13 May 2024

Strong first half, full year upgrade

Investor

Chief Executive, Johnny Thomson, gives an overview of the Group's performance

Organic revenue growth of 5%, volume-led with good momentum into the second half.
Double digit reported revenue growth includes 8% from acquisitions and an adverse 3% impact of foreign exchange translation.
Adjusted operating margin up 80bps to 19.6%, reflecting our value-add proposition; operational leverage; disciplined cost management; and accretive acquisitions.
Delivered with discipline: ROATCE up 20 bps to 18.0%; free cash flow conversion up 6ppts to 76% and leverage at 0.9x.
Ca. 284m invested in six quality acquisitions, including Peerless for ca. £236m and PAR Group for £38m, which completed after the period end.
Upgrading guidance: we now expect FY24 constant currency revenue growth of ca. 16% (comprising 6% organic growth and 10% from acquisitions), and an operating margin of ca. 20.5%. Strong underlying performance and recent acquisitions contribute equally to the upgrade to operating margin.

Read the full announcement:

Thank you to all my brilliant colleagues for their continued dedication and passion for serving our customers and driving our performance. We’ve delivered another strong first half with good volume-led organic growth in a more challenging market environment. Our momentum is encouraging going into the second half, underpinning our upgrade to full year guidance.

Johnny Thomson

Chief Executive, Diploma PLC

Revenue diversification driving organic growth and increasing resilience

Controls +7%: Strong growth in International Controls with structural tailwinds and market share gains. Windy City Wire delivered sustained, volume-led growth in line with Group average
Seals +1%: Resilient performance against a backdrop of customer destocking. Normal ordering patterns are starting to resume and we expect a stronger second half.
Life Sciences +5%: End market dynamics are now largely normalised post-pandemic, underpinning strong performance in Canada and Australia.

Complementary acquisitions driving future organic growth

Acquisition of US-based Peerless Aerospace Fastener LLC (“Peerless”) for ca. £236m, extending our established position in aerospace specialty fasteners and accelerating organic growth through product and geographic expansion. It is expected to deliver 15% ROATCE and 8% EPS accretion in year one.
Acquisition of UK-based Plastic and Rubber Group Holdings Limited (“PAR Group”) for ca. £38m adds scale to R&G’s Seals & Gaskets division. It is expected to deliver 14% ROATCE and 1% EPS accretion in year one.
Four small bolt-ons for £10m; average EBIT multiple around 4x; £10m of annual revenue; and year one ROATCE of over 20%.
Strong M&A pipeline diversified by Sector, size and geography. Strong cash flow and balance sheet provides capacity for disciplined acquisitive growth.

Scaling effectively for sustainable growth

Expansion of the ‘Leadership at Scale’ management development programme.
Three new state-of-the-art facilities opened to support future growth in the UK and Europe.
Delivered improvements against all our Delivering Value Responsibly targets.
Strengthened balance sheet through the refinancing of the Group’s facilities with a structured Revolving Credit Facility (“RCF") and debut US Private Placement (“USPP”) providing ca. £770m of committed facilities with a blend of maturities out to 2036.

Upgrading full year 2024 guidance

The momentum in our underlying business, combined with the contribution from recent acquisitions, drives an upgrade to previous guidance for FY24:
- Constant currency revenue growth of ca. 16%, up 5ppts from previous guidance, comprising ca. 6% organic revenue growth and growth from acquisitions of ca. 10%.
- Strong operating margin of ca. 20.5%, up 80bps from previous guidance. Strong underlying performance and recent acquisitions contribute equally to the upgrade.
- EPS growth of ca. 15%, reflecting strong underlying performance and the contribution of acquisitions.
- Free cash flow conversion of ca. 90% and leverage of 1.3x