Diploma plc (LON:DPLM) has announced its preliminary results for the year ended 30 September 2023.
| FY 2023 | FY 2022 | Y/y change |
| Revenue | £1,200.3m | £1,012.8m | +19% |
| Organic revenue growth (1) | 8% | 15% | |
| Adjusted operating profit (2) | £237.0m | £191.2m | +24% |
| Adjusted operating margin (2) | 19.7% | 18.9% | +80bps |
| Statutory operating profit | £183.3m | £144.3m | +27% |
| Free cash flow (3) | £163.8m | £120.4m | +36% |
| Free cash flow conversion (3) | 100% | 90% | |
| Adjusted earnings per share (2) | 126.5p | 107.5p | +18% |
| Basic earnings per share | 90.8p | 76.1p | +19% |
| Leverage | 0.9x | 1.4x | |
| Total dividend per share | 56.5p | 53.8p | +5% |
| ROATCE | 18.1% | 17.3% | +80bps |
(1) Adjusted for acquisition and disposal contribution and currency effects; (2) Before acquisition related and other charges and acquisition related finance charges; (3) Before cash flows on acquisitions, disposals and dividends. All alternative performance measures are defined in note 14 to the Condensed Consolidated Financial Statements.
Excellent financial performance
| ● | Strong organic growth of 8%. Good momentum into FY24, with Q4 volume-led exit rate of 7%. |
| ● | £280m invested in 12 quality acquisitions, supporting reported revenue growth of 19%. |
| ● | Adjusted operating margin up 80 bps to 19.7%, reflecting our value-add proposition; operational leverage; disciplined cost management; and accretive acquisitions. |
| ● | Delivered with discipline: free cash flow conversion of 100%; ROATCE up 80 bps to 18.1%; and leverage reduced to 0.9x. |
| ● | Confident FY24 guidance with growth in line with our financial model and consistently high margins. |
Commenting, Johnny Thomson, Diploma’s Chief Executive said:
“I’d like to thank all my brilliant colleagues who consistently deliver great service to our customers. Our decentralised culture is special, and preserving it as we grow is central to sustaining our great track record.
“We’ve had an excellent year with strong, volume-led organic growth; great margin progression; and continued double-digit EPS growth, all at strong returns. We continue to diversify end-market exposures, penetrate core geographies; and expand addressable markets through product extension to drive organic growth. We welcomed 12 quality new businesses to the Group. And, we carefully develop our businesses for scale.
“Diploma has a long track record of double-digit EPS growth at healthy returns. We are encouraged by momentum into FY24, and we are confident of continuing to deliver sustainable quality compounding.”
Revenue diversification driving organic growth and increasing resilience
| ● | Controls +11%: International Controls benefitted from structural tailwinds and market share gains in civil aerospace, defence and energy markets. Sustained strong growth from Windy City Wire (WCW). |
| ● | Seals +5%: Growth in International Seals led by contributions from R&G in the UK and our Australian businesses. In North America, Aftermarket continued to perform well and take market share. Softer performance in European and US OEM businesses with customer destocking in some end markets. |
| ● | Life Sciences +8%: Good growth resumed in the second half, as expected. Hospital staffing and surgical procedures have broadly recovered, and clinical diagnostics continues to benefit from increased investment. |
Complementary acquisitions driving future organic growth
| ● | 10 small bolt-ons for £33m; average EBIT multiple below 5x; £33m of annual revenue; accretive EBIT margins; and 20% year one ROATCE. | |
| ● | Two strategic platform acquisitions that address some of our “white space” with strong organic growth potential at accretive operating margins; funded by equity raise of ca. £232m in March 2023. | |
| ○ | Acquisition of T.I.E. for ca. £76m, entering the strategically important industrial automation end market in the US. | |
| ○ | Acquisition of DICSA for ca. £170m, establishing a scaled platform in fluid power solutions across the European aftermarket. | |
| ● | Continued portfolio management discipline: disposed of a non-core, lower margin heating control business in March for £23m. | |
| ● | M&A pipeline of ca. £1bn, diversified by Sector, size and geography. Strength of cash flow and balance sheet provides capacity for disciplined growth. | |
Scaling effectively for sustainable growth
| ● | Focused investments in talent, technology and new facilities across our businesses to continue delivering their customer proposition at scale. |
| ● | Evolving our structure, capability and culture to support the development of the Group. |
| ● | Delivered improvements against all our Delivering Value Responsibly targets. |
Confident outlook
| ● | Despite the challenging macro environment, the resilience of our model supports our confidence in the year ahead. | |
| ● | FY24 growth is expected to be in line with our financial model, albeit with stronger margins: | |
| ○ | Organic revenue growth of ca. 5%. | |
| ○ | Acquisitions announced to date to add ca. 6% to reported revenue growth. | |
| ○ | Strong operating margin, consistent year-on-year at ca. 19.7%. | |
| ○ | Free cash flow conversion of ca. 90%. | |
Notes:
1. Diploma PLC uses alternative performance measures as key financial indicators to assess the underlying performance of the Group. These include adjusted operating profit, adjusted profit before tax, adjusted earnings per share, free cash flow, leverage and ROATCE. All references in this Announcement to “organic” revenues refer to reported results on a constant currency basis, and after adjusting for any contribution from acquired or disposed businesses. The narrative in this Announcement is based on these alternative measures and an explanation is set out in note 14 to the Condensed Consolidated Financial Statements in this Announcement.
2. Certain statements contained in this Announcement constitute forward-looking statements. Such forward-looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of Diploma PLC, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such statements. Such risks, uncertainties and other factors include, among others, exchange rates, general economic conditions and the business environment.
A presentation of the results to analysts and investors will be held at 09:00 GMT. This will be streamed live via webcast and audio conference call.
Register your attendance for the webcast at: https://brrmedia.news/DPLM_FY23
Conference call dial in details:
| ● | Dial in: +44 (0) 33 0551 0200 (UK-Wide) / 0808 109 0700 (UK Toll Free) |
| ● | Confirmation code: Diploma Full Year |
A recording of the presentation will be available after the event on our website: https://www.diplomaplc.com/investors/financial-presentations/ Diploma hosted an Investor Seminar in June 2023. A recording is available on our website: https://www.diplomaplc.com/investors/results-reports-presentations/investor-seminar-2023/ |
