Diploma Plc · LSE:DPLM
Diploma — Investor Presentation (March 2020)
29 slides from Diploma's investor presentation, March 2020
Slide 1: Corporate Presentation
March 2020 Corporate Presentation Consistently delivering value
Slide 2: Agenda
Agenda 01 Group Overview 02 The Investment Case 03 Business Review 04 Appendix: FY19 Results 2
Slide 3: 1. Group Overview
1. Group Overview Consistently delivering value 3
Slide 4: Group Overview
Group Overview We are a value-add distributor that supplies specialised products and services to a wide range of end segments in our three Sectors of Life Sciences, Seals and Controls Life Seals Controls Sciences The Life Sciences Sector The Seals Sector businesses The Controls Sector businesses sup
Slide 5: The Group
The Group Well diversified by Sector and geography Revenue by Sector Revenue by geography* 11% 27% 40% 40% 49% 33% Seals Controls Life Sciences North America Europe Rest of World *b y d e s ti n a ti o n 5
Slide 6: Strong Fundamentals
Strong Fundamentals Niche value-add distribution People: passionate, accountable, customer-centric Strong positions in attractive markets Resilient business model Successful acquisition history Strong financial performance and balance sheet Focus on developing our strengths 6
Slide 7: Five Year Performance
Five Year Performance Delivering against our financial KPIs 2019 2018 2017 2016 2015 Revenue £544.7m £485.1m £451.9m £382.6m £333.8m Total growth +12% +7% +18% +15% +9% Underlying growth +5% +7% +7% +3% +1% Adjusted operating margin 17.8% 17.5% 17.3% 17.2% 18.1% Working capital (% revenues) 16.5% 15
Slide 8: 2. The Investment Case
2. The Investment Case Consistently delivering value 8
Slide 9: Value-add Proposition
Value-add Proposition Essential Products Essential Solutions Essential Values Critical to Responsive Decentralised model customers needs customer service Deep technical Opex budgets Customer-orientated support Added value Accountable for Range of end markets services performance execution Sustainabl
Slide 10: Significant Growth Opportunity
Significant Growth Large market potential Opportunity Global Gaskets Global Seals • Strong positions in key local markets $20bn $40bn • Underpenetrated in biggest developed economies • Further penetration with existing product General In Vitro portfolio Surgery Diagnostics • Adjacent product opportu
Slide 11: Our Strategy
Our Strategy Retain the high quality, resilient fundamentals of the business model Strengthen the core competencies that differentiate Diploma and drive our value-add model Develop our organisational capability, so we have the talent, technology and facilities to execute the business model at scale
Slide 12: End Markets
DIPLOMA: CONSISTENTLY DELIVERING VALUE Essential Products Essential Solutions Essential Values End Markets Supply chain Operational Route to Commercial Product management excellence market discipline Talent Technology Facility Robust organic Sustainable Consistently Value enhancing Value growth high
Slide 13: 3. Focus our Growth
3. Focus our Growth Structural trends in our Sectors Existing end markets Under-penetrated in large core markets Pragmatically taking advantage of scale Core Highly fragmented markets with acquisition opportunities Product Geographic category diversification diversification Significant adjacent prod
Slide 14: Acquisitions
Acquisitions Market Key target attributes Acquisition spend (£m) • Fragmented markets • Value-add servicing • Adjacent product range component 78.3 • Industrial cycle creates • Organic growth potential 37.8 32.7 opportunity • Capable and established 20.1 20.4 management teams 2015 2016 2017 2018 201
Slide 15: Financial Model
Financial Model Revenue Growth Adj. Operating Margin FCF Conversion 10% + 17% + ca. 90% Net Debt / EBITDA Dividend Cover ROATCE < 2x 2x adj EPS 20% + Consistent compounding value creation 15
Slide 16: Market Consensus and Financial Calendar
