TIDMDPLM
RNS Number : 9589D
Diploma PLC
27 June 2023
27 June 2023
Diploma PLC - CAPITAL MARKETS SEMINAR
Building high quality, scalable businesses for organic
growth
Diploma PLC, the value-add distribution group, is today hosting
a seminar setting out its strategy for building high quality,
scalable business for sustainable organic growth. The event will
give investors an opportunity to hear from members of the senior
management team who will provide practical insights into the
differentiated value-add business model; the exciting organic
growth potential; and the sustainability of the Group's long-term,
quality compounding performance delivery.
Quality compounding track record
Diploma has a long track record of delivering sustainable,
compounding financial performance:
-- Consistent, strong organic revenue growth : 5% on average for
the last 15 years, accelerating to 7% over the last three.
-- Accelerated by targeted acquisitions : driving total revenue
growth to 14% CAGR over the last 15 years, accelerating to 23% over
the last three.
-- Value-add customer propositions driving sustainably high
margins : EBIT margin averaging 18% over the last 15 years,
increasing to 19% over the last three.
-- Strong, compounding EPS growth : 15% over the last 15 years,
accelerating to 19% over the last 3.
-- Consistent, strong cash conversion : 90% free cash conversion
driving prudent balance sheet leverage.
-- Sustainable, high returns : ROATCE consistently in the high teens.
Differentiated value-add businesses
Value-add distribution is at the core of every Diploma business.
We distribute specialised products that are mission critical in our
customers' value chains; low component cost relative to their
budget; usually in their operating rather than capital budgets; and
with a 'service wrapper' of technical expertise, convenience or
customer productivity. The differentiated value-add proposition at
the heart of each of our businesses drives what we call the 'rule
of six': loyalty, and therefore share of wallet; a strong
reputation, and therefore growing market share; pricing power, and
therefore attractive margins.
Powerful, decentralised culture
Our decentralised culture is critical to successful delivery.
Our customers and value propositions, as well as our management and
performance, are all local. We believe in ownership at the front of
the organisation. We have commercial, accountable and empowered
management teams, and we support their development with leadership
programmes to equip them to manage bigger businesses. We have
excellent colleague engagement - a competitive advantage - and we
actively manage this with local initiatives to promote safe,
inclusive, and engaging environments.
Significant growth potential
Organic growth is our priority. Diploma is made up of 15 small
business units, each with significant growth potential in three
'buckets':
1. Structurally growing end-markets: our products and services
serve structurally growing end-markets, and we are increasingly
positioning towards these to provide a greater growth tailwind.
2. Penetrating core geographies: we are underpenetrated in our
core geographies of the US, Europe and the UK. We do not need to
enter tougher, risker countries to grow.
3. Extending our product capability: we do this incrementally,
and we do it more strategically too at a portfolio level to open up
new product verticals and grow our addressable market.
This strategy drives organic growth, scale and resilience. In
fragmented markets, we can accelerate organic growth with
complementary acquisitions. We have a strong track record over the
last four years, investing around GBP840m in 31 acquisitions which
are growing organically at an average of 15% and driving returns of
more than twice our cost of capital. We have an exciting pipeline
of around 50 near-term, active opportunities worth around GBP1bn.
Importantly, we are extremely disciplined and focus on businesses
with the right:
-- Core characteristics : value-add with high gross margin;
organic growth potential in one or more of our 'buckets'; and
capable management teams we can back.
-- Strategic fit : within our tightly managed portfolio.
-- Financial criteria : 20% ROATCE potential, year one for bolt-ons.
Resilience
Diploma has demonstrated resilience through systemic shocks such
as the global financial crisis and the pandemic, and this
resilience is increasing:
-- diversification in the three buckets drives revenue resilience;
-- the value-add nature of our products and services drives margin resilience; and
-- our low capital intensity drives resilient cash flows.
