Diploma Plc · LSE:DPLM
Diploma — FY2024 Earnings Presentation
37 slides from Diploma's earnings presentation, Nov 19, 2024
Slide 1: Strong Growth at Great Returns
FULL YEAR RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2024 19 NOVEMBER 2024 STRONG GROWTH AT GREAT RETURNS
Slide 2: Agenda
AGENDA 01 OVERVIEW 02 FINANCIAL PERFORMANCE 03 STRATEGY AND BUSINESS REVIEW 2 DIPLOMA PLC FY24 RESULTS
Slide 3: Overview
01 OVERVIEW
Slide 4: Great Progress
01 OVERVIEW GREAT PROGRESS • Strong performance building on our long-term compounding track record • Volume-led organic growth of 6%, despite tougher markets • Acquisitions: accelerating growth at great returns and strong margins: £293m invested in 7 new businesses • Portfolio discipline: disposal o
Slide 5: Strong Performance
01 OVERVIEW STRONG PERFORMANCE Organic Revenue Adjusted operating Adjusted revenue growth growth profit margin EPS growth 6% 14% 20.9% 15% Free cash flow ROATCE Leverage Dividend growth conversion 101% 19.1% 1.3X 5% Sustainable Quality Compounding 5 DIPLOMA PLC FY24 RESULTS
Slide 6: Our Track Record
01 OVERVIEW OUR TRACK RECORD 2019-24 2019-24 Reported revenue (£m) Adjusted EPS (pence) CAGR: CAGR: 20% 18% 2009-18 2009-18 CAGR: CAGR: 13% 16% 145.8 1,363 160 14.8 15-year revenue CAGR: 15% 15-year EPS CAGR: 16% 6 DIPLOMA PLC FY24 RESULTS
Slide 7: People and Culture
01 OVERVIEW PEOPLE AND CULTURE • Brilliant people • Powerful decentralised culture • Developing our management capability • Creating networks and best practice sharing • Engagement score: 79% 7 DIPLOMA PLC FY24 RESULTS
Slide 8: Financial Performance
02 FINANCIAL PERFORMANCE
Slide 9: Revenue Growth
02 FINANCIAL PERFORMANCE REVENUE GROWTH Year ended 30 September Organic growth: 6% £1,363m FX +6% +10% +1% Acquisitions £1,200m Seals Life Sciences Controls FY23 14% reported revenue growth FY24 Revenue diversification driving strong volume-led organic growth 9 DIPLOMA PLC FY24 RESULTS
Slide 10: Operating Margin Expansion
02 FINANCIAL PERFORMANCE OPERATING MARGIN EXPANSION Year ended 30 September Value-add Margin formula £285m FX £237m Opex Acquisitions Pricing Inflation Volume reinvestment FY23 20% adjusted operating profit growth FY24 19.7% 20.9% 120bps operating margin expansion 10 DIPLOMA PLC FY24 RESULTS
Slide 11: Compounding EPS Growth
02 FINANCIAL PERFORMANCE COMPOUNDING EPS GROWTH 23.3 (5.0) (8.9) Interest (4.7) 145.8p 18.7 Tax FX Acquisitions 126.5p (4.1) Placing Organic growth FY23 15% adjusted EPS growth FY24 Constant currency adjusted EPS growth of 19% All profit metrics are adjusted and stated before acquisition related and
Slide 12: Strong Cash Conversion
02 FINANCIAL PERFORMANCE STRONG CASH CONVERSION Year ended 30 September £m (77.2) 25.4 FX £197.9m Free cash flow (311.0) Adjusted Dividend Operating Profit (22.2) (75.8) FY23 Net M&A FY24 Other 33.4 (14.0) (8.5) 285.0 Interest Depreciation Net Working capital & tax Capex Net debt Net debt £254.7m £4
Slide 13: Accelerating Growth Through Acquisitions
02 FINANCIAL PERFORMANCE ACCELERATING GROWTH THROUGH ACQUISITIONS PEERLESS PAR 5 QUALITY STRONG ACQUISITION ACQUISITION BOLT ONS TRACK RECORD £243m £37m £13m £1.3bn 3 invested in 41 businesses ca. 7x ca. 7x ca. 4x EBIT multiple1 EBIT multiple1 EBIT average multiple1 ROATCE +17% 22% 14% >20% year 1 R
Slide 14: Portfolio Discipline
