Slide 1: Preliminary Announcement
20 November 2017 Preliminary Announcement Year ended 30 September 2017
Slide 2: Contents
Contents Introduction and Overview Financial Results Business Review Outlook and Prospects Preliminary Announcement 01
Slide 3: Introduction and Overview
DIPLOMA PLC Introduction and Overview
Slide 4: Group Overview
Group Overview Balanced portfolio of businesses Diploma PLC is an international group of specialised businesses supplying technical products and services to the following industries: Life sciences Seals Controls 28% of revenues 43% of revenues 29% of revenues Suppliers of consumables, Suppliers of s
Slide 5: Group Overview
Group Overview Well diversified by geography North America revenues European revenues Rest of World revenues (by destination) by sector (by destination) by sector (by destination) by sector 41% of revenues 23% US 18% Canada 48% of revenues 22% UK 26 Continental % Europe 11% of revenues Life Sciences
Slide 6: The Diploma Investment Case
The Diploma Investment Case Clearly defined strategy, consistent track record GDP plus underlying Acquisitions to revenue growth accelerate growth We focus on essential products and Carefully selected, value enhancing services, funded by customers’ operating acquisitions accelerate the organic growt
Slide 7: Overview of 2017
Overview of 2017 Strong results with double-digit growth in revenue and earnings • Revenue and adjusted operating profit increased by 18% and 19% respectively • Robust underlying revenue growth of 7%, with strong tailwind from currency and modest contribution from acquisitions • Operating margins up
Slide 8: Financial Results
DIPLOMA PLC Financial Results
Slide 9: Overview of Results
Overview of Results Year ended 30 September x 2017 2016 Revenue £451.9m £382.6m +18% Adjusted operating profit £78.2m £65.7m +19% Adjusted operating margin 17.3% 17.2% +10bps Adjusted profit before tax £77.5m £64.9m +19% Free cash flow £55.7m £59.0m -6% Acquisition spend £20.1m £32.7m Net cash funds
Slide 10: Financial Highlights
Financial Highlights Strong performance against key financial metrics • Revenue and adjusted operating profit increased by 18% and 19% respectively; adjusted EPS increased by 19% • Underlying revenues increased by 7%; currency movements added 9%; net contribution of 2% from businesses acquired • Adj
Slide 11: Revenue Bridge
Revenue Bridge Robust underlying growth of 7% £m 500 +£25.9m 450 +£34.9m +£8.5m £451.9m 400 £382.6m 350 300 250 200 FY16 Translational FX Acquisitions/Disposals Underlying FY17 FY16 & FY17 Preliminary Announcement 10
Slide 12: Foreign Exchange
Foreign Exchange Large depreciation in UK sterling provided translation gains GBP vs G10 currency basket securities 1050 1000 950 900 850 800 750 700 Sep 15 Sep 16 Sep 17 Preliminary Announcement 11
Slide 13: Profit Before Tax
Profit Before Tax Year ended 30 September x 2017 2016 £m £m Revenue 451.9 382.6 +18% Adjusted operating profit 78.2 65.7 +19% Adjusted operating margin (%) 17.3% 17.2% Interest expense (0.7) (0.8) Adjusted profit before tax 77.5 64.9 +19% Acquisition related charges (9.7) (10.3) Fair value remeasure
Slide 14: Foreign Exchange
Foreign Exchange Easing of transactional currency pressures on Healthcare margins Transactional impact-base currency (US$) 1.5 Change over Change over 1 year 3 years 1.4 C$ +5% -12% A$ +2% -12% 1.3 1.2 1.1 1 0.9 Sep 12 Sep 13 Sep 14 Sep 15 Sep 16 Sep 17 C$ A$ Preliminary Announcement 13
Slide 15: Taxation and Earnings per Share
Taxation and Earnings per Share Year ended 30 September x 2017 2016 Adjusted profit before tax (£m) 77.5 64.9 Reported taxation (18.6) (14.9) Adjustments (1.9) (1.8) Adjusted tax (20.5) (16.7) Effective adjusted tax rate 26.5% 25.7% Earnings per share (pence) Adjusted 49.8p 41.9p +19% Basic (Reporte
