Slide 1: Preliminary Announcement
PRELIMINARY ANNOUNCEMENT Year ended 30 September 2018 19 November 2018
Slide 2: Contents
01 FULL YEAR RESULTS CONTENTS Overview Financial Results Business Review Outlook and Prospects
Slide 3: Consistent Delivery
02 FULL YEAR RESULTS CONSISTENT DELIVERY TRACK RECORD OF DELIVERING STRONG RETURNS FOR SHAREHOLDERS ADJUSTED EPS GROWTH (PENCE) TSR GROWTH (TSR INDEX 2008 = 100) DIVIDEND GROWTH (PENCE) +13%p.a. 1 56.4 +29%p.a. 1 +13%p.a. 1 1,276 49.8 25.5 23.0 41.9 939 38.2 20.0 36.1 34.8 18.2 33.1 760 17.0 15.7 27
Slide 4: Financial Results
03 FULL YEAR RESULTS FINANCIAL RESULTS
Slide 5: Overview of Results
04 FULL YEAR RESULTS OVERVIEW OF RESULTS Year ended 30 September x 2018 2017 Revenue £485.1m £451.9m +7% Adjusted operating profit £84.9m £78.2m +9% Adjusted operating margin 17.5% 17.3% +20bps Adjusted profit before tax £84.8m £77.5m +9% Free cash flow £60.5m £55.7m +9% Acquisition spend £20.4m £20
Slide 6: Financial Highlights
05 FULL YEAR RESULTS FINANCIAL HIGHLIGHTS MAINTAINING FINANCIAL DISCIPLINE • Revenue and adjusted operating profit increased by 7% and 9%, respectively; adjusted EPS increased by 13% REVENUE ADJUSTED OPERATING PROFIT • Underlying revenues increased by 7%; contribution of 3% from businesses acquired
Slide 7: Profit Before Tax
06 FULL YEAR RESULTS PROFIT BEFORE TAX YEAR ENDED 30 SEPTEMBER 2018 2017 x £m £m Revenue 485.1 451.9 +7% Adjusted operating profit 84.9 78.2 +9% Adjusted operating margin (%) 17.5% 17.3% Interest expense (0.1) (0.7) Adjusted profit before tax 84.8 77.5 +9% CEO transition costs (2.1) - Acquisition re
Slide 8: Revenue Bridge
07 FULL YEAR RESULTS REVENUE BRIDGE ROBUST UNDERLYING GROWTH OF 7% £m 500 +£31.5m (+7%) £485.1m +£14.8m (+3%) 450 £451.9m -£13.1m (-3%) 400 350 FY17 Translational FX Acquisitions/Disposals Underlying FY18 FY17 & FY18
Slide 9: Taxation and Earnings per Share
08 FULL YEAR RESULTS TAXATION AND EARNINGS PER SHARE YEAR ENDED 30 SEPTEMBER 2018 2017 £m £m Adjusted profit before tax 84.8 77.5 Adjusted tax (20.3) (20.5) Group effective adjusted tax rate 23.9% 26.5% -260bps US effective adjusted tax rate 25.8% 35.8% -1,000bps Earnings per share (pence) Adjusted
Slide 10: Free Cash Flow
09 FULL YEAR RESULTS FREE CASH FLOW YEAR ENDED 30 SEPTEMBER 2018 2017 £m £m Adjusted operating profit 84.9 78.2 Depreciation 4.8 4.7 Working capital (5.1) (4.0) CEO transition costs paid (0.8) - Pension and share schemes, net 0.5 0.4 Operating cash flow, before acquisition expenses 84.3 79.3 +6% Int
Slide 11: Cash
10 FULL YEAR RESULTS CASH YEAR ENDED 30 SEPTEMBER 2018 2017 x £m £m Free cash flow 60.5 55.7 Acquisition cash paid (20.1) (19.5) Deferred consideration (0.3) (0.6) Dividends (27.0) (23.7) 13.1 11.9 Net cash brought forward 22.3 10.6 Exchange adjustments 0.6 (0.2) Cash funds at 30 September 36.0 22.3
Slide 12: Acquisitions
11 FULL YEAR RESULTS ACQUISITIONS ACQUISITION ENVIRONMENT HAS REMAINED CHALLENGING • Acquisitions are an integral part of the Group’s growth strategy FS CABLES • £20.4m spent on acquisitions during the year (Five year spend of ca. £128m): £16.9M – £16.9m on FS Cables – bringing a range of own- brand
Slide 13: Shareholders' Funds and ROATCE
12 FULL YEAR RESULTS SHAREHOLDERS’ FUNDS AND ROATCE AS AT 30 SEPTEMBER x 2018 2017 £m £m Tangible assets and investments 25.5 24.0 Goodwill and intangible assets 182.1 176.8 Net working capital 75.2 68.4 Trading capital employed - reported 282.8 269.2 Working capital (% of revenue) 15.1% 15.0% ROATC
Slide 14: Acquisitions
13 FULL YEAR RESULTS ACQUISITIONS BUILDING LARGER, BROADER-BASED BUSINESSES Life Seals Controls Sciences Acquisition spend 2018 • Coast – US £20.4m • FS Cables – UK Acquisition spend 2017 • Abacus – Australia & • PSP – US New Zealand • Edco - UK £20.1m Acquisition spend 2016 • WCIS – Australia • Cab