02 FINANCIAL PERFORMANCE PORTFOLIO DISCIPLINE THREE MEASURED CAPITAL DISPOSALS DISCIPLINE £45m We sell for two reasons: – Not value-add distribution 7 DISPOSALS – We’re not the right home to 7x since 2019 grow and scale EBIT multiple 6x 1 CONTROLS EBIT multiple We are long-term holders: Gremtek (par
Slide 15: Disciplined Stewardship of Capital
02 FINANCIAL PERFORMANCE DISCIPLINED STEWARDSHIP OF CAPITAL ROATCE (%) CAPITAL ALLOCATION PRIORITIES 5 year average: 18% i ii iii iv 19.1 19.1 17.4 17.3 18.1 Investment for Targeted Returns to Balance organic growth acquisitions shareholders sheet to drive future prudence organic growth Capital-ligh
Slide 16: Balance Sheet Strengthened
02 FINANCIAL PERFORMANCE BALANCE SHEET STRENGTHENED • £555m RCF Funding facilities (£m) 1,000 • Debut USPP(EUR) USPP RCF €250m @4.3%1 RCF extension option 800 • Subsequent USPP(USD) $150m @5.4%1 600 • £450m cash and undrawn facilities at 30 Sep 400 • Average maturity of drawn debt 200 7.6 years • Pe
Slide 17: Updating Our Financial Model
02 FINANCIAL PERFORMANCE UPDATING OUR FINANCIAL MODEL Ambitious… …with Discipline Organic revenue growth is our first priority Capital-light business model drives strong cash conversion 5% 90% Total revenue growth accelerated by quality acquisitions* Capital stewardship focused on strong ROATCE 10%
Slide 18: FY25 Guidance
02 FINANCIAL PERFORMANCE FY25 GUIDANCE Positive start to Organic revenue growth the year ca. 6% Momentum across Current acquisitions net all Sectors of disposals +ca. 2% to reported growth Absorbing the impact of the disposals Operating margin Contribution of margin ca. 21% accretive acquisitions Al
Slide 19: Strategy and Business Review
03 STRATEGY AND BUSINESS REVIEW
Slide 20: 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 21: End Markets (Bucket 1)
03 STRATEGY AND PERFORMANCE END MARKETS (BUCKET 1) 2023-2030 forecast CAGR* Renewables 11% Datacentres 10% Electrification 9% Aerospace 8% Industrial automation 8% In vitro diagnostics 7% Infrastructure 7% * Approximate growth rates based on company market data and research 21 DIPLOMA PLC FY24 RESUL
Slide 22: Significant White Space (Buckets 2 & 3)
03 STRATEGY AND PERFORMANCE SIGNIFICANT “WHITE SPACE” (BUCKETS 2 & 3) 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 Life
Slide 23: Sales Execution
03 STRATEGY AND PERFORMANCE SALES EXECUTION GREAT GREAT KEY ACCOUNT MANAGEMENT BUSINESS DEVELOPMENT • Relationships • Strategic sales leadership • Agile and responsive • Developing new markets • Technical know-how • Broader end market knowledge • Share of wallet • Scalable sales processes • End mark
Slide 24: Strong and Broad Acquisition Pipeline
03 STRATEGY AND PERFORMANCE STRONG AND BROAD ACQUISITION PIPELINE AVERAGE SIZE ca.£25m >3,000 by enterprise value OPPORTUNITIES WELL DIVERSIFIED by sector /geography (by number of opportunities) SEALS 46% ca.50 NEAR-TERM ACTIVE CONTROLS 32% OPPORTUNITIES US Europe LIFE SCIENCES UK Australia 22% 24 D
Slide 25: Controls: Excellent Progress
03 STRATEGY AND PERFORMANCE CONTROLS: EXCELLENT PROGRESS FY24 FY23 Change PERCENTAGE OF GROUP REVENUE* Revenue £652.4m £568.4m +15% 52% Organic growth +10% +11% Adjusted operating profit £169.9m £136.6m +24% SECTOR REVENUE MIX Adjusted operating margin 26.0% 24.0% +200bps 46% Wire & cable 30% FY24 h
