DIPLOMA
DELIVERS
ANNUAL REPORT AND ACCOUNTS
2023
CONTENTS
Financial highlights
Chair’s Statement
STRATEGIC REPORT
01
02
06 Our Business
Strategy
12
CEO’s Review
18
Sector Reviews
24
Financial Review
36
Key Performance Indicators
41
Internal Control and Risk Management
42
Viability statement
49
Engagement with Stakeholders
50
and Section 172 Statement
Delivering Value Responsibly
TCFD Statement
54
67
75
Non-Financial and Sustainability
Information Statement
Chair’s Introduction to Governance
CORPORATE GOVERNANCE
76
80 Governance at a Glance
Board of Directors
82
Audit Committee Report
88
96
Nomination Committee Report
102 Remuneration Committee Report
126 Directors’ Report
Independent Auditors’ Report
FINANCIAL STATEMENTS
131
140 Consolidated Income Statement
140 Consolidated Statement
of Comprehensive Income
141 Consolidated Statement
of Changes in Equity
142 Consolidated Statement
of Financial Position
143 Consolidated Cash Flow Statement
144 Notes to the Consolidated
Financial Statements
173 Group Accounting Policies
181
Parent Company Statement
of Financial Position
Parent Company Statement
of Changes in Equity
181
182 Notes to the Parent Company
Financial Statements
OTHER INFORMATION
184 Glossary
185 Subsidiaries of Diploma PLC
188 Alternative Performance Measures
190 Financial calendar and
Shareholder Information
Advisors
Five-Year record
191
192
DIPLOMA PLC ANNUAL REPORT 2023 − 1
DIPLOMA DELIVERS
SUSTAINABLE
QUALITY
COMPOUNDING
Diploma is a decentralised, value-add
distribution Group. Our businesses deliver
practical and innovative solutions that keep
key industries moving.
READ MORE ABOUT
OUR BUSINESS
ON PAGE 6
We are a distribution group with a difference.
Our businesses have the technical expertise,
specialist knowledge and long-term
relationships to deliver value-add products
and services that make our customers’
lives easier.
FINANCIAL HIGHLIGHTS
Organic revenue growth
Revenue growth
8%
Model: 5%
19%
Model: 10% +
Adjusted operating
profit margin
19.7%
Model: 17% +
Adjusted EPS growth
Free cash flow conversion
Net debt/EBITDA
18%
Model: Double digit
100% 0.9x
Model: ca.90% +
Model: <2.Ox
ROATCE
Dividend growth
18.1%
Model: High teens
5%
Model: 5%
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CHAIR’S STATEMENT
DECENTRALISED
CULTURE
SHARED
VALUES
DAVID LOWDEN
CHAIR
DIPLOMA PLC ANNUAL REPORT 2023 − 3
“ Our success is underpinned by the
characteristics of our decentralised
model, which embodies entrepreneurship,
autonomy and leadership.”
COLLEAGUES AND CULTURE
Our colleagues are the foundation
of the Group’s success and they
are central to our identity. Our
culture and values play a pivotal
role in supporting our colleagues'
engagement, growth, and
fulfilment as valued members
of the Diploma family.
We are guided by five core values
that shape our every decision and
action. We remain steadfastly
customer-centric, ensuring that
our customers’ needs remain at
the forefront. We believe in doing
the right thing, even when it's
challenging, because integrity is
non-negotiable. Accountability is
paramount, holding us responsible
for our actions and decisions. We
firmly believe in growing together,
as it is in unity that we reach new
heights. And finally, we are down
to earth, maintaining a culture
of humility and approachability.
It is through these values and the
dedication of our colleagues that
we continue to deliver excellence
in all that we do. Our colleagues
have been an integral part of our
ongoing success.
We are also seeing growth in
a number of areas aligned with
positive impact, demonstrating
that our businesses are embedding
Delivering Value Responsibly (DVR),
our ESG programme, into their
commercial strategies. It has been
another busy year for acquisitions,
with 12 high-quality businesses
joining the Group; these will
accelerate our future organic
growth. In particular, I am very
pleased to warmly welcome our
colleagues at DICSA, T.I.E. and
all other businesses joining the
Group during the year.
Given the challenges of the external
operating environment, improving
our adjusted operating margin by
80bps to 19.7% (2022: 18.9%) is a
great achievement and reflects
both our differentiated value-add
servicing model and the hard work
of colleagues across the Group.
Ensuring the sustainability of our
growth is paramount, and the team
has continued to build scale by
investing across our businesses and
the Group to ensure we can continue
to deliver for customers as we grow.
Throughout this, we remain financially
disciplined, maintaining high-teens
ROATCE of 18.1%, and a strong
balance sheet, which allows us
to invest in growth. I would like
to thank the Executive Team and
all of our businesses for another
great year at Diploma.
I am delighted to present the
Chair’s statement for 2023. This
year has been an exceptional year
for our Group, both strategically
and operationally, as you will
read in this report. Our success is
underpinned by the characteristics
of our decentralised business model
which embodies entrepreneurship,
autonomy and exceptional
leadership, allowing us to remain
resilient and maintain strong financial
success in challenging environments.
VERY STRONG FINANCIAL
PERFORMANCE AND EXCELLENT
STRATEGIC PROGRESS
The Group has delivered another
very strong financial performance,
with 8% organic revenue growth and
consistent strong operating margins
translating to 18% growth in adjusted
earnings per share (EPS). Our strong
organic growth shows that our
strategy and growth frameworks
continue to produce results and
remain resilient.
The Group has delivered
another very strong financial
performance, with 8% organic
The Group has delivered
revenue growth
another very strong financial
performance, with 8% organic
revenue growth
8%
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CHAIR’S STATEMENT CONTINUED
We are committed to developing
our colleagues and fostering
growth. Over the past year, we have
made a concerted effort to offer
apprenticeships to individuals who
are eager to learn and gain practical
experience. These initiatives not only
allow us to discover fresh talent but
also provide a valuable learning
experience for new colleagues.
Our Group Colleague Engagement
Survey continues to indicate
excellent levels of engagement.
The results and learnings from
this were discussed by the
Board, and each of our businesses
has now developed appropriate
engagement plans to ensure we
continue to create and maintain
optimal working environments to
support the wellbeing and success
of our colleagues.
BOARD CHANGES
After nearly nine years of service,
Anne Thorburn will be stepping down
from the Board and the positions
of Chair of the Audit Committee
and Senior Independent Director
during 2024. The Nomination
Committee has begun a search
process and an announcement
will be made at the appropriate
time regarding Anne's successor.
We welcomed Jennifer Ward
to the Board on 1 June 2023
as Non-Executive Director
and Chair-Designate of the
Remuneration Committee. Andy
Smith will step down from the
Board and its Committees in a few
months, following nearly nine years
of service, to facilitate a smooth
handover of the Remuneration
Committee Chair.
I would like to take this opportunity
to also thank both Anne and Andy
on behalf of the Board for their
outstanding contribution and
dedication throughout their
service to the Group.
We recognise that diverse
perspectives and experiences drive
innovation, decision-making, and
long-term sustainability. We are
therefore mindful of the diversity
and inclusion targets set by the
FCA’s listing rules for gender
and ethnic diversity on the Board,
as well as senior management
teams. These targets are factored
into our succession planning
processes to ensure that we
are inclusive, representative and
equipped to thrive as our business
grows. Further information on
the composition and diversity
of the Board, as well as senior
management, can be found in the
Nomination Committee Report.
DIVIDENDS
The Board has a progressive
dividend policy that aims to
increase the dividends per share
each year, by 5%. The combination
of very strong results and free
cash generation, supported by
a robust balance sheet, has led
the Board to recommend a final
dividend of 40.0p (2022: 38.8p)
taking the total dividend to 56.5p
(2022: 53.8p). Subject to shareholder
approval at the Annual General
Meeting, this dividend will be paid
on 2 February 2024 to shareholders
on the register at 19 January 2024
(ex-div 18 January 2024).
“ Our colleagues are the
foundation of the Group’s
success and they are
central to our identity.”
OUTLOOK
In conclusion, it has been a
remarkable year for our Group.
Not only have we achieved
significant financial success, we have
also evolved as an organisation that
values its people, embraces change
and remains resilient in the face of a
changing world. Our commitment to
our colleagues, culture, and values,
along with our adaptive governance
structure and sustainability initiatives
position us for a prosperous and
sustainable future.
On behalf of the Board, I would like
to take this opportunity to thank all
of our colleagues for their invaluable
contribution to our success over
the last year as we look forward to
embarking on another exciting year
of growth and transformation.
David Lowden
Chair
DIPLOMA PLC ANNUAL REPORT 2023 − 5
DEVELOPING
A DIPLOMA
CULTURE
AND IDENTITY
Our ongoing success is driven by
brilliant, effective leadership and
strong colleague engagement.
Both of these are supported by
our culture. As a Group, Diploma
has a strong purpose, values and
common cultural fundamentals
that govern our actions and
provide guidance across
our businesses.
Our culture is a commercial and
strategic advantage and reflects
our decentralised model. It
empowers our businesses to
deliver the right solutions for
their customers, in their own way.
All businesses feel a sense of
belonging and allegiance to the
Group thanks to our shared values,
brilliant leadership teams, and
intercompany networks and
best practice sharing.
As part of Diploma, our businesses
can leverage the additional
resources, opportunities and
expertise of a large, international
and diversified Group to benefit
their customers, colleagues,
suppliers and communities.
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OUR BUSINESS
DISTRIBUTION
WITH A DIFFERENCE
OUR PURPOSE
Our purpose is to create,
innovate and deliver value-add
solutions for a better future.
OUR VALUES
CUSTOMER-CENTRIC
We are driven to add value and
help our customers grow.
DO THE RIGHT THING
We are ambitious about delivering
value responsibly.
ACCOUNTABLE
We are all empowered
to succeed.
GROW TOGETHER
We collaborate to create
success and opportunity.
DOWN TO EARTH
We’re low on ego – our
performance speaks for itself.
WHO WE ARE
We are a dynamic, decentralised distribution Group with a
core purpose and values that ensure that every colleague
and every business is aligned.
DIPLOMA PLC ANNUAL REPORT 2023 − 7
WHAT WE DO
Through our three Sectors, we deliver practical and innovative
solutions to a diverse range of critical end markets. We operate
in our core geographies of North America, Continental Europe,
UK and Australia.
OUR SECTORS
CONTROLS
SEALS
LIFE SCIENCES
The Controls businesses
deliver wire and cabling,
interconnect, specialty fasteners,
specialty adhesives and industrial
automation solutions for a range
of technically demanding
applications. Their solutions
support aerospace and defence
markets, key infrastructure,
advances in medical devices and
first-responder communications.
The Seals businesses supply
sealing solutions and fluid
power products to support
aftermarket repairs, OEM
partners and maintenance, repair
and overhaul projects. Whether
machining parts for emergency
repairs, working with customers
to specify material compounds
and design, or preventing fugitive
emissions or fluid leaks, our Seals
Sector solutions have mission-
critical applications.
The Life Sciences businesses
supply and service equipment,
consumables and instrumentation
for surgery, diagnosis of disease,
and critical care support. They
work side-by-side with surgeons,
pathologists, laboratory scientists
and other healthcare professionals
to navigate a complex regulatory
environment and deliver innovative,
market-leading solutions.
READ MORE ABOUT
OUR CONTROLS SECTOR
ON PAGE 24
READ MORE ABOUT
OUR SEALS SECTOR
ON PAGE 28
READ MORE ABOUT
OUR LIFE SCIENCES SECTOR
ON PAGE 32
REVENUE BY SECTOR*
REVENUE BY GEOGRAPHY*
CONTROLS
44%
SEALS
39%
LIFE SCIENCES
17%
42% US
10% Canada
17% UK
22% Continental Europe
9% Australia/other
* Pro forma revenue is stated after total adjustments
of £75.6m to Reported revenue for acquisitions and
disposals completed during the year.
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8 − DIPLOMA PLC ANNUAL REPORT 2023
OUR BUSINESS CONTINUED
WHAT WE DO (CONTINUED)
Our businesses deliver products and
services to their customers, including
wire and cable, connectors, fasteners
and adhesives; seals, gaskets, hose
and fluid power sealing products;
surgical and diagnostic equipment,
consumables and instrumentation.
We sell products that are critical
to our customers’ needs, typically
funded through operating expenditure
and with a low component cost.
This might include a seal used in the
repair of heavy machinery, consumable
reagents used in the diagnosis of lung
cancer, or a specialist screw used in an
aerospace rocket engine.
Our businesses operate across our
core geographies of North America,
UK, Continental Europe and Australia
serving customers in a broad range
of markets, such as public healthcare,
renewables, manufacturing,
infrastructure and defence.
L T O
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DIPLOMA PLC ANNUAL REPORT 2023 − 9
HOW WE DO IT
Our decentralised model empowers
our businesses to work alongside their
customers to deliver practical and
innovative solutions that keep key
industries moving. By focusing on
value-add solutions, not just products, we
are an essential partner to our customers.
VALUE-ADD SERVICE
DISTRIBUTION MODEL
We’re a service business
as much as we are a
distribution business.
Our products all come
with a value-add wrapper
– whether that’s technical
expertise, responsive
customer service, or
product customisation
– we create solutions that
make our customers’ lives
easier. Our products and
services are critical to our
customers’ value chain
and the value we deliver
far exceeds the cost of the
product. This model drives
loyalty and share of wallet,
reputation and market
share potential, and pricing
power and strong margins.
LEARN MORE ABOUT
VALUE-ADD ON
OUR WEBSITE
WWW.DIPLOMAPLC.COM/
ABOUT-US/
BRILLIANT PEOPLE AND
DECENTRALISED CULTURE
We believe in
accountability at the
front of the organisation.
Our businesses are
empowered to deliver
for their customers, their
way. As part of Diploma,
our businesses can also
leverage the resources,
opportunities and
expertise of a large,
international and
diversified Group to
benefit their customers,
colleagues, suppliers
and communities.
Our colleagues have
the technical expertise,
specialist knowledge
and market experience
to fulfil our purpose.
Our strong leadership
teams keep our shared
culture and values alive
across the Group.
READ MORE ABOUT
OUR PEOPLE
ON PAGE 55
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10 − DIPLOMA PLC ANNUAL REPORT 2023
OUR BUSINESS CONTINUED
OUR IMPACT AND OUTCOMES
Our strategy and the way we do business is shaped
by the views of our stakeholders. Our financial model
balances ambition and discipline to deliver
sustainable, quality compounding.
OUR FINANCIAL MODEL
We have a differentiated business
model and proven strategy that
generate quality, compounding
financial outcomes and resilience.
We deliver consistent organic
revenue growth, accelerated by
acquisitions and with sustainable
high margins.
Our financial model balances
ambition with discipline to
deliver strong shareholder value.
DELIVERING VALUE RESPONSIBLY
Delivering Value Responsibly is our
sustainability framework, already
embedded across the Group, which
ensures that we operate responsibly
whilst taking action on climate and
looking after our people.
READ MORE ABOUT
DELIVERING VALUE
RESPONSIBLY
ON PAGE 54
OUR FINANCIAL MODEL
AMBITIOUS...
...WITH DISCIPLINE
Organic revenue growth
is our first priority
5%+
Total revenue growth accelerated
by quality acquisitions
10%+
Value-add drives strong
operating margins
17%+
Compounding EPS growth
Double-digit
Capital-light business model
drives strong cash conversion
90%+
Capital stewardship focused
on strong ROATCE
High teens
Balance sheet discipline
maintains prudent leverage
<2.0x
Return to shareholders - dividend
Progressive
Sustainable Quality Compounding
DIPLOMA PLC ANNUAL REPORT 2023 − 11
WE MAKE
OUR CUSTOMERS’
LIVES EASIER
“ What sets VSP aside is the innovation behind
the engineering and the research that goes into that.
They are extremely responsive if you need something,
they are very quick to put you in touch with the right
engineer to solve a problem. That could be a small
problem or a larger, more catastrophic issue. Knowing
that the end product is going to be the right product
applied in the right way, that's priceless.”
John Kennedy,
President of Field Sales at Rescar Companies
VSP Customer
READ MORE ABOUT
OUR STAKEHOLDER
ENGAGEMENT
ON PAGE 50
LEARN MORE
ABOUT OUR VSP
CUSTOMER STORY
WWW.DIPLOMAPLC.COM/
OUR-BUSINESSES/SEALS/
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12 − DIPLOMA PLC ANNUAL REPORT 2023
STRATEGY
BUILDING HIGH-QUALITY
SCALABLE BUSINESSES
FOR SUSTAINABLE
ORGANIC GROWTH
Our strategy is delivered by a brilliant team
in an empowered decentralised culture.
As a result, we have an impressive and resilient
track record of growth at attractive margins.
We drive organic growth in three
buckets by: positioning behind
structurally growing end markets;
penetrating further into core
developed geographies; and
extending our product range to
expand our addressable markets.
This drives sustainable organic
growth and increased resilience.
We complement our organic growth
strategy with bolt-on acquisitions
that drive future organic growth in
one or more of our three buckets.
Our value-add model and
decentralised culture are our key
differentiators. As we grow, we need
to build scale within the businesses
and the Group in order to protect
our differentiators and sustain
long-term delivery.
Our Delivering Value Responsibly
(DVR) framework means that we are
positioned to deliver products and
services for a decarbonising
economy, whilst also delivering for
our colleagues and the environment.
GROW
Organic growth in three buckets
SCALE
COMPLEMENTARY ACQUISITIONS
TO DRIVE FUTURE ORGANIC GROWTH
VALUE-ADD BUSINESS
MODEL AT SCALE
POWERFUL DECENTRALISED
GROUP AT SCALE
DELIVER VALUE RESPONSIBLY*
*READ MORE ABOUT DELIVERING VALUE RESPONSIBLY ON PAGE 54
1 END MARKETS2 GEOGRAPHIC PENETRATION3 PRODUCT EXTENSION
DIPLOMA PLC ANNUAL REPORT 2023 − 13
GROW
1 E ND MARKETS
2 GEOGRAPHIC PENETRATION
3 PRODUCT EXTENSION
We have an exciting opportunity
to access structurally high-growth
end markets, such as clinical
diagnostics, electrification,
industrial automation,
infrastructure, renewables,
water management, energy,
and civil aerospace. We have
increased our exposure in these
markets, but still have a very
small share. We also have the
opportunity to position ourselves
for a more sustainable economy.
We remain focused on our core,
developed economies of North
America, UK & Ireland, Continental
Europe, and Australia & New
Zealand. We have minimal market
share – or none at all – in most of
our product verticals across our
core geographies and therefore
do not need to look to higher-risk,
developing markets for growth.
There is lots to go for in our
established geographies.
We expand our addressable
markets through product
extension. We do this through
continuous product innovation;
coordinated cross-selling across
different Group businesses; or,
selectively, through building out
material new product lines that
support value-add distribution.
OUR GEOGRAPHIC AND PRODUCT OPPORTUNITIES
MARKET SHARE
Significant
Moderate
Small
White space
ADDRESSABLE
MARKET
OUR
SECTORS
OUR PRODUCT
VERTICALS
OUR GEOGR APHIC RE ACH
US
CANADA
UK &
IRELAND
GERMANY
FRANCE
SPAIN
OTHER
EU
ANZ
CURRENT
ADDRESSABLE
MARKET
S
L
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F
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WIRE & CABLE
INTERCONNECT
SPECIALTY FASTENERS
SPECIALTY ADHESIVES
INDUSTRIAL AUTOMATION
SEALS
GASKETS
HOSES & FITTINGS
PUMPS / VALVES
S DIAGNOSTICS
E
C
N
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C
S
SURGICAL /
CRITICAL CARE
ENDOSCOPY
I
GROWING
ADDRESSABLE
MARKE T
NE W PRODUCT
VE RTICALS
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14 − DIPLOMA PLC ANNUAL REPORT 2023
STRATEGY CONTINUED
ORGANIC
GROWTH AT
AUSTRALIAN SEALS
Our Australian Seals business
supplies premium mechanical
engineering products, parts
and services to the power,
water and mining industries.
Since 2019, their organic
growth has been consistently
double-digit. Since
joining Diploma, it has
made some strategic
acquisitions to accelerate
organic growth through
geographic penetration
and product extension.
The bolt-on acquisition ACT in
2022 introduced exciting and
innovative products, creating
an attractive, full-service
proposition for customers.
The dewatering unit in
Australian Seals has also
grown by more than 50%
since 2019. By increasing
its product offering and
expanding service it
has improved sales mix.
Operating margin has
improved from low
double-digits to high-teens
during the same period.
The business has also been
able to take advantage of
exciting opportunities in the
waste management, water
and marine industries, as
well as expanding its repair
service, driven by new
refineries, including Lithium.
Reported revenue
Organic revenue growth
£41.0m +24%
FY22: £32.2m | 27% YoY
FY22: +10%
DIPLOMA PLC ANNUAL REPORT 2023 − 15
12 SUCCESSFUL ACQUISITIONS
During the year we made 12
acquisitions across all of our Sectors.
We acquired two platform
businesses: T.I.E., acquired in March,
is our first venture into the Industrial
Automation market; and DICSA,
bought in July, provides us with a
European Aftermarket platform in
the Seals Sector. It is also our first
Spanish-based investment. Both
companies have a long track record
of excellent organic growth and
high margins.
We also acquired 10 smaller bolt-
ons, which fit well into our existing
businesses:
• R&G acquired FPS, Hedley,
Valves Online and Lantech
• Techsil acquired Eurobond
• Shoal Group acquired Shrinktek
• VSP acquired GP&S and Hex
• Hercules OEM acquired ITG
• Simonsen & Weel acquired
GM Medical
STEVE SARGEANT
GROUP CORPORATE DEVELOPMENT
DIRECTOR
“ We are long-term
investors in our
businesses.
We acquire high-quality
companies, preserving
their legacy, culture and
people, and supporting
their onward growth
journeys with continued
investment and sharing
of best practice.
We have considerable
expertise in making
acquisitions and have
completed over 30
in the last four years.”
LEARN MORE ABOUT
OUR APPROACH TO
ACQUISITIONS ON
OUR WEBSITE
WWW.DIPLOMAPLC.COM/
ABOUT-US/ACQUISITIONS/
COMPLEMENTARY
ACQUISITIONS TO DRIVE
FUTURE ORGANIC GROWTH
We make complementary
acquisitions to drive future organic
growth, positioning behind exciting
end markets, expanding our footprint
in a core geography, or adding
product capability. Acquisitions also
help us to build scale and resilience,
bring in fantastic new talent, and
drive great returns on capital.
The companies we acquire have
the same core characteristics as our
existing businesses: a compelling
value-add proposition, strong
organic growth potential, a brilliant
leadership team, a good strategic
fit, and attractive financial returns.
We are long-term investors in our
businesses and help acquired
businesses develop and grow.
We do this by offering management
expertise, assisting with a more
structured sales approach, sharing
best practice across similar Group
companies, improving margins and
cash management, and providing
an ESG framework.
As a result, we have a strong track
record of delivering disciplined
acquisitions with great returns.
Since 2019 we have spent over
£1 billion on acquisitions that have
delivered average organic growth
and ROATCE of ca. 16%.
A WINNING PROPOSITION
FOR SELLERS
Our decentralised model and culture
make us attractive to small business
owners. We preserve their legacy,
value and develop their people,
and we’re in it for the long term.
This gives us a competitive
advantage where price is not
the sole decision driver.
EXCITING PIPELINE
We have a strong internal corporate
development team, and have
developed our capabilities and
processes over the past couple
of years. This, together with our
winning proposition for sellers,
large fragmented markets
and white space, leads to an
exciting pipeline of continued
acquisition opportunities.
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16 − DIPLOMA PLC ANNUAL REPORT 2023
STRATEGY CONTINUED
SCALE
Our differentiators are our value-add
business model and decentralised
culture. As the businesses – and the
Group – become significantly larger,
we have to scale at the same time in
order to preserve and enhance those
differentiators and guarantee our
delivery for the long term.
VALUE-ADD BUSINESS
MODEL AT SCALE
To scale successfully, each of our
businesses designs their operating
model of the future, the processes
and core competencies that
underpin it, and the capability
– talent, technology, and facility
– required to deliver it.
Our core competencies are
common to all our businesses:
value-add, route to market,
operational excellence, supply chain
management, commercial discipline.
Strengthening them requires the
business to be more strategic,
structured and systematic, which
in turn improves customer service
and performance.
POWERFUL DECENTRALISED
GROUP AT SCALE
We keep it focused. Portfolio
discipline ensures a manageable
platform for scale, whilst simple
strategic and performance
frameworks preserve local
ownership but ensure alignment
to the Group’s objectives.
Lean structures with dynamic leaders.
By remaining lean, we ensure agility
and execution while avoiding
unnecessary bureaucracy.
This approach requires great
management, and so we have
development and engagement
programmes to ensure this.
Mood. Being decentralised doesn’t
mean that our businesses are
isolated. Regular individual
and collective touch points
and communications allow us to
manage pace and engagement.
All of this means that our businesses
are able to remain agile, close to their
customers, with local accountability,
decision-making and leadership.
At the same time, they enjoy the
benefits of being part of a large,
multinational Group: networks,
central expertise, collaboration,
and best practice sharing.
OUR IMPERATIVE TO SCALE
FROM
£10m
BUSINESS
• Hands-on business leader
• Individuals wear many hats
• Responsive service
• Manual
• Family feel
TO
£200m
BUSINESS
• Strategic, structured leadership
• Broader management capability
• Seamless, customer-led processes
• Technology-enabled: data and automation
• Commercial, agile, innovative
Value-add service model at scale requires a different approach
DIPLOMA PLC ANNUAL REPORT 2023 − 17
JILL TENNANT
STRATEGY DIRECTOR
“ Scaling means we
are building bigger,
better businesses whilst
also preserving our
decentralised culture.
Scaling is a journey. It is
carefully planned as part
of our strategy, and it
guarantees our delivery
for the long term.”
BUILDING SCALE AT
WINDY CITY WIRE
Windy City Wire, part of the
Controls Sector, has cultivated a
very high-performance culture
with strong sales expertise.
Every colleague is clear on their
objectives and job role, ensuring
clarity and simplicity in a rapidly
growing business.
Windy City Wire uses
technology to improve
efficiency. All of their
performance metrics are
available in real time, allowing
them to set the right pace and
course-correct as needed.
The business is currently
investing in digital marketing
and strengthening their online
presence. This enables them to
tell their story and strengthen
their brand reputation.
All of this is supported by an
innovative and highly automated
facility, where customers often
visit to learn more about Windy
City Wire’s products.
Windy City Wire also benefits
from control over their own
supply chain and a very well
diversified customer base, with
over 12,000 regular customers.
The business has a strong
‘hub & spoke’ operating model
with a central facility in Illinois,
supported by 19 distribution
sites across the US.
Even as it scales, Windy
City Wire’s service remains
unwaveringly brilliant.
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CEO’S REVIEW
SUSTAINABLE
QUALITY
COMPOUNDING
JOHNNY THOMSON
CHIEF EXECUTIVE OFFICER
Revenue in the year was
up 19% to:
£1.2bn
DIPLOMA PLC ANNUAL REPORT 2023 − 19
Our adjusted operating
profit increased by
24% to £237.0m
24%
“ I am extremely pleased with our financial
performance and strategic progress.
I would like to thank my brilliant
colleagues across the Group who
do a fantastic job every single day.”
EXCELLENT FINANCIAL
PERFORMANCE, DELIVERED
WITH DISCIPLINE
The Group has delivered another
successful year, reflecting the power
of our value-add propositions, our
strategy, and our decentralised
model. This, underpinned by the
commitment of our colleagues to
deliver excellent customer service,
has enabled us again to deliver
strong organic growth at high
and growing margins.
Revenue in the year was up 19%
to £1.2bn (2022: £1.0bn). Organic
growth of 8% was driven by strong
volumes. Acquisitions, net of a small
disposal, contributed 8% to reported
revenue while foreign exchange
translation added a further 3%.
Our value-add customer
propositions enable us to price
to offset cost inflation and then
selectively reinvest some of the
benefits of positive operational
leverage into scaling our businesses.
This 'margin formula', coupled
with disciplined cost control
and accretive acquisitions, means
that we have increased adjusted
operating margin by 80 bps to a
very strong 19.7% (2022: 18.9%). Our
adjusted operating profit increased
by 24% to £237.0m (2022: £191.2m).
Adjusted earnings per share (EPS)
grew by 18%, continuing our long-
term compounding track record
(15% compound annual growth rate
(CAGR) EPS over 15 years).
Our cash-generative business model
drove free cash flow conversion
of 100% (2022: 90%), benefitting
from targeted inventory reduction.
Together with the equity raise earlier
in the year, this led to a reduction
in net debt to £254.7m, reducing
leverage to 0.9x at 30 September
2023 (2022: £328.9m and 1.4x).
Returns on capital are a key underpin
of our compounding financial model
and return on average trading capital
employed (ROATCE) improved by 80
bps to 18.1% (2022: 17.3%).
REVENUE DIVERSIFICATION
DRIVING ORGANIC GROWTH
AND INCREASING RESILIENCE
The Group’s strategy is to build
high-quality, scalable businesses
for organic growth.
We drive organic growth in three
ways: positioning behind structurally
growing end markets; penetrating
further into core developed
geographies; and extending
our product range to expand
addressable markets. This strategy
drives both sustainable organic
growth and increased resilience.
Execution of this strategy across
our businesses drove organic growth
of 8% in FY23, with strong trading
momentum as we exit the year.
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CEO’S REVIEW CONTINUED
“ The acquisition of DICSA
creates a platform for our
fluid power businesses in
Spain and across Europe,
including cross-selling
opportunities.”
Controls
Seals
Life Sciences
Group
Revenue £m
Growth
FY23
568.4
419.0
212.9
1,200.3
FY22
492.8
331.4
188.6
1,012.8
Reported
Organic
+15%
+26%
+13%
+19%
+11%
+5%
+8%
+8%
Some examples of how our
businesses are delivering organic
growth are set out below, with further
detail provided in the Sector Reviews
on pages 24 to 35.
Positioning to take advantage of
structurally growing end markets
Across the Group we have continued
to drive growth through expansion
in structurally growing end markets.
A number of businesses in our
Controls Sector are gaining share
in aerospace, defence and energy
markets as well as penetrating the
wider electrification ecosystem.
The acquisition of Tennessee
Industrial Electronics (T.I.E.), in March
gives us access to the strategically
important industrial automation end
market in the US. Across our Seals
businesses, we are well positioned to
benefit from US infrastructure spend
and we have diversified into exciting
growing markets such as water
treatment and renewable energy.
In Life Sciences, in addition to
benefitting from the recovery of
surgical procedures, our businesses
are continuing to diversify, in
particular across diagnostic areas
such as molecular testing, allergy and
auto-immune testing, haematology,
and cancer screening.
Penetration of core
developed economies
Over the last year we have made
progress developing our US and
European footprint. In Controls,
for example, we continue to win
market share in the German energy
market delivering very strong
double-digit growth.
In Seals, we are continuing to win
share in the western and mid-west
states of the US, leveraging the
investment in the facility in Louisville.
In the UK, R&G has enjoyed a very
strong first year in the Group, building
out our regional position and product
offerings to drive excellent organic
growth. The acquisition of
Distribuidora Internacional Carmen
S.A.U. (DICSA) in July creates a
platform for our fluid power business
in Spain and across Europe, including
cross-selling opportunities with R&G.
