europe 34% Continental Europe 14% Rest of W
Slide 21: Life Sciences Segmentation
Half Year Announcement Life Sciences Segmentation Healthcare Diploma Healthcare Group (“DHG”) 85% 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
Slide 22: Life Sciences Operating Results
Half Year Announcement Life Sciences Operating Results Six Months ended 31 March 2015 2014 Revenue £52.0m £46.6m +12% Adjusted operating profit £10.3m £10.6m -3% Adjusted operating margin 19.8% 22.7% > Underlying revenues increased by 1% after adjusting for currency and acquisitions > TPD added 14%
Slide 23: Life Sciences Sector Developments
Half Year Announcement Life Sciences Sector Developments > In Healthcare, Canadian businesses faced tougher markets, with hospitals increasing focus on controlling costs and taking initiatives to centralise functions within regions LIFE SCIENCES > Consumable and service revenues have remained robust
Slide 24: TPD Acquisition
Half Year Announcement TPD Acquisition > DHG acquired 80% of Technopath Distribution (“TPD”) 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 of ca. €15m > TPD shares key
Slide 25: Seals Segmentation
Half Year Announcement 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 specialis
Slide 26: Seals Operating Results
Half Year Announcement Seals Operating Results Six Months ended 31 March 2015 2014 Revenue £64.8m £54.9m +18% Adjusted operating profit £12.0m £9.3m +29% Adjusted operating margin 18.5% 16.9% > Underlying revenues increased by 8% after adjusting for currency and acquisitions: > Aftermarket businesse
Slide 27: Seals Sector Developments - Aftermarket
Half Year Announcement Seals Sector Developments - Aftermarket > Strong growth in core Hercules business in North America, with growing US economy and less severe winter weather > Weaker markets for HKX in Canada and Latin America SEALS > In Europe, FPE Seals delivered good underlying growth and als
Slide 28: Seals Sector Developments - Industrial OEMs
Half Year Announcement Seals Sector Developments – Industrial OEMs > In North America, RT Dygert, All Seals and J Royal performed well in positive US industrial economy and increased underlying revenues by 10% SEALS > Growth driven by new products supplied to existing and new customers - after prior
Slide 29: Kubo Acquisition
Half Year Announcement Kubo Acquisition > Acquired Kubo Group in March 2015 for net cash consideration of £22.7m > 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 in h
Slide 30: Controls Segmentation
Half Year Announcement 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 25% control products used in the Food, Beverage and
Slide 31: Controls Operating Results
Half Year Announcement Controls Operating Results Six Months ended 31 March 2015 2014 Revenue £46.4m £47.1m -1% Adjusted operating profit £7.3m £7.9m -8% Adjusted operating margin 15.7% 16.8% > Underlying revenues decreased by 5% after adjusting for currency and acquisitions > Acquisition of SFC add
Slide 32: Controls Sector Developments
Half Year Announcement Controls Sector Developments > In Interconnect, revenues from UK operations broadly flat with growth initiatives to broaden the product range offsetting softer Industrial markets CONTROLS > In Germany, some improvement in Q2 to weak industrial markets, but delayed customer ord
Slide 33: Current Trading and Outlook
Half Year Announcement Current Trading and Outlook > The Group has a strong and proven business model and growth strategy which aim to deliver: > “GDP plus” levels of organic revenue growth > Carefully selected acquisitions to accelerate growth to target double digit levels > In the first half, Dipl
Slide 34: 4. Appendix
4. Appendix
Slide 35: Group Overview - Sectors
Half Year Announcement 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 ca. 30% of revenues ca. 40% of revenues ca. 30% of revenues A BALANCED AND DIVERSE PORTF
Slide 36: Group Overview - Geography
Half Year Announcement Group Overview - Geography North America Europe Rest of World 49% 43% 8% of revenues¹ of revenues¹ of revenues¹ 26% US 23% UK 23% Canada 20% Continental Europe Life Sciences Seals Controls Healthcare Aftermarket Controls Environmental Industrial OEM ¹By destination, FY2014 fig
Slide 37: Our Business Model
Half Year Announcement 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 cu
Slide 38: Our Growth Strategy
Half Year Announcement Our Growth Strategy 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 facilities > Synergies manag
Slide 39: Our Corporate Objectives
Half Year Announcement Our Corporate Objectives STRONG DOUBLE-DIGIT UPPER QUARTILE PROGRESSIVE DIVIDEND GROWTH EPS GROWTH TSR GROWTH 2014 36.1 2014 469 2014 17.0 2013 34.8 2013 434 2013 15.7 2012 33.1 2012 306 2012 14.4 +20% p.a. +36% p.a. +17% p.a. 2011 27.9 2011 199 2011 12.0 2010 18.9 2010 171 20
Slide 40: Financial KPIs
Half Year Announcement Financial KPIs Five Year Trends 2010 2011 2012 2013 2014 Revenue £183.5m £230.6m £260.2m £285.5m £305.8m Total growth +15% +26% +13% +10% +7% Organic growth +11% +17% +6% +4% +8% Operating margin 17.5% 19.6% 20.3% 19.0% 18.5% Working capital (% revenues) 15.4% 16.1% 16.5% 16.7
Slide 41: Contact
Contact Bruce M Thompson Chief Executive Officer Nigel P Lingwood Group Finance Director Tel: +44 (0) 20 7549 5700 Fax: +44 (0) 20 7549 5715 Email: investors@diplomaplc.com Web: www.diplomaplc.com 12 Charterhouse Square London EC1M 6AX Tulchan Communications: David Allchurch Martin Robinson Tel: +44