Slide 15: Clarendon Specialty Fasteners Inc
14 FULL YEAR RESULTS CLARENDON SPECIALTY FASTENERS INC DEVELOPING THE US SPECIALTY FASTENER MARKET • Coast Fabrication Inc (rebranded Clarendon Specialty Fasteners Inc) acquired in October 2017 • Small supplier of specialty fasteners based in Huntington Beach, California • Has strong reputation in t
Slide 16: FS Cables
15 FULL YEAR RESULTS FS CABLES EXTENSION OF INTERCONNECT ACTIVITIES • FS Cables acquired in August 2018 for net cash consideration of £16.9m; £1.0m of deferred consideration • Leading supplier of specialist data, control and electrical cable products, based in St. Albans, UK • Supplies to a range of
Slide 17: Gremtek
16 FULL YEAR RESULTS GREMTEK BUILDING A BROADER INTERCONNECT BUSINESS IN EUROPE • Gremtek was acquired in October 2018 for cash consideration of £7.4m; £0.5m of deferred consideration • Leading supplier of own-branded protective sleeving and cable identification products to a broad range of industri
Slide 18: Business Review
17 FULL YEAR RESULTS BUSINESS REVIEW
Slide 19: Group Overview
18 FULL YEAR RESULTS GROUP OVERVIEW BALANCED PORTFOLIO OF BUSINESSES Diploma PLC is an international group of specialised businesses supplying technical products and services LIFE SCIENCES SEALS CONTROLS 28% of revenues 43% of revenues 29% of revenues Suppliers of consumables, Suppliers of seals, ga
Slide 20: Group Overview: Geographic Diversification
19 FULL YEAR RESULTS GROUP OVERVIEW WELL DIVERSIFIED BY GEOGRAPHY NORTH AMERICAN REVENUES EUROPEAN REVENUES REST OF WORLD REVENUES (BY DESTINATION) BY SEC TOR (BY DESTINATION) BY SECTOR (BY DESTINATION) BY SECTOR GROUP GROUP GROUP REVENUE 23% US REVENUE 23% UK REVENUE 40% 17% Canada 48% 25% Continen
Slide 21: Life Sciences Segmentation
20 FULL YEAR RESULTS LIFE SCIENCES SEGMENTATION HEALTHCARE ENVIRONMENTAL 85% OF REVENUES 15% OF REVENUES Clinical diagnostic instrumentation, Environmental analysers, consumables and services supplied containment enclosures and to hospital pathology and life emissions monitoring systems. sciences la
Slide 22: Life Sciences Operating Results
21 FULL YEAR RESULTS LIFE SCIENCES OPERATING RESULTS Year ended 30 Sept 2018 2017 Revenue £134.7m £125.9m +7% Adjusted operating profit £23.9m £23.3m +3% Adjusted operating margin 17.7% 18.5% -80bps • Underlying revenues • Sector adjusted operating increased by 5% – Favourable currency hedges margin
Slide 23: Life Sciences Sector Developments
22 FULL YEAR RESULTS LIFE SCIENCES SECTOR DEVELOPMENTS • Underlying revenue growth of 6% in Healthcare businesses, despite UNDERLYING REVENUE GROWTH continuing budget pressures from GPOs • In Canada, underlying revenues increased by 8% with strong performance in Surgical and Endoscopy HEALTHCARE • I
Slide 24: Seals Segmentation
23 FULL YEAR RESULTS SEALS SEGMENTATION NORTH AMERICA NORTH AMERICA AFTERMARKET INDUSTRIAL OEM 31% OF REVENUES 29% OF REVENUES Next day delivery of seals, sealing Sealing products, custom moulded products and cylinder components and machined parts supplied to for the repair of heavy mobile manufactu
Slide 25: Seals Operating Results
24 FULL YEAR RESULTS SEALS OPERATING RESULTS Year ended 30 Sept 2018 2017 Revenue £208.0m £195.3m +7% Adjusted operating profit £36.0m £31.9m +13% Adjusted operating margin 17.3% 16.3% +100bps • Underlying revenue growth • Adjusted operating margins of 10% with strong North increased by 100bps Ameri
Slide 26: North American Seals Sector Developments
25 FULL YEAR RESULTS NORTH AMERICAN SEALS SECTOR DEVELOPMENTS • North American Seals underlying revenues increased by 11% driven by UNDERLYING REVENUE GROWTH robust trading conditions in US and Canadian markets • Aftermarket reported 9% increase in underlying revenues; higher equipment levels benefi