In Life Sciences, we now have a
scaled European platform.
Product range extension
New product development forms
an ongoing component of all our
businesses’ organic growth strategies.
• Controls has delivered outstanding
growth from speciality adhesives,
having entered that segment
through the acquisition of Techsil
in 2021. The acquisition of T.I.E.
brings expertise in aftermarket
and circular economy solutions
for CNC machines and robotics.
• With the acquisition of DICSA,
following last year’s acquisition of
R&G, Seals continues to diversify
from its traditional strength across
seals and gaskets, into wider fluid
power products.
• Product development is intrinsic
to our Life Sciences businesses.
The Canadian businesses
introduced new technology in
the gastrointestinal and surgical
segments. The European
businesses introduced the
single-use endoscope in the
Urology segment, as well as
new ultrasound technology,
and new products in the
lab and pharmaceutical
testing environments.
DIPLOMA PLC ANNUAL REPORT 2023 − 21
Since 30 September 2022,
we have acquired 12 high
quality businesses for
a total of £280m
£280m
COMPLEMENTARY ACQUISITIONS
TO ACCELERATE GROWTH
Acquisitions can accelerate our
growth strategy. We are disciplined
and selective and will only consider
opportunities with the following core
characteristics:
• differentiated value-add customer
proposition generating sustainable
high gross margins;
• strong organic growth and scaling
potential; and
• capable management teams
we can back.
Since 30 September 2022, we have
acquired 12 high-quality businesses
for a total of £280m.
In March, we acquired T.I.E. for
ca. £76m, entering the strategically
important industrial automation end
market in the US. T.I.E. is a high
growth, market-leading value-add
distributor of aftermarket parts and
repair services for robotics and CNC
machines. It differentiates through
speed to market and superior
technical support, driving a strong
organic growth track record and
high margins.
In July, we acquired DICSA for ca.
£170m, establishing a platform in
fluid power solutions across the
European aftermarket. DICSA has
significant customer value-add,
based on quality product, breadth of
range, technical service, and speed
to market. It adds to our established
positions in the US and UK,
expanding our aftermarket fluid
power capability and accessing
key strategic markets.
Over time we will drive significant
revenue and procurement synergies
including cross-selling existing
product from R&G through DICSA’s
platform into Europe; leveraging our
North American Seals Aftermarket
platform to accelerate DICSA’s
growth in the US; and delivering
consolidated procurement synergies.
Both T.I.E. and DICSA are strategic
platform acquisitions, well positioned
for continued strong growth, and are
margin and earnings accretive in the
first year.
During the year, we have also
completed 10 bolt-on acquisitions for
£33m, at an average earnings before
interest and tax (EBIT) multiple of
under 5x. These will add £33m of
annual revenue to the Group at
accretive EBIT margins, driving
ROATCE of over 20% from their
first full year.
Continuing our disciplined approach
to portfolio management, we
disposed of the lower growth,
lower margin Hawco business (fluid
controls within the Controls Sector)
in March for £23m.
In fragmented markets with a
well-developed approach and a
compelling proposition to sellers,
the Group’s acquisition pipeline is
strong and diversified. We remain
committed to disciplined investment
of capital, ensuring the Group’s
acquisitions support our future
organic growth and deliver
compounding earnings growth
at high returns over the long term.
Strategic ReviewCorporate GovernanceFinancial StatementsOther InformationCorporate GovernanceStrategic ReportFinancial Statements “ Delivering our strategy of
building high-quality
businesses for sustainable
organic growth requires
that we scale the
businesses, developing
their operating models to
continue to deliver great
customer propositions
at scale.”
22 − DIPLOMA PLC ANNUAL REPORT 2023
CEO’S REVIEW CONTINUED
SCALING THE BUSINESSES
AND THE GROUP
Delivering our strategy of
building high-quality businesses for
sustainable organic growth requires
that we scale the businesses,
developing their operating models
to continue to deliver great customer
propositions at scale. At the same
time, we are developing the Group,
evolving our structures, capabilities
and culture to support this growth
and maintain discipline and
appropriate controls.
Scaling the Businesses
We have a simple, common
framework which enables our
businesses to deliver their target
operating models. We have a set
of core competencies (value-add,
supply chain, operational excellence,
commercial discipline, and route to
market) which underpin their model.
As well as developing core
competencies, scaling our businesses
requires selective investment in
capability, in the form of talent,
technology, and facilities. During the
year, we have invested in functional
leadership across a number of our
businesses, creating or upgrading
roles in areas such as supply chain
management, operations, route to
market and support functions. From
a technology perspective, we have
Enterprise Resource Planning (ERP)
upgrade projects underway across
a number of businesses, as well
as automated warehouse system
upgrades in some Seals and Controls
businesses. In terms of facilities,
we have upgrades and relocations
underway in each of our three Sectors
to drive efficiency and improved
customer service as those businesses
continue to grow.
Scaling the Group
We have continued to focus on
three principles this year:
First: keep it focused. This means
portfolio discipline to ensure a
manageable platform for scale.
Despite more than doubling in
size, we have moved from 20 to 16
business units in the last four years.
For example, during the year we
created new scaled businesses in
Life Sciences (Canada and Ireland)
and Seals (Australia) by combining
smaller constituent businesses to
form integrated operations that are
better able to service their
customers at scale.
Second: lean structures with dynamic
leaders. This avoids bureaucracy
in the businesses and promotes
alignment, agility and execution.
We have very lean Central and Sector
teams but require more capability and
capacity as we grow. During the year
we have selectively added capability
in Finance, HR, Sustainability and
Risk & Compliance roles. Through
our development processes and
programmes, alongside external
appointments, we are building
talent and succession across the
organisation.
Third: mood - the beat of the
organisation. Decentralisation doesn’t
mean isolation. Regular individual and
collective touchpoints allow us to be
agile, manage pace, and execute
better. This year, we have further
developed the ‘Diploma Identity’,
strengthening leadership networks,
collaboration and best practice
sharing, while preserving our critical
differentiated decentralised culture.
DIPLOMA PLC ANNUAL REPORT 2023 − 23
At this stage in the year, FY24 growth
is expected to be in line with our
long-term financial model, albeit
at higher margins:
• Volume-led organic revenue
growth of ca. 5%.
• Acquisitions announced to date
add ca. 6% (net) to reported
revenue growth.
• Strong operating margin
of ca. 19.7%.
• Free cash flow conversion
of ca. 90%.
We remain focused on executing our
strategy of building high-quality,
scalable businesses for organic
growth and are confident in our
ability to deliver long-term growth
at sustainably high margins.
Johnny Thomson
Chief Executive Officer
DELIVERING VALUE RESPONSIBLY
We are making good progress across
our businesses with Delivering Value
Responsibly (DVR). During the year
we have hired an experienced Group
Sustainability Director and submitted
our net zero targets for validation
to the Science Based Targets
initiative (SBTi).
DVR, our framework, is focused
on six core areas:
• Colleague Engagement increased
to 80%, a very strong result
particularly for a decentralised
business. We have engagement
plans in each of our businesses and
aim to maintain engagement above
70% over the long-term.
• Workshops and listening groups
are also helping to further our
Diversity, Equity & Inclusion
agenda. Over the last four years
our gender diversity has improved,
with women now representing 28%
of our Senior Management Team
(SMT) up from 20% in 2019. Our
2030 target is for women to make
up 40% of our SMT.
• Potential hazard reporting and
training are enhancing our Health
& Safety culture. In 2023, our lost
time incident (LTI) Rate (LTIs per
1,000 employees) was 9.5 (2022:
10.6). We target at least a 5%
reduction in lost time incidents
every year.
• Our businesses are stepping up
engagement with their Supply
Chains. Over 70% of key suppliers
are now aligned to our Supplier
Code - committing to high ethical,
professional and legal standards.
• Further focus on the Climate
Action has included energy
workshops and implementing
emission-reduction initiatives.
We have begun to introduce
solar solutions on our facilities
and expect to progress this
further in the coming year.
Our target is to achieve net zero
across our value chain by 2045,
with a 50% reduction in Scope 1
& 2 emissions by 2030.
• We are making good progress in
Waste Reduction, with the volume
of waste sent to landfill down to
32% from 60% in the prior year.
We are also focused on the positive
impact that our Group has on society
and the environment by delivering
innovative and life-saving healthcare
solutions; playing a role in renewable
energy generation; and supporting
circular practices across our
aftermarket businesses.
OUTLOOK
Whilst we remain mindful of the
uncertain economic outlook, we are
confident in the Group’s prospects.
Diploma has an excellent track
record of compounding growth and
delivering strong financial returns
through the cycle. Our model is
resilient, and its resilience has
increased over time as we execute
our strategy:
• Our revenue is resilient: ongoing
diversification means we are
exposed to structurally growing
end segments.
• Our margins are resilient: focus on
value-add solutions critical to
customer needs supports pricing
power.
• Our cash flow is resilient: our low
capital-intensity model is highly
cash-generative, underpinning
a strong balance sheet.
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CONTROLS
The Controls Sector businesses supply specialised wiring,
cable, connectors, fasteners, control devices, adhesives,
and CNC and robotic components for a range of technically
demanding applications.
FINANCIAL HIGHLIGHTS
£568.4m
Revenue
FY22: £492.8m | +15% YoY
£136.6m
Adjusted operating profit
FY22: £105.8m | +29% YoY
£112.9m
Statutory operating profit
FY22: £75.3m | +50% YoY
+11%
Organic revenue growth
FY22: 24%
24.0%
Adjusted operating margin
FY22: 21.5% | +250bps
INTERNATIONAL
CONTROLS
Interconnect
Specialty Fasteners
UK Wire & Cable
Specialty Adhesives
Industrial Automation
WINDY CITY WIRE
Windy City Wire
DIPLOMA PLC ANNUAL REPORT 2023 − 25
WINDY CITY WIRE (WCW): 49%
Delivers innovative low-voltage wire
and cable management solutions
that save integrators time and
money on projects - from concept
to completion. Windy City Wire
delivers its proprietary value-add
solutions - SmartWire, RackPack
and SmartKits - with outstanding
customer service.
WIRE & CABLE (UK): 8%
Delivers cable management,
identification and termination
solutions to data centres, rail,
energy, marine and construction
industries. They offer customers
same-day despatch, technical
support, excellent customer service,
and custom-made product and
inventory solutions.
INDUSTRIAL AUTOMATION: 5%
Delivers machine uptime
through specialist repair, servicing
and refurbishment of industrial
automation equipment for customers
in machine shops, metalworking
and manufacturing industries.
Customers benefit from minimised
downtime, technical support and
asset life extension.
INTERCONNECT: 23%
Our interconnect businesses supply
electrical-mechanical solutions
to customers in Defence, Energy,
Medical and Automotive industries.
They distribute high-performance
interconnect products, as well as
identification, protection and metal
braided products. They deliver tailored
solutions, responsive customer service
and technical knowledge.
SPECIALTY FASTENERS: 12%
This business supplies a range
of high-quality fasteners, inserts
and components to customers
in industries with highly technical
and demanding applications and
environments. They work with
customers to develop bespoke,
value-add solutions, such as in-
house assembly, design, technical
expertise, bespoke kitting, and
automatic inventory replenishment.
SPECIALTY ADHESIVES: 3%
Our specialty adhesives business
distributes industrial adhesives,
sealants, and tapes to customers in
automotive, electronics, aerospace,
defence and other manufacturing
industries. Value-add services
include repacking to meet customer-
specific requirements, stock and
supply chain management, kitting,
deep technical support, and
innovative sealing solutions.
REPORTED REVENUE £
REVENUE BY SEGMENT1
REVENUE BY GEOGRAPHY1
19
20
21
22
23
4
.
8
6
5
8
.
2
9
4
2
.
3
4
3
3
.
8
7
1
6
.
6
5
1
49%
Windy City Wire
8%
Wire & Cable (UK)
63%
North America
16%
Continental Europe
23%
Interconnect
5%
Industrial Automation
17%
UK
4%
Other
12%
Specialty Fasteners
3%
Specialty Adhesives
1 Pro forma revenue is stated after total net adjustments of (£2.4m) to Reported revenue for acquisitions and disposals completed during the year.
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26 − DIPLOMA PLC ANNUAL REPORT 2023
CONTROLS SECTOR CONTINUED
DAVID GOODE
CEO, INTERNATIONAL CONTROLS
SECTOR
“ International Controls
enjoyed another
exceptional year.
Incisive growth plans
and hard work ensured
success across the
Sector. The addition
of T.I.E. both enhanced
Sector margins and
opened new markets and
products to support the
next phase of growth.”
RICH GALGANO
CEO, WINDY CIT Y WIRE
“ In a year of diligent effort,
our team’s commitment
to organic growth has
been the cornerstone
of our success, building
scale sustainably and
setting a solid foundation
for the future.”
2023 HIGHLIGHTS
• Very strong performance in
International Controls with
organic revenue growth of 15%.
• Windy City Wire (WCW) delivered
organic growth of 7%, building on
a very strong comparative period
in FY22.
• Adjusted operating profit
increased significantly, 29% higher
at £136.6m (2022: £105.8m) with
a 250bps year-on-year increase
in adjusted operating margin to
24.0% (2022: 21.5%). Both WCW
and International Controls
contributed to margin expansion
driven by positive operating
leverage and mix into higher
margin products.
• Strategic acquisition of Tennessee
Industrial Electronics (T.I.E.) builds
scale and gives access to the
important industrial automation
end market.
International Controls (51% of
Controls Sector revenue) delivered
15% organic growth in the year,
benefitting from market share
gains in recovering civil aerospace
markets and structural tailwinds in UK
defence and German energy markets
as investment in these areas remains
a critical focus for governments.
The Sector also further penetrated
exciting end markets within electric
vehicles (EV), renewables and space.
Operating margin increased strongly,
primarily due to positive operating
leverage on volume growth, and mix
benefits from the acquisition of T.I.E.
and disposal of Hawco.
Windy City Wire (49% of Controls
Sector revenue) continues to perform
strongly, with organic revenue growth
of 7% in the year, following a very
strong comparative period with 32%
organic growth in FY22. Product
range extension and share gains in
new end market segments drove
volume and a favourable mix.
Adjusted operating profit
increased significantly, 29%
higher at £136.6m with a 250bps
year-on-year increase in adjusted
operating margin to 24.0%.
29%
REVENUE DIVERSIFICATION
DRIVING ORGANIC GROWTH
The Sector continues to diversify its
end markets, gaining share in space
and telecoms and benefitting from
the wider move to electrification
and green energy as it continues
to deliver growth in the EV and
renewable energy end markets.
We delivered strong double-digit
organic growth in our Interconnect
businesses, particularly in the
German energy end market,
driven by share gains and upgrades
to the transmission and distribution
network. Other key growth segments
include defence, motorsport,
aerospace and medical, where
our businesses benefitted from
momentum in these growing
end markets and share gains.
Our Specialty Fasteners businesses
delivered very strong double-digit
growth during the year as they
continue to win market share
and benefit from strong customer
demand in the recovering civil
aerospace market in both the US and
UK. We secured key contract wins in
seats and cabin hardware and further
diversified end markets with good
momentum into space, unmanned
aerial vehicles (UAVs) and electric
vertical take-off and landing (eVTOL)
aircraft. Geographic diversification
has also been a theme in aerospace,
with an important contract win
in France for a major cabin and
seating manufacturer.
DIPLOMA PLC ANNUAL REPORT 2023 − 27
OUTLOOK
We have made good strategic
progress in Controls. Our businesses
are benefitting from initiatives to
capture growth in structurally
growing end markets, such as data
centres, EV and energy, as well
as high-growth emerging markets,
such as space and eVTOL. We are
also benefitting from continued
geographic diversification as we
continue to build scale in the US
and Europe. We are taking share
in markets in which we operate.
The Sector has strong momentum,
and we remain very positive about
its prospects.
Specialty Adhesives delivered
strong double-digit growth in
its key automotive end market as
well as continued share gains in the
telecommunications and EV markets.
WCW continues to drive strong
growth and gain share in the high
margin petrol station end market,
where its products are essential
to the new generation chip readers
used to prevent fraud, and which
are being systematically rolled
out across the US.
TARGETED ACQUISITIONS
TO ACCELERATE GROWTH
During the year, the Sector
completed the acquisition of
T.I.E. for ca. £76m, providing it with
access to the important industrial
automation end market, which
has been a strategic target end
market for some time. T.I.E. also
drives product extension (robotics
and CNC machines) as well as
deepening geographic penetration
in the key US market.
Two smaller bolt-on acquisitions
were completed in the year, with
Eurobond further broadening our
product offering in Specialty
Adhesives, and Shrinktek expanding
the Sector’s offering in UK Wire &
Cable.
BUILDING SCALE
Significant investment in technology
and facilities is underway as the
Sector finalises the integration of
its UK Wire & Cable locations into
one state-of-the-art facility and
a common ERP platform.
Sales resource has been added to
the European Fasteners business as
part of the strategy to expand in the
civil aerospace market. Focused
investments in sales resources are
also being made into the adhesives
market to capitalise on long-term
aerospace and defence
opportunities.
SPECIALTY ADHESIVES
TECHSIL
Techsil, based in the UK, sells
specialty silicones, adhesives
and sealants. It adds value
through technical sales and
support, own branding and
technical specification.
Techsil is aligned with structurally
growing end markets, such as EVs,
through battery bonding and circuit
board solutions, as well as the
telecoms and defence industries.
A strong management team has
enabled us to add two bolt-on
acquisitions since Techsil joined
the Group in 2021.
Techsil has significant opportunity
across all of our growth buckets -
UK consolidation, geographic
penetration in the US and
Europe, and exceptional
end market potential.
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SEALS
The Seals Sector businesses supply a range of seals, gaskets,
cylinders, components and kits used in heavy mobile machinery
and a diverse range of fluid power products with Aftermarket,
OEM and MRO applications.
FINANCIAL HIGHLIGHTS
£419.0m
Revenue
FY22: £331.4m | +26% YoY
£79.0m
Adjusted operating profit
FY22: £62.6m | +26% YoY
£55.8m
Statutory operating profit
FY22: £46.0m | +21% YoY
+5%
Organic revenue growth
FY22: +14%
18.9%
Adjusted operating margin
FY22: 18.9%
NORTH AMERICAN
SEALS
NA Aftermarket
US OEM
US MRO
INTERNATIONAL
SEALS
UK Aftermarket
European OEM
Australia
DIPLOMA PLC ANNUAL REPORT 2023 − 29
NA AFTERMARKET: 18%
Our North American Aftermarket
business supplies a range
of products, including seals,
bespoke kits, repair accessories,
and cylinders to customers repairing
heavy machinery and hydraulic
equipment across a wide range
of industries. Their value-add
proposition includes next-day
delivery, technical assistance, kitting,
custom seals and quality assurance.
US OEM: 13%
Our US OEM business is a leading
provider of technical solutions.
They supply a wide range of
products, including seals, gaskets,
custom moulded parts and stamped
metal components. Their value-add
services include engineering
expertise, such as compound
and application design; supply chain
and inventory management; quality
assurance and kitting and assembly.
US MRO: 13%
Our US MRO business is engineering-
focused and supports customers’
gasket, packing and expansion joint
needs in high-cost-of-failure
applications. Customers benefit from
proprietary products, significant cost
savings and inventory management.
Product design assistance and
experienced engineering resources
offer customers ongoing support
throughout their production cycle.
UK AFTERMARKET: 21%
These businesses supply a wide
range of fluid-power products,
including industrial hose and
couplings, hydraulic and pneumatic
components, and gaskets and seals.
Their customers benefit from
their expertise, broad experience
and in-depth product knowledge
and stock.
EUROPEAN OEM: 11%
Our European OEM businesses
supply seals, gaskets and custom
and moulded parts to customers
across a wide range of industries,
including renewable energy,
healthcare, food & beverage, and
automotive. They offer value-add
services, including design and
engineering support, and quality
control and testing.
EUROPEAN AFTERMARKET: 16%
Our European Aftermarket business
distributes a range of connectors,
stainless steel fittings, hoses, and
hydraulic components to customers
in diverse industries, including
agriculture, marine, automotive,
chemical processing and
infrastructure. Their value-add
proposition includes deep technical
expertise, breadth of stock and
advanced international logistics.
AUSTRALIA: 8%
These businesses deliver solutions
that reduce whole-of-life costs
through equipment efficiency and
reliability, reduced downtime and
energy use. They supply premium
mechanical engineering products,
parts and servicing as well as
products, including pumps, filtration
and sealing devices. They serve the
power, water and mining industries.
REPORTED REVENUE £
REVENUE BY SEGMENT1
REVENUE BY GEOGRAPHY1
19
20
21
22
23
0
.
9
1
4
4
.
1
3
3
7
.
3
6
2
1
.
2
4
2
6
.
0
2
2
18%
11%
NA Aftermarket
European OEM
42%
North America
13%
US OEM
13%
US MRO
21%
UK Aftermarket
16%
European Aftermarket
22%
UK
8%
Australia
25%
Europe
11%
International/other
1 Pro forma revenue is stated after total adjustments of £74.6m to Reported revenue for acquisitions completed during the year.
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30 − DIPLOMA PLC ANNUAL REPORT 2023
SEALS SECTOR CONTINUED
TED MESSMER
CEO, NORTH AMERICAN SEALS SECTOR
“ I am so proud of the
North American Seals
team and all the progress
they have made this year
in strengthening our
growth potential and
broadening our
value-add capabilities.”
ALESSANDRO LALA
CEO, INTERNATIONAL SEALS SECTOR
“ The International Seals
Sector is poised for
continued strong organic
growth, augmented by
the increased European
footprint due to the
acquisition of DICSA.”
2023 HIGHLIGHTS
• Strong International Seals
performance driven by R&G
and Australian Seals.
• Resilient performance in North
American Seals, benefitting
from returns on the investment
into the Aftermarket facility in
Louisville and strong performance
in our MRO business offsetting
some destocking in certain
OEM customers.
• Adjusted operating profit increased
by 26% to £79.0m (2022: £62.6m).
• Invested in scaling projects
focusing on automation and
supply chain efficiencies through
facilities upgrades.
• Strategic acquisition of
Distribuidora Internacional
Carmen S.A.U. (DICSA) builds
scale in Europe and broadens the
product portfolio into stainless
steel fittings, expanding
addressable markets.
International Seals (56% of Sector
revenue) delivered strong organic
growth of 9%, principally driven by an
excellent trading performance from
R&G in the UK and strong recovery
of capital projects in Australia.
North American Seals (44% of
Sector revenue) delivered organic
growth of 1% against a very strong
comparator (2022: +16%) with
strong growth in our North American
Aftermarket and MRO businesses,
partly offset by some destocking
in some industrial OEM customers.
REVENUE DIVERSIFICATION
DRIVING ORGANIC GROWTH
In International Seals, our UK
Aftermarket business, R&G, grew
strongly, benefitting from initiatives
to diversify into product adjacencies
and new end markets, such as
wastewater treatment and potash
mining. R&G has made a significant
contribution to the organic growth
of the Sector since acquisition,
driven by strong sales into
capital projects, particularly in the
pneumatics and industrial markets,
underpinned by solid MRO volumes.
Our Australian Seals businesses
delivered very strong growth.
This was driven by share gains and
public infrastructure investments
on the east coast, strong demand in
anti-corrosion applications in the oil
and gas industries, and continuous
strong demand for the mining of
raw materials for batteries. Anti-
Corrosion Technology (ACT), which
was acquired in late FY22, has more
than doubled since acquisition,
capitalising on asset protection
projects in the oil and gas industry.
We saw softer performance in our
European OEM businesses where
both medical and industrial end
markets suffered some customer
destocking. We expect this to
moderate growth in the near term.
North American Aftermarket
delivered another year of strong
growth. The investment in our
Aftermarket facility in Louisville,
extending service hours and product
availability, is continuing to deliver
accelerated growth and market share
gains, particularly in western states.
Very strong organic growth in the
core repair market was boosted
by the continuing focus on US
infrastructure development.
The US MRO business delivered
strong organic growth driven by
high levels of demand for our
proprietary products in the
transportation market.
The US OEM business was softer,
driven by destocking in a number
of customers. We expect this to
moderate growth in the near term.
TARGETED ACQUISITIONS TO
ACCELERATE GROWTH
During the year, the Sector acquired
DICSA for ca. £170m, establishing
a scaled platform in fluid power
solutions across the European
aftermarket. It adds to our
established positions in the
US and UK and over time will drive
significant revenue and procurement
synergies: cross-selling existing
product from R&G, leveraging
the Louisville facility to accelerate
DICSA’s growth in the US, and
enabling procurement synergies.
DIPLOMA PLC ANNUAL REPORT 2023 − 31
Also in International Seals, four
bolt-on acquisitions were added into
the R&G Group. Hedley and FPS
bring complementary products and
geographical expansion to R&G’s
Hydraulics division. Valves Online will
complement and strengthen R&G’s
capabilities in the online route to
market, as well as developing the
valve product category. Lantech
enhances the end market capabilities
of the Industrial division with its focus
on the food & beverage and
pharmaceutical markets.
In North American Seals, VSP
acquired two businesses during the
year, both creating cross-selling
opportunities. GP&S, which supplies
gaskets, seals, and fasteners; and
Hex, which provides bolting and
sealing training solutions to make
manufacturing sites safer, more
reliable and more profitable.
Hercules OEM completed the
bolt-on acquisition of ITG, a
distributor of seals and adhesives for
use in electrical connectors, valves,
medical devices and industrial
equipment.
BUILDING SCALE
The Sector is selectively integrating
smaller businesses to form better
scaled platforms and during the
year, completed the integration
of TotalSeal into FITT Resources
in Australia.
Further scaling investments in
facilities to establish national hubs are
being made, with the construction of
a new M Seals facility in Denmark that
will become the Nordic hub for the
Sector. In the UK, we have invested
in a national distribution centre for
hydraulic products and a centre of
excellence for hose assemblies to
position R&G as the national leader
for these product ranges.
In North American Seals, we have
focused on improving the supply
chain; investing in facilities, talent
and processes to improve supply-
demand planning and optimise
inventory. The Sector continues
to make major investments
in warehouse automation and
has successfully expanded the
Autostore facility in Louisville.
OUTLOOK
We have made good strategic
progress in Seals in the year and
the growth prospects for the Sector
remain strong. The Sector is more
resilient now than ever, supported
by end segment exposures such
as medical, food and beverage and
renewable energy, and DICSA adds
a scaled European operation to our
existing US and UK platforms.
Customer destocking has continued
in our North American and European
industrial OEM businesses and while
we remain confident in their long
term prospects, we do expect this
to moderate Seals growth in the near
term. We are well positioned to
benefit from the significant
investments into infrastructure
projects across the US and Europe,
which create a tailwind for growth
across our Aftermarket businesses.
US MRO VSP
TECHNOLOGIES
Supported by their engineering
expertise, VSP sells its customers
solutions that reduce fugitive
emissions and leakages and
reduce downtime in mission-
critical and hazardous
environments such as rail
transportation of toxic materials.
Their solutions reduce customer
operating costs and have tangible
environmental benefits.
VSP Technologies offers
customers fluid sealing solutions
used in mission-critical and
hazardous environments.
When VSP Technologies was
acquired in 2019, it sold custom
gaskets used in chemical
processing, power generation
and other heavy industries.
Since our acquisition, they have
successfully broadened their flow
control product lines, cross selling
o-rings and hoses from other
North American Seals Sector
businesses, to VSP's existing
customers.
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32 − DIPLOMA PLC ANNUAL REPORT 2023
LIFE SCIENCES
The Life Sciences Sector sources and supplies
technology-driven, value-add solutions in the
In Vitro Diagnostics, Scientific and Medtech
segments of the global healthcare market.
FINANCIAL HIGHLIGHTS
£212.9m
Revenue
FY22: £188.6m | +13% YoY
£43.2m
Adjusted operating profit
FY22: £41.0m | +5% YoY
£36.4m
Statutory operating profit
FY22: £42.5m | (14%) YoY
LIFE SCIENCES
Canada
Europe
Australia
+8%
Organic revenue growth
F22: (4%)
20.3%
Adjusted operating margin
F22: 21.7% | (140)bps
DIPLOMA PLC ANNUAL REPORT 2023 − 33
CANADA: 42%
Our Canadian businesses supply
innovative and leading diagnostic
technologies, surgical and
endoscopic solutions to Canadian
healthcare providers. They offer
technical expertise, service and
support to find the right solution
for their customers.
EUROPE: 39%
Our European businesses distribute,
service and install a wide range
of laboratory equipment and
consumables, surgical products,
medical technology and devices,
life sciences solutions, and medical
nutrition to customers in hospitals,
community care, laboratories, and
primary care.
AUSTRALASIA: 19%
Our Australian businesses distribute
surgical instrumentation, diagnostic
pathology, medical research and
innovative laboratory equipment
solutions to a range of laboratories,
hospitals, and university research
departments across Australia
and New Zealand.
REPORTED REVENUE £
REVENUE BY SEGMENT1
REVENUE BY GEOGRAPHY1
23
9
.
2
1
2
19
20
21
22
6
.
8
8
1
4
.
0
8
1
8
.
5
4
1
7
.
9
3
1
33%
Diagnostics
63%
MedTech
2%
Scientific
2%
Other healthcare
42%
Canada
39%
Europe
19%
Australasia
1
Pro forma revenue is stated after total adjustments of £3.4m to Reported revenue for acquisitions completed during the year.
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34 − DIPLOMA PLC ANNUAL REPORT 2023
LIFE SCIENCES SECTOR CONTINUED
TBC
PETER SOELBERG
SECTOR CEO, LIFE SCIENCES
“ Our Life Sciences Sector
is well positioned for the
continued growth,
investment and adoption
of new technology in the
healthcare sector, which
will support improved
patient care.”
Organic revenue +8%. The
Sector has returned to growth
with momentum accelerating,
driven by the normalisation of
surgical procedure and
diagnostic testing volumes.
+8%
Our growth in Canada has been
driven largely by implementation
of technology and innovation by
hospitals to address acute staffing
shortages, with successful expansion
in the urology, gynaecology and
endoscopy specialties as well
as technological adoption in
laboratories and increased focus
in interventional diagnostics testing.
The Australian and New Zealand
markets moved out of restrictive
business conditions in January,
resulting in increased activities
in surgery case numbers (as staff
availability improved), scientific
projects and studies, and
pathology testing.
In Europe, our Irish and UK businesses
continue to see growth in the In Vitro
Diagnostics (IVD) segment and the
scientific segment driven by
improvement in technologies for
R&D and manufacturing regulations.
In the Nordics, we are well positioned
to further expand into the critical
care, surgical and gastrointestinal
segments through national tender
and contract wins.
2023 HIGHLIGHTS
• Organic revenue +8% (2022: -4%):
The Sector has returned to growth,
with momentum accelerating,
driven by the normalisation of
surgical procedure and diagnostic
testing volumes despite ongoing
healthcare staffing challenges.
• Positive outlook as governments
act to address healthcare staffing
shortages with automation and the
associated increase in capital
project funding.
• Operating margins remain well
ahead of our financial model
but declined year-on-year, as
expected, primarily due to a
higher proportion of relatively
lower margin capital sales; a
full year effect of Accuscience
(which has a lower margin with
lower capital intensity); plus
ongoing scaling investments.