Slide 26: Peerless: Fantastic Start
03 STRATEGY AND PERFORMANCE PEERLESS: FANTASTIC START A great acquisition…. • Excellent management team remain with the business • Quality value-add business strong margins • Reputation for quality product and availability • Strong organic growth historic 9% CAGR • Structurally growing end market •
Slide 27: Seals: Resilient Performance
03 STRATEGY AND PERFORMANCE SEALS: RESILIENT PERFORMANCE FY24 FY23 Change PERCENTAGE OF GROUP REVENUE* Revenue £489.1m £419.0m +17% 32% Organic growth +1% +5% Adjusted operating profit £90.7m £79.0m +15% SECTOR REVENUE MIX Adjusted operating margin 18.5% 18.9% -40bps 44% Seals FY24 highlights 25% Ga
Slide 28: Life Sciences: Good Momentum
03 STRATEGY AND PERFORMANCE LIFE SCIENCES: GOOD MOMENTUM FY24 FY23 Change PERCENTAGE OF GROUP REVENUE* Revenue £221.9m £212.9m +4% 16% Organic growth +6% +8% Adjusted operating profit £46.8m £43.2m +8% SECTOR REVENUE MIX Adjusted operating margin 21.1% 20.3% +80bps 36% FY24 highlights IVD 59% • Orga
Slide 29: Scaling Life Sciences
03 STRATEGY AND PERFORMANCE SCALING LIFE SCIENCES • Scaling strategy in action – investing to drive improvement • Investment in talent - Sector leadership and regional management • Upgraded facilities – forming hubs in key locations • Commercial benefits – improved service and efficiency • A platfor
Slide 30: 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 ✓ ✓ ✓ ✓ ✓ ✓ • Strong performance building on our long-term compounding track record • Vo
Slide 31: Appendix
04 APPENDIX
Slide 32: Income Statement
04 APPENDIX INCOME STATEMENT Year ended 30 September £m FY 24 FY 23 Change Revenue 1,363.4 1,200.3 +14% Adjusted Operating profit 285.0 237.0 +20% Operating margin (%) 20.9% 19.7% Financial expense, net (27.0) (20.4) Profit before tax 258.0 216.6 +19% Effective tax rate 24% 24% Adjusted Earnings 196
Slide 33: Sector Revenue and Profit
04 APPENDIX SECTOR REVENUE AND PROFIT Revenue Organic growth FY 24 FY 23 FY 24 FY 23 £m £m Change % % Controls 652.4 568.4 +15% +10 +11 Seals 489.1 419.0 +17% +1 +5 Life Sciences 221.9 212.9 +4% +6 +8 Group 1,363.4 1,200.3 +14% +6 +8 Adjusted operating profit Adjusted operating margin FY 24 FY 23 FY
Slide 34: Balance Sheet
04 APPENDIX BALANCE SHEET £m, as at 30 September FY24 FY23 Goodwill and acquisition intangible assets 1,048.9 959.2 Tangible and other intangible assets 66.0 63.4 Net lease liabilities (6.4) (8.7) Net working capital 276.5 214.3 Trading capital employed - reported 1,385.0 1,228.2 ROATCE 19.1% 18.1%
Slide 35: Financial KPIs
04 APPENDIX FINANCIAL KPIS Five year trends 5yr average 2024 2023 2022 2021 2020 Reported revenue growth 20%1 +14% +19% +29% +46% (1%) Organic revenue growth 7% +6% +8% +15% +12% (7%) Adjusted operating margin 19% 20.9% 19.7% 18.9% 18.9% 16.2% Adjusted EPS growth 18%1 +15% +18% +26% +51% (12%) Free
Slide 36: Delivering Value Responsibly
04 APPENDIX 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 Employee Survey Key su
Slide 37: Organic Growth
04 APPENDIX ORGANIC GROWTH Definition: Organic revenue growth is the incremental constant currency revenue generated by Diploma businesses in a period compared to the equivalent period in the prior year. For businesses acquired during the year, organic growth includes the growth or decline in revenu