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HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2022
Strong results. Successfully executing our strategy for organic growth.
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HY 2022 |
HY 2021 |
Y/y change |
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Revenue |
£448.5m |
£365.2m |
+23% |
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Underlying revenue growth (1) |
16% |
2% |
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Adjusted operating profit(2) |
£82.5m |
£66.6m |
+24% |
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Adjusted operating margin(2) |
18.4% |
18.2% |
+20bps |
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Statutory operating profit |
£58.2m |
£46.3m |
+26% |
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Free cash flow(3) |
£37.7m |
£34.3m |
+10% |
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Free cash flow conversion(3) |
64% |
72% |
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Adjusted earnings per share(2) |
47.0p |
38.4p |
+22% |
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Basic earnings per share |
28.6p |
25.5p |
+12% |
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Interim dividend per share |
15.0p |
12.5p |
+20% |
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ROATCE |
17.5% |
16.5% |
+100bps |
(1) Adjusted for acquisition and disposal contribution and currency effects; (2) Before acquisition related charges and acquisition related finance charges; (3) Before cash flows on acquisitions, disposals and dividends. All alternative performance measures are defined in note 2 to the condensed Consolidated Financial Statements
Strong half year financial performance
· Underlying revenue growth of 16%, driven by organic revenue initiatives, positive demand and pricing.
· Pass-through of higher year-on-year copper prices has added ca. 5% to underlying revenue growth.
· Reported revenue growth of 23% with a positive contribution from high quality acquisitions.
· Adjusted operating margin +20bps to 18.4%. Continuing to successfully navigate supply chain challenges, labour pressures and inflation, demonstrating the resilience of our value-added service model.
· 22% growth in adjusted EPS and 20% increase in interim dividend.
Growth strategy: business revenue diversification activity driving growth, building scale and increasing resilience
· Controls +28%: excellent contribution from Windy City Wire (“WCW”); strong growth at International Controls driven by business diversification activity.
· Seals +15%: accelerated market share gains in North American Aftermarket; very positive International Seals performance, benefiting from organic revenue initiatives.
· Life Sciences -7%: underlying growth ca. 2% excluding last year's COVID-related revenues. Short-term growth affected by Canadian/Australian lockdowns this year. Expect to return to growth during H2.
Delivering our strategy sustainably: disciplined portfolio development
· Strategy: building high quality, scalable businesses for organic growth.
· Three high quality businesses acquired for a combined consideration of £172m.
· LJR Electronics acquired in January for £21m, expanding our Controls presence into the large, attractive and growing US interconnect market.
· R&G Fluid Power Group (“R&G”) acquired in April for £100m to build scale in UK Seals:
o Value-added aftermarket distributor of a diverse range of industrial, hydraulic and pneumatic products (including seals and gaskets).
o Excellent strategic fit, adding scale in the UK and broadening Seals product portfolio to expand addressable markets.
o Impressive track record with significant organic and inorganic growth potential.
· Accuscience, a market-leading life sciences and med-tech distributor in Ireland for £51m:
o Increases exposure to the high growth diagnostics segment.
o Adds scale to Life Sciences in Ireland, and continues to build out the Sector's European pillar.
o Purchase price represents a multiple of ca. 9.5x EBIT, expected to contribute annualised revenue of ca. £35m.
· Acquisition pipeline is active. We remain highly disciplined, with ROATCE increasing to 17.5% (2021: 16.5%).
· Disposal of a1-envirosciences in May for £11m, in line with our disciplined approach to portfolio development.
Delivering Value Responsibly (“DVR”): ESG framework building momentum
· Continuing to make progress across our five focus areas.
· DVR being embedded into commercial and operational strategy.
· On track to set targets from the next financial year.
Strong free cash flow and deleveraging giving balance sheet flexibility
· Strong free cash flow conversion of 64% (2021: 72%) despite incremental inventory investment to ensure product availability and support market share gains.
· Cash flow generation providing balance sheet flexibility to continue to invest in growth: net debt £209.5m at 31 March 2022 (1.2x EBITDA).
Positive and unchanged outlook
· The second half has started well.
· Full year outlook is unchanged, confident in our materially upgraded April guidance:
o Low double digit underlying revenue growth, well ahead of our model. Expect growth to moderate in Q3 as the comparators get tougher
o Reported revenue growth a little over 20%.
o New acquisition, Accuscience, expected to deliver annualised revenue of ca. £35m.
o Operating margin at the top end of the 18-19% guidance range.
o Strong cash generation expected to result in net debt/EBITDA of ca. 1.5x by year end.
· Whilst the wider geopolitical and macroeconomic outlook is uncertain, our resilience is underpinned by our increasing revenue diversification, value-added model and strong balance sheet.
Commenting on the results, Johnny Thomson, Diploma's Chief Executive said:
“ I am delighted with our performance and strategic progress in the last six months. Thank you to my brilliant colleagues. Our organic growth and margins have been strong, and we have also welcomed three important businesses to the Group. We are executing our strategy by diversifying our business revenues for organic growth, scale and resilience. We are also continuously improving our value-add model for sustainable scale. We are not complacent about the economic outlook, but the second half has started really well and we are confident in our upgraded full year guidance. “