Slide 27: International Seals Sector Developments
26 FULL YEAR RESULTS INTERNATIONAL SEALS SECTOR DEVELOPMENTS • International Seals underlying revenues increased by 7% with UNDERLYING REVENUE GROWTH substantially stronger revenues in second half of year • FPE and M Seals delivered underlying revenue growth of 6%; strong growth in Scandinavia and i
Slide 28: Controls Segmentation
27 FULL YEAR RESULTS CONTROLS SEGMENTATION INTERCONNECT FLUID CONTROLS 59% OF REVENUES 20% OF REVENUES Wiring, cable, harness components Temperature, pressure and fluid and cable accessories used in control products used in Food, specialised technical applications in Beverage and Catering industries
Slide 29: Controls Operating Results
28 FULL YEAR RESULTS CONTROLS OPERATING RESULTS Year ended 30 Sept 2018 2017 Revenue £142.4m £130.7m +9% Adjusted operating profit £25.0m £23.0m +9% Adjusted operating margin 17.6% 17.6% - • Underlying revenues increased • Adjusted operating margins – Investment in sales by 5% were unchanged: resour
Slide 30: Controls Sector Developments
29 FULL YEAR RESULTS CONTROLS SECTOR DEVELOPMENTS • Interconnect underlying revenues up 7%; good growth in IS-Group and UNDERLYING REVENUE GROWTH Cablecraft more than offsetting absence of major project in Filcon • IS-Group UK revenues up 18% with success in broadening European INTERCONNECT customer
Slide 31: Outlook and Prospects
30 FULL YEAR RESULTS OUTLOOK AND PROSPECTS
Slide 32: Outlook and Prospects
31 FULL YEAR RESULTS OUTLOOK AND PROSPECTS 01 Another strong result in 2018, with double-digit growth in earnings per 02 The Group has a proven business model, broad geographic spread of share. Delivered compound double- businesses, robust balance sheet and digit growth in adjusted EPS over past con
Slide 33: Appendix
32 FULL YEAR RESULTS APPENDIX
Slide 34: The Diploma Investment Case
33 FULL YEAR RESULTS THE DIPLOMA INVESTMENT CASE CLEARLY DEFINED STRATEGY, CONSISTENT TRACK RECORD GDP PLUS UNDERLYING ACQUISITIONS TO REVENUE GROWTH ACCELERATE GROWTH We focus on essential products Carefully selected, value enhancing and services, funded by customers’ acquisitions accelerate the or
Slide 35: Our Business Model
34 FULL YEAR RESULTS 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 STABLE REVENUE GROWTH ATTRACTIVE MARGINS RESPONSIVENESS Focus on essential Highly responsive Ent
Slide 36: Our Growth Strategy
35 FULL YEAR RESULTS OUR GROWTH STRATEGY COMPOUNDING GROWTH THROUGH VALUE-ENHANCING ACQUISITIONS ACQUIRE BUILD GROW Fit with Group’s Investment to build Businesses maintain business model a solid foundation their distinct sales and for growth: marketing identity Marketing led with • New facilities s
Slide 37: Financial KPIs
36 FULL YEAR RESULTS FINANCIAL KPIS FIVE YEAR TRENDS 2014 2015 2016 2017 2018 Revenue £305.8m £333.8m £382.6m £451.9m £485.1m Total growth +7% +9% +15% +18% +7% Underlying growth +8% +1% +3% +7% +7% Operating margin 18.5% 18.1% 17.2% 17.3% 17.5% Working capital (% revenues) 17.2% 17.0% 16.6% 15.0% 1
Slide 38: Foreign Exchange
37 FULL YEAR RESULTS FOREIGN EXCHANGE STRENGTHENING IN UK STERLING PROVIDED TRANSLATION HEADWIND GBP VS G10 CURRENCY BASKET SECURITIES 840 830 820 810 800 790 780 770 760 Sep 16 Sep 17 Sep 18
Slide 39: John E Nicholas Executive Chairman Nigel P Lingwood
John E Nicholas Executive Chairman Nigel P Lingwood Group Finance Director Tel: +44 (0) 20 7549 5700 Email: investors@diplomaplc.com Web: www.diplomaplc.com 12 Charterhouse Square London EC1M 6AX Tulchan Communications Martin Robinson David Allchurch Tel: +44 (0) 20 7353 4200 Email: diploma@tulchang