TIDMDPLM
RNS Number : 0289I
Diploma PLC
12 April 2022
DIPLOMA PLC
10-11 CHARTERHOUSE SQUARE, LONDON EC1M 6EE
TELEPHONE: +44 (0)20 7549 5700
12 APRIL 2022
DIPLOMA PLC
STRONG TRADING PERFORMANCE AND EXCITING ACQUISITION DRIVE
MATERIAL INCREASE TO FULL YEAR GUIDANCE
Diploma PLC, the international group distributing specialised
products and services, today issues an update on trading, recent
acquisitions and full year trading outlook.
Our thoughts are with all those who have been affected by the
situation in Ukraine. The Group has no direct exposure to Ukraine
or Russia. Our priority is to support colleagues who have been
personally impacted, and to contribute to disaster relief
funding.
Trading ahead of expectations
The Group's trading performance so far this year has been
strong, with double digit underlying growth in Q2 (consistent with
Q1) driven by our organic revenue initiatives, market share gains
and robust demand:
-- Controls: very strong performance, with International Controls benefiting from our business diversification
activity while Windy City Wire continues to make an excellent contribution.
-- Seals: accelerated growth reflecting geographic market share gains in North American Aftermarket and
International Seals benefiting from our revenue diversification activity.
-- Life Sciences: short-term growth has been impacted by Canadian/Australian lockdowns this year and last year's
COVID inflated revenues. Encouraging underlying trading means we expect to return to growth in the second half.
Our operating margin performance is very encouraging as we
continue to navigate inflation, supply chain challenges and tight
labour markets.
Acquisitions to accelerate our strategy
The Group's strategy is to build high quality, scalable
businesses for organic growth. Acquisitions are an integral part of
the strategy, with a disciplined focus on acquiring value-added
businesses, with great management teams, to accelerate our organic
growth. We have recently acquired two high quality businesses for a
combined consideration of ca. GBP121m.
R&G Fluid Power - a very exciting addition to build scale in
Seals in the UK
We are pleased to announce the acquisition of R&G Fluid
Power ("R&G"), a high quality aftermarket distribution business
for our Seals Sector in the UK, for ca. GBP100m.
R&G is a value-added distributor of a diverse range of
industrial, hydraulic and pneumatic products (including seals and
gaskets). Its value-added proposition is based on responsive
customer service, technical advice, breadth of stock and product
customisation. Over time, the management team has built a platform
with extensive reach across the UK. This has included consolidating
a number of regional distributors to extend geographic and product
reach. The R&G historic growth track record, organic and
inorganic, has been impressive.
R&G has significant organic growth potential, including:
developing the aftermarket e-commerce channel, continued regional
expansion in the UK, and further product cross-selling and
diversification. The business gives the Seals Sector scale in the
UK and the ability to drive revenue synergies with existing UK
Seals businesses. We are also excited by the broadening of the
Seals product capability, in line with our strategy to expand
addressable markets through product extension, with the potential
to take this to other markets in the future. An active pipeline
also positions R&G well to continue to deliver on acquisition
growth. Following the acquisition, R&G's experienced and highly
capable management team will remain with the business.
The purchase price of ca. GBP100m represents a multiple of ca.
9.5x EBIT and the business is expected to contribute annualised
revenue of ca. GBP65m. Further deferred consideration of up to ca.
GBP7.5m is payable within 9 months subject to the completion of
certain acquisitions advanced in the pipeline; payment in full
would result in an overall transaction multiple of ca. 9x. The
transaction completed in early April and has been funded through
existing cash resources and debt facilities.
Acquisition of LJR Electronics - continuing to build out
Controls in the US
Additionally, in January, the Group acquired LJR Electronics
("LJR"), a value-added distributor of connectors in the US for ca.
GBP21m. The acquisition forms part of our Interconnect business
within the Controls Sector, and has expanded our presence into the
large, attractive and growing US interconnect market. LJR is
expected to generate annualised revenue of ca. GBP14m.
Outlook
While the situation in Ukraine and Russia has not directly
impacted our businesses, we are closely monitoring the wider
economic trading environment. Our strong trading to date,
acquisitions and confidence in our prospects mean we now expect
full year performance to materially exceed our previous
guidance:
-- Underlying revenue growth is expected to be low double digit,
well ahead of our model. This reflects our expectation that growth
will moderate in the second half, particularly as comparators
become more demanding.
-- On this basis, and including recent acquisitions, reported
revenue growth is expected to be a little over 20%.
-- Our operating margin expectation is at the top end of the 18-19% range.
-- Our balance sheet remains strong and we currently expect
continued cash generation to drive net debt/EBITDA below 1.5x by
year end.
Our next scheduled update will be the publication of half year
results on 16 May 2022.
Enquiries:
Diploma PLC +44 (0)20 7549 5700
Johnny Thomson, Chief Executive Officer
Barbara Gibbes, Chief Financial Officer
Kellie McAvoy, Head of Investor Relations
Tulchan Communications +44 (0)20 7353 4200
Martin Robinson
Olivia Peters
Further information on Diploma PLC can be found at
www.diplomaplc.com
Notes:
1. This trading update is based upon unaudited management
accounts and has been prepared solely to provide additional
information on trading to the shareholders of Diploma PLC. It
should not be relied on by any other party for other purposes.
Certain statements made in this update are forward-looking
statements. Such statements have been made by the Directors in good
faith using information available up until the date that they
approved this Statement. Forward-looking statements should be
regarded with caution because of the inherent uncertainties in
economic trends and business risks.
2. Diploma PLC uses alternative performance measures as key
financial indicators to assess the underlying performance of the
Group. All references in this Statement to "underlying" revenues
refer to reported results on a constant currency basis, before
acquired or disposed businesses (ex-growth basis) and include
growth generated by acquisitions under our ownership.
3. A copy of this Statement, together with further information
about Diploma PLC, may be viewed on its website at
www.diplomaplc.com
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
TSTGPUUPCUPPGMG
(END) Dow Jones Newswires
April 12, 2022 02:00 ET (06:00 GMT)
Diploma (LSE:DPLM)
Historical Stock Chart
From Jun 2024 to Jul 2024
Diploma (LSE:DPLM)
Historical Stock Chart
From Jul 2023 to Jul 2024