Slide 16: Free Cash Flow
Free Cash Flow Year ended 30 September 2017 2016 £m £m Adjusted operating profit 78.2 65.7 Depreciation 4.7 4.5 Working capital (4.0) 6.3 Pension and share schemes, net 0.4 0.1 Operating cash flow, before acquisition expenses 79.3 76.6 +4% Interest paid, net (0.4) (0.6) Tax paid (19.3) (17.6) Capita
Slide 17: Free Cash Flow Conversion
Free Cash Flow Conversion High quality of earnings Free cash flow conversion (£m) 60 50 40 30 20 88% 81% 93% 93% 124% 99% 10 0 FY12 FY13 FY14 FY15 FY16 FY17 Free cash flow Adjusted earnings Preliminary Announcement 16
Slide 18: Net Cash
Net Cash Year ended 30 September x 2017 2016 £m £m Free cash flow 55.7 59.0 Acquisition cash paid (19.5) (32.0) Deferred consideration (0.6) (0.7) Dividends (23.7) (21.4) 11.9 4.9 Net cash brought forward 10.6 3.0 Exchange adjustments (0.2) 2.7 Net cash funds at 30 September 22.3 10.6 Comprising: Ca
Slide 19: Acquisitions
Acquisitions Acquisition environment more challenging over last 12 months • Acquisitions are an integral part of the Group’s growth strategy • £20.1m spent on acquisitions during the year (£90m over three years): – £15.0m on Abacus – adding critical mass to our Healthcare business in Australia and N
Slide 20: Acquisitions
Acquisitions Building larger, broader-based businesses Life Seals Controls Sciences Acquisition spend 2017 • Abacus – Australia & • PSP – US New Zealand • Edco - UK £20.1m Acquisition spend 2016 • WCIS – Australia & New • Cablecraft – UK Caledonia • Ascome – France £32.7m Acquisition spend 2015 • TP
Slide 21: Shareholders’ Funds and ROATCE
Shareholders’ Funds and ROATCE As at 30 September x 2017 2016 £m £m Tangible assets and investments 24.0 25.4 Goodwill and intangible assets 176.8 169.8 Net working capital 68.4 63.4 Trading capital employed - reported 269.2 258.6 Working capital (% of revenue) 15.0% 16.6% ROATCE 24.0% 21.1% Retirem
Slide 22: Business Review
DIPLOMA PLC Business Review
Slide 23: Life Sciences: Segmentation
Life Sciences Segmentation Healthcare (84% of revenues) Clinical diagnostic instrumentation, consumables and services supplied to hospital pathology and life sciences laboratories for the testing of blood, tissue and other samples. Surgical medical devices and related consumables and services suppli
Slide 24: Life Sciences: Operating Results
Life Sciences Operating Results Year ended 30 Sept 2017 2016 Revenue £125.9m £109.9m +15% Adjusted operating profit £23.3m £19.6m +19% Adjusted operating margin 18.5% 17.8% +70bps • Underlying revenues increased by 4% after adjusting for currency, the acquisition of Abacus and a small prior year dis
Slide 25: Life Sciences: Sector Developments
Life Sciences Sector Developments • Underlying revenue growth of 4% in Healthcare businesses, despite continued pressure on budgets in both Canada and Australia • In Canada, strong capital revenues as new technology introduced and delayed projects reactivated in laboratory diagnostics • AMT and Vant
Slide 26: Abacus acquisition
Abacus acquisition Adds critical mass to Healthcare in Australia and New Zealand • Acquired Abacus in April 2017 for consideration of ca. £15m (A$25.0m) • Leading supplier of diagnostics instrumentation and consumables to the Pathology and Life Sciences sectors • Strengths in Immunology and Biochemi
Slide 27: Seals: Segmentation
Seals Segmentation North America Aftermarket (32% of revenues) Next day delivery of seals, sealing products and cylinder components for the repair of heavy mobile machinery. North America Industrial OEM (29% of revenues) Sealing products, custom moulded and machined parts supplied to manufacture
Slide 28: Seals: Operating Results
