Diploma Plc · LSE:DPLM
Diploma — FY2023 Earnings Presentation
32 slides from Diploma's earnings presentation, Nov 20, 2023
Slide 1: Full Year Results for the Year Ended 30 September 2023
FULL YEAR RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2023 20 NOVEMBER 2023 DIPLOMA DELIVERS SUSTAINABLE QUALITY COMPOUNDING
Slide 2: Agenda
AGENDA 01 OVERVIEW 02 FINANCIAL PERFORMANCE 03 STRATEGY AND BUSINESS REVIEW 2 DIPLOMA PLC FY23 RESULTS
Slide 3: Overview
01 OVERVIEW
Slide 4: Great Progress
01 OVERVIEW GREAT PROGRESS • Excellent performance building on our long-term compounding track record • Revenue diversification initiatives delivering strong organic growth • Good momentum into FY 2024 • High quality acquisitions accelerating organic growth: £280m invested in 12 new businesses • Sca
Slide 5: Excellent Performance Across All Metrics
01 OVERVIEW EXCELLENT PERFORMANCE ACROSS ALL METRICS Organic Revenue Adjusted operating Adjusted revenue growth growth profit margin EPS growth +80bps 8% 19% 19.7% 18% Model: 5% Model: 10% + Model: 17% + Model: Double digit Free cash flow Net debt / EBITDA ROATCE Dividend growth conversion +80bps 10
Slide 6: Our Track Record
01 OVERVIEW OUR TRACK RECORD Reported revenue (£m) 2019-23 Adjusted EPS (pence) 2019-23 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% 6 DIPLOMA PLC FY23 RESULTS
Slide 7: Powerful Decentralised Culture
01 OVERVIEW POWERFUL DECENTRALISED CULTURE Our purpose is to Customer-centric We are driven to add value create, innovate and deliver 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
Slide 8: Financial Performance
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Slide 9: Revenue
02 FINANCIAL PERFORMANCE REVENUE Year ended 30 September Organic growth: 8% +3% £1,200.3m +8% +8% FX +5% Acquisitions +11% Life Seals Sciences £1,012.8m Controls FY FY 2022 19% reported revenue growth 2023 Revenue diversification driving very strong organic growth 9 DIPLOMA PLC FY23 RESULTS
Slide 10: Adjusted Operating Profit
02 FINANCIAL PERFORMANCE ADJUSTED OPERATING PROFIT Year ended 30 September Value-add Margin formula £237.0m FX £191.2m Acquisitions Pricing Inflation Volume & Opex performance re-investment FY FY 2022 24% adjusted operating profit growth 2023 18.9% 19.7% 80 bps operating margin expansion 10 DIPLOMA
Slide 11: Income Statement
02 FINANCIAL PERFORMANCE INCOME STATEMENT Year ended 30 September £m 2023 2022 Change Revenue 1,200.3 1,012.8 +19% Operating profit 237.0 191.2 +24% Operating margin (%) 19.7% 18.9% Interest expense (20.4) (11.6) Profit before tax 216.6 179.6 +21% Effective tax rate 24.0% 25.0% Earnings 164.0 133.9
Slide 12: Cash Flow
02 FINANCIAL PERFORMANCE CASH FLOW Year ended 30 September £m £163.8m Free cash flow 255.3 231.9 Adjusted Operating Profit 70.8 4.6 FX 18.6 Placing Dividend 59.3 Net M&A Other 30.5 21.6 4.2 237.0 Working Interest Y/E Depreciation Capex capital & tax Y/E 2022 2023 Net debt Net debt £328.9m £254.7m 1.