• Continued investments being
made to build scale in the
facilities and systems in
Canada and Europe following
the successful completion of
the scaling project in Australasia.
REVENUE DIVERSIFICATION
DRIVING ORGANIC GROWTH
All businesses in the Sector have
successfully diversified revenue
streams to capitalise on the
recovery of surgical and operating
room procedures, as well as
the increased funding for capital
projects. During the year, we have
secured new contracts across
all regions as governments and
hospitals increase capacity to clear
the surgical backlogs and reinvest
in new medical research laboratories.
New product introduction and the
adoption of new technology were
the primary drivers of growth in
FY23. Growth has been driven by
automated diagnostic testing in
histology; molecular testing in
infectious disease; haematology
testing in oncology; AI-assistance
in diagnostic & therapeutic
endoscopy; single-use endoscopy
in surgical urology procedures;
and point of care patient
monitoring and ultrasound.
BUILDING SCALE
In Australia, we have successfully
combined the operations of our two
businesses to generate operational
efficiencies, such as warehouse
process improvements and freight
consolidation. Similar projects are
underway in the Canadian and
European businesses, focusing on
facilities and ERP systems. Together,
these projects will build three scaled
platform businesses to enable the
Sector to capitalise on future growth
opportunities.
TARGETED ACQUISITIONS TO
ACCELERATE GROWTH
In July 2023 we acquired GM
Medical in Denmark, distributing
consumables and capital equipment
for anaesthesia, critical care, surgery,
obstetrics, neonatology, simulation
and sterilisation. GM Medical is highly
complementary to our existing
Danish business, Simonsen & Weel.
OUTLOOK
With tailwinds from the recovery
in surgical procedures, and
increasing investment in pre-emptive
diagnostics, the Sector’s growth
outlook remains positive. All
businesses in the Sector continue
to focus on building their portfolio
of products and services to broaden
their value proposition to both
suppliers and customers.
FY24 will see a continuation of
private and public laboratories
investing to meet the growing
demand for expanded diagnostics
and screening utilising new
automation and molecular testing;
surgical and critical care capacity
being rebuilt and expanded in
healthcare systems; and drug
and vaccine research and
development, and companion
diagnostics fields accelerating.
DIPLOMA PLC ANNUAL REPORT 2023 − 35
LIFE
SCIENCES
AUSTRALIA
The Life Sciences Australia
business navigate a highly
technical and specialised
environment in order to
bring innovative surgical,
pathology, and medical
research products to market.
Following an investment from
Diploma, the Life Sciences
Australia business has built
capability and organisational
strength by consolidating its
facilities, third-party logistics,
warehousing and ERP
systems, bringing them
all under one roof.
This has allowed the business
to move from a generalised
model to a specialised
model, allowing them to bring
in specialist talent to manage
inventory, operations, service,
and accounts. The new
facility is also designed
to support collaboration
between teams.
Another advantage of the
move has been that clients
are now able to visit the
facility for product
demonstrations and see
first-hand the logistical
value-add benefits that
are on offer.
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FINANCIAL REVIEW
EXCELLENT
PERFORMANCE
DELIVERED WITH
DISCIPLINE
CHRIS DAVIES
CHIEF FINANCIAL OFFICER
DIPLOMA PLC ANNUAL REPORT 2023 − 37
The Group reports under UK-adopted International Accounting Standards and references alternative performance measures where the Board believes that they
help to effectively monitor the performance of the Group and support readers of the Financial Statements in drawing comparisons with past performance.
Certain alternative performance measures are also relevant in calculating a meaningful element of Executive Directors' variable remuneration and our debt
covenants. Alternative performance measures are not considered to be a substitute for, or superior to, IFRS measures. These are detailed in note 28 to the
Consolidated Financial Statements.
In FY23, the Group has again demonstrated progress
against all elements of our financial model.
Excellent financial performance
Organic growth is our first priority
Total revenue accelerated by quality acquisitions
Value-add drives strong operating margins
Compounding EPS growth
Delivered with discipline
Capital-light business model drives strong cash conversion
Capital stewardship focused on strong ROATCE
Balance sheet discipline maintains prudent leverage
Return to shareholders with a progressive dividend
FY23
8%
19%
Model
5%
10%
19.7%
17%+
18% double-digit
FY23
Model
90%+
100%
18.1% High teens
<2.0x
0.9x
5%
5%
SUMMARY INCOME STATEMENT
Our diversified portfolio and growth strategy drive strong, sustainable
revenue growth, and our value-add service propositions drive consistently
high margins.
Year ended 30 September 2023
Year ended 30 September 2022
Adjusted
£m
Adjustments
£m
Total
£m
Adjusted
£m
Adjustments
£m
Total
£m
-
1,200.3
1,012.8
-
1,012.8
Revenue
Operating expenses
1,200.3
(963.3)
Operating profit
Financial expense, net
Profit before tax
Tax expense
Profit for the year
Earnings per share (p)
Adjusted/Basic
237.0
(20.4)
216.6
(52.0)
164.6
(53.7)
(1,017.0)
(821.6)
(53.7)
183.3
(7.3)
(27.7)
(61.0)
155.6
14.7
(46.3)
(37.3)
118.3
191.2
(11.6)
179.6
(45.0)
134.6
(46.9)
(46.9)
(3.2)
(50.1)
10.9
(39.2)
126.5p
90.8
107.5p
(868.5)
144.3
(14.8)
129.5
(34.1)
95.4
76.1
Reported revenue increased by
19% to £1,200.3m (2022: £1,012.8m),
consisting of organic growth of
8%, an 8% net contribution from
acquisitions and disposals, and a
3% benefit from foreign exchange
translation. During the year, the
Group disposed of Hawco, which
contributed £15.1m to Group
revenues in FY23 (2022: £30.7m).
Adjusted operating profit increased
by 24% to £237.0m (2022: £191.2m)
as the operational leverage from
the increased revenue, disciplined
cost management and accretive
acquisitions drove an 80bps
year-on-year improvement in
the adjusted operating margin
to 19.7% (2022: 18.9%).
Statutory operating profit increased
27% to £183.3m (2022: £144.3m),
benefitting from a £12.2m profit on
disposal of Hawco, compared with a
net gain on disposal of £7.3m in the
prior year relating to the disposal of
Kentek and a1-envirosciences.
Net adjusted finance expense
increased to £20.4m (2022: £11.6m),
principally due to the impact of
higher interest rates, in particular in
the second half of the year. Average
gross debt remained broadly
consistent with prior year with the
proceeds from the equity raise in
March being utilised, as intended,
to finance acquisitions during the
year. The all-in, blended cost of bank
debt increased to 5.6% (2022: 2.8%).
Adjusted profit before tax increased
21% to £216.6m (2022: £179.6m).
Statutory profit before tax was
£155.6m (2022: £129.5m) and is
stated after charging acquisition
and other related charges, and
acquisition related finance charges.
Acquisition and other related charges
of £53.7m (2022: £46.9m) principally
comprise of the amortisation of
acquisition related intangible assets
of £52.9m (2022: £42.4m), £6.3m
of acquisition related expenses
(2022: £10.5m), £5.9m of fair value
adjustments to inventory acquired
through acquisition recognised in
cost of inventories sold (2022: £nil)
and partly offset by a net gain
of £12.2m (2022: £7.3m) from
the disposal of Hawco in the
year. Acquisition related finance
charges of £7.3m (2022: £3.2m)
principally comprise of fair value
remeasurement of put options for
future minority purchases of £1.8m
(2022: £1.4m) and amortisation
and write-off of capitalised
borrowing fees on acquisition
related borrowings of £5.9m
(2022: £1.4m).
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FINANCIAL REVIEW CONTINUED
We are committed to being a
responsible taxpayer and our
approach is to comply with tax laws in
the countries in which we operate and
to pay our fair share of tax. The Group’s
tax strategy was approved by the
Board and is published on our website.
The Group’s adjusted effective rate of
tax on adjusted profit before tax was
24.0% (2022: 25.0%) reduced from
the year ended 30 September 2022
largely due to non-recurring items
from the prior year.
Adjusted earnings per share
increased by 18% to 126.5p
(2022: 107.5p). Basic earnings per
share increased by 19% to 90.8p
(2022: 76.1p). An equity raise was
completed in March 2023, resulting
in a 7.5% increase (9,350,965 new
shares) in the issued ordinary share
capital. As at 30 September 2023,
the average number of ordinary
shares (which includes any potentially
dilutive shares) was 130,260,868
(2022: 124,855,007) and the
weighted average number of
ordinary shares in issue was
129,675,581 (2022: 124,533,060).
RECOMMENDED DIVIDEND
The Board has a progressive
dividend policy that aims to increase
the dividend each year by 5%. In
determining the dividend, the Board
considers a number of factors which
include the free cash flow generated
by the Group, the future cash
commitments and investment
needed to sustain the Group’s
long-term growth strategy and
the target level of dividend cover.
For FY23, the Board has
recommended a final dividend
of 40.0p per share, making the
proposed full year dividend 56.5p
(2022: 53.8p). This represents a 5%
increase in the full year dividend
per share with a dividend cover of
2.2x EPS, continuing the Group’s
progressive dividend track record.
CASH FLOW
Our capital-light business model, coupled with balance sheet and capital
discipline drives strong and consistent cash conversion and ROATCE and
maintains prudent leverage.
Free cash flow increased by 36% to £163.8m (2022:£120.4m). Statutory cash
flow from operating activities increased by 42% to £257.3m (2022: £180.6m).
Free cash flow conversion for the year was 100% (2022: 90%), ahead of our
targeted 90%+ model, demonstrating the highly cash-generative qualities
of our businesses and the results of targeted inventory reductions.
Funds flow
Adjusted operating profit
Depreciation and other non-cash items
Working capital movement
Interest paid, net (excluding borrowing fees)
Tax paid
Capital expenditure, net of disposal proceeds
Lease repayments
Notional purchase of own shares on exercise of options
Free cash flow
Acquisition and disposals1
Proceeds from issue of share capital (net of fees)
Acquisition of minority interests
Dividends paid to shareholders and minority interests
Foreign exchange and other non cash movements
Net funds flow
Net debt
Year ended
30 Sep 2023
£m
Year ended
30 Sep 2022
£m
237.0
30.5
(4.2)
(17.9)
(41.4)
(21.6)
(16.7)
(1.9)
163.8
(255.3)
231.9
-
(70.8)
4.6
74.2
(254.7)
191.2
24.6
(25.5)
(8.9)
(39.2)
(5.5)
(13.5)
(2.8)
120.4
(177.5)
-
(0.3)
(56.4)
(33.7)
(147.5)
(328.9)
1 Net of cash acquired/disposed and including acquisition expenses, deferred consideration, and
payments of pre-acquisition debt-like items.
Depreciation and other non-
cash items includes £28.6m
(2022: £23.9m) of depreciation and
amortisation of tangible, intangible
and right of use assets and £1.9m
(2022: £0.7m) of other non-cash
items, primarily share-based
payments expense.
Working capital increased by only
£4.2m despite a 19% increase
in revenue. This was largely driven
by a £10.8m decrease in inventory
as a result of strategic focus in this
area as supply chain constraints
have eased.
Interest payments increased by
£9.0m to £17.9m (2022: £8.9m) in
line with increased interest charges.
Tax payments increased by £2.2m to
£41.4m (2022: £39.2m) with the cash
tax rate reducing to 19% (2022: 22%)
due to the timing of tax payments.
Our effective cash tax rate remains
lower than our Group effective
tax rate, mainly due to acquisition
goodwill which is deductible for
US tax purposes.
Net cash flow from acquisitions and
disposals of £255.3m, which includes
£6.0m of acquisition fees, comprises
the spend for DICSA of £159.7m and
T.I.E. of £75.1m; £23.7m principally
relating to ten smaller bolt-on
businesses; and £12.3m of deferred
consideration relating to previous
acquisitions; partly offset by net
proceeds of £21.5m from the
disposal of Hawco, a lower growth,
lower margin business.
Capital expenditure increased by
£16.1m, largely driven by scaling
investments in Shoal Group,
Hercules Aftermarket and R&G.
FY22 benefitted from £9.9m of
proceeds from disposal of property,
plant and equipment.
The Group funded the Company’s
Employee Benefit Trust with £1.9m
(2022: £2.8m) in connection with the
Company’s long term incentive plan.
The Group received net proceeds
of £231.9m from an equity raise
completed in March 2023, to enable
the refinancing of the acquisition of
T.I.E., and provide greater flexibility
to execute further acquisitions.
Dividends of £70.8m (2022: £56.4m)
were paid to ordinary and minority
interest shareholders.
This strong free cash generation has
allowed the Group to deleverage
more quickly than expected.
At 30 September 2023, the Group’s
Net Debt (excluding IFRS 16 lease
liabilities) stood at £254.7m
(2022: £328.9m).
ACQUISITIONS ACCELERATE
GROWTH
In fragmented markets, we
deploy capital selectively and
with discipline, to acquire quality
businesses which accelerate
strategic execution; build scale;
broaden our portfolio; and
accelerate organic growth.
The Group’s acquisition liabilities to
shareholders of acquired businesses
at 30 September 2023 reduced
to £22.6m (2022: £31.4m) and
comprised both put options to
purchase outstanding minority
shareholdings and deferred
consideration payable to vendors
of businesses acquired during the
current and prior years.
• The liability to acquire minority
shareholdings outstanding
relates to a 10% interest held in
M Seals, 5% interest in Techsil,
a 2% interest in R&G and a 5%
interest in Pennine Pneumatic
Services. These options are valued
at £9.2m (2022: £7.4m), based
on the latest estimate of EBIT
when these options crystallise.
• The liability for deferred
consideration payable at
30 September 2023 was £13.4m
(2022: £24.0m). This liability
represents the best estimate of
any outstanding payments based
on the expected performance
of these relevant businesses
during the measurement period.
The reduction in the year is
primarily due to the revaluation
and settlement of deferred
consideration for Kungshusen
and R&G.
Goodwill at 30 September 2023
was £439.1m (2022: £372.3m).
Goodwill is assessed each year
to determine whether there has
been any impairment in the carrying
value. It was confirmed that there
was significant headroom on
the valuation of this goodwill,
compared with the carrying
value at the year end.
DIPLOMA PLC ANNUAL REPORT 2023 − 39
ATTRACTIVE RETURNS
ROATCE is a key metric used to
measure our success in creating
value for shareholders. It is a metric
that drives ongoing capital and
operating discipline, adding back
amortised intangibles and other
factors such as any impaired
goodwill such that any improvement
must be driven by true economic
factors. As at 30 September 2023,
the Group’s ROATCE increased by
80 basis points to 18.1% (2022:
17.3%). This increase was primarily
driven by strong operating profit
growth from the existing businesses,
but was supplemented by the
bolt-on acquisitions completed
during the year which generate
year 1 returns of 20%. This increase
in ROATCE was delivered despite
the dilutive impact of the DICSA
and T.I.E. acquisitions which, when
acquired with a combined 9x EBIT
multiple, naturally constrain year one
returns. We expect both of these
acquisitions to reach 20% returns
over the medium term.
IMPROVED FUNDING
On 17 July 2023, the Group entered
into a new committed multi-currency
revolving credit facility agreement
(RCF) with an aggregate principal
amount of £555.0m. The RCF is
due to expire in July 2028 with an
option to extend for two further
12 month periods. The RCF
replaced the Group's previous
debt facility agreement which as
at 30 September 2022 comprised
an RCF with an aggregate principal
amount of £359.7m, an amortising
term loan for an aggregate principal
amount of £114.2m ($127.5m), a bullet
term loan for an aggregate principal
amount of £59.1m ($66.0m) and
a further bullet term loan for
an aggregate principal amount
of £45.3m.
At 30 September 2023, net
debt of £254.7m (2022: £328.9m)
represented leverage of 0.9x
(2022: 1.4x) against a banking
covenant of 3.5x (2022: 3.0x).
The Group maintains strong liquidity,
with year end headroom (comprised
of undrawn committed facilities and
cash funds) of £297m (2022: £204m).
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FINANCIAL REVIEW CONTINUED
The table below outlines the composition of the Group’s net debt
at 30 September 2023:
TYPE
RCF
RCF
USD
EUR
CURRENCY
AMOUNT
GBP
EQUIVALENT
INTEREST RATE EXPOSURE
$200.0m
£163.9m
SOFR fixed at 3%
€181.0m
£157.0m
Floating
Floating
Overdraft facilities
Capitalised debt fees net of accrued
interest
£0.3m
£(4.1)m
Gross debt drawn at 30 September 2023 £317.1m
Cash & equivalents at year end
Net debt at 30 September 2023
£(62.4)m
£254.7m
PENSIONS
The Group maintains a legacy closed
defined benefit pension scheme in
the UK. In the year, the Group funded
this scheme with cash contributions
of £0.6m (2022: £0.6m) which
increases annually on 1 October by
2%. In Switzerland, local law requires
our Kubo business to provide
a contribution-based pension
for all employees, which is funded
by employer and employee
contributions. The cash contribution
to the scheme was £0.5m (2022:
£0.5m). Both schemes are accounted
for in accordance with IAS 19. At
30 September 2023, the UK defined
benefit scheme was in a surplus
position of £6.8m (30 September
2022: £6.4m) reflecting a slight rise
in corporate bond yields and a slight
fall in the market’s expectation of
future inflation. The Kubo scheme
is not material.
EXCHANGE RATES
A significant proportion of the
Group’s revenue (ca.80%) is derived
from businesses located outside the
UK, principally in the US, Canada,
Australia and continental Europe.
Compared with FY22, the average
Sterling exchange rate is weaker
against the US dollar and the Euro,
while stronger against the Canadian
and Australian dollars. The impact
from translating the results of the
Group’s overseas businesses into
UK sterling has led to an increase
in Group revenues of £17.5m; an
increase in the Group’s adjusted
operating profit of £4.1m; and a
reduction in net debt of £14.9m,
compared with the same period
last year.
GOING CONCERN
The Group’s business activities,
together with the factors likely
to affect its future development,
performance and position are set
out in this announcement and further
detailed in the Annual Report &
Accounts, which also includes an
assessment of the Group’s longer
term viability.
The Directors have undertaken
a comprehensive review of going
concern, taking into account the
updated financing of the Group
against a number of economic
scenarios, to consider whether
there is a risk that the Group could
breach either its facility headroom
or financial covenants.
The Group has modelled a base case
and downside case in its assessment
of going concern. The base case
is driven off the Group’s detailed
budget which is built up on a
business by business case and
considers both the micro and
macroeconomic factors which could
impact performance in the industries
and geographies in which that
business operates. The downside
case models steep declines in
revenues and operating margins
resulting in materially adverse cash
flows. These sensitivities factor in
a continued unfavourable impact
from a prolonged downturn in the
economy. Both scenarios indicate
that the Group has significant
liquidity and covenant headroom
on its borrowing facilities to continue
in operational existence for the
foreseeable future.
Accordingly, the Directors continue
to have a reasonable expectation
that the Group has adequate
resources to continue in operational
existence for the foreseeable future
and continue to adopt the going
concern basis in preparing the
Annual Report & Accounts.
DIPLOMA PLC ANNUAL REPORT 2023 − 41
KEY PERFORMANCE INDICATORS
EXCITING GROWTH
POTENTIAL
Another year of strong performance against our strategic
objectives (as set out on pages 12-17), our financial model
(see page 10) and our ESG framework (see pages 54-66).
SEE OUR
NON-FINANCIAL
KPIS ON PAGE 54
FINANCIAL KPIS
19 20 21 22 23
19 20 21 22 23
19 20 21 22 23
19 20 21 22 23
19 20 21 22 23
19 20 21 22 23
5
1
+
2
1
+
5
+
7
-
8
+
7
8
7
5
4
5
8
3
5
0
0
2
,
1
3
1
0
,
1
8
.
7
1
2
.
6
1
9
.
8
1
9
.
8
1
7
.
9
1
5
.
6
2
5 1
.
7
0
2 1
.
5
8
8
7
3
1
1
3
0
1
0
0
0 1
9
9
.
2
2
1
.
9
1
4
.
7
1
3
.
7
1
1
.
8
1
3
.
4
6
4
.
6
5
ORGANIC
REVENUE
GROWTH (%)
REPORTED
REVENUE
GROWTH (£M)
ADJUSTED
OPERATING
MARGIN (%)
ADJUSTED
EPS (P)
Organic revenue
growth is our first
priority. We focus
on products and
solutions which
are critical to
customers’ needs,
giving resilience to
revenues. We target
mid-single digit
organic growth.
We aim to deliver
sustainable
double-digit
growth through
a combination
of organic growth
and high-quality,
acquisitions which
accelerate our
organic growth.
Our differentiated
value-add solutions
and customer-
focused approach
drive customer
loyalty and create
pricing power,
supporting
sustainable and
attractive margins.
We target a margin
of 17%+.
EPS growth is
a measure of
how successful
we have been in
growing organically
and through
acquisition,
including capital
allocation and tax
considerations. We
target double-digit
EPS growth.
FREE
CASH FLOW
CONVERSION
(%)
A strong balance
sheet and cash flow
fund our growth
strategy and
provide healthy,
growing dividends.
We target free cash
flow conversion
of 90%+.
ROATCE (%)
This measures how
successful we are at
generating returns
on the investments
we make. We target
ROATCE in the high
teens.
Performance
Performance
Performance
Performance
Performance
Performance
7% 20% 18% 18% 97% 19%
five-year average
five-year compound
five-year average
five-year compound
five-year average
five-year average
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INTERNAL CONTROL AND RISK MANAGEMENT
MANAGING RISK
Effective risk management is a key component
of the discipline that underpins sustainable
quality compounding.
Our risk management framework
supports informed risk taking by our
businesses. It sets out those risks
that we are prepared to be exposed
to and the risks that we want to
avoid, together with the processes
and internal controls necessary
to evaluate the exposures and
ensure they remain within our
overall risk appetite.
This framework also provides
the basis for the businesses to
anticipate threats to delivering
for their customers and ensures we
are resilient to risks we have limited
control over.
Our governance processes continue
to evolve in support of the Group’s
strategic objectives. By improving
our understanding and management
of risk, we provide greater assurance
to our shareholders, employees,
customers, suppliers, and the
communities in which we operate.
OUR RISK MANAGEMENT FRAMEWORK
DIPLOMA PLC
BOARD OF DIRECTORS
AUDIT COMMITTEE
EXECUTIVE
TEAM
LOCAL MANAGEMENT TEAMS
OUR BUSINESSES
Top down
The Group manages
horizon scanning for
emerging risks, review of
principal risks, internal
controls, processes and
risk management
frameworks.
Bottom up
Our businesses
continually identify risks
and opportunities
to feed into Sector and
Group risk reviews.
IDENTIFYING AND MONITORING
MATERIAL RISKS
Each of our Diploma businesses
identifies risks and opportunities
as part of their regular business
reviews, evaluating how they are
controlled, whether mitigations are
appropriate and whether any further
actions are required. Material risks
are identified through a detailed
analysis of business processes and
procedures and a consideration of
the strategy and operating
environment of the Group.
The businesses use a quantitative
framework to determine a score for
each risk, which is based on both the
likelihood and consequence of each
risk occurring, and its impact on the
business. Each risk is evaluated on
the hypothetical basis that there
are no mitigating actions or controls
to provide a score and then
reconsidered to establish the net
score after mitigation. This identifies
which risks require internal mitigating
controls, and which require further
treatment. A similar exercise is then
performed at Sector and Group
level to develop an overall picture
of operational risk for the Group.
This process is both robust and
challenging. It ensures that risks are
identified and monitored and that
management controls are embedded
in the businesses’ operations.
OUR APPROACH
Risk management and the oversight
of appropriate systems of control
are ultimately the responsibility
of the Board, with responsibility
for overseeing the effectiveness
of the internal control environment
delegated to the Audit Committee.
Group Internal Audit provides
independent assurance that
the Group’s risk management,
governance and internal control
processes are operating
effectively. Each of our businesses
is accountable for managing risks
effectively. We have continued
to broaden our risk management
and governance by developing
horizon scanning for emerging
and potential risks, and enhancing
efficiency of management and
governance procedures.
RISK APPETITE
The Board recognises that
continuing to deliver resilient
returns for shareholders and other
stakeholders is dependent upon
accepting a level of risk. Our risk
appetite sets out how we balance
risk and opportunity in pursuit of our
strategic objectives. The acceptable
level of risk is assessed on an annual
basis by the Board, which defines its
risk appetite against certain key
indicators, including potential impact
of risk, likelihood of risk and ability
to reduce risk through mitigation.
This ensures alignment between
acceptable risk exposure and the
strategic priorities of the Group.
We have three levels of risk appetite:
• Averse: take steps to avoid risk
• Cautious: take steps to
mitigate risk
• Tolerant: accept risk
DIPLOMA PLC ANNUAL REPORT 2023 − 43
During this process, the operational
risks identified are reviewed to
ensure there are no new principal
risks or material risks affecting
multiple businesses or Sectors.
Any actions to improve evaluation
or management of risks are shared
across the businesses by the
relevant Sector. With the assistance
of the Audit Committee, the Board
obtained assurance that the Group’s
risk management and internal control
framework was operating effectively
and was therefore satisfied that risks
were being managed in line with
risk appetite.
Risk management relies on internal
control activities to ensure accurate
accounting and to help mitigate
the principal risks of the Group.
The governance process within
the framework ensures that the
completeness of identified risks
and adequacy of mitigating actions
are appropriately reviewed by the
Executive Team and are reported
to the Board on a regular basis.
EMERGING RISKS AND
OPPORTUNITIES
The Board also considers potential
risks and opportunities that could
impact our Group in the future. The
risk management framework enables
early identification of emerging risks
and opportunities so that they can
be tracked and evaluated thoroughly
at the appropriate time with any
potential exposure assessed. This
allows the Board to determine if the
Group is adequately prepared for the
situation. During the year, 'Climate
Change', previously identified as an
emerging risk, has been transferred
to the Group's principal risk register
and separated into the direct impact
of adverse weather versus the impact
of increased legislation in line with
our TCFD climate assessment.
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INTERNAL CONTROL AND RISK MANAGEMENT CONTINUED
PRINCIPAL RISKS AND UNCERTAINTIES
The Group’s decentralised operating model helps
mitigate the potential impact of our principal risks.
The risks summarised below
represent the principal risks and
uncertainties faced by the Group,
and the steps taken to mitigate
them. These have been determined
by the Board, using the robust risk
evaluation described on the previous
page, as having the potential
to have a material impact to the
performance, position or future
prospects of the Group.
There have been some changes
to the Group's principal risks
during the year:
• Two climate-related risks:
maximum legislation and
maximum impact, have been
added to incorporate our TCFD
risk assessment.
• Supply Chain has been
disaggregated into loss of
key suppliers and supply chain
disruption given the differing
nature of the mitigating actions.
• Inflationary environment and
foreign currency have been
removed from the register of
principal risks as they are part
of the underlying operating
environment, managed through
standard operating procedures.
The Group's medium/high risks
have been identified in the upper
right four quadrants of the matrix.
These risks and their corresponding
mitigating actions are summarised
in the table overleaf.
GROUP RISK MATRIX
Likely
50-90%
chance
Y
T
I
L
I
B
A
B
O
R
P
Moderate
10-50%
chance
1
2
3
Unlikely
1-10%
chance
5
6
8
9
4
7
Minor
Some disruption
possible
Moderate
Significant
time/resources
required
Major
Potential for
severe damage
CONSEQUENCES
Operational
1 Health & Safety
2 Inventory obsolescence
3 Key systems failure
4 Unsuccessful acquisition
5 Failure to attract, develop
& retain talent
6 Cyber attack
7 Product liability
Strategic
8 Supply chain disruption
9 Loss of key supplier
Loss of key customer
Macro
Climate - max legislation
Pandemic
Climate - max impact
Prolonged market downturn
Geopolitical trade issues
Risk assessment
High risk
Medium risk
Low risk
DIPLOMA PLC ANNUAL REPORT 2023 − 45
Increase
No change
Decrease
New risk
PRINCIPAL RISK
RISK DESCRIPTION AND ASSESSMENT MITIGATION
UNSUCCESSFUL
ACQUISITION
Risk category
Operational
Board risk appetite
Cautious
Change in risk
The following are the key risks
of an acquisition process:
• The Group may overpay
for a target.
• The acquired business may
experience limited growth
post-acquisition.
• Loss of key customers or
suppliers post integration.
• Potential cultural misfit as smaller
businesses are faced with the new
requirements of a listed Company.
The acquisition pipeline
remains healthy and we
retain our disciplined approach
to acquiring high-quality,
value-enhancing businesses.
The above may be the result
of inadequate due diligence,
poor integration or unrealistic
assumptions used in the
investment case.
FAILURE TO ATTRACT,
RETAIN AND DEVELOP
TALENT
Risk category
Operational
Board risk appetite
Cautious
Change in risk
The success of the Group is built on
strong, self-standing management
teams, which are committed to the
success of their respective
operating businesses. As a result,
the loss of key personnel can have
an impact on performance for
a limited time period.
Not having the right talent or
diversity at all levels of the
organisation to deliver our
strategy, resulting in reduced
financial performance.
This risk remains elevated
due to tight labour markets
affecting candidate availability
and retention, upward pressure
on wage levels in certain
geographies, and changing
expectations of working
environments.
Diploma has a strong history of
executing a clearly defined, disciplined
acquisition approach to acquire high-
quality, value-enhancing businesses.
The Corporate Development team is
responsible for seeking and evaluating
new acquisition opportunities with the
Group Corporate Development
Director reporting to the CEO.
A formal due diligence process is
followed for every acquisition, with
close supervision by the CEO, CFO
and relevant Group senior management.
A formal governance process is in place
up to Board level.
A disciplined post-acquisition
integration process covers operational,
financial, governance, legal and
reporting matters.
The Board reviews performance
of recent acquisitions annually.
Contractual terms such as notice
periods and non-compete clauses
can mitigate the risk in the short term.
The Group places very high importance
on talent development, motivation
and reward:
• Ensuring a challenging working
environment where managers
feel they have control over, and
responsibility for their businesses.
• Implementing a structured
talent review process for the
development, retention and
succession of key personnel.
• Offering balanced and competitive
compensation packages with
a combination of salary, annual
bonus, and long-term cash or
share incentive plans.
• Giving the freedom, encouragement,
financial resources and strategic
support for managers to pursue
ambitious growth plans.
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INTERNAL CONTROL AND RISK MANAGEMENT CONTINUED
PRINCIPAL RISK
RISK DESCRIPTION AND ASSESSMENT MITIGATION
CYBER ATTACK
Risk category
Operational
Board risk appetite
Cautious
Change in risk
The risk of cyber attacks
remains high.
Group and operating business
management depend critically on
timely and reliable information from
their IT systems to run their
businesses and serve their
customers’ needs.
The decentralised nature of the Group,
including stand-alone IT systems for
each business, limits the potential
impact to any individual business.
There is good support and back-up
built into local IT systems.
Any disruption or denial of service
may delay or impact decision-
making if reliable data is unavailable.
Poor information handling or
interruption of business may also
lead to reduced service to
customers. Unintended actions of
employees caused by a cyber attack
may also lead to disruption,
including fraud.
All businesses in the Group have a
robust cyber security programme and
we regularly engage with cyber security
experts to continuously improve and
strengthen our IT systems.
A formalised ERP approval and
implementation process ensures
businesses have the most suitable
IT systems to effectively manage
their business.