Market Consensus and Financial Calendar Full year ending 30 2020 2019 Actual Upcoming Events Sept Consensus* Revenues £544.7m £590.6m +8.4% Trading update 25 March 2020 Operating Margin 17.8% 17.8% +0 bps Half-year results 11 May 2020 Adjusted PBT £96.5m 104.4 +8.2% Trading update Adjusted EPS £64.3
Slide 17: 4. Business Review
4. Business Review Consistently delivering value 17
Slide 18: Life Sciences
Life Sciences Segmentation Healthcare Environmental 85% of revenues 15% of revenues Clinical diagnostics Environmental analysers, instrumentation, consumables containment enclosures and and services supplied to emission monitoring systems. hospital pathology and life sciences laboratories for the te
Slide 19: Life Sciences
Life Sciences Top 10 Device Areas • High growth budget segments 18% In Vitro Diagnostics (IVD) Size of market ➢ Diagnostics, preventative, speciality 16% Cardiology 14% surgical Diagnostic Imaging 12% ➢ Niche, innovative, technology based 10% Opthalmics solutions beyond mass market 8% General & Drug
Slide 20: Seals
Seals Segmentation North America US Aftermarket Industrial OEM 30% of revenues 27% of revenues Next day delivery of seals, Sealing products, custom Primary growth drivers sealing products and cylinder moulded and machined parts components for the repair of supplied to manufacturers of General econom
Slide 21: Seals
Seals Addressable market • Structural growth opportunities • Further North America penetration 15% ➢ Louisville facility: broader US Aftermarket reach 40% Addressable ➢ Aftermarket scale advantages Asia Seals Americas • Focus on core developed international economies £20bn EMEA • Product adjacencies
Slide 22: Controls
Controls Segmentation Interconnect Fluid controls 63% of revenues 16% of revenues Wiring, cable, harness Temperature, pressure and components and cable fluid control products used in accessories used in specialised Food, Beverage and Catering technical applications in industries. Aerospace, Defence,
Slide 23: Controls
Controls Interconnect addressable market • Underpenetrated European market Europe Market Share $1.3bn 7% ➢ Foothold for Interconnect in France Cabling addressable market (Gremtek) Europe Market Share ➢ Developing Interconnect Germany $800m 4% (Sommer) Specialty fastener addressable market Europe Mar
Slide 24: 5. Appendix: FY19 Results
5. Appendix: FY19 Results Consistently delivering value 24
Slide 25: Profit Before Tax
Profit Before Tax Year ended 30 September 2019 2018 £m £m Revenue 544.7 485.1 +12% Adjusted operating profit 97.2 84.9 +14% Adjusted operating margin (%) 17.8% 17.5% Interest expense (0.7) (0.1) Adjusted profit before tax 96.5 84.8 +14% Previous CEO transition costs - (2.1) Acquisition related charg
Slide 26: Free Cash Flow
Free Cash Flow Year ended 30 September 2019 2018 £m £m Adjusted operating profit 97.2 84.9 Depreciation 5.4 4.8 Increase in working capital (9.4) (5.1) Previous CEO transition costs paid (1.3) (0.8) Pension and share schemes, net 0.4 0.5 Operating cash flow, before acquisition expenses 92.3 84.3 +9%
Slide 27: Net (Debt)/Cash
Net (Debt)/Cash Year ended 30 September 2019 2018 £m £m Free cash flow 56.5 60.5 Acquisition cash paid (77.2) (20.1) Deferred consideration (1.1) (0.3) Dividends (30.1) (27.0) (51.9) 13.1 Net cash brought forward 36.0 22.3 Exchange and other adjustments 0.8 0.6 Net (debt) / cash funds (15.1) 36.0 Co
Slide 28: Shareholders' Funds
Shareholders’ Funds Year ended 30 September 2019 2018 £m £m Tangible and other intangible assets 29.4 25.5 Goodwill and acquisition intangible assets 251.1 182.1 Net working capital 96.6 75.2 Trading capital employed - reported 377.1 282.8 Working capital (% of revenue) 16.5% 15.1% ROATCE 22.9% 24.5
Slide 29: Contact
Johnny Thomson Chief Executive Officer 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 Olivia Peters Tel: +44 (0) 20 7353 4200 Email: diploma@tulcha