Slide 13: Strong Balance Sheet
02 FINANCIAL PERFORMANCE STRONG BALANCE SHEET • £555m bank debt refinanced: maturities extended to July 2028 • Leverage reduced to 0.9x • Cash and undrawn facilities: £297m • Evaluating facilities to extend and diversify funding structure • Pension in surplus Substantial headroom to fund further gro
Slide 14: Disciplined Capital Allocation
02 FINANCIAL PERFORMANCE DISCIPLINED CAPITAL ALLOCATION 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 model Acquisitions deliver 20% Progressive dividend, 5% Net debt to (ca. 2% revenue
Slide 15: Putting Capital to Work
02 FINANCIAL PERFORMANCE PUTTING CAPITAL TO WORK Year ended 30 September 10 BOLT ONS 2 STRATEGIC £33m ACQUISITIONS Under 5x EBIT average multiple T.I.E. 9.8x £33m EBIT multiple annualised revenue £76m £31m annualised revenue PORTFOLIO MANAGEMENT DICSA 9.0x £23m EBIT multiple £170m £80m Disposal annu
Slide 16: Guidance for FY24
02 FINANCIAL PERFORMANCE GUIDANCE FOR FY24 Revenue Value-add: Highly diversification sustainable high margins cash generative Double digit revenue growth Consistently high at Cash conversion Organic: +5% 19.7% 90%+ Acquisitions: +6% Confident outlook 16 DIPLOMA PLC FY23 RESULTS
Slide 17: Strategy and Business Review
03 STRATEGY AND BUSINESS REVIEW
Slide 18: 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 19: Bucket 1: End Market Exposure
03 STRATEGY AND PERFORMANCE BUCKET 1: END MARKET EXPOSURE 5 year forecast CAGR* Clinical Diagnostics 7% Data, Digital & Telecoms 10% Electrification 10% Industrial Automation 9% Infrastructure 11% Renewables 9% Water Management 7% Positioning behind structurally growing end markets * Approximate fiv
Slide 20: Buckets 2 & 3: Geographic & Product White Space
03 STRATEGY AND PERFORMANCE BUCKETS 2 & 3: GEOGRAPHIC & 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 & Fittings Pumps / Valves
Slide 21: Controls: Double-Digit Organic Growth
03 STRATEGY AND PERFORMANCE CONTROLS: DOUBLE-DIGIT ORGANIC GROWTH FY 2023 FY 2022 Change Revenue £568.4m £492.8m +15% PERCENTAGE OF GROUP REVENUE* Organic growth +11% +24% Adjusted operating profit £136.6m £105.8m +29% 44% Adjusted operating margin 24.0% 21.5% +250bps SECTOR REVENUE MIX FY 2023 high
Slide 22: T.I.E.: Industrial Automation End Market Entry
03 STRATEGY AND PERFORMANCE T.I.E.: INDUSTRIAL AUTOMATION END MARKET ENTRY A new strategic vertical • Fast growing, attractive end segment • T.I.E. differentiated by strong aftermarket capability • Value-add proposition based on deep technical expertise Significant growth potential • Structural grow
Slide 23: Seals: Consistent Growth
03 STRATEGY AND PERFORMANCE SEALS: CONSISTENT GROWTH FY 2023 FY 2022 Change Revenue £419.0m £331.4m +26% PERCENTAGE OF GROUP REVENUE* Organic growth +5% +14% Adjusted operating profit £79.0m £62.6m +26% 39% Adjusted operating margin 18.9% 18.9% unchanged SECTOR REVENUE MIX FY 2023 highlights • Inter
Slide 24: DICSA: European Fluid Power Platform
03 STRATEGY AND PERFORMANCE DICSA: EUROPEAN FLUID POWER PLATFORM Adds to established positions in US and UK • High quality distributor of hydraulic hoses, fittings and components • Aftermarket business with highly diversified customer base • Presence in key European markets with significant further
Slide 25: Life Sciences: Building Momentum
03 STRATEGY AND PERFORMANCE LIFE SCIENCES: BUILDING MOMENTUM FY 2023 FY 2022 Change Revenue £212.9m £188.6m +13% PERCENTAGE OF GROUP REVENUE* Organic growth +8% -4% Adjusted operating profit £43.2m £41.0m +5% 17% Adjusted operating margin 20.3% 21.7% (140)bps SECTOR REVENUE MIX FY 2023 highlights •
Slide 26: Delivering Value Responsibly
03 STRATEGY AND PERFORMANCE 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 Employ
Slide 27: 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 ✓ ✓ ✓ ✓ ✓ ✓ • Excellent performance building on our long-term compounding track record •
Slide 28: Appendix
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Slide 29: DNA of a Quality Compounder
04 APPENDIX DNA OF A QUALITY COMPOUNDER COMPOUNDING 1 2 3 4 5 6 QUALITY CONSISTENT COMPOUNDING SUSTAINABLE CONSISTENT HIGH RESILIENCE OUTCOMES STRONG ACQUISITIONS HIGH MARGINS STRONG CASH ROATCE (X3) ORGANIC CONVERSION GROWTH Strong ATTRACTIVE Product Portfolio Scaling Low capital stewardship Low ca
Slide 30: Financial KPIs
04 APPENDIX FINANCIAL KPIS Five year trends 2023 2022 2021 2020 2019 Revenue £1,200.3m £1,012.8m £787.4m £538.4m £544.7m Reported growth +19% +29% +46% -1% +12% Organic growth +8% +15% +12% -7% +5% Adjusted operating margin 19.7% 18.9% 18.9% 16.2% 17.8% Working capital (% revenues) 16.0% 15.6% 15.8%
Slide 31: Sector Revenue and Profit
04 APPENDIX SECTOR REVENUE AND PROFIT Revenue Organic growth 2023 2022 2023 2022 £m £m Change % % Controls 568.4 492.8 +15% +11% +24% Seals 419.0 331.4 +26% +5% +14% Life Sciences 212.9 188.6 +13% +8% (4)% Group 1,200.3 1,012.8 +19% +8% +15% Adjusted operating profit Adjusted operating margin 2023 2
Slide 32: Balance Sheet
04 APPENDIX BALANCE SHEET £m, as at 30 September 2023 2022 Goodwill and acquisition intangible assets 959.2 827.3 Tangible and other intangible assets 63.4 53.7 Net lease liabilities (8.7) (6.7) Net working capital 214.3 184.2 Trading capital employed - reported 1,228.2 1,058.5 Working capital as %