Business continuity plans exist for
each business with ongoing testing.
SUPPLY CHAIN
DISRUPTION
Risk category
Strategic
Board risk appetite
Cautious
Change in risk
This risk is less acute than in
the prior year, and our supplier
relationships remain strong,
supported by the ongoing
rollout of our Supplier Code.
The risk of manufacturing lead times
increasing as a result of supply chain
shortages or supply chain partners
not operating to the same ethical
standards as Diploma.
We maintain strong relationships with
suppliers and keep customers updated
of any changes to retain key business.
Meeting with key customers regularly
to gain insight into their product
requirements and market
developments.
We work with our supply chain partners
to help them meet our standards
of acceptable working conditions,
financial stability, ethics and technical
competence. Our key suppliers are
also asked to adhere to our Supplier
Code. If they are unable to meet the
standards expected then we will
source product elsewhere.
DIPLOMA PLC ANNUAL REPORT 2023 − 47
Increase
No change
Decrease
New risk
PRINCIPAL RISK
RISK DESCRIPTION AND ASSESSMENT MITIGATION
LOSS OF KEY SUPPLIER
Risk category
Strategic
Board risk appetite
Cautious
Change in risk
The continued growth and
diversification of the Group
effectively reduces the
materiality of any loss
of supplier.
The risk that a key supplier revokes
a supply agreement and accesses
the market through a competitor
or directly.
In certain businesses there is a
disintermediation risk where a
supplier may go direct to market
rather than via a distributor.
The key mitigation is the value-add
service we provide to our supply
partners, enabling them to access
markets in the most efficient and
effective way.
We continue to pursue diversification
strategies and regularly seek
alternative sourcing.
Long-term, multi-year exclusive
contracts have been signed with
suppliers with change of control
clauses, where applicable, for
protection or compensation in
the event of acquisition.
The risk of increasing environmental
legislation that adds cost or
complexity to products and
services and/or renders some
products obsolete.
CLIMATE - MAX
LEGISLATION
Risk category
Macro
Board risk appetite
Tolerant
Change in risk
This is a new risk identified by
our TCFD scenario analysis.
Our businesses are close to their
customers; have the technical expertise
to specify compound materials;
and enjoy long-term, meaningful
relationships with their suppliers.
We expect them to pivot and adapt
in line with legislation. We have seen
examples of this already, with North
American Seals businesses promoting
and identifying PFAS-free products
to customers.
Our Group has set net zero targets
across our value chain. We expect
our businesses to incorporate this
into their value-add offering and see
this as a competitive advantage for
customers that wish to decarbonise
their supply chain.
Given that many of our businesses are
small-to-medium sized, few of their
competitors have the same access
and resources to analyse and progress
against emissions reduction targets.
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INTERNAL CONTROL AND RISK MANAGEMENT CONTINUED
Increase
No change
Decrease
New risk
PRINCIPAL RISK
RISK DESCRIPTION AND ASSESSMENT MITIGATION
The businesses identify key market
drivers and monitor trends and
forecasts, as well as maintaining
close relationships with key customers,
who may give an early warning of
slowing demand.
A number of characteristics of the
Group’s businesses moderate the impact
of economic and business cycles:
• The Group’s businesses operate in
three different Sectors with different
characteristics and across a number
of geographies and markets.
• The businesses offer specialised
products and services, which are often
specific to their application, increasing
customers’ switching costs.
• A high proportion of the Group’s
revenue comprises consumable
products, which are purchased as part
of the customer’s operating budget,
rather than through capital budgets.
• In many cases the products are used in
MRO applications, rather than original
equipment manufacture.
We continue to diversify our supply
base and invest in product range
development to mitigate exposure
to any single market or region.
Adverse changes in the major
markets that the businesses
operate in can result in slowing
revenue growth due to reduced or
delayed demand for products and
services, or margin pressures due
to increased competition.
PROLONGED MARKET
DOWNTURN
Risk category
Macro
Board risk appetite
Averse
Change in risk
This risk remains at a similar
level to last year and is
addressed continuously in
our risk management process.
GEOPOLITICAL TRADE
ISSUES
Risk category
Macro
Board risk appetite
Averse
Change in risk
This risk remains elevated in
certain geographies, including
due to ongoing events such as
the conflicts in Ukraine and the
Middle East.
Diploma operates in established
economies with stable political and
legal systems with immaterial
exposure to current geopolitical
'hot spots' such as Russia and the
Middle East.
Geopolitical events that could
disrupt the Group’s operations
include:
• Interruption of trade agreements;
• Change of trade or tariff
relationships between countries
in which we operate;
• Government budget spending;
and
• Political elections.
DIPLOMA PLC ANNUAL REPORT 2023 − 49
In addition, the Group has also
carried out reverse stress tests
against the base case financial
projections to determine the
conditions that would result in
a breach of financial covenant.
The conclusion of this was that
the conditions required to create
the reverse stress test scenarios
on revenue, operating margin and
cash flows were so severe that they
were implausible.
The Directors therefore confirm that
they have a reasonable expectation
that the Group will continue to
operate and meet its liabilities, as
they fall due, for the next three years
to September 2026. The Directors’
assessment has been made with
reference to the resilience of the
Group as evidenced by its robust
performance since the Covid-19
pandemic, its strong financial
position and cash generation,
the Group’s current strategy,
the Board’s risk appetite and the
Group’s principal risks and how
these are managed, as described
in the Strategic Report.
VIABILITY STATEMENT – DIPLOMA PLC
In accordance with the UK Corporate Governance Code,
the Directors have assessed the viability of the Group
over a three-year period to 30 September 2026, which
is a longer period than the 12-month outlook required
in adopting the going concern basis of accounting.
A period of three years has been
chosen for this assessment, having
considered the speed and degree of
change possible in key assumptions
influencing the Group, as well as the
speed of evolution of the footprint of
the Group, which collectively limits
the Directors' ability to predict
beyond the period chosen reliably.
Given the pace of change in the
primary end segments in which
the Group operates, the Directors
believe that three years represents
the most appropriate timescale over
which to assess the Group’s viability.
This timescale is consistent with
the Board’s review of the Group’s
strategy at which the prospects
of each business are discussed.
As part of this, assumptions are
made regarding entering into
new markets and geographies;
about future growth rates of the
existing businesses; and about
the acceptable performance of
existing businesses.
The Directors confirm that this
robust assessment also considers
the principal risks facing the Group,
as described on pages 44 to 48,
and the potential impacts these risks
would have on the Group’s business
model, future performance, solvency
or liquidity over the assessment
period. The Board considers that
the diverse nature of the Sectors
and geographies in which the
Group operates acts significantly
to mitigate the impact any of these
risks might have on the Group.
The viability assessment considers
severe but plausible scenarios
aligned to the principal risks facing
the Group where the realisation of
these risks is considered remote,
considering the effectiveness of
the Group’s risk management and
controls and current risk appetite.
A robust financial model of the Group
is built on a business-by-business
basis and the metrics for the Group’s
key performance indicators (KPIs)
are reviewed for the assessment
period. The Group’s KPIs have been
subjected to sensitivity analysis that
includes flexing a number of the main
assumptions, namely future revenue
growth, operating margins and cash
flows as a consequence of adverse
trading impacts arising from a
downturn in the major end markets in
which the businesses operate, supply
chain disruption and climate related
risks. The degree of severity applied
in this sensitised scenario was based
on management’s experience and
knowledge of the Sectors in which
the Group operates.
The results of flexing these
assumptions, in aggregate to reflect
a severe but plausible scenario, are
used to determine whether additional
bank facilities will be required during
this period. The Group has significant
financial resources including banking
facilities as detailed on pages 157 -
158. The Group also has a broad
spread of customers and suppliers
across different geographic areas
and independent market sectors,
often secured with longer-term
agreements. The Group is further
supported by a robust balance sheet
and strong operational cash flows.
Strategic ReviewCorporate GovernanceFinancial StatementsOther InformationCorporate GovernanceStrategic ReportFinancial Statements 50 − DIPLOMA PLC ANNUAL REPORT 2023
ENGAGEMENT WITH STAKEHOLDERS
AND SECTION 172 STATEMENT
EMBEDDING
STAKEHOLDER VIEWS,
GUIDED BY OUR
PURPOSE
Our business strategy is shaped and informed by the
views of our stakeholders and we have always believed
that stakeholder engagement is vital to building a
sustainable business.
S172
Section 172 of the Companies Act
2006 requires the Directors to
promote the success of the
Company for the benefit of the
members as a whole, having regard
to the interests of stakeholders in
their decision-making.
In discharging their duties, each
Director will seek to balance the
interests, views and expectations
of the various stakeholders, whilst
recognising that not every matter
will be equally relevant to each
stakeholder nor every decision
necessarily result in a positive
outcome for all. Decisions will be
consistent with Diploma’s purpose
and ultimately promote the long-
term success of the Group.
STAKEHOLDER ENGAGEMENT
The Board is committed to effective
engagement with all stakeholders and
has established a culture that ensures
this commitment is adopted within our
businesses. Directors consider the
views and interests of a wide set of
stakeholders and are conscious that
expectations around our performance
and contribution to society – from
local to global – are both diverse and
continuously evolving.
Stakeholder interactions take
place at all levels of the Group
and an essential component of
our strategy is that we recognise
the value of autonomy and ensure
that decisions are made at the
appropriate level.
The Board will sometimes engage
directly with stakeholders on certain
issues where appropriate to do so,
but the decentralised nature of our
Group and resultant distribution of
our stakeholders mean that some
stakeholder engagement is more
appropriate at an operational level.
Our governance framework
delegates authority for local
decision-making to the appropriate
level within a defined set of
parameters. This allows Sectors
and businesses to take account
of the needs of their own specific
key stakeholders in their decision-
making. Our strong management
teams make decisions with a long-
term view and to the highest
standards of conduct in line with
overarching Group governance.
The Board receives and debates
regular reports from the Executive
Team, who in turn have continuing
dialogue with Sector and business
management, to help it understand
and assess the impact of our
business, and the interests and
views of our key stakeholders.
It also reviews strategy, financial and
operational performance, as well as
information covering areas such as
key risks, and legal and regulatory
compliance. All Group and subsidiary
board papers must demonstrate that
relevant stakeholder perspectives
and needs have been considered
as part of the decision-making
process. As a result of these
activities, the Board has an overview
of engagement with stakeholders,
and other relevant factors, which
enable the Directors to comply with
their legal duties under s172 of the
Companies Act 2006 and therefore
improve decision-making.
Please see pages 85 to 87 for details
on how the Board operates and
the way in which the Board and
its Committees reach decisions,
including the matters we discussed
during the year.
DIPLOMA PLC ANNUAL REPORT 2023 − 51
HOW STAKEHOLDER
INTERESTS HAVE INFLUENCED
DECISION-MAKING
Decisions taken by the Board and its
Committees consider the interests of
our key stakeholders, the impacts of
these decisions and the need to
foster the Company’s business
relationships with customers,
suppliers and other stakeholders.
The Board acknowledges that
not every decision it makes will
necessarily result in a positive
outcome for all stakeholders
and the Board frequently has to
make difficult decisions based on
competing priorities. By considering
the Group’s purpose and values
together with its strategic priorities
and having a process in place for
decision-making, Directors aim
to balance those different
perspectives.
Throughout this Strategic Report,
the Board has sought to demonstrate
how the views of our stakeholders
are embedded in how we do
business, guided by our clear
purpose. Details of the matters
considered by the Board during
the year can be found on page 79.
Set out overleaf are some examples
of decisions made by the Board
in the year.
EQUITY PLACING
In March 2023, following consultation
with key shareholders, the Company
raised 9,350,965 new ordinary
shares, resulting in a 7.5% increase in
the issued ordinary share capital with
gross proceeds of approximately
£236m. The Board was confident
that the proceeds of the capital raise
could be deployed against strongly
value-enhancing opportunities,
whilst maintaining rigorous discipline
to capital allocation.
DIVIDEND
One of the principal decisions
considered by the Board over the
year has been in relation to returning
value to shareholders. The Board has
adopted a progressive dividend
strategy, which considers our
shareholders’ expectations, the
Company’s liquidity position, and
the financial resources required
to execute our strategy.
ACQUISITIONS
Acquisition opportunities remain
central to our strategy, but the
Board is also mindful of their
potential impact on our existing
stakeholders. Throughout the year,
the Board discussed and approved
several new opportunities and
projects across our Sectors. The
Board receives detailed proposals
from our CEO and Corporate
Development team in respect of
a potential acquisition to consider
the long-term impact, allowing us
to make careful investments in
businesses that possess essential
Diploma characteristics, particularly
high-quality, value-add customer
servicing distribution and great
management teams. The Board
balances the financial commitment
required against the risks and
anticipated return, the relative
benefits of capital investment within
existing businesses, potential cultural
differences, local regulatory or
community impacts as well as how
it will be perceived by investors. The
Board was particularly cognisant that
investors would want to understand
how any acquisitions would fit within
the existing financial framework and
the impact, if any, on cash flow, and
capital investment.
Strategic ReviewCorporate GovernanceFinancial StatementsOther InformationCorporate GovernanceStrategic ReportFinancial Statements 52 − DIPLOMA PLC ANNUAL REPORT 2023
ENGAGEMENT WITH STAKEHOLDERS AND SECTION 172 STATEMENT CONTINUED
HOW WE ENGAGE WITH OUR STAKEHOLDERS
OUR COLLEAGUES
OUR BUSINESSES
OUR CUSTOMERS
OUR SUPPLY CHAIN
OUR INVESTORS
ENVIRONMENT
AND COMMUNITIES
WHY WE ENGAGE
Diploma’s success depends on its ability
to attract and retain qualified and
experienced employees.
WHY WE ENGAGE
It is imperative that we maintain good
levels of engagement with our
businesses to support engagement,
ensure alignment with our Group
strategy, evolve our culture and facilitate
knowledge sharing and best practice.
WHY WE ENGAGE
We are focused on customer
satisfaction and delivering an excellent
value-add service. We remain engaged
with our customer base, to receive
feedback for continuous improvement
and to build long-lasting relationships.
WHY WE ENGAGE
WHY WE ENGAGE
WHY WE ENGAGE
Our supply chain is fundamental to
We are committed to maintaining an
We value local engagement with our
Diploma’s business and we engage with
open and constructive dialogue with our
communities. We are committed to
our suppliers to encourage and maintain
shareholders, keeping them informed
conducting business sustainably,
collaborative and transparent working
on performance and strategy so that
targeting net zero and creating
relationships.
they can fairly value the Company and
long-term value for stakeholders.
ensure our continued access to capital.
HOW WE ENGAGE
• Group Colleague Engagement
Survey, listening groups and
engagement plans
• Regular business visits
• Consistent talent and performance
management approach
• Internal communications through
Purple Pages, our Group-wide
internal newsletter, regular CEO
videos and internal memos
• Employee Assistance Programme
• Talent development, DVR governance
and training via our Group learning
management system
• Regular updates from the Group
CEO, Group HR Director,
Group Corporate Development
Director and Sector CEOs
• Feedback from the Group Colleague
Engagement Survey
• Bi-annual facility visits
OUTCOMES/ACTION TAKEN
Following the engagement survey
results, the Board is aware of areas of
improvement and the following actions
were taken:
• Colleague champion nominations
• Workshops delivered on DEI and
Women’s focus groups
• Mental health first aiders
Training & development initiatives:
• Launched the Leadership at
Scale Programme, attended by
35 senior colleagues
• Apprenticeship Week celebration
HOW WE ENGAGE
• Quarterly business reviews
• Regular business visits from Group
• Quarterly SLT meetings
• In-person Sector conferences
• CEO updates
• Regular updates from Sector CEOs
• Business visits – this year our Board
visited Acernis Medical in Canada,
and Simonsen & Weel in Denmark
HOW WE ENGAGE
• Decentralised model: individual
businesses have close customer
relationships and are responsive
to their needs
• Conferences and trade events
• Long-term relationships
• CEO reports
• Updates from Sector CEOs
• Risk management
OUTCOMES/ACTION TAKEN
• Onboarding programmes for
all acquisitions, including DICSA
and T.I.E.
OUTCOMES/ACTION TAKEN
• Product innovations across Life
Sciences and other Sectors
• Workshops and customer education
• Celebration of apprentices,
at our facilities
who visited head office to meet
senior management, meet other
apprentices, and learn about Diploma
• Providing value-add services
OUTCOMES/ACTION TAKEN
• Strong, mutually beneficial
partnerships
• Increased number of key suppliers
signed up to Group Supplier Code
• Ongoing collaboration to realise
• Strategic alignment and growth
innovation
opportunities
OUTCOMES/ACTION TAKEN
OUTCOMES/ACTION TAKEN
• Updated website, providing investors
As a result of the aforementioned
(both current and prospective) with a
engagement activities, the following
better understanding of our past and
actions were taken:
current performance, regulatory
announcements, strategy and
various reports
• Continuing initiatives for business
relocations to more energy efficient
facilities where possible
• Investor Seminar took place in
• Continuing to transition to renewable
June this year
HOW WE ENGAGE
HOW WE ENGAGE
• Decentralised model: individual
• Results presentations by CEO
businesses maintain close
relationships with suppliers
and CFO
• Regular engagement, including
by CEO, CFO and Head of Investor
• One-on-one meetings undertaken
• Group Environmental Policy
audits as appropriate
• Supply Chain Policy
• Clear payment practices
• Updates from Group CEO and
Sector CEOs
• Supply chain reporting
• Modern Slavery Statement
• Risk management
Relations throughout the year,
including results roadshows
• Annual General Meeting
• Trading updates, regulatory news
items and website updates
• ESG rating schemes
• Responses to general investor
enquiries
• CEO and CFO feedback on results
• Engagement with the Chair and
Committee Chairs as appropriate;
including consultation with
shareholders on remuneration
and the new remuneration policy
• Shareholder briefings and investor
relations update by the Head of
Investor Relations
• Approval of trading updates, half
year and full year results and RNSs
• Reviews of analysts’ research
HOW WE ENGAGE
• The Group matches donations
fundraised by the businesses
• More frequent greenhouse gas
emissions reporting
• Integrated waste reporting
• DVR governance and workshops
• Training key roles to achieve net
zero targets
• CEO reports
Committees
and trends
• Updates from biannual DVR
• Training on climate-related issues
energy by partnering with electric
companies and investing in
technological advancements
• Positioning the businesses to
support the transition to a lower
carbon economy
HOW WE ENGAGE WITH OUR STAKEHOLDERS
Survey, listening groups and
engagement plans
• Regular business visits
• Consistent talent and performance
management approach
• Internal communications through
Purple Pages, our Group-wide
internal newsletter, regular CEO
videos and internal memos
• Employee Assistance Programme
• Talent development, DVR governance
and training via our Group learning
management system
• Regular updates from the Group
CEO, Group HR Director,
Group Corporate Development
Director and Sector CEOs
• Feedback from the Group Colleague
Engagement Survey
• Bi-annual facility visits
were taken:
• Colleague champion nominations
• Workshops delivered on DEI and
Women’s focus groups
• Mental health first aiders
Training & development initiatives:
• Launched the Leadership at
Scale Programme, attended by
35 senior colleagues
• Apprenticeship Week celebration
OUR COLLEAGUES
OUR BUSINESSES
OUR CUSTOMERS
OUR SUPPLY CHAIN
OUR INVESTORS
WHY WE ENGAGE
WHY WE ENGAGE
WHY WE ENGAGE
Diploma’s success depends on its ability
It is imperative that we maintain good
We are focused on customer
to attract and retain qualified and
levels of engagement with our
satisfaction and delivering an excellent
experienced employees.
businesses to support engagement,
value-add service. We remain engaged
ensure alignment with our Group
with our customer base, to receive
strategy, evolve our culture and facilitate
feedback for continuous improvement
knowledge sharing and best practice.
and to build long-lasting relationships.
WHY WE ENGAGE
Our supply chain is fundamental to
Diploma’s business and we engage with
our suppliers to encourage and maintain
collaborative and transparent working
relationships.
WHY WE ENGAGE
We are committed to maintaining an
open and constructive dialogue with our
shareholders, keeping them informed
on performance and strategy so that
they can fairly value the Company and
ensure our continued access to capital.
HOW WE ENGAGE
HOW WE ENGAGE
• Group Colleague Engagement
• Quarterly business reviews
• Regular business visits from Group
• Quarterly SLT meetings
• In-person Sector conferences
• CEO updates
• Regular updates from Sector CEOs
• Business visits – this year our Board
visited Acernis Medical in Canada,
and Simonsen & Weel in Denmark
HOW WE ENGAGE
• Decentralised model: individual
businesses have close customer
relationships and are responsive
to their needs
• Conferences and trade events
• Long-term relationships
• CEO reports
• Updates from Sector CEOs
• Risk management
HOW WE ENGAGE
• Decentralised model: individual
businesses maintain close
relationships with suppliers
• Regular engagement, including
audits as appropriate
• Supply Chain Policy
• Clear payment practices
• Updates from Group CEO and
Sector CEOs
• Supply chain reporting
• Modern Slavery Statement
• Risk management
HOW WE ENGAGE
• Results presentations by CEO
and CFO
• One-on-one meetings undertaken
by CEO, CFO and Head of Investor
Relations throughout the year,
including results roadshows
• Annual General Meeting
• Trading updates, regulatory news
items and website updates
• ESG rating schemes
• Responses to general investor
enquiries
• CEO and CFO feedback on results
• Engagement with the Chair and
Committee Chairs as appropriate;
including consultation with
shareholders on remuneration
and the new remuneration policy
• Shareholder briefings and investor
relations update by the Head of
Investor Relations
• Approval of trading updates, half
year and full year results and RNSs
• Reviews of analysts’ research
OUTCOMES/ACTION TAKEN
Following the engagement survey
OUTCOMES/ACTION TAKEN
• Onboarding programmes for
OUTCOMES/ACTION TAKEN
• Product innovations across Life
results, the Board is aware of areas of
all acquisitions, including DICSA
Sciences and other Sectors
improvement and the following actions
and T.I.E.
• Celebration of apprentices,
at our facilities
who visited head office to meet
senior management, meet other
apprentices, and learn about Diploma
• Workshops and customer education
• Providing value-add services
OUTCOMES/ACTION TAKEN
• Strong, mutually beneficial
partnerships
• Increased number of key suppliers
signed up to Group Supplier Code
• Ongoing collaboration to realise
innovation
• Strategic alignment and growth
opportunities
OUTCOMES/ACTION TAKEN
• Updated website, providing investors
(both current and prospective) with a
better understanding of our past and
current performance, regulatory
announcements, strategy and
various reports
• Investor Seminar took place in
June this year
DIPLOMA PLC ANNUAL REPORT 2023 − 53
ENVIRONMENT
AND COMMUNITIES
WHY WE ENGAGE
We value local engagement with our
communities. We are committed to
conducting business sustainably,
targeting net zero and creating
long-term value for stakeholders.
HOW WE ENGAGE
• The Group matches donations
fundraised by the businesses
• Group Environmental Policy
• More frequent greenhouse gas
emissions reporting
• Integrated waste reporting
• DVR governance and workshops
• Training key roles to achieve net
zero targets
• CEO reports
• Updates from biannual DVR
Committees
• Training on climate-related issues
and trends
OUTCOMES/ACTION TAKEN
As a result of the aforementioned
engagement activities, the following
actions were taken:
• Continuing initiatives for business
relocations to more energy efficient
facilities where possible
• Continuing to transition to renewable
energy by partnering with electric
companies and investing in
technological advancements
• Positioning the businesses to
support the transition to a lower
carbon economy
Strategic ReviewCorporate GovernanceFinancial StatementsOther InformationCorporate GovernanceStrategic ReportFinancial Statements 54 − DIPLOMA PLC ANNUAL REPORT 2023
DELIVERING VALUE RESPONSIBLY
GROWTH WITH
POSITIVE IMPACT
We are determined to make a difference. For our Delivering
Value Responsibly (DVR) framework, that means that we
need objectives that are linked to our business model and
embedded in the business strategy and commercial and
operational activities.
SUPPLY
CHAIN
HEALTH
& SAFETY
COLLEAGUE
ENGAGEMENT
WASTE
REDUCTION
DIVERSITY,
EQUITY &
INCLUSION
DELIVERING
FOR OUR
PEOPLE
DOING
BUSINESS
RESPONSIBLY
DELIVERING
VALUE
RESPONSIBLY
DELIVERING
FOR THE
ENVIRONMENT
CLIMATE
ACTION
POSITIVE IMPACT REVENUE
NON-FINANCIAL KPIS
These are the metrics we use to measure progress against our DVR framework and wider strategy.
COLLEAGUE
ENGAGEMENT
80%
2022: 79%
WOMEN IN SENIOR
MANAGEMENT TEAM
POSITONS
28%
2022: 27%
KEY SUPPLIERS ALIGNED
TO SUPPLIER CODE
EMISSIONS INTENSITY
(TONNES PER £1M REVENUE)
73%
2022: 59%
LOST TIME INCIDENT
RATE (LTIS PER 1,000
EMPLOYEES)
9.5
2022: 10.6
7.2
2022: 7.4
WASTE TO
LANDFILL
32%
2022: 60%
DIPLOMA PLC ANNUAL REPORT 2023 − 55
01
DELIVERING
FOR OUR PEOPLE
We are building an engaged and diverse workforce,
who can reach their full potential as part of Diploma.
Our colleagues are the foundation
of our business. They deliver for our
customers, execute against our
strategy and are essential to our
ongoing success. It is critical that
we continue to support
their success.
Developing our leaders at pace.
Our businesses are run by our
brilliant leaders. We must continue
to develop them as our Group and
businesses scale.
Colleague engagement.
Our colleagues have great technical
expertise and in-depth knowledge
of their customers and markets.
Engagement helps us to retain that
talent and nurture the unique
culture that binds us.
Developing our emerging talent.
We must continue to deepen our
breadth and depth of expertise in
the areas that make the biggest
difference to our businesses.
We continue to focus on DEI
to ensure that all our colleagues are
given the opportunity to succeed.
DONNA CATLEY
GROUP HR DIRECTOR
“ We need exceptional
leaders who are
empowered to lead,
when coupled with our
ambitious growth we
have a very compelling
people proposition.”
Strategic ReviewCorporate GovernanceFinancial StatementsOther InformationCorporate GovernanceStrategic ReportFinancial Statements 56 − DIPLOMA PLC ANNUAL REPORT 2023
DELIVERING VALUE RESPONSIBLY
DELIVERING FOR OUR PEOPLE CONTINUED
PERFORMANCE AGAINST OUR TARGET
FOCUS
AREA
FY30
TARGET
FY23 PERFORMANCE
AGAINST TARGET
FY22
COMMITMENTS
FY23 PERFORMANCE AGAINST COMMITMENTS
• Our learning management system,
‘Purple Portal’ has been rolled out
across the Group
• Continued focus on mental health
during the year: celebrations of
world mental health day, business-led
initiatives, and Group-led workshops
• Bolstered HR capability with HR
network established and HR
leadership event held in US
• Successful delivery of our Leadership
at Scale Development Programme
• Colleague engagement plans
in place at every business
• Increase in female representation
at SMT
COLLEAGUE
ENGAGEMENT
STATUS:
ON TRACK
Maintain an
engagement
index of
70%+
• Engagement index
score of 80% - an
increase on FY22
score of 79%
• Build out our
learning
management
system
• Continued
focus on
wellbeing and
mental health
• HR network to
support best
practice
• Continued
leadership
development
DIVERSITY,
EQUITY &
INCLUSION
STATUS:
ON TRACK
Women to
represent
40%+ of
Senior
Management
Team (SMT)
• Female talent
retention and
planning part
of business and
strategy reviews
• DEI policy
implemented
across the Group
• Succession
planning
• Implementing
the Diversity,
Equity and
Inclusion
Policy across
the Group
• Engagement
• Further
learning and
knowledge
sharing
initiatives across
the Group,
including equity
workshops and
women’s listening
groups held with
over 100 women,
including key senior
talent to help define
our areas of focus
1. COLLEAGUE ENGAGEMENT
In 2023, we surveyed colleagues
across the Group for the third time.
We are delighted to have maintained
our high response rate of 86%. Our
overall engagement score increased
to 80%, compared with 79% in FY22.
There were some areas of standout
success. 88% of colleagues told us
they feel empowered to do their job.
This was further supported by high
scores relating to clarity on objectives
at work, as well as our culture of
teamwork and collaboration.
belonging to an ethnic minority are
as engaged, or more engaged than
white, male colleagues.
However, we are not complacent and
recognise that there is more work to
do. We need to continue
strengthening communication ties
and ensure colleagues have access
to the learning and progression
opportunities that come with a
growing business. Every business
is now working hard to co-create
action plans informed by our
colleagues’ feedback.
We are proud to hear that women
and colleagues identifying as
Retention is equally important and
we are pleased to have reduced our
overall voluntary attrition by 4% in
the last year (21.7% to 17.7%), this
is especially significant given the
context of the UK/US labour market.
88%
of colleagues told us
they feel empowered
to do their job
DIPLOMA PLC ANNUAL REPORT 2023 − 57
2. DEVELOPING LEADERS AT PACE
Our decentralised model spans
16 business units, three Sectors and
multiple geographies. It’s a model
that puts our customers at the heart
of what we do, promotes local
ownership, empowers our leaders
to make the right decisions for their
business, and drives a culture of
accountability and ambition. The
best decisions are made by leaders
who are closest to our customers,
employees and markets.
To ensure the success of this model
we need exceptional leaders who are
empowered to lead their business.
This ownership, when coupled with
our ambitious growth makes our
people proposition very compelling.
To accelerate the development
of our leaders we have invested in
bespoke leadership development
targeted at supporting both Senior
and Future Leaders as they consider
how to Lead at Scale.
It is an opportunity for us to build
relationships across our global
business and share best practice.
Following the success of this year’s
programme, which was attended by
over 30 of our senior leaders, we will
be extending the programme further
across Europe, US and Australia
during FY24.
3. MENTAL HEALTH & WELLBEING
We are mindful of the potential
impact that working environments
and practices can have on our
colleagues.
Our businesses are very engaged
in supporting the mental health and
wellbeing of their colleagues. Many
of our businesses now have trained
mental health first aiders in place,
whilst others have brought in
external expertise to teach
colleagues how to build resilience,
improve communication and create
healthy and sustainable habits. For
other businesses, the focus is on
building awareness - through ‘tea
and toast’ sessions, Mindfulness
Monday or a day every week
dedicated to open discussion
of mental health.
ELENA
LOCASTRO
VP OF LIFE SCIENCES
NORTH AMERICA
I joined Diploma in 2004, when the
business I worked for - Somagen
Diagnostics - was acquired. In
2009, I was appointed Managing
Director and every year since has
offered new challenges and
successes as we’ve grown and
scaled the business.
I have recently been promoted
to Senior Vice President, North
America for the Life Sciences
Sector. It’s an exciting and
rewarding role, with many
opportunities ahead.
During my time at Diploma, I’ve had
the opportunity to focus on talent
development and diversification
of our businesses. I’ve enjoyed
working with our colleagues to
develop exceptional talent
within the Sector and it has been
rewarding to work with my team
to build purpose and culture.
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DELIVERING VALUE RESPONSIBLY
DELIVERING FOR OUR PEOPLE CONTINUED
4. DEVELOPING OUR
EMERGING TALENT
We know that the successful
development of emerging talent is
key to the future of our companies
and that is why we are particularly
proud of our apprenticeship
programme.