Seals Operating Results Year ended 30 Sept 2017 2016 Revenue £195.3m £166.6m +17% Adjusted operating profit £31.9m £28.2m +13% Adjusted operating margin 16.3% 16.9% -60bps • Underlying revenue growth of 4% after adjusting for acquisitions and currency • Acquisitions of PSP and Edco added 1% to reven
Slide 29: North American Seals: Sector Developments
North American Seals Sector Developments • In North America, Aftermarket underlying revenues increased by 5% with good performance in core Hercules business and strong recovery in HKX • Growth initiatives continued to gain traction and E-commerce delivered strong year on year growth • Industrial OEM
Slide 30: International Seals: Sector Developments
International Seals Sector Developments • International Seals businesses outside North America increased underlying revenues by 1% with performances very dependent on market conditions • FPE Seals and M Seals delivered strong underlying growth of 11% in core markets in the UK and Scandinavia and ben
Slide 31: Controls: Segmentation
Controls Segmentation Interconnect (59% of revenues) Wiring, harness components and cable accessories used in specialised technical applications in Aerospace, Defence, Motorsport, Energy, Medical, Rail and Industrial. Specialty Fasteners (18% of revenues) Specialty aerospace-quality fasteners suppli
Slide 32: Controls: Operating Results
Controls Operating Results Year ended 30 Sept 2017 2016 Revenue £130.7m £106.1m +23% Adjusted operating profit £23.0m £17.9m +28% Adjusted operating margin 17.6% 16.9% +70bps • Underlying revenues increased by 14% after adjusting for currency and full year contributions from Cablecraft and Ascome •
Slide 33: Controls: Sector developments
Controls Sector developments • The Interconnect businesses increased underlying revenues by 8%, benefiting from increased project work – In the UK, strong performances in the IS-Group and Cablecraft benefiting from stronger Industrial markets – In Germany, modest growth in IS-Sommer boosted by major
Slide 34: Cablecraft Acquisition
Cablecraft Acquisition Extension of Interconnect activities • Cablecraft was acquired by the Group in March 2016 • In only its second year as part of the Group, Cablecraft is already showing the benefits of investments made post-acquisition in: – Increased management and sales resources – Expanded e
Slide 35: Outlook and Prospects
Outlook and Prospects
Slide 36: Current Trading and Outlook
Current Trading and Outlook • The Group delivered another strong performance in 2017, reporting strong double-digit growth in revenue and earnings • The performance in 2017 provides confidence in the Group’s prospects for solid underlying growth in the year ahead, enhanced by unlocking value-enhanci
Slide 37: Appendix
DIPLOMA PLC Appendix
Slide 38: Our Business Model
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 • Entrepreneurial pr
Slide 39: Our Growth Strategy
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 • Marketing led with for growth: and marketing strong customer – New facilities identit
Slide 40: Our Corporate Objectives
Our Corporate Objectives Track record of delivering strong returns for shareholders Adjusted EPS growth (pence) TSR growth (TSR index 2007 = 100) Dividend growth (pence) +14%p.a. 1 +21%p.a. 1 +16%p.a. 1 23.0 672 49.8 20.0 41.9 18.2 543 17.0 38.2 36.1 15.7 34.8 33.1 14.4 406 401 375 27.9 12.0 9.0 265
Slide 41: Financial KPIs
Financial KPIs Five Year Trends 2013 2014 2015 2016 2017 Revenue £285.5m £305.8m £333.8m £382.6m £451.9m Total growth +10% +7% +9% +15% +18% Underlying growth +4% +8% +1% +3% +7% Operating margin 19.0% 18.5% 18.1% 17.2% 17.3% Working capital (% revenues) 16.7% 17.2% 17.0% 16.6% 15.0% Free cash flow
Slide 42: Bruce M Thompson Chief Executive Officer Nigel P Lingwood
Tel: +44 (0) 20 7549 5700 Bruce M Thompson 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 (0) 20 7