Scaling our decentralised Group
As we grow, we naturally need to do things differently, whilst
always preserving our value-add customer proposition and our
decentralised culture. Building effective scale is therefore key to
sustaining long-term delivery. We develop our businesses' operating
models: investing incrementally in talent, technology and
facilities to deliver their customer propositions at scale. To
manage a growing decentralised Group, we ensure that we have a
focused portfolio, governed by simple strategic and financial
frameworks. We have lean structures and dynamic leaders, and we
complement the local culture with the power of the Group - the
'Diploma identity': leadership; networks; commercial collaboration;
and best practice sharing.
Sustainable quality compounding
We believe that sustainable, quality compounding comes from a
balance of ambition with discipline, and we have encapsulated this
as our "financial model". The financial model is not a forecast, it
is there to set a level of expectations for sustainable
delivery.
We are ambitious.
-- Organic revenue growth is our first priority: model 5%.
-- Total revenue growth is accelerated by quality acquisitions: model 10%.
-- Value-add drives strong operating margins: model 17%.
-- All of this drives double digit compounding EPS growth
We are disciplined.
-- Capital-light business model drives strong cash conversion: model 90%.
-- Capital stewardship focused on strong ROATCE: model high teens.
-- Balance sheet discipline maintains prudent leverage: model < 2.0x.
-- We are committed to a progressive dividend. We have done so
for over 30 years, and we intend to grow it by 5% every year.
We have a differentiated value-add service distribution model.
It is delivered every day by brilliant people in a powerful
decentralised culture. Our strategy is clear, unchanged and
working. We have exciting growth prospects and we expect to
continue delivering sustainable quality compounding.
The event takes place today at 2:00 at the Numis Auditorium, 45
Gresham Street, London EC2V 7BF. The presentation will be streamed
live. Please register via the following link: register here
Any investors who wish to attend the event in person but have
yet to register please contact ava.jarman@teneo.com. Copies of the
presentation and a replay of the webcast will be available on the
Diploma Investor Relations website following the event.
For further information please contact:
Diploma PLC +44 (0)20 7549 5700
Johnny Thomson, Chief Executive Officer
Chris Davies, Chief Financial Officer
Kellie McAvoy, Head of Investor Relations
Teneo +44 (0)20 7353 4200
Martin Robinson
Olivia Peters
NOTE TO EDITORS:
Diploma PLC is a decentralised, value-add distribution Group.
Our businesses deliver practical and innovative solutions that keep
key industries moving - from energy and infrastructure to
healthcare.
We are a distribution group with a difference. Our businesses
have the technical expertise, specialist knowledge, and long-term
relationships required to deliver value-add products and services
that make our customers' lives easier. These value-add solutions
drive customer loyalty, market share growth and strong margins.
Our decentralised model means our specialist businesses are
agile and empowered to deliver the right solutions for their
customers, in their own way. As part of Diploma, our businesses can
also leverage the additional resources, opportunities and expertise
of a large, international and diversified Group to benefit their
customers, colleagues, suppliers and communities.
We employ c.3,000 colleagues across our three Sectors of
Controls, Seals and Life Sciences. Our principal operating
businesses are located in the UK, Northern Europe, North America
and Australia.
Over the last fifteen years, the Group has grown adjusted
earnings per share (EPS) at an average of c.15% p.a. through a
combination of organic growth and acquisitions. Diploma is a member
of the FTSE 250 with a market capitalisation of c.GBP3.9bn.
Further information on Diploma PLC can be found at
www.diplomaplc.com
The person responsible for releasing this Announcement is John
Morrison, Company Secretary.
LEI: 2138008OGI7VYG8FGR19
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
MSCFLFIDRSIRFIV
(END) Dow Jones Newswires
June 27, 2023 02:00 ET (06:00 GMT)
Diploma (LSE:DPLM)
Historical Stock Chart
From Mar 2024 to Apr 2024
Diploma (LSE:DPLM)
Historical Stock Chart
From Apr 2023 to Apr 2024