For many of our businesses,
apprentices are a key source of
talent. We work hard to support,
develop and upskill our apprentices,
who often remain with the Group
for decades, adopting a number
of roles including, in some cases,
Managing Director.
During the year, we also worked
to retain and develop key talent
by facilitating movement between
businesses and secondment of roles
into businesses.
We continue to actively work with
our businesses to ensure people
development is high on the agenda,
and we are helping to build out local
plans that play an important role
in ensuring that we have strong
succession pipelines to support
our future growth and scale.
CELEBRATING
OUR
APPRENTICES
We were delighted to welcome our UK apprentices
to the Diploma PLC office to celebrate National
Apprenticeship Week in March this year.
Apprenticeship schemes play a huge role in developing
and retaining talent across our businesses.
At our M Seals UK division, 24% of colleagues are either
current or former apprentices and 85% of the shop floor
team joined as apprentices or school leavers.
5. CONTINUED FOCUS ON
DIVERSITY AND INCLUSION
Diversity and inclusion is a
competitive advantage that can help
our businesses grow. We have set an
ambition that all our colleagues feel
able to bring their full selves to work,
fulfil their potential, and benefit
from working as part of a diverse
team. To realise that vision, we
must attract, retain and develop
a diverse workforce.
Gender balance - we recognise that
we have more to do to drive diversity
across our senior team and this is
why we have set ourselves the goal
of gender parity by 2030. This year
our Senior Leadership Team is made
up of 28% women, up from 27% in
2022. Our continued focus is
producing results – we recently
promoted two female leaders to
our Life Sciences Executive Team.
We have conducted listening
groups with over one hundred
women across the Diploma business
to hear first-hand their experiences
and insights. As a result we will be
designing and implementing a global
Women in Leadership programme
that will be implemented in FY24
and will support the accelerated
development of female talent
across the Group.
We will also focus on supporting our
businesses to hire for diversity -
including how to attract and hire.
DIPLOMA PLC ANNUAL REPORT 2023 − 59
Recognising the importance of
support for mothers returning from
maternity leave, we are delighted to
announce a partnership with ‘Mentor
Mums’ in the UK. Through this
partnership, we aim to enhance
our support and coaching for new
mothers returning to the workplace.
Diversity, Equity & Inclusion
MALE FEMALE OTHER TOTAL
28
7
0
35
Reporting to
Executives
80% Male
Race and ethnicity - alongside
gender equality, we are building
the foundations for greater ethnic
diversity. Currently, 8% of our
Senior Leadership Team consider
themselves to be in an ethnic
minority. Growing our ethnic
diversity relative to the markets
we operate in is our future goal
and work is underway to establish
a clear baseline for measured
future progress.
Fostering inclusion - we continue
to focus on fostering a culture of
inclusion and community. We were
pleased to see this reflected in the
results of our recent colleague
engagement survey.
It is humbling to see how our
companies continue to build
inclusive businesses and support
our people so they can drive the
growth of our businesses. This is
testament to our culture and
organisation model.
Finally, a huge thanks to our
colleagues across the globe
who deliver for our customers
and colleagues every day.
20% Female
MALE FEMALE OTHER TOTAL
98
39
0
137
Senior
Management
Team
72% Male
28% Female
MALE FEMALE OTHER TOTAL
Employees 2,176
997
1
3,174
69% Male
31% Female
0% Other
Ethnicity
ETHNIC
MINORITY
NON-
ETHNIC
MINORITY
PREFER
NOT
TO SAY TOTAL
Senior
Management
Team
11
103
23
137
75% Non-Ethnic Minority
17% Prefer not to say
8% Ethnic Minority
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DELIVERING VALUE RESPONSIBLY CONTINUED
02
DOING
BUSINESS
RESPONSIBLY
Ensuring the highest standards of ethics, safety
and conduct across our Group.
Keeping our colleagues healthy,
safe and well is a prerequisite to
doing business. We have a duty of
care to any person who is working
remotely, working at, or visiting
a Diploma business.
We have outlined a vision that no
one should be harmed at work. In
order to achieve this, we will focus
on risk mitigation and a proactive
Health & Safety culture.
Management of our supply chain
is key to our broader social and
environmental impact as a Group,
and a key part of our strategy and
commercial proposition. Our focus
will be to work with our suppliers to
tackle climate change and reduce
our own impact through more
sustainable packaging, logistics
and products.
PHIL PRATT
GROUP SUSTAINABILIT Y DIRECTOR
“ Two years on from
the establishment
of our Delivering
Value Responsibly
framework, our
sustainability agenda
aimed at addressing
some of the most
pressing challenges
facing our business
and the world, we are
on track to reach our
FY30 targets.”
DIPLOMA PLC ANNUAL REPORT 2023 − 61
PERFORMANCE AGAINST OUR TARGET
FOCUS
AREA
FY30
TARGET
FY23 PERFORMANCE
AGAINST TARGET
FY22
COMMITMENTS
FY23 PERFORMANCE
AGAINST COMMITMENTS
• 73% of suppliers aligned to code,
• Continue to
up from 59% in FY22.
SUPPLY CHAIN
MANAGEMENT
STATUS:
ON TRACK
85% of key
suppliers
aligned to
supplier code
• Strong progress
during the year
led by meaningful
engagement
with suppliers
• Steady
performance
against LTI rate
undermined by
increase in
severity of
incidents
ensure
alignment of
key suppliers
with Supplier
Code
• Align our
Supply Chain
Policy and
processes with
our net zero
targets
• Build our
understanding
of supplier
emissions
• Build positive
mental health
and wellbeing
• Continuous
improvement
and focus on
Health & Safety
culture
• Ensure process
in place to
reduce risks
identified by
potential
hazard
reporting
HEALTH &
SAFETY
STATUS:
ON TRACK
Zero Harm
• 10% reduction on LTI rate
FY23 target:
5% reduction
on lost time
incident rate
(LTI rate)
Supply Chain Management
We have seen a steep improvement
in the number of key suppliers
aligned to our Supplier Code. 73%
of our key suppliers are aligned to
our Code, up from 59% in FY22,
and accounting for ca. 54% of
total Group supplier spend.
Key suppliers are identified by our
businesses and must, in aggregate,
account for 50% of the Group's
supplier spend. They may also
include any supplier that is a high-
volume or high-spend supplier,
a critical component supplier
or a non-substitutional supplier.
The standards of our Supplier Code
ask our key suppliers to commit to
conducting their business according
to ethical, professional and legal
standards including those relating
to human rights, labour laws,
anti-bribery and corruption
and international trade laws and
sanctions. We also ask our suppliers
to work with us to reduce waste and
emissions within our value chain.
Percentage of identified
key suppliers aligned
with our Supplier Code
73%
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DELIVERING VALUE RESPONSIBLY
DOING BUSINESS RESPONSIBLY CONTINUED
LTI rate
2022
10.6
2023
9.5
Giving Back
Giving back is important to Diploma
and this year we’ve seen a number of
creative initiatives across the Group
to support local communities and
fundraise for charities that are
important to our colleagues.
In line with our decentralised model,
charitable initiatives are driven by
the businesses and matched through
Diploma’s fundmatching scheme.
During the year, charitable donations
across the Group totalled £54,000.
No political donations were made.
Our focus for FY24 will be to embed
the Diploma 'Stand up for Safety'
framework to ensure a consistent
approach to Health & Safety
across all businesses. To support
implementation of the framework,
we will introduce workshops and
enhanced training to ensure strong
safety leadership and effective
standards and governance,
supported by third party audits.
We remain committed to the
ongoing safety and wellbeing of
all colleagues, and will continue to
support our businesses and business
leaders in reaching our long-term
objective of zero harm.
Health & Safety
In line with our decentralised
model, our Managing Directors are
accountable for Health & Safety
in their businesses. Each business
works to build a strong Health
& Safety culture, driven by the
Managing Director and upheld
by all colleagues.
Our Group CEO holds ultimate
responsibility for Health & Safety
across the Group, including ensuring
good governance and provision
of a safe working environment
for all colleagues.
Businesses are responsible for
developing and implementing
procedures and frameworks to
suit their specific circumstances
and risk level. However, we expect
all businesses to comply with the
standards and requirements of
our Group policy.
Our guiding principle is that no one
should be harmed at work. In order
to achieve this, we have focused
on identifying and mitigating risks.
Our Health & Safety KPI is our Lost
Time Incident (LTI) rate, defined
as Lost Time Incidents per 1,000
employees. An LTI is defined as any
incident in which time is lost beyond
time taken for on-site first aid.
During FY22, we set a target of
5% year-on-year reduction in the
LTI rate. In FY23, we recorded a total
of 27 LTIs and an LTI rate of 9.5. This
represents a 10% decrease on the
FY22 rate of 10.6. There were no
fatalities in the year.
The majority of our LTIs relate to
operations of our warehouses, such
as manual handling, slips and trips.
We have identified further areas of
increased risk from poor use of
equipment and programmes are
being implemented to address this.
DIPLOMA PLC ANNUAL REPORT 2023 − 63
03
DELIVERING
FOR THE
ENVIRONMENT
We are delivering against our net zero ambitions
and positioning the Group to contribute positively
to a low-carbon economy.
The climate crisis is urgent and
global, we recognise the impact
of our value chain and the
narrowing window of opportunity
to make a positive contribution in
tackling this crisis. Beyond the
moral obligation that we feel,
we also see how taking action
can contribute to long-term value
creation and the growth of our
businesses.
Our colleagues are increasingly
passionate about climate change
and expect the Group to drive
progress and support business
initiatives. There is also the
opportunity to deliver value
to our customers by offering
more sustainable products and
solutions, building our knowledge
and expertise, and working to be
a more carbon-efficient business
that can in turn support their net
zero goals.
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DELIVERING VALUE RESPONSIBLY
DELIVERING FOR THE ENVIRONMENT CONTINUED
PERFORMANCE AGAINST OUR TARGET
FOCUS AREA
FY30 TARGET
FY23 PERFORMANCE
AGAINST TARGET
FY22
COMMITMENTS
FY23 PERFORMANCE
AGAINST COMMITMENTS
CLIMATE
ACTION
STATUS:
ON TRACK
50% reduction of
Scope 1 & 2 emissions
on FY22 baseline
30% reduction of
Scope 3 emissions
on FY22 baseline
We have also set a
target to reach net zero
across our value chain
by 2045
• Scope 1 and 2
• Set SBTi net zero
• Calculation of Scope
emissions intensity
reduced from 7.4 to
7.2 tonnes CO2e per
£m revenue
target
• Build internal
knowledge of Scopes
1, 2 & 3
3 emissions
• Submission of net
zero targets to the
SBTi
• Set out a clear
• Defined our roadmap
roadmap to our 2030
targets
to 2030 targets
• Workshops held with
all businesses and
Sector leadership
on how to reach
operational net zero
• Capital investment in
facilities to increase
solar coverage and
improve efficiency
WASTE
REDUCTION
Less than 15% waste
to landfill
• 32% to landfill,
representing a
41% reduction
on the prior year
• Divert waste
from landfill
• Reduction in waste
to landfill in every
business across
the Group
STATUS:
ON TRACK
OUR NET ZERO ROADMAP
Our businesses are responsible for setting their own strategy and initiatives
on emissions reduction, in line with our Group target. Our net zero roadmap
supports the Group and our businesses in achieving our targets.
01
UNDERSTAND
As a decentralised
Group, ensuring
that businesses are
engaged and equipped
with the knowledge
and support they need
to effect change, is key
to our success.
02
REDUCE
Businesses are
challenged to make
their operations as
energy-efficient and
low-carbon as possible
and to divert Scope 1
emissions to Scope 2
wherever possible.
03
PROCURE
Procurement of
renewable energy,
in the short term,
is a useful means of
progressing against
our ambitions.
Procurement should be
undertaken with due
diligence to ensure that
it is both responsible
and transparent.
04
GENERATE
Diverting Scope 1
emissions to Scope 2
and eliminating those
emissions through
on-site renewable
energy generation is
our preferred, long-
term method for
reaching net zero.
DIPLOMA PLC ANNUAL REPORT 2023 − 65
OUR NET ZERO ROADMAP CONTINUED
UNDERSTAND
REDUCE
PROCURE
GENERATE
• Scope 3 calculation
the Group on our Net Zero
Roadmap
S • Workshops held across
S
E
R
G
O
R
P
3
2
Y
F
undertaken, which allows
us to understand our
material categories
at Group, Sector and
entity level
• Monthly meetings with
Sector Finance teams to
review performance
new facilities
• Minimum requirements for
• Increase data input for
Scope 3 calculation
) • Energy efficiency audits
0
for key facilities
3
–
4
2
0
2
(
T
X
E
N
S
’
T
A
H
W
• Build engagement and
knowledge of Scope 3
across the Group
• Workshops and roadmap
for top 10 contributors to
Scope 3
• Two new facilities built
during the year with
solar panels
• Reduced emissions
• Businesses starting to
intensity
procure renewable energy
• Investment into new, more
efficient facilities in the
Controls and Seals Sectors
(expected impact in 2024)
• Transitioning fleet to
electric. We have tripled
the number of hybrid or
electric vehicles during
the year
• Where possible, all
• Continue to responsibly
• Continued roll out of
procure renewable energy
solar panel projects and
increased coverage
vehicles to be electric.
Some exceptions might
include utility vehicles
used to carry heavy
equipment over long
distances and in remote
regions in our Australian
Seals businesses
• Continued facility
upgrades and
improvements to
processes
0 • All businesses to
3
Y
F
Y
B
understand how to reduce
emissions across their
value chain and have plans
in place to reach net zero
• All energy reduction
• 100% of energy renewably
initiatives to have been
actioned
procured
• Significant proportion
of energy generated
through solar
SETTING NET ZERO TARGETS
We have calculated our Scope 3
emissions for FY22, using a cost-
based methodology. These have
been submitted to the SBTi, where
they are awaiting validation.
We have set a near-term target of
50% reduction of absolute Scope 1
and 2 emissions by 2030 from an
FY22 base year. We also committed
to reduce our absolute Scope 3
emissions by 30% within the same
timeframe. Our long-term target is
to reduce absolute Scope 1, 2 and 3
GHG emissions 90% by 2045 from
an FY22 base year.
SCOPE 1 & 2
During FY23, Scope 2 represented
60% of our operation emissions.
During the year, our businesses
continued to install LED lights, EV
chargers and change processes
to improve efficiency. We also held
workshops across the businesses
to align on our net zero strategy.
Categories 4 and 9, which relate to
upstream and downstream transport
and distribution are in aggregate
responsible for 34% of Scope 3
emissions. Where possible, we will
shift air freight to lower emission
options, such as shipping or rail,
and select road freight partners
with electric fleets.
SCOPE 3
Scope 3 emissions are the most
material GHG source for the Group,
accounting for 97% of total FY22
emissions. Of the 15 categories
considered, Category 1: Purchased
Goods & Services is 51% of Scope 3.
Our focus will be to engage suppliers
on their emissions initiatives.
EMISSIONS INTENSITY
Emissions intensity decreased
from 7.4 to 7.2 indicating that gross
emissions from existing businesses
remained flat despite an increase in
revenue.
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66 − DIPLOMA PLC ANNUAL REPORT 2023
DELIVERING VALUE RESPONSIBLY
DELIVERING FOR THE ENVIRONMENT CONTINUED
Scope 1 and 2 emissions
8,662 CO2e
2022
2023
GREENHOUSE
GAS
EMISSIONS
1
7
4
,
3
1
9
1
,
5
7.2
7.4
9
0
9
,
2
0
8
5
,
4
TONNES CO2e
FY23
3,471
5,191
5,653
8,662
9,123
FY22
2,909
4,5801
4,806
7,4891
7,715
199,487
206,9761
207,202
TONNES CO2e PER £1M REVENUE
7.2
7.4
Scope 1 emissions
Scope 2 emissions
Location-based
Market-based
Gross emissions
(Scope 1 & 2)
Location-based
Market-based
Scope 3 emissions 2,3
Gross emissions
Location-based
Market-based
Emissions intensity
(Scope 1 and 2)
ENERGY
USAGE
Total energy
consumption
UK
KWH
14,905,885
13,893,454
3,011,796
2,524,621
Scope 1: tonnes CO2e
Scope 2: tonnes CO2e
Emissions intensity
(tonnes CO2e per £m revenue)
1 We have restated our FY22 location-based, Scope 2 figures to reflect updated GHG conversion
factors. We have used the relevant year’s figures to calculate the FY22 and FY23 numbers.
2 We will calculate our FY23 Scope 3 emissions during FY24.
3 Categories correspond to standard Scope 3 categories as defined by GHG Protocol.
WASTE
Although reported waste has
increased by 12%, the reported
waste intensity ratio has decreased
from 3.3 to 3.1.
Importantly, our businesses have
made strong progress on our KPI - %
of total waste to landfill - which has
fallen from 60% during FY22 to 32%
in FY23. This puts us on track to hit
our target of less than 15% waste
to landfill by FY30.
1% OTHER
4% ENERGY FROM WASTE
32% LANDFILL
63% RECYCLING
Waste per £m revenue1
3.3
metric tonnes
Total waste
3,720
metric tonnes
1 Reported waste per £m revenue is 3.1, however,
this number excludes acquisition revenue for
acquisitions that aren’t currently reporting
waste.
DIPLOMA PLC ANNUAL REPORT 2023 − 67
TASKFORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD)
Climate change is an urgent and global crisis and we recognise
the part we play in mitigating its effects.
We set out below our climate-related financial disclosures consistent with all the TCFD recommendations and
recommended disclosures. By this we mean the four TCFD recommedations and the 11 recommeded disclosures set
out in Figure 4 of Section C of the report entitled ‘Recommendations of the Task Force on Climate-related Financial
Disclosures’ published in June 2017 by the TCFD.
GOVERNANCE
MORE
INFORMATION
See our DVR
Governance
structure on
page 87
Review our Risk
Management
framework on
page 42
As part of our ESG programme, Delivering Value Responsibly (DVR), we have an established
governance structure in which the Board has ultimate oversight of, and responsibility for,
climate-related risks and opportunities (CRROs). The Group’s Executive Directors, who are
both members of the Group DVR Steering Committee, are responsible for the delivery of the
Group’s DVR strategy (which includes the management of CRROs) and are the sponsors of its
2045 net zero ambitions.
We have a fully embedded risk management framework, which is overseen by the Board and
the Group CFO, and includes the analysis of CRROs and their materiality to the Group.
They are supported in this by:
COMMITTEE
Executive
Committee
FREQUENCY
RESPONSIBILITIES
Fortnightly updates
Biannual 2-day
strategic meeting
Overseeing and agreeing the Group’s approach to
identifying and managing CRROs. Updated as needed by
Group Sustainability Director. In-depth coverage of DVR
and CRROs at strategic meetings.
DVR Steering
Committee
Monthly
performance
meeting
Quarterly strategic
meeting
Biannual
Governance meeting
Senior Leadership
team (SLT)
Quarterly update
Local DVR
committees
and networks
Varies
Members include the Group CEO, CFO and Sustainability
Director. It sets the Group’s DVR strategy, framework and
governance, and oversees reporting, performance and
development, including the net zero and emissions
reduction strategies and performance. During the year,
it led the climate-related modelling, analysis and review
of principal CRROs.
Governance meeting attendees include Executive Team
and Sector Management. Review progress of strategic
objectives, targets and initiatives, and emerging trends
and relevant risks and opportunities.
Comprised of the business MDs and key senior leaders.
The SLT drives local performance against climate-related
metrics and targets, and identifies and mitigates against
local CRROs.
Share resources and best practice and build local
knowledge and expertise. Annual workshops with Group
on DVR initiatives, targets and strategy.
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68 − DIPLOMA PLC ANNUAL REPORT 2023
DELIVERING VALUE RESPONSIBLY
TASKFORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
GOVERNANCE CONTINUED
The Board is kept informed on all relevant matters, including climate-related issues, in a
number of ways, including: monthly reporting packs, covering financial and non-financial
performance; regular Board meetings, which include CEO updates on DVR and climate-
related strategy and performance; an annual, in-depth DVR update from the Group
Sustainability Director; annual deep-dive reporting on macroeconomic trends, including
the risks of climate change; quarterly climate risk updates, including a review of the Group’s
climate risk management.
The Board considers climate-related issues when reviewing and guiding strategy, major plans
of action, risk management policies, annual budgets and business plans as well as setting the
organisation’s performance objectives, monitoring implementation and performance and
overseeing major capital expenditures, acquisitions and divestitures.
The Board has practical experience in implementing ESG strategies. They supplement this with
external expertise. During the year we engaged external consultants to support on emissions
reporting, including Scope 3, net zero target setting, and qualitative risk scenario modelling.
RISK MANAGEMENT
Our businesses have in-depth knowledge of their customers, industry, products and
services, and our decentralised model empowers them to manage and make decisions
locally. We consult our businesses and Sector management in identifying and assessing all
risks, including CRROs, supported by expertise and knowledge from relevant functions and
Group departments.
In FY23, we undertook a qualitative scenario analysis to identify principal CRROs.
We involved operational, business and functional leaders across the Group, supported
by external, independent expert consultants. The CRROs were assessed using a
Probability-Impact Matrix to consider the likelihood of the CRRO materialising over
the different timeframes, and the potential impact and materiality to the Group.
Following the identification of key CRROs, we considered the materiality of their impact on
the Group over time (short, medium and long-term horizons). We assess materiality against
climate-related risks on a 'net basis' after consideration of mitigating factors or actions.
• Short to medium-term risks: materiality determined at higher than 5% of the Group’s
adjusted Profit Before Tax (in line with our Financial Statement audit methodology) in the
respective year of the most recent long-term strategic plan. Short-term refers to the time
period up to 2030, medium-term refers to the time period between 2030-2040.
• Long-term risks: we apply 2x the materiality levels of short to medium-term risks. This
reflects likely continued growth of the Group, greater uncertainty over time, and time
available for mitigation planning. Long term refers to the time period between 2040-2050.
This process will be refreshed annually to ensure that the material climate-related risks
and opportunities continue to be relevant and appropriate to the Group.
CRROs are managed in line with our decentralised culture and DVR and Risk Governance
frameworks. Climate risk management is fully integrated into our risk management process.
MORE
INFORMATION
More information
on our Board and
Committee
attendance on
page 80
Information on
Board activity and
focus areas can be
found on page 79
Read more about
the Board’s skills
and experience on
pages 83-84
MORE
INFORMATION
Read about our
decentralised
culture on
page 9
Risk management
framework on
page 42
DVR governance
framework on
page 87
Relevant
committees,
responsibilities and
frequency of
updates on
page 81
Group risk
management
framework on
page 42
DIPLOMA PLC ANNUAL REPORT 2023 − 69
STRATEGY
In order to identify relevant CRROs, we considered the following scenarios, which allowed us to consider the impacts
of likely physical and transitional outcomes. We considered the impact of climate regulation and physical impacts
across our key geographies and sites, including those of our suppliers. We considered changing markets and the
impact on our customers and suppliers.
RCP SCENARIO
Description
FOSSIL-FUELLED GROWTH
STEADY PATH TO SUSTAINABILITY
More extreme weather events due to
extremely limited decarbonisation efforts
Globally coordinated decarbonisation
to achieve net zero by 2050
Mean temperature rise by 2100
4 degrees celsius
2 degrees celsius
Fossil-fuelled growth scenario - overview
Global collaboration is focused on mitigation, rather than reducing climate change, resulting in an increase
of extreme weather events as the current warming rate continues unabated. Temperatures exceed the warming
rate of 4 degrees by the end of the century, as projected by the IPSS’s worst case RPC 8.5 scenario.
Steady Path to Sustainability scenario - overview
Globally coordinated efforts to reduce emissions to net zero by 2050. This limits the global temperature increase
to 2 degrees above pre-industrial levels, as projected by the Intergovernmental Panel on Climate Change’s (IPCC)
RCP2.6 scenario.
FOSSIL-FUELLED GROWTH SCENARIO
We assumed a range of extreme weather events occurring with increasing frequency across the short, medium and
long term, and the potential damage to our distribution centres and offices due to flooding, extreme heat, wildfires
and storms. We reviewed 10 of our most significant locations, covering ca. 60% of the Group’s total revenue.
Mitigation – such as property or business interruption insurance and buffer stockholding in place – would
significantly reduce any financial impact.
We identified the highest physical risk and impact would be due to hurricanes at our Hercules Aftermarket site,
located in Louisville. However, there are preventative disaster recovery plans and insurance in place to mitigate
against those risks.
The financial impact of the risks identified in this scenario would not be material due to:
• The broad geographical spread of the Group;
• Diversified physical assets, customers and suppliers, with low commercial dependencies (largest customer
and supplier represent 1% and 5% of revenue respectively);
• Our distribution centres are not typically located in high-risk areas. Whilst there may be very short-term disruptions
on a very localised basis, it would only affect a few, small locations with insufficient frequency to have a material
financial impact, post-mitigation.
We will continue to monitor the impact physical risks have on our operations as part of our future financial planning.
STEADY PATH TO SUSTAINABILITY SCENARIO
We considered the risk of changing regulation and/or customer demand, in the context of the Group’s 2045 net zero
target. This scenario identified our most relevant CRROs, which we have outlined below, including their impact on the
Group’s business, strategy and financial planning. We have performed a quantification of the financial impacts to the
Group based on the relevant timeframes. Whilst our assessments show that the financial impacts of these CRROs are
low, our financial statements and viability assessments nevertheless reflect our best estimate of the impact of
climate change on future business performance and the carrying values of our tangible and intangible assets, based
on currently available information and taking into account the planned mitigation measures. We have also considered
the resilience of the Group’s strategy against these CRROs, including potential mitigations as well as actions to
capitalise on the material climate-related opportunities.
Strategic ReviewCorporate GovernanceFinancial StatementsOther InformationCorporate GovernanceStrategic ReportFinancial Statements 70 − DIPLOMA PLC ANNUAL REPORT 2023
DELIVERING VALUE RESPONSIBLY
TASKFORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
STRATEGY CONTINUED
Identified risks and impact (Steady Path to Sustainability Scenario)
TRANSITIONAL RISK
MATERIALITY OF RISK
MITIGATION
Policy & Legal / Market:
Timeframe: medium term
Financial impact: low
The fragmented product
decarbonisation policy landscape
also has the knock on impact
of making products more
expensive and uncompetitive
in less environmentally ambitious
markets, whilst posing a potential
risk if suppliers lack regional
decarbonisation incentives.
The EU’s proposed ban on PFAS may
have the impact of increasing the
cost of seals that incorporate raw
material alternatives to PFAS to be
sold into the EU market, but also
seals that originate from the EU
to be more expensive in other
territories that have not imposed
the PFAS ban.
The failure to adapt our products
would mean a reduced ability
to sell certain products into
jurisdictions where demand
for sustainable goods is high,
potentially reducing revenue and
affecting our competitiveness.
Product decarbonisation due to
stricter climate policies and market
shifts
As a global company, we will likely
face differing and localised
environmental policies and
legislation across our key
geographies. We also expect them
to be introduced and implemented
at a different pace. Meeting these
higher standards is extremely
important to ensure we can
successfully and compliantly
operate in those geographies.
One specific identified risk in
product decarbonisation is the
EU’s proposed ban on synthetic
chemicals such as polyfluoroalkyl
substances (PFAS), which is relevant
to our Seals business, where ca. 6%
of the Group’s revenue is generated
from seals that include PFAS.
From a market perspective,
a significant proportion of our
downstream market is subject
to considerable emissions scrutiny.
It is therefore likely that we will be
expected to reduce the carbon
intensity of our sold products to
support our customers in meeting
their own sustainability goals.
As a consequence, it will become
vital to obtain emissions data and
encourage product decarbonisation
from our suppliers, especially in less
sustainability-focused countries,
given our role as a value-added
distributor.
As a global Group, we benefit
from knowledge sharing – those
businesses that have navigated
stricter or faster-moving legislation
will enrich the Group experience and
provide case studies and learnings
that will benefit other businesses.
As a decentralised Group, our
businesses are close to their
customers, have the technical
expertise to specify compound
materials, and enjoy long-term,
meaningful relationships with their
suppliers. We expect them to pivot
and adapt in line with legislation.
We have seen examples of this
already, with North American
Seals businesses promoting and
identifying PFAS-free products
to customers.
Our Group has set net zero targets,
including against Scope 3 emissions.
We expect our businesses to
incorporate this into their value-add
offering and see this as a competitive
advantage for customers that wish
to decarbonise their supply chain.
Given that many of our businesses
are small-to-medium sized, few of
their competitors have the same
access and resources to analyse
and progress against emissions
reduction targets.
DIPLOMA PLC ANNUAL REPORT 2023 − 71
STRATEGY CONTINUED
Identified risks and impact (Steady Path to Sustainability Scenario)
TRANSITIONAL RISK
MATERIALITY OF RISK
MITIGATION
The Group has previously navigated
rising supply chain costs by
successfully passing costs
on to the customer.
Policy & Legal
Decarbonisation costs
A shift towards decarbonisation
could see increased operating costs
particularly in relation to purchased
inventory as well as logistics costs.
This could largely be influenced by
the tightening of environmental laws
and regulations in relation to carbon
pricing globally. Carbon pricing
instruments can take many forms,
with the most common being
carbon taxes, taxes on fuels
and trading schemes or levies.
Timeframe: short, medium and
long term
Financial impact: low
The risk of new regulation
manifesting in the EU via the carbon
border adjustment mechanism
(CBAM) for example, could see
product costs increasing. There
is also a risk that products will
increase in cost as raw materials
such as precious earth metals
become more expensive to procure
due to scarcity, increased demand
and government regulation.
Inbound and outbound logistics
cost is ca. 34% of our Scope 3
emissions. There could be increased
costs associated with carbon freight
taxes and low-carbon technologies
implemented through either
government regulation or
investments by our logistics
partners in sustainable alternatives.
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DELIVERING VALUE RESPONSIBLY
TASKFORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
STRATEGY CONTINUED
Identified risks and impact (Steady Path to Sustainability Scenario)
OPPORTUNITY
Policy & Legal / Market:
POTENTIAL BENEFIT
Timeframe: short, medium and long term
Product and market opportunities
Prolonging product lifespans is at the core of the circular
economy. With a significant portion of our products
catering to repair, maintenance and refurbishment,
we inherently contribute to our customers’ machinery
longevity. Circularity is a core part of our business
model. The ability to manage, reuse and recycle waste
products and by-products is a competitive advantage.
As the global economy transitions to a low-carbon
model (albeit at varying rates), there are opportunities
to grow revenues across a range of new customer
segments, including adaptation infrastructure and
renewables. As economies decarbonise, new
opportunities are likely to emerge.
Our recent acquisition of T.I.E. exemplifies how we
are pivoting to more aftermarket and repair service
opportunities. We will use T.I.E. and existing
aftermarket businesses as a platform for further
growth in this segment.
The transition to a lower-carbon economy and its
impact on industrial design should lead to significant
opportunities for new customers and segments for
the Group. We have a strong process to assess and
capitalise on new market opportunities. In our budgeting
and strategic planning process, all businesses identify
transitioning industries and strategies to access these
new markets. We are already seeing this growth in
market segments with our Australian Seals business
securing its largest service contract to remove, repair
and reinstall pump equipment for a national water
company.
Policy & Legal / Market:
Timeframe: medium
Lower transportation costs, including decreased
fuel use, transport miles and associated emissions and
taxes through route optimisation, reverse logistics, fuel
efficiency, consolidated supply chains, a move to local
suppliers, combined shipments and other efforts to
decarbonise transport and logistics.
Enhanced logistics efficiency
Through sustainable supply chain management we
can simultaneously reduce costs through more efficient
distribution and improve our reputation with customers
who are increasingly interested in greener product
deliveries. This can also enhance access to new
customers looking for more sustainable distribution
options, including those looking to reduce their
Scope 3 emissions.
Our aim is to pass on efficiencies to our customers
and market our sustainable approach to customers
interested in reducing their value-chain emissions.
We have started to collect data on our inbound and
outbound logistics and work closely with our customers
and third-party couriers to reduce their emissions and
improve efficiency.
We are currently doing this by consolidating orders
into less frequent shipments and driving model shifts
where possible.
DIPLOMA PLC ANNUAL REPORT 2023 − 73
STRATEGY CONTINUED
Identified risks and impact (Steady Path to Sustainability Scenario)
Resilience of the Organisation’s Strategy
Our strategy enables us to remain resilient to CRROs:
• Our decentralised model means that our businesses retain their in-depth product
knowledge, understanding of local markets, and strong customer and supplier relationships.
This enables us to respond quickly to changes in regulation, market and technology;
• Our low customer and supplier dependencies ensure that any identified risks are
sufficiently diversified;
• Our value-add and pricing discipline allows us to pass on the impact of decarbonisation
costs to protect our margins;
• Our organic growth initiatives capture opportunities relating to a decarbonising economy,
supporting our transition away from markets that are at risk due to decarbonisation;
• DVR is embedded across our Group, ensuring that our businesses are aligned on our net
zero target and are driving action and emissions reductions across every aspect of their
business;
• Our low capital intensity model gives us the versatility to transition with little risk
to asset values.
As part of our Supplier Code, we continue to work with our suppliers to align on our emissions
reduction ambitions and intend to expand the Scope of our Supplier Code in order to drive
Scope 3 emissions reductions with our product and logistics suppliers.
MORE
INFORMATION
Read about our
decentralised
culture on
page 9
See customer
and supplier
dependency
on page 69
Read more
about DVR on
pages 54-66
Read about our
material Scope 3
emissions on
page 65
Read about our
Supplier Code
on page 61
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DELIVERING VALUE RESPONSIBLY
TASKFORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
METRICS & TARGETS
A summary of our Group emissions
The Group measures and monitors the following key metrics. Below we have outlined those
that are relevant to our identified CRROs. A summary of the below metrics, KPIs and relevant
targets can be found on pages 54-66.
Emissions
Reducing our absolute emissions is a key driver to achieving our 2045 net zero target.
Waste
Although waste does not represent a material proportion of our emissions footprint,
we nevertheless see it as potentially significant in terms of business reputation, efficiency
and circularity.
Supplier Code
We see supplier engagement and the future alignment of our Supplier Code to our
Scope 3 targets, as fundamental to our net zero strategy.
Financial metrics
Financial performance targets are set as part of the budget, which incorporate the revenue,
profit and cash flow impacts of CRROs. The financial performance targets form a material
element of the short-term variable bonus schemes as well as the longer-term performance
share plans.
We actively monitor revenue that comes from both the physical and transitional impacts
of climate change – such as renewable energy generation, circularity or fugitive emissions –
as well as our social impact.
In addition, the three-year strategic plan and the annual budget includes opex and
capex investments related to our CRROs. All scaling projects are now scrutinised for their
environmental impact, taking advantage of these projects to make step changes towards
meeting our environmental targets and incorporates the respective financial investments
required to enable this. A similar process is in place and applied to due diligence and business
plan preparations for new acquisitions, e.g. T.I.E. and DICSA acquisitions in FY23.
More detail on these targets and the performance against them is set out on pages 54 to 66.
MORE
INFORMATION
See pages 64-66
for our absolute
Group Scope 1, 2
and 3 emissions;
energy
consumption;
emissions intensity
ratio (tonnes per
£1m revenues); and
net zero targets
and strategy
See page 66 for
total Group waste;
waste intensity
ratio (tonnes per
£1m revenues)
See page 61 for
further information
on our supplier
code; percentage
of suppliers
aligned to code;
and next steps
DIPLOMA PLC ANNUAL REPORT 2023 − 75
NON-FINANCIAL AND SUSTAINABILITY
INFORMATION STATEMENT
This table signposts related non-financial information in this report and further reading on our website at
https://www.diplomaplc.com/sustainability/sustainability-reports-and-policies/.
REPORTING
REQUIREMENT
POLICIES
REFERENCE IN
2023 ANNUAL
REPORT
1. Anti-bribery
and Corruption
The Group has a policy on anti-bribery and corruption that complies with the requirements
of the Bribery Act 2010. This policy is reviewed periodically to ensure continued and
effective compliance in our business through our Learning Management System.
Further detail
can be found on
our website
2. Code of
Conduct
3. Diversity,
Equity
& Inclusion
4. Equal
Opportunity
Our Code of Conduct sets out the expected standards of conduct and behaviour of all
employees across Diploma as they relate to our people, governance and the law, and
stakeholder engagement.
Further detail
can be found on
our website
Our DEI Policy applies to all our businesses and every aspect of how we work. We believe
our business leaders play a key role in creating an inclusive, diverse and equitable
workplace and that an effective DEI strategy will add value to our business, contribute to
employee wellbeing and allow us to recruit and retain a wider pool of talent.
56-59;
100
Our Group-wide diversity and inclusion commitment is for all candidates are considered
fairly, regardless of their gender, race, age, sexual orientation, professional or academic
background. Development opportunities are equally applied to all employees regardless
of disability, In the event of an existing employee becoming disabled, every effort will be
made to ensure their employment with the Group continues and appropriate support
is provided.
Further detail
can be found on
our website
5. Environment
Our Environment Policy asks our businesses to comply with or exceed all applicable
environmental laws, understand climate-related risks and opportunities and their
impact on their business.
6. Climate-related
Financial
Disclosures
We summarise our climate-related financial disclosures consistent with all TCFD
recommendations and recommended disclosures. By this we mean the four TCFD
recommendations and the 11 recommended disclosures set out in Figure 4 of Section C
of the report entitled ‘Recommendations of the Task Force on Climate-related Financial
Disclosures’ published in June 2017 by the TCFD.
7. Health
& Safety
Our Health & Safety Policy supports our commitment to ensure the Health & Safety of
our colleagues, visitors and partners through a proactive culture, rigorous standards,
governance and reporting.
8. Human Rights
& Labour
Conditions
The Group’s activities are primarily carried out in countries with strong human rights
legislation, which we comply with in the countries in which we operate. Our businesses
carry out due diligence on their supply chain and key suppliers comply with our Supplier
Code. Our own colleagues are provided with a safe, secure and healthy working
environment, with access to employee assistance programmes.
9. Modern Slavery
Statement
The Group has a zero-tolerance approach to slavery in all forms, including human
trafficking, forced and child labour. Each business undertakes an annual risk assessment
of modern slavery within the business and its principal suppliers. Based on these and the
initiatives implemented by the businesses to counter slavery, the Board has been assured
that slavery is not taking place within the Group.
10. Whistleblowing
We have a Whistleblowing Policy that applies to all employees and businesses and is
monitored by the Audit Committee. The Policy is displayed on noticeboards at all
businesses. Employees are encouraged to raise concerns via the confidential,
independently-managed, multilingual hotline, which is available 24/7, 365 days a year.
All reports are reviewed by the Group Company Secretary with the support of internal
audit and external resources, if required.
63-66
67-74
60-62
60-61
79
95
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CHAIR’S INTRODUCTION
TO GOVERNANCE
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
It is the Board’s view that for the financial year ended 30 September 2023,
the Company has been compliant with all of the principles and provisions set
out in the UK Corporate Governance Code 2018 (the Code). In respect of the
year ending 30 September 2024, as set out below, the Board expects that it
will for a short period require further explanation with regard to Provision 10 in
respect of Andy Smith who will remain on the Board and its Committees for a
short extension past his nine-year tenure to enable a smooth and effective
transition of the role of Chair of the Remuneration Committee. The Board
considers Andy Smith to remain independent during this extended period.
PRINCIPLES OF THE UK CORPORATE GOVERNANCE CODE 2018
BOARD LEADERSHIP
AND COMPANY PURPOSE
Diploma is led by an effective
and committed Board, dedicated to
promoting the long-term sustainable
success of the Company, generating
value for shareholders and other
stakeholders, and contributing
to wider society.
AUDIT, RISK AND
INTERNAL CONTROL
Formal, transparent policies and
procedures are in place to ensure
the independence and effectiveness
of the internal and external audit
functions, and the integrity of financial
and narrative statements, and to
manage and mitigate risks.
READ MORE ON PAGES 50 TO 53,
AND PAGES 86 TO 87.
READ MORE ON PAGES 42 TO 48,
AND PAGES 88 TO 95.
REMUNERATION
Diploma has remuneration policies
designed to attract the best talent
and promote long-term sustainable
performance aligned with shareholder
interests. Executive remuneration is
aligned to the Company’s purpose
and values and is clearly linked to the
delivery of long-term strategy.
READ MORE ON PAGES 102 TO 125.
DIVISION OF RESPONSIBILITIES
The roles of the Chair and the Group
CEO are separate and there is an
appropriate balance of Executive and
Independent Non-Executive Directors.
READ MORE ON PAGES 83 TO 85.
COMPOSITION, SUCCESSION
AND EVALUATION
Appointments are subject to a formal,
rigorous and transparent procedure.
Succession plans are in place for the
Board and senior management.
An evaluation of the Board and its
committees is undertaken annually,
in line with the Code.
READ MORE ON PAGES 83 TO 84,
AND PAGES 96 TO 101.
David Lowden
Chair
DIPLOMA PLC ANNUAL REPORT 2023 − 77
“ The high standards of corporate
governance underpin everything
we deliver.”
DEAR SHAREHOLDER,
On behalf of the Board, I am
delighted to present the Company’s
Corporate Governance Report for
the year ended 30 September 2023,
which summarises how the Board
and our governance have provided
leadership over the year in support
of the long-term sustainable success
of Diploma. Diploma has grown
consistently over the last few years
and our governance has continued
to evolve accordingly to provide
confidence to our investors and
allow our entrepreneurial businesses
to develop further.
Corporate governance is the
predominant framework in which
companies build trust with their
stakeholders, and the wider
community. It is more than just
the principles that safeguard a
company’s interests, but a way to
create long-term value. Corporate
governance in itself is not a direct
value driver, but can facilitate or
hinder the creation or protection of
value. Forward-looking organisations
are able to focus on growth and
value creation through the
development of strong corporate
governance practices. We must
also go beyond the balance sheet,
reporting intangible value and
investing in our employees'
development to grow alongside
their businesses.
Sustainable corporate governance
focuses on tackling environmental
issues, evolving supply chains,
improving diversity in the workforce,
as well as contributing to the local
communities. The Board is pleased
that our corporate governance
thinking and approach have
continued to grow and evolve
alongside the growth of our
businesses. Throughout the last
few years, we have continued
to develop and embed our
Delivering Value Responsibly (DVR)
frameworks. Further information on
our sustainability programmes can
be found on pages 54 to 66. Insights
from our DVR and governance
developments have been used to
inform steps taken by the Board, the
Executive Team and our businesses
to improve the efficiency of other
systems and processes, with the
goal of further empowering our
colleagues, increasing agility and
speed in execution and enhancing
local accountability.
Effective leadership and optimal
colleague engagement depends on
a healthy, empowered and positive
business culture. Diploma has a
strong purpose, values, and cohesive
cultural fundamentals that govern our
actions and provide guidance across
our varied businesses.
The Non-Executive Directors were
very pleased to witness this culture
in person during our visits this year
to our Life Sciences businesses,
Simonsen & Weel in Denmark
and Acernis Medical in Canada.
We will continue to refine and
develop our governance processes
to ensure robustness and efficiency
at Board level and throughout the
Group, in a way that enables the
creation of sustainable long-term
value for our shareholders and
other stakeholders.
BOARD SUCCESSION
AND EVALUATION
Board composition and succession
remain key areas of activity and
focus. Anne Thorburn and Andy Smith
will be retiring in 2024 after nearly
nine years of service each. During
the year, our Nomination Committee
oversaw the succession and
appointment process for a
suitable candidate to take over
the Remuneration Committee Chair
position and were pleased to appoint
Jennifer Ward as Remuneration
Committee Chair-Designate on
1 June 2023. Jennifer brings a wealth
of knowledge and experience to
the Board and is an important part
of its continued evolution. The
Nomination Committee has begun
a search process for the role of
Audit Committee Chair and an
announcement will be made at
the appropriate time.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 78 − DIPLOMA PLC ANNUAL REPORT 2023
CHAIR'S INTRODUCTION TO GOVERNANCE CONTINUED
The Board’s priorities for FY24 remain
consistent, with a continued focus
on: the implementation of the
Group’s strategy; challenging
and empowering management;
succession planning; and
management of risk. Your
Board is well placed to execute
its stewardship role to ensure that
the Group continues to evolve,
scale and deliver long-term
sustainable growth. We will also
continue to be agile, adapting
our thinking and priorities and
promoting the interests of our
investors, employees and other
stakeholders over the coming years.
Our AGM will be held on 17 January
2024. I hope that as shareholders
in the Company, you will be able to
attend to meet with the Board of
Directors and discuss any matters
you feel are important to the future
success of the Group. I welcome
the opportunity to meet with our
shareholders at the AGM, but would
also remind all stakeholders that the
Board and I are available throughout
the year to answer questions or
engage on topics of interest to you.
You can contact us via the Group
Company Secretary.
David Lowden
Chair
The Board is keenly aware of the
need for diversity and inclusion,
which is a key component of the
Group’s DVR programme. Following
the appointment of Jennifer Ward
in June, as at the end of the Financial
Year the Board is 37.5% female,
which does not meet the target
by the Financial Conduct Authority
that 40% of Board members are
to be women. We do meet the
recommendations requiring
women to occupy at least one
of the Board’s senior roles.
Gender diversity in the wider senior
management and wider workforce
remains a key focus as expanded
upon on pages 56 to 59. The
Board will continue to set the right
conditions and lead by example
through its own approach to inclusion
and diversity across its composition;
further information can be found in
our Nomination Committee Report
on pages 96 to 101.
A key aspect of good governance is
for the Board to critically self-analyse
itself, its members and Committees,
in order to continually improve its
effectiveness. The Board carries out
effectiveness reviews annually, and in
FY23 this was undertaken internally in
line with the Code. This evaluation
has also enabled the Board to
identify opportunities for it to further
improve its effectiveness; additional
detail on the evaluation results and
areas of agreed focus can be found
on page 101. In FY24 we will
undertake an externally facilitated
evaluation and look forward to the
opportunity for candid self-
reflection.
DIPLOMA PLC ANNUAL REPORT 2023 − 79
BOARD ACTIVITIES
STRATEGY & STRATEGIC
EXECUTION
FINANCE
OPERATIONS
COLLEAGUES
& CULTURE
RISK
GOVERNANCE
25%
20%
10%
15% 15%
15%
Set out below are some of the key activities, matters considered and decisions made by the Board in the year.
STRATEGY &
STRATEGIC EXECUTION
• Regularly reviewed the Group’s
performance against the strategy.
• Presentations by the Group
Corporate Development Director
and Sector leadership on strategic
priorities and execution against
those priorities.
• Reviewed and discussed our ESG
strategy and approach, Delivering
Value Responsibly.
• Reviewed and approved the Group’s
M&A and business development
activities, reorganisations and
various other projects.
• Strategy review session.
• Equity raise.
COLLEAGUES & CULTURE
• Reviewed Group Colleague
Engagement Survey results.
• Received reports on workforce
wellbeing throughout the year.
• Denmark and Canada site visits.
• Talent and succession update.
• Whistleblowing reports.
• Sector presentations.
FINANCE
• Received updates on the Group’s
OPERATIONS
• Regular updates from the
financial performance.
Group CEO.
• Approved the FY24 budget;
• Monitored and discussed the
monitored performance against
the FY23 budget through regular
presentations from the CFO.
regulatory and political impacts
on the Group’s operations.
• Approval of the annual Modern
• Assessed and approved dividend
payments, balancing the views of
various stakeholders.
• Investor relations: regular reports
including share register movement
and feedback from analysts and
investors.
• Presentations from Tax and
Treasury Functions.
• Control of Treasury and Tax
policies.
• New multi-currency revolving
credit facility agreement (RCF)
and wider financing strategy.
RISK
• Received reports on the
macroeconomic environment,
world events and emerging trends.
• Annual risk review: review of
principal risks to ensure they
remain appropriate together
with mitigating activity; reviewed
and approved the inclusion of
new and emerging risks.
• Quarterly risk updates.
• Cybersecurity briefing.
• Annual Insurance Review.
Slavery Statement.
• Sector presentations.
• Business visits.
GOVERNANCE
• Regular corporate governance and
regulatory updates from the Group
Company Secretary.
• Concluded the annual Board
effectiveness review.
• Agreed and tracked actions from
the 2022 internal evaluation of
the Board’s performance.
• Approved the appointment of
a new Non-Executive Director.
• Reviewed schedule of matters
reserved for the Board and Terms
of Reference of its Committees.
• Reviewed and approved the
Company’s financial reporting.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 80 − DIPLOMA PLC ANNUAL REPORT 2023
GOVERNANCE AT A GLANCE
ETHNIC DIVERSITY
GENDER DIVERSITY
LENGTH OF TENURE
0%
62.5%
37.5%
50%
25%
25%
Ethnic minority
Male
Female
0–3 years
3–6 years
6–9 years
SKILLS AND EXPERIENCE
B2B, Industrial & Distribution Sectors
Retail and FMCG Sectors
Financial and Risk Management
Operations
Customer Service
Health & Safety / Diversity, Equity & Inclusion
Strategy
M&A/Financing
International Business
BOARD AND COMMITTEE ATTENDANCE FY23 (AS AT 30 SEPTEMBER 2023)
MEMBER
David Lowden
Johnny Thomson
Chris Davies
Anne Thorburn
Andy Smith
Geraldine Huse1
Dean Finch2
Jennifer Ward3
BOARD
AUDIT
COMMITTEE
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
8/8
8/8
8/8
8/8
8/8
7/8
8/8
1/2
–
–
–
5/5
5/5
3/5
4/5
0/1
4/4
–
–
4/4
4/4
3/4
4/4
0/1
3/3
–
–
3/3
3/3
2/3
3/3
1/1
1 Geraldine Huse was unable to attend the September 2023 Board and Committee meetings due to an unavoidable conflict, and was unable to attend
the Audit Committee meeting held in April as it was called on short notice.
2 Dean Finch was unable to attend the Audit Committee meeting held in April as it was called on short notice.
3 Jennifer Ward was unable to attend the September 2023 Board, Audit and Nomination Committee meetings due to an unavoidable conflict.
CHANGES TO THE BOARD
• Chris Davies was appointed to the Board as
Chief Financial Officer on 1 November 2022.
• Jennifer Ward was appointed to the Board as
an independent Non-Executive Director and as
Chair-Designate of the Remuneration Committee
on 1 June 2023.
DIPLOMA PLC ANNUAL REPORT 2023 − 81
OUR GOVERNANCE FRAMEWORK
The Board comprises the Chair, Executive Directors and Independent Non-Executive Directors, and is responsible for
the performance and long-term success of the Company, including Health & Safety, leadership, strategy, values,
standards, controls and risk management.
DAVID LOWDEN
Chair
Leads the Board and ensures
its overall effectiveness in
discharging its duties.
ANNE THORBURN
Senior Independent Director
The Senior Independent Director
provides a sounding board for
the Chair and serves as an
intermediary for other
Directors and shareholders.
Independent
Non-Executive Directors
Independent Non-Executive
Directors ensure that no
individual or small group of
individuals can dominate the
Board’s decision making.
GROUP COMPANY SECRETARY
The Group Company Secretary supports the Chair and ensures that Directors have access to accurate
and timely information that they need to perform their roles.
BOARD COMMITTEES
AUDIT COMMITTEE
Chair: Anne Thorburn
NOMINATION COMMITTEE
Chair: David Lowden
Oversees and monitors the
Company’s financial statements,
accounting processes, audit
(internal and external), internal
controls systems and financial risk
management procedures. Also
monitors the effectiveness of the
internal audit function and reviews
the external auditor independence
and performance.
Regularly reviews structure, size
and composition of the Board and
its Committees. Identifies and
nominates suitable candidates to be
appointed to the Board. Leads the
Board’s succession planning and
keeps the senior leadership needs of
the Group under review. Oversees
the development of a diverse
succession pipeline.
SEE MORE ON PAGES 88 TO 95.
SEE MORE ON PAGES 96 TO 101.
REMUNERATION COMMITTEE
Chair: Andy Smith
Chair-Designate: Jennifer Ward
Reviews and recommends the
framework and policy on Executive
Director and senior management
remuneration. Reviews workforce
remuneration policies and
alignment with culture.
SEE MORE ON PAGES 102 TO 125.
TREASURY COMMITTEE
Provides oversight of treasury
activities in implementing the
treasury policies approved by
the Board.
ADMINISTRATION COMMITTEE
Conducts general business
administration on behalf of the
Company within clearly defined limits
delegated by the Board and subject
to the matters reserved to the Board.
DISCLOSURE COMMITTEE
Oversees the disclosure of market
sensitive information.
EXECUTIVE DIRECTORS
Group Chief Executive Officer and Group Chief Financial Officer
The Group CEO and CFO lead the implementation of the Group’s strategy set by the Board.
EXECUTIVE TEAM
The Executive Team provides strategic and operational leadership to the Group,
ensuring that strategies are executed effectively.
SENIOR LEADERSHIP TEAM
The Senior Leadership Team oversees essential day-to-day business operations and talent strategy, leads core
initiatives and implements policies and procedures. The team is made up of members of the Executive team,
Managing Directors of the businesses and key Group functional roles.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 82 − DIPLOMA PLC ANNUAL REPORT 2023
BOARD
OF DIRECTORS
07
05
03
06
08
02
04
01
DIPLOMA PLC ANNUAL REPORT 2023 − 83
01 DAVID LOWDEN
02 JOHNNY THOMSON
03 CHRIS DAVIES
Board Chair & Nomination Chair
Group Chief Executive Officer
Group Chief Financial Officer
Joined: October 2021
Joined: February 2019
Joined: November 2022
Committee membership N R
Current external appointments:
• Senior Independent Director,
Current external appointments:
• None
Current external appointments:
• Non-Executive Director, Motability
Morgan Sindall plc
• Chair, Capita PLC
Relevant skills and experience:
• Industrial and Distribution Sectors
• Financial and Risk Management
• Operations
• Strategy
• M&A/Financing
• International Business
Past appointments:
• Chair, PageGroup plc
• Senior Independent Director,
Berendsen plc
• Chair, Huntsworth plc
• Non-Executive Director, William Hill
plc and Cable & Wireless
Worldwide plc
• Chief Executive, Taylor
Nelson Sofres
Operations Group PLC
Relevant skills and experience:
• B2B Industrial, Distribution and
Service Sectors
• Financial and Risk Management
• Operations and Customer Service
• Strategy
• M&A/Financing
• International Business
Relevant skills and experience:
• Retail and FMCG Sectors
• Financial and Risk Management
• Strategy
• M&A/Financing
• International Business
• Operations and Customer Service
Past appointments:
• Group Finance Director, Compass
Past appointments:
• Chief Financial Officer, National
Group PLC
• Regional Managing Director, Latin
America, Compass Group PLC
Express Group PLC
• Group Financial Controller and
Treasurer (and Interim Group CFO),
Inchcape plc
• Chief Financial Officer for
North America, Diageo plc
04 ANNE THORBURN
05 ANDY SMITH
06 GERALDINE HUSE
Senior Independent Director
& Audit Chair
Independent Non-Executive
Director & Remuneration Chair
Independent Non-Executive
Director
Joined: September 2015
Joined: February 2015
Joined: January 2020
Committee membership A N R
Committee membership A N R
Committee membership A N R
Current external appointments:
• Non-Executive Director and Chair
Current external appointments:
• None
Current external appointments:
• President, Procter & Gamble,
of the Audit Committee, TT
Electronics plc
Relevant skills and experience:
• B2B Industrial and Manufacturing
Relevant skills and experience:
• Healthcare, Retail, FMCG
Sectors
• Financial and Risk Management
• Strategy
• M&A/Financing
• International Business
and Utilities Sectors
• Operations, HR and
Customer Service
• Strategy and Risk Management
• Health & Safety, Sustainability,
and Diversity Equity & Inclusion
• International Business
Canada
Relevant skills and experience:
• Retail and FMCG Sectors
• Customer Service
• Sales and Marketing
• Diversity, Equity & Inclusion
• Organisational Development
• International Business
Past appointments:
• Chief Financial Officer, Exova
Past appointments:
• Managing Director, Severn Trent
Group plc
Services
• Group Finance Director, British
• Water Services Director,
Polythene Industries plc
Severn Trent plc
• Non-Executive Director, BTG plc
• Group HR Director, The Boots
Past appointments:
• Chief Executive Officer,
P&G Central Europe
• Chair of the Institute
of Grocery Distribution
Company PLC
• Customer, Retail and Technology
Director, Severn Trent plc
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information
SKILLS AND EXPERIENCE
84 − DIPLOMA PLC ANNUAL REPORT 2023
BOARD OF DIRECTORS CONTINUED
07 DEAN FINCH
08 JENNIFER WARD
Independent Non-Executive
Director
Independent Non-Executive
Director
Joined: May 2021
Joined: June 2023
Committee membership A N R
Committee membership A N R
(Chair-Designate of Remuneration
Committee)
Current external appointments:
• Group Chief Executive,
Current external appointments:
• Executive Director and Chief Talent,
Persimmon PLC
Culture and Communications
Executive, Halma Plc
Relevant skills and experience:
• B2B Industrial, Services and
Relevant skills and experience:
• B2B Industrial, Services and Retail
Retail Sectors
Sectors
• Financial and Risk Management
• Operations and Customer Service
• Health & Safety
• M&A/Financing
• Strategy
• International Business
• Customer Service
• Sales and Marketing
• Organisational Development
• International Business
• Diversity, Equity & Inclusion
Past appointments:
• Chief Executive Officer,
Past appointments:
• Senior Director, Human Resources,
National Express Group plc
PayPal Inc
• Group Chief Executive, Tube Lines
• Group Finance Director & Group
• SVP Learning & Leadership
Development, Bank of America
Chief Operating Officer,
FirstGroup plc
JOHN MORRISON
Group General Counsel
& Company Secretary
Joined: April 2020
An experienced FTSE company
secretary and solicitor, John
is responsible for the Group’s
global legal, compliance and
governance affairs.
John provides support and advice
to the Directors, the Board and its
Committees. He brings rigour to
corporate governance and ensures
that Board procedures are fit for
purpose and adhered to. John
has expertise in regulatory and
contractual law and legal risk
management.
SKILLS AND EXPERIENCE
DIPLOMA PLC ANNUAL REPORT 2023 − 85
DIVISION OF RESPONSIBILITIES
The Board is responsible to
shareholders for the Group’s financial
and operational performance,
risk management and culture. It is
collectively responsible for promoting
the long-term success of the Group.
The Board is responsible for
monitoring progress made against
strategic objectives, approving
proposed actions, and ensuring that
the appropriate internal controls are
in place and operating effectively.
There is a formal schedule of matters
reserved for the Board, that sets out
the structure under which the Board
manages its responsibilities, providing
guidance on how it discharges its
authority and manages the Board’s
activities. The Board is assisted by
three principal committees (Audit,
Nomination and Remuneration), each
of which is responsible for reviewing
and dealing with matters within its own
terms of reference.
MATTERS RESERVED
FOR THE BOARD
The Board has a formal
schedule of matters
reserved for its decisions:
• Purpose, strategy and
management
• Values, culture and
stakeholders
• Membership of the Board and
other appointments
• Financial and other reporting
and controls
• Audit, risk and internal
controls
• Contracts and capital
structure
• Communication
• Remuneration
• Delegation of authority
• Corporate governance and
other matters
ROLES IN THE BOARDROOM
Non-Executive Chair
• Leads the Board and ensures its
overall effectiveness in discharging
its duties.
• Shapes the culture in the boardroom
and promotes openness, challenge
and debate.
• Sets the agenda for Board meetings,
focusing on strategy, performance,
value creation, risk management,
culture, stakeholders and
accountability.
• Chairs meetings ensuring there
is timely information flow before
meetings and adequate time
for discussion and debate.
• Fosters relationships based on
trust, mutual respect and open
communication inside and outside
the boardroom.
• Leads relations with major
shareholders in order to understand
their views on governance and
performance against strategy.
Independent
Non-Executive Directors
• Ensure that no individual or small
group of individuals can dominate
the Board’s decision-making.
• Provide constructive challenge, give
strategic guidance, offer specialist
advice and hold executive
management to account.
Independent Non-Executive Directors
meeting the independence criteria set
out in the Code comprise more than
half of Board membership.
Senior Independent
Non-Executive Director
• Leads the Board and ensures its
overall effectiveness in discharging
its duties.
• Provides the Chair with support in
the delivery of objectives, where
necessary works closely with the
Nomination Committee, leads the
process for the evaluation of the
Chair and ensures orderly succession
of the Chair’s role.
• Acts as an alternative contact for
shareholders, providing a means of
raising concerns other than with the
Chair or senior management.
Group CEO & Group CFO
• Lead the implementation of the
Group’s strategy set by the Board.
• Group CEO is responsible for
delivering the strategy and for the
overall management of the Group.
• Group CEO leads the Executive
team and ensures its effectiveness
in managing the overall operations
and resources of the Group.
• Executive Directors provide
information and presentations to
the Board and participate in Board
discussions regarding Group
management, financial and
operational matters.
Matters delegated to the CEO and
CFO include managing the Group’s
business in line with the Group’s
strategy, annual budget and
implementation of the risk
governance framework.
Group Company Secretary
• Supports the Chair and ensures
the Directors have access to the
accurate and timely information
they need to perform their roles.
• Is the trusted interlocutor within
the Board and its Committees,
and between executive management
and the Non-Executive Directors.
• Advises the Board on legal and
corporate governance matters and
supports the Board in applying the
Code and complying with UK listing
obligations and other statutory and
regulatory requirements.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 86 − DIPLOMA PLC ANNUAL REPORT 2023
BOARD OF DIRECTORS CONTINUED
MONITORING CULTURE
PURPOSE, CULTURE AND VALUES
The Board is responsible for ensuring
that the Group achieves its purpose,
which is to innovate, create and
deliver value-add solutions for
a better future. In reviewing and
ensuring the implementation of the
Group’s strategy, the Board ensures
that the objectives of our purpose
are met while also taking into
account the risks and opportunities
facing the Group.
The 2018 UK Corporate Governance
Code (the Code) emphasises the
importance of the role of the Board
regarding culture, with specific
recommendations that the Board
assesses and monitors. Our
decentralised model means
that culture is embedded in our
businesses, each of which has
its own unique aspects which we
believe are critical to the autonomy
and empowerment that underpins
the Group’s success. As the business
landscape evolves and the Group
continues to grow, the Board felt
it necessary to review the Group’s
culture and values during the year to
ensure continuity, adaptability and
the right cultural direction. Following
this review, we refreshed our core
values to be: customer-centric,
doing the right thing, remaining
accountable, growing together
and being down to earth.
During the year, the Board has
monitored culture in a number of
ways. This includes business visits,
presentations from Sector
leadership, strategy review sessions,
and updates on people and culture
from the Group HR Director.
Successfully scaling up our value-
add model requires constant
evolution, and our culture has a
critical role to play in supporting
growth. When considering
acquisition strategies, cultural fit
is also an important area of focus
and discussion. Whilst remaining
decentralised and maintaining their
own unique identity, our businesses
benefit from shared best practices,
intercompany networks and
exceptional leadership teams.
One of the key ways in which the
Board can experience and evaluate
the culture is through meeting with
colleagues across our businesses.
We were delighted to have travelled
to Simonsen & Weel in Denmark and
Acernis Medical in Canada in April
2023. The results of our Group
Colleague Engagement Survey
(discussed on page 56) have also
provided further insight.
HOW THE BOARD
MONITORS CULTURE
The Board
• Strategy updates
• CEO’s report
• Presentations by the
Group HR Director
• Sector and function presentations
• Employee engagement survey
• Site visits
• Board Committees
Our Board Committees also play
an important role in monitoring
our culture:
• Remuneration Committee
receives updates from the
Group HR Director that provide an
overview of pay structures across
the Group and their alignment with
our purpose, values and strategy.
This allows the Committee to
ensure that the relevant policies
and practices are consistent
with our values.
• Audit Committee has oversight of
internal controls and continuous
access to internal audit, both of
which can give an indication of
culture, particularly honing in on
any negative elements that don’t
align with the Group’s culture.
DIPLOMA PLC ANNUAL REPORT 2023 − 87
EMPLOYEE ENGAGEMENT
The Board is committed to engaging
with employees and has considered
the employee engagement methods
specified by the Code but felt that
alternative methods are more
appropriate. Given the Group’s
decentralised model and its
geographical spread, the Board
has continued with a multi-faceted
approach to engagement with
the global workforce that is not
led by any one Director or group
of Directors.
We consider that engagement by the
local Managing Directors (MDs) with
their own workforce, together with
strong channels of communication
from MDs to their respective Sector
CEO, as well as communication with
the global workforce led by the
Group’s central functions, provides
an effective platform for transparent
two-way dialogue with employees.
The Board feels well informed on
colleague views and matters and
uses a combination of methods to
comply with the Code’s
requirements:
• The Board was presented with the
outcomes of the Group Colleague
Engagement Survey and discussed
these together with key learnings.
We were delighted with the high
participation rate and engagement
index score of 80%; the full
results of the survey are
detailed on page 56.
DELIVERING VALUE RESPONSIBLY
Our DVR governance structure is lean
and reflects our decentralised
model. The Board has ultimate
oversight and responsibility for DVR
including DVR governance, strategy,
performance and climate-related
risks and opportunities. The Audit
committee reviews Group climate-
related risks and their mitigation, as
well as Group TCFD disclosures. The
Remuneration Committee has a role
in ensuring flexibility to introduce
DVR metrics into future remuneration.
The Executive Team, which includes
the Sector CEOs, ensures alignment
and oversight of DVR within their
areas of responsibility.
The Senior Leadership Team,
including Managing Directors,
is responsible for local DVR
performance and operational
execution. They are supported by
local DVR committees and networks.
The role of the DVR Steering
Committee, which includes the
Group CEO and Sustainability
Director, is to outline DVR strategy,
set Group targets, support the
Sectors and businesses, and monitor
and communicate progress.
In a decentralised Group, ensuring
alignment and driving progress at
the right pace can be a challenge
so communication is key. The Board
is regularly updated on DVR and also
has an annual in-depth annual
session with the Group Sustainability
Director. The SLT and Executive
Team also cover DVR during regular,
scheduled updates. All targets and
metrics are discussed and approved
by the Board.
• Regular updates to the Board at
OUR DVR GOVERNANCE STRUCTURE
every scheduled Board meeting on
people matters. Over the past year,
colleague wellbeing and morale
have been areas of keen focus.
• Colleague, talent and culture
updates from the Group
HR Director.
• The Remuneration Committee
reviews workforce pay practices
across Diploma.
• The Board regularly undertakes
site visits.
• Executive Board members regularly
interact with individual businesses
and our flat structure ensures
strong channels of communication.
THE BOARD
AUDIT COMMITTEE
REMUNERATION COMMITTEE
EXECUTIVE COMMITTEE
DVR STEERING COMMITTEE
SENIOR LEADERSHIP TEAM
DVR COMMITTEES & NETWORKS
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 88 − DIPLOMA PLC ANNUAL REPORT 2023
AUDIT COMMITTEE REPORT
THE ROLE OF THE COMMITTEE
The Audit Committee is responsible
for ensuring that the Group maintains
a strong control environment. It
provides effective governance over the
Group’s financial reporting, including
oversight and review of the systems of
internal control and risk management,
the performance of internal and
external audit functions, as well as the
behaviour expected of the Group’s
employees through the
whistleblowing policy and similar
codes of conduct. The Committee
continues to focus on monitoring and
overseeing management on continual
improvements to governance,
compliance and financial safeguards.
TERMS OF REFERENCE
CAN BE FOUND ON OUR WEBSITE
AT W W W.DIPLOMAPLC.COM
KEY MATTERS DISCUSSED
• Reviewed and agreed the scope of
audit work to be undertaken by the
external auditor and agreed the
terms of engagement and fees to
be paid for the external audit.
• Reviewed the Annual Report
& Accounts and received reports
from the Group CFO and the
external auditor on the key
accounting issues and areas
of significant judgement.
• Reviewed the report on
compliance with the UK Corporate
Governance Code 2018 and
reports on the provision of
information to the auditor.
• Reviewed the report from the
CFO on the controls in place
to mitigate fraud risks.
• Approved the Going Concern
and Viability Statements.
• Reviewed the Half Year
Announcement and received
reports from the external auditor
on the key accounting issues and
areas of significant judgement.
• Reviewed the trading updates.
• Reviewed the effectiveness of
the Group’s internal control and
risk management procedures
and, where appropriate, made
recommendations to the Board
on areas for improvement.
• Invited the Group Head of Internal
Audit to attend meetings to review
the results of the internal audit
work for the current year and to
agree the scope and focus of
internal audit work to be carried
out in the following year.
• Reviewed the proposed revisions
to the UK Corporate Governance
Code 2018 and what this means
for the Group’s internal control
framework as well as future
reporting under section 172
Companies Act 2006.
• Continued to monitor
developments in audit reform
and changing best practice.
• Approved the Committee work
programme for 2024.
• Engaged and cooperated with the
Financial Reporting Council (FRC)
in response to their review letter,
in particular regarding a technical
compliance issue relating to an
interim dividend paid in 2021.
Anne Thorburn
Chair of the Audit Committee
DIPLOMA PLC ANNUAL REPORT 2023 − 89
“ Building trust and confidence in
our Group’s governance through our
unwavering commitment to excellence
and to upholding the highest standards
of financial integrity.”
MEMBER
MEETINGS
ATTENDED
JOINED
ANNE THORBURN
(CHAIR)
5/5 September 2015
ANDY SMITH
5/5
February 2015
GERALDINE
HUSE1
DEAN FINCH2
JENNIFER
WARD3
3/5
January 2020
4/5
0/1
May 2021
June 2023
¹ Geraldine Huse was unable to attend the
April meeting as it was called on short
notice and the September meeting due
to an unavoidable conflict.
² Dean Finch was unable to attend the April
meeting as it was called on short notice.
³ Jennifer Ward was unable to attend
the September meeting due to an
unavoidable conflict.
DEAR SHAREHOLDER
The Audit Committee assists the
Board in discharging its responsibilities
with regard to monitoring the integrity
of Group financial reporting, external
and internal audits, and controls.
This includes advising on the
reappointment and independence
of external auditors and assessing the
quality of their services; and reviewing
the effectiveness and appropriateness
of the Company’s internal audit
activities, internal controls, and
management systems. The Committee
reinforces the Board’s ability to make
informed decisions and upholds the
best interests of our shareholders
and stakeholders.
During the year ended 30 September
2023, the Committee has ensured
oversight of all these areas while also
responding to evolving regulatory and
market dynamics. Regulatory bodies
continue to raise the bar on corporate
governance and financial reporting
standards. This has necessitated
an evolution within the business
environment as we continue to
adapt and enhance the Committee’s
oversight functions to maintain the
highest standards of transparency,
accountability and integrity in
our financial reporting and
governance practices.
Two key aspects of these reforms
entail the establishment of the Audit,
Reporting and Governance Authority
(ARGA) to oversee audit regulation
and the anticipated revisions to the UK
Corporate Governance Code. Other
aspects of anticipated reforms are
uncertain following recent government
statements and we will continue
to review the evolving landscape.
The Committee has received reports
on internal audits for the Group’s
businesses, together with several
deep dive sessions, including audits
of recently acquired businesses, as
well as updates on the steps being
taken to address internal audit
findings and control issues.
I commented in last year’s report
that the Committee recognises
the growing importance of ESG
factors, including climate-related
financial disclosures, in shaping the
investment landscape and promoting
sustainability. We continue to enhance
our ESG and climate-related financial
disclosures, aligning them with best
practices to provide comprehensive
and accurate information so that
stakeholders can make informed
decisions and effectively assess
our resilience to climate change.
As Audit Chair, I have regular
conversations with the Group
CFO, Group Head of Internal Audit,
Group Financial Controller, Group
Company Secretary & General
Counsel and also the audit partner
at PricewaterhouseCoopers LLP
(PwC), our external auditor.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 90 − DIPLOMA PLC ANNUAL REPORT 2023
AUDIT COMMITTEE REPORT CONTINUED
After serving on the Board for nearly
nine years, including in my role as
Audit Chair, I will be stepping down
during 2024. It has been a privilege
to serve alongside my Board
colleagues and to work with our
dedicated management team.
During my tenure, I have witnessed
the Group’s growth and evolution,
and I am proud of the progress
we have made.
I want to express my gratitude to all
our shareholders for your trust and
support and I am confident that
the Group is well-positioned for
continued success. The Audit
Committee will transition smoothly
to a new Chair, who will continue to
champion the values and principles
that drive the Group.
I look forward to meeting
shareholders at the AGM on
17 January 2024 and will be happy to
respond to any questions relating to
the activities of the Audit Committee.
Anne Thorburn
Chair of the Audit Committee
20 November 2023
PwC has now completed its sixth full
annual cycle, led by Richard Porter
who became our lead audit partner
for this financial year. I am pleased
to report that again there have been
no significant control deficiencies
or accounting irregularities reported
to the Committee this year. Following
a routine review of the Company's
Annual Report by the FRC, the
Committee became aware that
approximately £2.5m of the FY21
interim dividend was not paid in
accordance with the technical
requirements of the Companies
Act 2006. This was because interim
accounts had not been publicly filed
prior to the dividend declaration.
It is intended that this technical issue,
which has no impact on the Group’s
financial position, be ratified by a
shareholders’ resolution proposed
at the upcoming Annual General
Meeting (AGM). The Committee has
reviewed the circumstances and is
satisfied that the failure was due to
an inadvertent oversight and is not
indicative of any wider problem
with its systems and controls.
The FRC also highlighted several
recommendations to improve
financial reporting which were
reviewed by the Committee and
incorporated.
The Committee plans to commence
a retender process for the audit
during 2026/2027 for the FY28
Annual Report and Accounts in order
to make any necessary changes to
providers of other services in a timely
and orderly fashion and to appoint an
auditor before the start of that year,
which is in the best interests of our
shareholders. I am confident that
the Audit Committee has carried out
its duties effectively and to a high
standard during the year, providing
independent oversight with the
support of management and
assurance from the external auditors.
DIPLOMA PLC ANNUAL REPORT 2023 − 91
AUDIT COMMITTEE
The Committee is chaired by
Anne Thorburn and comprises
five Independent Non-Executive
Directors. The Committee acts
independently of the Executive
Directors and management. Our
members have a range of skills
and the Committee as a whole has
experience relevant to the Sectors
in which the Group operates. Anne
has recent and relevant financial
experience, as required by the Code.
The Group General Counsel
& Company Secretary acts as
Secretary to the Committee. The
Executive Directors and Board Chair
also regularly attend Committee
meetings and subject matter experts
are invited to present on specific
topics as and when required. The
Committee met with the external
auditor during the year, without the
Executive Directors or management
being present.
The Audit Committee confirms that
the Company has complied with
the provisions of the Competition
& Markets Authority Order
throughout its financial year ended
30 September 2023 and up to the
date of this report.
FINANCIAL REPORTING
AND SIGNIFICANT FINANCIAL
JUDGEMENTS AND ESTIMATES
The Committee considered
and assessed:
The Committee considered the
matters set out below as being
significant in the context of the
consolidated financial statements for
the year ended 30 September 2023.
These were discussed and reviewed
with management and the external
auditor; the Committee then
challenged judgements and sought
clarification where necessary.
The Committee considered the
judgements made in preparing the
financial statements, including the
accounting for acquisitions and
associated valuation of intangible
assets, the provisions for excess and
slow-moving inventory, the potential
for impairment of goodwill and the
appropriateness of the Going
Concern assumption. The Committee
also reviewed the movements in the
Group’s defined benefit pension
schemes.
ACCOUNTING FOR
ACQUISITIONS AND DISPOSALS
The Committee reviewed the
accounting for acquisitions
completed during the year, in
particular the acquisitions of DICSA
and T.I.E.. The acquisitions were
material for the FY23 audit and, in
accordance with IFRS 3 (Business
Combinations), management has
performed a full fair value exercise
for these two acquisitions in this
year’s financial statements. As part of
their audit of the Group, the external
auditor has performed work on:
• the Full Year and Half Year Results,
a) the Purchase Price Allocation
and trading updates for
recommendation to the Board;
(PPA);
The Committee reviewed and
challenged management’s
assessment, which also included
consideration of the external audit
findings. The Committee concluded
that the provisional accounting for
these two acquisitions and the other
ten smaller acquisitions is
appropriate.
The Group completed one disposal
in the year for proceeds of £25m
resulting in a net profit on disposal
of £12m. The profit on disposal has
been presented within acquisition
and other related items.
PROVISIONS FOR EXCESS AND
SLOW-MOVING INVENTORY
The Committee reviewed the
CFO report that set out the gross
balances, together with any related
provision against the carrying value
of inventory.
The Committee reviewed the bases
used to value inventory held across
the Group; it also considered the
appropriateness of provisions
held against the carrying value of
inventory, having regard to the age
and volumes of inventory relative to
expected usage and considering the
actions taken in response to supply
chain disruptions during the year.
Following its review, which also
included consideration of the
external audit findings, the
Committee concluded that the
provision for excess and slow-
moving inventory is appropriate.
b) the opening balance sheet as
at the acquisition date; and
c) audit of any material fair value
adjustments arising on the
acquisition balance sheet.
• the appropriateness of accounting
policies and practices, as well as
critical accounting estimates and
key judgements; and
• whether the Annual Report, taken
as a whole, is fair, balanced and
understandable and provides
the information necessary for
shareholders to assess the Group’s
position, performance, business
model and strategy.
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AUDIT COMMITTEE REPORT CONTINUED
IMPAIRMENT OF GOODWILL
The Committee considered the
carrying value of goodwill and
the assumptions underlying the
impairment review. The judgements
in relation to goodwill impairment
largely relate to the assumptions
underlying the calculations of
the value in use of the cash-
generating units (CGUs) being
tested for impairment.
These judgements are primarily
the calculation of the discount rates,
which have decreased, largely due
to the reduction of the equity size
premium, net of rising risk free rate
and cost of debt; the achievability
of management’s forecasts in the
short to medium-term against
the backdrop of a challenging
macroeconomic environment;
and the selection of the long-term
growth rate.
Following the review, which also
included consideration of the
external audit findings, the
Committee concluded that the
carrying value of the goodwill
recorded is appropriate.
OTHER AUDIT MATTERS
The Committee also considered
other less material matters including
the valuation of the Group’s defined
benefit scheme and the impact of
the key actuarial assumptions on the
balances. The Committee is satisfied
with the year end position and the
assumptions used.
In addition to the above, the
Committee also seeks comments
from the auditor on whether
the Group’s businesses follow
appropriate policies to recognise
material streams of revenue,
and their audit work carried out
more generally has assessed
whether there is any evidence of
management override of key internal
controls designed to guard against
fraud or material misstatement.
As part of its monitoring of the
integrity of the financial statements,
the Committee reviews whether
suitable accounting policies
have been adopted and whether
management has made appropriate
estimates and judgements, and
seeks support from the external
auditor to assess them.
GOING CONCERN AND VIABILITY
The Going Concern and Viability
assessment was prepared by
management. In preparing the
assessment, management carried
out reverse stress testing as well
as scenario analysis. Two scenarios
were considered – the base case and
the downside case. The base case
reflects actual recent trading and
the downside case reflects a more
significant decline in trading, lower
than forecast operating margins,
and adverse cash flows, and is
considered by management to be
a severe but plausible scenario.
The Group has ample liquidity and
covenant headroom in each scenario
for both Going Concern and Viability
Statement purposes. The Audit
Committee reviewed the
assumptions underpinning each
scenario and is satisfied with
management’s assessment and
conclusions on Going Concern
and Viability. Further detail on the
assessment of Viability and the
Viability Statement are set out on
page 49. Further details on Going
Concern can be found on page 173.
ENGAGEMENT OF THE
EXTERNAL AUDITOR
The external auditor is engaged to
express an opinion on the financial
statements of the Group and the
Company. The Committee welcomed
Richard Porter as the new lead audit
partner, following last year’s audit
partner rotation. The audit includes
the consideration of the systems of
internal financial control and the
data contained in the financial
statements, to the extent necessary
for expressing an audit opinion
on the truth and fairness of the
financial statements.
During the year, the Committee
carried out an assessment of the
audit process, led by the Chair of
the Committee and assisted by
the Group CFO. The assessment
focused on certain criteria that
the Committee considered to be
important factors in demonstrating
an effective audit process. These
factors included the quality of the
audit process and the robustness of
challenge to management; key audit
risks and how these have been
addressed; the planning and
execution of the audit; and the role
of management in the audit process.
DIPLOMA PLC ANNUAL REPORT 2023 − 93
The Committee was satisfied that
the PwC audit of the Company and
Group had provided a robust and
effective audit and an appropriate
independent challenge of the
Group’s senior management.
It also supported the work of
the Committee through clear
and objective communication on
developments in financial reporting
and governance.
NON-AUDIT SERVICES
The Committee has approved the
Group’s internal guidelines covering
the type of non-audit work that
can be carried out by the external
auditor of the Group, in light of the
regulation set out in the EU Audit
Directive and Audit Regulation 2014
(the Regulations) and the FRC
Revised Ethical Standard 2019.
The Group CFO does not have
delegated authority to engage
the external auditor to carry out
any non-audit work, but must
seek approval from the Chair of
the Audit Committee.
Taxation services are not provided
by the Group’s current audit firm.
A range of firms are used for the
provision of tax advice and any
assistance with tax compliance
matters generally. In addition, due
diligence exercises on acquisitions
and similar transactions are not
provided by the auditor, but are
placed with other firms.
The external auditor is retained
to carry out assurance services to
the Committee in connection with
an Interim Review of the Group’s
half year consolidated financial
statements (£74,500). The external
auditor also provides access to its
Viewpoint technical subscription
service (£1,200).
With the exception of these services,
PwC has not provided any non-audit
services to the Group or its
subsidiaries and has confirmed
its independence to the Audit
Committee. Further information is
set out in note 26 to the consolidated
financial statements.
The Committee assures itself of the
auditor’s independence by receiving
regular reports from the external
auditor that provide details of any
assignments and related fees carried
out by the auditor in addition to its
normal audit work, and these are
reviewed against the above
guidelines. PwC has reconfirmed
its independence for the current
financial year.
RISK MANAGEMENT AND
INTERNAL CONTROL
The principal risks and uncertainties
that are currently judged to have
the most significant impact on the
Group’s long-term performance are
set out in a separate section of the
Strategic Report on Internal Control
and Risk Management on pages
42 to 48.
The Committee is responsible for
reviewing the effectiveness of the
Group’s system of internal control.
The system of internal control is
designed to manage, rather than
eliminate, the risk of failure to
achieve business objectives and
can only provide reasonable and
not absolute assurance against
material misstatement or loss.
The Group has the necessary
procedures in place to ensure
that there is an ongoing process
for identifying, evaluating and
managing the principal risks to
the Group. These procedures are
in line with the FRC’s guidance.
The Board has established a clear
organisational structure with defined
authority levels.
The day-to-day running of the
Group’s business is delegated to
the Executive Directors of the Group,
who are supported by the heads of
each business Sector and functional
heads of the Group.
Key financial and operational
measures relating to revenue, cash
and receivables are reported on a
weekly basis. Detailed management
accounts and key performance
indicators are prepared monthly
using a robust proprietary reporting
system to collect and analyse
financial data in a consistent
format. Monthly results are measured
against both budget and subsequent
reforecasts, which have been
approved and reviewed by the
Board. All capital expenditure
above predefined amounts must
be supported by a paper prepared
by management.
All financial data is taken directly
from each business’ trial balance,
which is held in their local ERP
system. This is reanalysed and
formatted in a separate Group
management reporting system,
operated by the Group Finance
department. There is no rekeying
of financial data by the Group
businesses to report monthly
financial results.
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AUDIT COMMITTEE REPORT CONTINUED
The Group Finance department
continues to develop the
functionality of this management
reporting system to provide greater
insights into the financial and
operational activities of the
Group’s businesses.
The Group’s internal audit function
regularly audits the base data at
each business to ensure it is properly
reported through to the Group
management reporting system.
Senior management of each
business is required to confirm its
adherence with Group accounting
policies, processes and systems
of internal control by means of
a representation letter.
During the year, management
reviewed the design of the Minimum
Controls Framework, encompassing
a set of standard process controls,
entity level controls and IT general
controls that will be rolled out to all
entities in the Group from FY24, in
conjunction with the upcoming
requirements of the UK Corporate
Governance Reforms.
The Committee has reviewed the
effectiveness of the Group’s risk
management and internal control
systems for the period from 1
October 2022 to the date of this
report. Taking into account the
matters set out on pages 44 to 48
relating to principal risks and
uncertainties and the reports from
the Group Internal Audit Director,
the Board, with the advice of the
Committee, is satisfied that the
Group has in place effective
risk management and internal
control systems.
INTERNAL AUDIT
The Group maintains an internal audit
department, which reports directly to
both the Group CFO and Chair of the
Audit Committee. During the year,
a new Group Head of Internal Audit
was appointed, who joined the
Group in October 2023. Due to the
expansion of our presence in the US,
the incumbent Group Internal Audit
Director will take on a new role and
be responsible for the internal audits
of the US entities, reporting to the
new Group Head of internal Audit.
This is effective from October 2023,
with a smooth transition process
completed at the date of this report.
The department comprises a Group
Head of Internal Audit and two
Group Internal Auditors.
At the beginning of the year,
the Group Internal Audit Director
presented the audit plan for the year
to the Committee for its approval.
During the year, a risk-based scoping
process was gradually introduced to
combine a top-down, strategic
approach and a bottom-up
operational approach to identifying
business risks which, in turn, shape
the scope of each review when
carrying out site visits.
The scope of work carried out by
internal audit generally focuses
on the internal financial, operational
and compliance controls operating
within each business, including risk
management activities and business
process improvements. Formal
written reports are prepared on the
results of each internal audit visit that
set out internal control weaknesses/
risks identified during their work,
together with recommendations
to improve the internal control
environment and mitigate these
weaknesses/risks. These reports
are timely and regularly discussed
with senior management. The
reports are also shared with the
external auditors.
The Group Head of Internal Audit
formally reports to the Committee on
the results of the internal audit work
carried out by the Internal Audit
department during the year. The
Committee reviews management’s
responses to matters raised,
including the time taken to resolve
such matters. Updated reports
on progress against the plan are
provided at regular intervals and
the Audit Chair also meets separately
with the Group Head of Internal Audit
at least twice a year to review some
of the department’s reports and
discuss their findings.
There were no significant or material
matters identified in the internal
audits undertaken during the
current financial year. Several
recommendations were again
made this year to the businesses
on implementing adequate and
effective internal controls and
procedures aimed at improving
existing processes around
cybersecurity, inventory
management and procurement
practices.
The Committee conducted the
annual review of the effectiveness
of the internal audit department,
including its audit plan, general
performance and relationship with
the external auditors. Based on its
review, the Committee was satisfied
with the effectiveness of the Group’s
internal audit function, specifically
that the internal audit department is
sufficiently independent of Executive
Management and has sufficient
resources and scope that is
appropriate to the size and
nature of the Group.
DIPLOMA PLC ANNUAL REPORT 2023 − 95
WHISTLEBLOWING
The Committee also monitors
the adequacy of the Group’s
Whistleblowing Policy and protocols,
which provide the framework to
encourage and give employees
confidence to speak up and report
irregularities. The policy, together
with hotline posters, are placed on
site noticeboards across the Group.
Employees are encouraged to
raise concerns via the confidential
multilingual hotline, which is
managed by an independent
external company and is available
24/7, 365 days a year.
All reports are provided to the
Group Company Secretary & General
Counsel for review to ensure that
they are appropriately investigated
– with the support of internal audit
and external resource, if required.
Most matters reported through the
whistleblowing service relate to
personnel/HR matters and, while
these are not areas for review by
the Committee, such matters are
duly investigated in the same manner
as any other issue raised.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 96 − DIPLOMA PLC ANNUAL REPORT 2023
NOMINATION COMMITTEE REPORT
MEMBER
MEETINGS
ATTENDED
JOINED
DAVID LOWDEN
(CHAIR)
4/4 October 2021
ANNE THORBURN
4/4 September 2015
ANDY SMITH
4/4
February 2015
GERALDINE HUSE1
3/4
January 2020
DEAN FINCH
JENNIFER WARD2
4/4
0/1
May 2021
June 2023
1 Geraldine Huse was unable to attend the
September Nomination Committee meeting
due to an unavoidable conflict.
2 Jennifer Ward was unable to attend the
September Nomination Committee meeting
due to an unavoidable conflict.
THE ROLE OF THE COMMITTEE
The Nomination Committee reviews
the composition of the Board and
principal Committees, considering
skills, knowledge, experience and
diversity requirements before making
appropriate recommendations to the
Board regarding any changes. It also
manages succession planning for
Directors and the Group Company
Secretary and oversees succession
planning for senior leadership across
the Group.
TERMS OF REFERENCE CAN
BE FOUND ON OUR WEBSITE
AT WWW.DIPLOMAPLC.COM
KEY MATTERS DISCUSSED
• Succession planning for Chairs
of Audit and Remuneration
Committees.
• Recruitment of Jennifer Ward.
• Consideration of a detailed skills,
experience and diversity matrix
that sought to identify recruitment
priorities based on identified gaps,
industry expectations and good
practice.
• Reviewing Board and Committee
Diversity in detail as well as wider
Group Diversity & Inclusion.
• Consideration of the contributions
and effectiveness of the Non-
Executive Directors seeking
re-election at the FY23 Annual
General Meeting, prior to giving
recommendations to the Board and
shareholders for their re-elections.
• Keeping the Group’s leadership
and succession requirements
under active review.
David Lowden
Nomination Committee Chair
DIPLOMA PLC ANNUAL REPORT 2023 − 97
“ Ensuring the right mix of skills and
experience to deliver long-term
value for our stakeholders.”
DEAR SHAREHOLDER
I am pleased to set out the report
on the activities of the Nomination
Committee during the year.
The Board is of the view that it is
essential to have an appropriate mix
of experience, expertise, diversity
and independence. Such attributes
enable the Board as a whole to
provide informed opinions and
advice on strategy and relevant
topics, thereby discharging its duty
of oversight. Appointments to the
Board are made with consideration
of the experience and expertise of
existing Directors, any required skill
sets or competencies, and the
strategic requirements of the Group.
During FY23 and into FY24, the
composition of the Board has and
will continue to change reflecting
the departures of Anne Thorburn
and Andy Smith in 2024 after nearly
nine years of service leading our
Audit Committee and Remuneration
Committee respectively.
A fundamental responsibility of the
Committee is to ensure plans are
in place for orderly succession to
the Board, as well as our Group
Company Secretary and senior
management positions, and the
Committee debates these regularly.
The key focus of the Committee
during this past year has been on
Board succession planning, primarily
the search for the Chairs of the Audit
and Remuneration Committees to
ensure these positions are appointed
in time for an orderly handover.
The Committee continually monitors
the balance on the Board to ensure
we have the right combination of
skills, experience and knowledge
consistent with the long-term
strategy of the Company. This
allows us to identify where further
focus is needed in the coming years
and beyond.
We are mindful of the discussions
around improving diversity and
inclusion, together with the targets
set by the Hampton-Alexander
Review and the Parker Review. At the
end of the financial year, three out of
eight Directors (37.5%) were women
and we had no Board members from
a minority ethnic background,
therefore did not meet the targets
for women and ethnic minority
representation.
The Board will maintain oversight of
the range of activities the Group is
pursuing aimed at increasing the
diversity of our workforce – including
the executive pipeline that is
essential for Executive Director
succession planning. We have written
elsewhere (see page 59) about our
Group-wide approach to diversity
and inclusion, which emanates from
the Board and impacts the approach
of the Nomination Committee.
The guidance from the Financial
Reporting Council (FRC) on board
effectiveness recognises a breadth
of diversity that goes beyond just
gender and race, and includes
personal attributes including intellect,
critical assessment, judgement,
courage, honesty and tact; and
the ability to listen and forge
relationships and develop trust.
This ensures that a board is not
comprised of like-minded individuals.
The Committee agrees that
diversity is vital when reviewing the
composition of the Board and setting
the criteria for the recruitment of new
appointees, alongside succession
planning activities. External search
consultants are expected to make
every effort to put forward diverse
candidates for new Board positions.
Whilst appointments will continue
to be made on merit and against
objective criteria, it remains the
Committee’s intention that the
diversity on the Board will continue
to increase over time.
The Committee has also maintained
its focus on the executive succession
pipeline and senior management
succession plans within the Group,
reflecting its responsibility to ensure
appropriate plans are in place.
David Lowden
Nomination Committee Chair
20 November 2023
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NOMINATION COMMITTEE REPORT CONTINUED
NOMINATION COMMITTEE
The Nomination Committee is
chaired by David Lowden, Board
Chair. The Committee comprises the
Non-Executive Directors and meets
as necessary to discharge its
responsibilities.
The Group Company Secretary acts
as Secretary to the Committee.
The Committee reviews the
composition of the Board and
principal Committees, considering
skills, knowledge, experience and
diversity requirements before making
appropriate recommendations to the
Board regarding any changes. It also
manages succession planning for
Directors and the Group Company
Secretary, and oversees succession
planning for senior leadership across
the Group.
The Committee’s roles and
responsibilities are set out in its
Terms of Reference, which were
reviewed during the year and
approved by the Board.
INDUCTION AND
PROFESSIONAL DEVELOPMENT
The Chair, assisted by the Group
Company Secretary, is responsible
for ensuring that there is a properly
constructed and timely induction
for new Directors when joining the
Board. Upon appointment, all new
Directors are provided with a
comprehensive induction, where
they meet with key members
of management and familiarise
themselves with all core aspects
of the Group, its businesses and
the markets in which it operates.
Directors are encouraged, wherever
possible, to visit the Group’s sites so
that they can get a better
understanding of the business and
interact with employees. Site visits
by individual Directors (and the Board
as a whole) are undertaken during the
year as well, with this year focusing
primarily on Life Sciences.
These visits allow Directors to see
Diploma’s safety and sustainability
processes, to talk with local
management and workforces and
to assess how effectively Diploma’s
culture is communicated and
embedded at all levels.
The Chair also has the responsibility
of ensuring that Directors receive
training on a continual basis in
support of their ongoing
development. This training is
provided by way of technical
updates, reports and briefings
prepared for Board meetings.
Directors have full access to our
corporate advisors as well as a
regular and comprehensive supply of
financial, operational, strategic and
regulatory information to help them
discharge their responsibilities.
PROCESS FOR BOARD APPOINTMENTS
When making Board appointments,
we follow the five steps outlined
below. We disclose the name of the
search agent and any other
connection they have with Diploma
in our Annual Report & Accounts
published following the search.
During the year we engaged
Korn Ferry in connection with
the recruitment of Jennifer Ward.
Korn Ferry do not have any other
connection to the Group, other
than providing executive
search services.
In due course, a tailored induction
programme is developed for the
new Director.
The Committee
reviews and
approves an outline
brief and role
specification and
appoints a search
agent to facilitate
the search
A Committee
member discusses
the specification
with the
independent search
agent, who
prepares an initial
longlist of
candidates
The Committee
then defines a
shortlist of
candidates and we
hold interviews
The Committee
makes a
recommendation to
the Board for its
consideration
Following Board
approval, the
appointment is
announced in line
with the
requirements of the
FCA’s Listing Rules
STEP 1STEP 2STEP 3STEP 4STEP 5 DIPLOMA PLC ANNUAL REPORT 2023 − 99
ONBOARDING PROCESSES
The decentralised nature of the
Group has always made induction
processes complex. Ideally we
seek to arrange face-to-face
meetings with key executives
and management, introductions
to their direct reports, one-to-ones
following the initial meetings,
and site visits arranged to key
businesses. Parts of the induction
plan are conducted via video calls,
particularly where key people
are located outside of Europe.
This permits Directors to have
considerably greater exposure to
the various businesses and personnel
and we are pleased that we can once
again encourage Directors to visit
our businesses and appreciate our
culture and colleagues in person, as
well as continuing to develop their
understanding of each business.
SUCCESSION PLANNING
The Committee formally reviews
succession planning for the Board,
Group General Counsel & Company
Secretary, and senior management
at least once each year, taking
into account the challenges and
opportunities facing the Group and
the background, skills and expertise
that will be required by the Group
in the future. During 2023, the
Committee undertook a regular
thorough analysis of the Board’s
competencies. The Committee also
considered how the Board would
need to evolve to be fit for the future,
as well as any potential gaps that
may need to be filled through
succession or training.
The Group CEO manages the
development of succession plans
for the Executive Team, and these
are overseen by the Committee. The
Group CEO and Group HR Director
presented a succession planning
update to the Board in January 2023.
The Committee is aware of the
importance of identifying critical
roles within the businesses to ensure
Diploma retains and motivates key
talent and has the necessary skills
for the future. Overall, it was clear
that we have a good executive and
management succession planning
process and, importantly, succession
is being actively managed by the
Executive Team to achieve the
desired long-term outcomes.
The standard term for Non-Executive
Directors is three years. They
normally serve for a maximum of
nine years, which is split across
three terms of three years each.
All Directors are subject to annual
re-election.
With only specific exceptions that
may be necessary to ensure Board
continuity, Non-Executive Directors
shall not stand for re-election after
they have served for the period of
their independence of nine years,
as determined by applicable
UK standards.
LENGTH OF TENURE
2015
2016
2017
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
DAVID LOWDEN
ANDY SMITH1
ANNE THORBURN1
GERALDINE HUSE
DEAN FINCH
JENNIFER WARD
Length of term
1 Director in third and final term.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 100 − DIPLOMA PLC ANNUAL REPORT 2023
NOMINATION COMMITTEE REPORT CONTINUED
DIVERSITY & INCLUSION
Diversity is a key consideration when
assessing the Board’s composition
and that of its Committees, as well
as the wider Group, to ensure the
development of a diverse pipeline
for succession. The Committee has
worked hard to ensure the Board is
sufficiently diverse to meet and
support its future strategic
developments.
The Board and this Committee
consider a broad definition of
diversity when setting policies and
appointing Directors. This includes:
ethnicity, religion, socio-economic
background, gender, sexual
orientation, age, disability,
partnership status, culture,
personality and professional
experience.
The Board confirms that as at
30 September 2023 (being the
reference date selected by the Board
for the purposes of this disclosure)
the Company has not fully complied
with the gender diversity targets of
Listing Rule 9.8.6R(9) and the
FTSE Women Leaders Review.
It is anticipated that following the
departures of two Non-Executive
Directors in 2024, the Company will
fully comply with the gender diversity
targets of the Listing Rule.
The Committee notes the Parker
Review and the ethnicity diversity
targets of Listing Rule 9.8.6R(9) and
acknowledges that further work
is required for the Board and its
Committees to become more
ethnically diverse. In order to
develop a truly diverse culture,
the Board and its Committees
recognises it needs to set the tone
and become more proportionately
representative of its workforce and
the stakeholders it serves.
As at 30 September 2023 the
Company did not meet the Listing
Rule 9.8.6R(9) ethnicity target for
Board members of at least one
individual on its Board from a
minority ethnic background.
In order to collect the data for
the gender and ethnic diversity
disclosures, the Board and its
executive management team were
each sent a series of questions
to complete, including asking how
they self-identify in each of the
designated categories under the
Listing Rules disclosure. This data
was then collected with results
recorded and retained for
future records.
BOARD AND EXECUTIVE MANAGEMENT GENDER IDENTITY
Men
Women
Number of Board
Members
5
3
Percentage
of the Board
62.5%
37.5%
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
3
1
Number
in executive
management
7
2
Percentage
of executive
management
78%
22%
BOARD AND EXECUTIVE MANAGEMENT ETHNIC IDENTITY
Non-ethnic minority
Number of Board
Members
8
Percentage
of the Board
100%
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
4
Number
in executive
management
8
Percentage
of executive
management
100%
DIPLOMA PLC ANNUAL REPORT 2023 − 101
BOARD EVALUATION
The Board conducts an annual
evaluation of its performance
and that of its committees and,
in accordance with good practice,
engages an independent third-party
facilitator to assist in this process
every three years. For the year ended
30 September 2023, the evaluation
of the Board as a whole and of its
committees was undertaken
internally, led by the Board Chair.
Board members completed
questionnaires regarding the
operation and effectiveness of the
Board and its Committees. Findings
were collated by the Group Company
Secretary and the Board Chair
discussed the conclusions and
recommendations separately
with each Director.
The performance of the Non-
Executive Directors and Executive
Directors were reviewed by the
Board Chair. The results of the 2023
evaluation process were considered
and debated in detail by the Board.
The conclusion was that the Board,
its members and its committees
continue to function well. Directors
operated in an atmosphere of open
and constructive debate with a good
breadth of skills, experience, and
viewpoints. Following the evaluation,
the below recommendations
were made:
RECOMMENDATION
ACTION
Board and Committee structures
Enhanced risk management
Stakeholders
Review Committee structures and Board schedule to
reflect the increased size/complexity of the Group, and to
permit Committees to function in parallel as appropriate.
Development of risk management and an increased
focus on climate-related and emerging risks, in line with
our overall strategy.
Develop further understanding of key stakeholders,
including customers, during Board business visits and
with additional deep-dive sessions as appropriate.
The Company expects to update shareholders on the progress made in relation to the matters identified above
in its 2024 Annual Report.
KEY AREAS FOR DEVELOPMENT
The below recommendations were made following the 2022 external Board performance evaluation.
RECOMMENDATION
ACTION
Consider the diversity of the Board, from both a
gender and ethnicity standpoint.
Continue to challenge and support on the progress
of DVR actions.
Nomination Committee addressed diversity requirements
in succession planning and during the Non-Executive
Director recruitment process.
The Board continues to critically review DVR progress and
actions. After consideration the Board concluded that
it was preferable for DVR matters to remain the focus
of the full Board rather than a committee.
Improve information shared with the Board to
enhance visibility on certain topics and improve
decision-making.
Board papers continue to evolve to ensure they
communicate effectively and facilitate critical
thinking and decision-making.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 102 − DIPLOMA PLC ANNUAL REPORT 2023
REMUNERATION COMMITTEE REPORT
• Reviewed remuneration framework
for the Executive Team and senior
management in the operating
businesses.
• Reviewed workforce remuneration
framework.
• Approved the 2023 Remuneration
Committee Report.
MEMBER
MEETINGS
ATTENDED
JOINED
ANDY SMITH
(CHAIR)
3/3
February 2015
ANNE THORBURN
3/3
September 2015
DAVID LOWDEN
GERALDINE HUSE1
DEAN FINCH
JENNIFER WARD
3/3
2/3
3/3
1/1
October 2021
January 2020
May 2021
June 2023
1 Geraldine Huse was unable to attend the
September 2023 meeting due to an
unavoidable conflict.
THE ROLE OF THE COMMITTEE
The Committee, on behalf of the
Board, agrees all aspects of the
remuneration of the Executive
Directors. It agrees the strategy,
direction, and policy framework
for the remuneration of the senior
executives who have significant
influence over the Group’s ability
to meet its strategic objectives. The
Committee also oversees workforce
remuneration policies.
TERMS OF REFERENCE CAN
BE FOUND ON OUR WEBSITE
AT WWW.DIPLOMAPLC.COM
KEY MATTERS DISCUSSED
• Approved Remuneration
Committee work programme
for 2023.
• Reviewed the AGM 2023 votes on
the 2022 Remuneration Committee
Report.
• Undertook a post-AGM review
of the new Remuneration Policy.
• Approved annual performance
bonus targets and the subsequent
bonus awards for 2023.
• Approved new Performance Share
Plan (PSP) awards for Executive
Directors and Group senior
management and confirmed
the performance conditions
for such awards.
• Confirmed the vesting percentages
for the PSP awards made in
December 2020, which matured
in 2023.
• Reviewed Executive Directors’
salaries, pensions and benefits.
• Reviewed the fees of the Chair
and Non-Executive Directors.
Andy Smith
Remuneration Committee Chair
DIPLOMA PLC ANNUAL REPORT 2023 − 103
“ Another strong year of performance
adds to the track record of growth,
strategic execution and strong returns.
We continue to develop our reward
based on the interests of all
stakeholders.”
DEAR SHAREHOLDER
As Chair of the Board Remuneration
Committee (Committee), I am
pleased to present our Directors’
Remuneration Report (DRR) for the
year ended 30 September 2023.
CONTEXT AND APPROACH
TO REMUNERATION
The Company continues to perform
very strongly. Our current leadership
team has led substantial and rapid
growth and created considerable
shareholder value over the longer
term. In September 2018 Diploma
was ranked 189th on the FTSE index
and in August 2023 we entered the
FTSE 100, more than doubling the
market capitalisation in five years.
The Board is very pleased with this
growth and recognises it is key for us
to retain our strong leadership team,
incentivise them to deliver and to be
able attract the talent we need to
continue to grow. As we continue
to build high-quality scalable
businesses that deliver sustainable
organic growth, our leadership
roles become bigger and more
complex. The Committee devotes
considerable time to ensuring
that our remuneration policies
and practices align to strategy
and that reward is linked firmly to
performance. The Committee pays
particular attention to developing
reward to keep pace with the rapid
growth in the Company and the
increasing complexity it brings.
If the growth trajectory of the
Company continues, it is likely that
the organisation will need to bring
forward the Remuneration Policy
review for consultation during 2024
and for voting at the January 2025
AGM. The Committee will continue to
review this over the coming months.
2023 PERFORMANCE PAY
The leadership team has delivered
another year of strong performance
and continued to build on their
impressive track record (pages
106 to 107). It has been a year of
excellent progress with regard to
scaling the Company to enable
further growth through building
infrastructure, developing talent
and further developing our
businesses’ target operating
models, capabilities and cultures.
Organic growth has been strong,
driven by revenue diversification
initiatives and good organic
performance from recent
acquisitions. We have continued
our programme of high-quality
acquisitions with two strategic
additions and ten smaller ‘bolt-ons’
taking us into new strategic markets
(further detail on strategic delivery
can be found on pages 12 to 17).
Adjusted operating profit, reported
revenue and free cash all exceeded
annual bonus targets (on page 109),
resulting in a full bonus payment
of 125% of salary for both Johnny
Thomson and Chris Davies.
Our long-term performance
continues to generate excellent
shareholder returns.
Our three-year compound annual
growth rate (CAGR) for adjusted
earnings per share (EPS) is 31%,
exceeding the performance target
maximum of 14%. Return on adjusted
trading capital employed (ROATCE),
which underpins our Performance
Share Plan (PSP), is 18% and in line
with the Group’s financial model and
Board expectation. Our three-year
total shareholder return (TSR)
performance is in the 88th percentile
when compared to the comparator
group of FTSE 250 companies
(excluding investment trusts). The
Committee reviewed the possible
impact of Covid on the outturn of the
2020 grant and was satisfied that
there was no windfall gain. Therefore,
based on these excellent results, the
PSP 2020 has vested at maximum for
Johnny Thomson and all other PSP
participants. Given his start date of
November 2022, Chris Davies does
not have any PSP vesting this year.
Full details are shown in the table
on page 112. As covered in previous
disclosures, Chris Davies received
remuneration to replace variable
awards foregone at his previous
employer in order to join the
Group (shown on page 108).
In line with the Code, the
Committee reviewed individual
Directors’ incentive plan outcomes
and overall remuneration considering
the Company's underlying
performance and concluded that
Executive Director remuneration
in respect of the year ended
30 September 2023 is consistent
with the levels of Company
performance delivered and that
there was no requirement for any
discretionary adjustments.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 104 − DIPLOMA PLC ANNUAL REPORT 2023
REMUNERATION COMMITTEE REPORT CONTINUED
IMPACT OF GROWTH AND
SCALE ON REMUNERATION
Diploma’s trajectory over the last
five years is extremely positive
and has generated excellent
returns for shareholders.
On page 107 we have set out
the journey of growth, portfolio
development and strategic execution
delivered by management over the
last five years since Johnny Thomson
was appointed as CEO. In that time
the business has added seven
new business lines and diversified
product ranges as well as expanded
and entered new geographic
end-markets.
Balancing the development of
reward to account for the pace of
growth and increasing complexity
and proven, sustainable performance
is key. Accordingly, the Committee
pays careful attention to ensuring
reward follows performance and
does not precede it. In its
considerations, the Committee
balances the interests of
shareholders, management and
colleagues, and uses relevant market
data as context to inform decisions.
Given our entry into the FTSE 100,
the Committee now reviews market
data for companies of a similar
size using FTSE 51-100 (excluding
investment trusts and financial
services) as the broad comparator
group and a bespoke group of
11 companies* as a peer comparator.
REMUNERATION IN
THE WORKFORCE
Our colleagues are at the heart of
our success and retaining top talent
in highly competitive international
markets is key to Diploma’s delivery.
We seek to ensure that colleagues
are fairly and well-rewarded and are
pleased to note that the Company
achieved outstanding levels of
colleague engagement again this
year (more information on page 56).
The Committee takes colleagues’
perspectives into account when
considering remuneration across
the Company. During 2023, the
Committee engaged with colleagues
in our workforce via the Executive
team, business presentations and
site visits. The general feedback from
the workforce is that they want the
Company to be successful and
sustainable so as to provide job
security, and for everyone to be
paid fairly.
In our decentralised model,
remuneration decisions for our
workforce of around 3,300
colleagues operating in different
markets, businesses and countries
are made locally, based on local
market conditions. We do seek to
align remuneration throughout the
Company, and the Group provides
guidance and oversight to ensure
we pay all our colleagues fairly and in
line with our Group reward philosophy.
For our business leaders, we have
increased variable pay, both short-
term and long-term remuneration,
ensuring emphasis on sustainable
long-term performance.
The overall workforce pay increase
for the start of 2024 is 5%. This year
we have experienced more regional
variation than usual, driven by
differences in the pace of changing
inflation and macroeconomic
conditions in different markets.
For our wider workforce, our UK
businesses are moving towards the
real living wage (with our businesses
already accredited or in the process
of being accredited and new
acquisitions tasked to move
towards that goal). We have also
introduced life assurance for all UK
colleagues who did not previously
have it and have introduced further
healthcare plans.
EXECUTIVE REMUNERATION
FOR 2024 – IMPLEMENTATION
Fixed Pay:
Johnny Thomson continues to deliver
excellent leadership and build an
impressive track record. The breadth
and complexity of his role has
increased significantly as the
Company scales and expands into
new end markets, new products and
new geographies.
As stated earlier, our ambition is
strong, and we want to retain Johnny
to lead the Company through the next
phase of growth. He is of great value
to our business, with a skillset that is
highly sought after in the market. We
wish to continue to move his reward
and incentivisation forward to
recognise the increased scale of the
business, the excellent performance
delivery, and the increased worth in
the marketplace that his track-record
of delivery brings.
Against the current FTSE comparator
group and also against the bespoke
peer group*, Johnny’s total direct
compensation (TDC) is between
lower quartile and median; base
rate is at lower quartile and bonus
as a percentage of salary is below
lower quartile.
After careful consideration of pace
of growth, complexity and the
interests of stakeholders, including
consultation with ca. 20 of our
largest shareholders representing
around 60% of our register, as well as
the key proxy agencies, the
Committee has decided to increase
the CEO's reward this year as
permitted within our existing policy.
We are therefore increasing Johnny
Thomson’s annual base salary from
£754,000 per annum to £820,000
per annum, an increase of 8.75%.
* Rentokil Initial plc, Bunzl plc, Halma plc, Spirax-Sarco Engineering plc, Croda International plc, DS
Smith plc, Howden Joinery plc, RS Group plc, Spectris plc, Inchcape plc, Johnson Matthey plc.
DIPLOMA PLC ANNUAL REPORT 2023 − 105
NON-EXECUTIVE DIRECTORS
AND COMMITTEE EVALUATION
The Committee’s performance was
assessed as part of the annual Board
evaluation. I am pleased to report
that the Committee is operating
effectively. As set out in the
Nomination Report on page 96
Jennifer Ward will take up the role
of Remuneration Chair in June 2024
after my tenure expires. Jennifer will
continue our journey on remuneration
with ongoing partnership with
shareholders.
Non-Executive Director fees have
been reviewed and the increases
are set out on page 112. The Board
and Committee are conscious of
potentially higher demands on
Non-Executive Directors which may
arise from the Company’s promotion
to the FTSE 100. We plan to review
fees at the end of 2024 based on
our performance during next year.
CONCLUSION
In closing, I would once again like
to thank shareholders for their
engagement over this last year and
indeed for working closely with me
over the past nine years. We will
maintain close dialogue as we
continue to deliver a competitive,
motivating pay framework that is
tightly aligned to shareholder
experience. We look forward to
receiving your support at the
AGM on 17 January 2024.
Andy Smith
Chair of the Remuneration
Committee
20 November 2023
PSP measures remain unchanged for
the 2023 grant. 75% of the total
award will be based on adjusted EPS
growth, with an underpin on ROATCE.
25% of the total award will be based
on relative TSR. Given the Company’s
promotion into the FTSE 100, it was
decided that the FTSE 250 (minus
investment trusts) was no longer the
best comparator group and having
considered options, the Committee
chose the FTSE 100 (minus
investment trusts) as the most
appropriate comparator group
for the 2023 award.
Given the importance of stretching
targets, the Committee spent time
reviewing the long-term business
case. In setting targets, we ensure
strong focus on organic growth,
enhanced by quality, strategic
acquisitions and maintaining financial
discipline in line with the Company’s
financial model. The targets for
adjusted EPS have been set at the
same level as 2022 (5% threshold
and 13% maximum). This provides the
right degree of stretch ambition for
Diploma at this time. The Board will
maintain oversight of ROATCE to
ensure that it meets their
expectations of high-teens. We will
continue to review the level of stretch
annually for each new PSP grant.
ESG
Our ESG programme Delivering Value
Responsibly (DVR) is now firmly
embedded in our strategy (more
detail can be found on page 54).
The management team are
accountable for DVR as part of the
strategy and performance is
reviewed by the Board. In 2023 we
set targets for the Group which the
Committee noted were achieved.
The Board are continuing to monitor
performance and we are keeping the
connection between DVR and
Executive incentives under review.
We have flexibility in our policy to
introduce DVR as a measure in the
future should that be appropriate.
Chris Davies joined us in November
2022, and we recruited him on
a package that reflected that
of his previous employer and his
experience at the time. He has made
a very strong start in his first year
with us, swiftly establishing himself
in the role, delivering against all his
objectives and we are confident
he will be instrumental in our future
success. He has led the finance team
well, building additional capability
and has played an instrumental role
in strengthening the Company’s
finances by managing an equity raise
to support our M&A pipeline and
refinancing of the Company’s
revolving credit facility.
Against the current FTSE market
group and peer group* CFO TDC is
below lower quartile as are base rate
and bonus as a percentage of salary.
The Committee considered market
positioning compared to peers, and
determined that based on the scale
of his role, his experience, and his
contribution to the Company, an
increase to Chris Davies' salary
is warranted.
We are therefore increasing
Chris Davies’ annual base salary from
£450,000 to £510,000 (an increase
of 13.3%).
Annual Bonus:
The 2024 annual performance
bonus will follow the same measures
as 2023, namely 50% adjusted
operating profit, 25% revenue, 25%
free cash flow. Targets will be based
on the Board approved budget.
Maximum bonus for the CEO and
CFO will remain unchanged at 125%
of base salary.
PSP:
Arising from the rationale stated
above, Chris Davies will receive a PSP
award of 250% of base salary (PSP
2022: 200%), which takes him to the
maximum allowed under the existing
policy. Additional emphasis on
long-term reward was supported by
shareholders and aligns with interests
in sustainable long-term returns.
Johnny Thomson will receive a PSP
award of 300% of base salary which
remains unchanged from 2022.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 106 − DIPLOMA PLC ANNUAL REPORT 2023
REMUNERATION AT A GLANCE
The strategy is working and delivering
excellent long-term value for shareholders.
Diploma’s Strategy: build high-quality, scalable
businesses for sustainable organic growth.
STRATEGIC
PILLARS
SHORT-TERM INCENTIVE:
ANNUAL BONUS
LONG-TERM INCENTIVE:
PERFORMANCE SHARE PLAN
GROW
SCALE
50%
+24%
ADJUSTED
OPERATING PROFIT*
REVENUE*
FREE CASH
FLOW*
ADJUSTED EPS*
(ROATCE UNDERPIN)
25%
25%
75%
RELATIVE
TSR*
25%
+19% +36%
+31% (3-year CAGR)
18% (ROATCE)
Upper
quartile
* Directors receive maximum payout as targets delivered.
DVR
Non-financial KPIs and targets in place, flexibility to introduce DVR (ESG)
metrics into remuneration included in the Policy
REMUNER ATION IN OUR DECENTR ALISED BUSINESS AS WE SCALE:
EXECUTIVE
DIRECTORS
• Stretching targets, pay for performance
• Evolving reward to keep pace with our expanding Company
which is bigger and more complex to lead
• Aligned with shareholders on sustainable long–term performance
• Retaining top talent
LEADERSHIP
ROLES
• Stretching targets, pay for performance
• Same basket of financial measures as Executive Directors;
locally accountable
• Top 50 participate in Diploma Performance Share Plan
• Evolving reward to keep pace with our expanding roles which
are bigger and more complex
• Attracting and retaining top talent
WORKFORCE
• Set locally
• Fair and competitive in local market
• Linked to colleague value proposition
• Attracting and retaining top talent
DIPLOMA PLC ANNUAL REPORT 2023 − 107
GROWTH, VALUE AND SCALING
Diploma’s trajectory over the last five years is
extremely positive and has generated excellent
returns for shareholders. Growth and scaling make
our leadership roles more complex.
Growth
johnny thomson
appointed ceo
chris davies
appointed cfo
2018
2019
2020
2021
85.2
118
128
56.4
56.4
189
64.3
172
ADJUSTED EPS (P)
FTSE RANKING
Value and returns (Total Shareholder Returns)
2022
107.5
106
2023
126.5
84
30 SEP 2018
30 SEP 2019
30 SEP 2020
30 SEP 2021
30 SEP 2022
30 SEP 2023
700
600
500
400
300
200
100
0
DIPLOMA PLC
FTSE 250
(EXCLUDING
INVESTMENT
TRUSTS)
FTSE 100
Scaling the business and our leadership
2018
4.8
2023
£1.2bn
)
£
(
e
u
n
e
v
e
R
10 BUSINESS LINES
7 NEW BUSINESS LINES
� INDUSTRIAL AUTOMATION
� SPECIALTY ADHESIVES
� US MRO
� EUROPEAN
AFTERMARKET
(ENTERED SPAIN)
� US WIRE & CABLE
(LARGEST ACQUISITION)
� UK AFTERMARKET
� NORDICS LIFE SCIENCES
PLUS CA. 25 BOLT-ONS
£485m
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information
108 − DIPLOMA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION
The following section of this Report provides details of the implementation of the Remuneration Policy for the
Executive Directors for the year ended 30 September 2023. All of the information set out in this section of the
Report has been audited, unless indicated otherwise.
EXECUTIVE DIRECTORS (AUDITED)
Total remuneration in 2023 and 2022
Salary
Taxable benefits2
Pension
Total fixed
Annual performance bonus
Long-term incentive plans – dividend equivalent (cash)
Long-term incentive plans – performance element
Long-term incentive plans – share appreciation element
Long-term share-based remuneration3
Other4
Total variable
Single total figure
Johnny Thomson
Chris Davies1
2023
£000
754
26
41
821
943
107
1,725
522
2,354
-
3,297
4,118
2022
£000
711
25
71
807
889
75
1,725
262
2,062
-
2,951
3,758
2023
£000
413
18
17
448
516
–
–
–
-
395
911
1,359
1 Chris Davies was appointed as Group CFO and an Executive Director on 1 November 2022, replacing Barbara Gibbes who stepped down as CFO and
an Executive Director on 30 September 2022.
2 Taxable benefits comprises cash allowance in lieu of a car, private medical, life assurance and income protection.
3 Dividend equivalents are included in long-term share-based remuneration and total variable pay.
4 In line with the Remuneration Policy, during the year Chris Davies received £186,000 in cash and £208,700 of restricted shares (7,518 shares at a share price
of 2,776p) that are subject to a holding period of two years. These mirror the cash and share-based variable remuneration arrangements that are foregone in
order to join the Group.
Executive Directors’ base salary (unaudited)
On 14 November 2023, the Committee approved an 8.75% increase in base salary for the CEO and a 13.3% increase
in base salary for the CFO. Explanations of how the Committee has considered remuneration in the workforce are in
the Chair’s letter on pages 103 to 105.
Johnny Thomson
Chris Davies (appointed 1 November 2022)1
1 Chris Davies was appointed Group CFO on 1 November 2022. His annualised salary for 2022 was £450,000.
Salary from
1 October
2023
£000
Salary from
1 October
2022
£000
820
510
754
450
Increase in
salary
8.75%
13.33%
DIPLOMA PLC ANNUAL REPORT 2023 − 109
Pension (audited)
The Executive Directors receive a cash allowance in lieu of pension contributions from the Company. During 2022
and 2023, both Executive Directors took this as a cash allowance. None of the Executive Directors have a right to a
Company Defined Benefit pension plan. Johnny Thomson lowered his cash allowance in lieu of pension contributions
to 4% of base salary from 1 January 2023, in line with the majority of the UK workforce.
Johnny Thomson
Chris Davies
2023
2022
Contribution
rate % of
base salary
10 / 4
4
Pension
allowance
paid as cash
£000
Contribution
rate % of
base salary
Pension
allowance
paid as cash
£000
41
17
10
-
71
-
ANNUAL PERFORMANCE BONUS (AUDITED)
Bonus payout for year ended 30 September 2023
The Board approves a stretching budget each year. Based on the performance of the Group, the Executive Directors
will receive 100% of their maximum bonus for the year ended 30 September 2023. The following table summarises
the performance assessment by the Committee in respect of 2023 with regard to the Group financial objectives and
the bonus awarded to each of the Executive Directors:
Performance measure
Targets for 2023
Overall assessment against targets1
Adjusted operating profit
(calculated on a constant currency basis)
50% of bonus opportunity
Minimum: £201.3m
On-target: £211.9m
Maximum: £222.5m
Adjusted operating profit for FY23 was £238.9m at
exchange rates consistent with the FY23 targets.
The maximum threshold was met and the maximum
award is payable.
Revenue (calculated on a constant currency basis)
25% of bonus opportunity
Free cash flow (reported)
25% of bonus opportunity
Minimum: £1,087.2m
On-target: £1,144.4m
Maximum: £1,201.6m
Revenue for FY23 was £1,207.4m at exchange rates
consistent with the FY23 targets. The maximum
threshold was met and the maximum award is payable.
Minimum: £124.1m
On-target: £130.6m
Maximum: £137.1m
Free cash flow for the year was £163.8m. The maximum
threshold was met and the maximum award is payable.
1 All figures for FY23 are stated at the exchange rates that were used to set the FY23 targets.
Bonus awarded to each of the Executive Directors for year ended 30 September 2023
Johnny Thomson
Chris Davies
Base salary
2023 actual bonus – as a percentage of 2022 base salary
2023 bonus
£000
754
450
Minimum
On-target
Maximum
5%
5%
63%
63%
125%
125%
Financial
objectives
125%
125%
Total bonus
125%
125%
£000
943
5161
1 Chris Davies’ bonus is prorated for the period from 1 November 2022 to 30 September 2023.
In line with the Remuneration Policy, minimum shareholding requirement for the CEO is 300% of base salary and
250% of base salary for other Executive Directors. In line with the Company’s Shareholding Policy, Johnny Thomson
has met his minimum shareholding requirement (300%) and therefore his bonus for the year will be paid as cash.
50% of the 2023 bonus for Chris Davies will be paid as cash and 50% will be deferred into shares until he reaches
his minimum shareholding requirement (250%) set out in the Policy.
Bonus awards for year ended 30 September 2024
In the financial year beginning 1 October 2023, the Annual Performance Bonus Plan will be based on the following
metrics: 50% will be based on adjusted operating profit, 25% will be based on revenue (both metrics measured on
a constant currency basis) and the remaining 25% will be based on free cash flow. The financial performance targets
set for the Annual Performance Bonus Plan for this year will be disclosed in next year’s Annual Report & Accounts,
due to their commercial sensitivity.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 110 − DIPLOMA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION CONTINUED
LONG-TERM INCENTIVE AWARDS (AUDITED)
The Company’s long-term incentive plan is the Performance Share Plan (PSP).
Performance conditions
Set out below is a summary of the performance conditions that apply to the PSP awards which vest in
2023 (PSP 2020), 2024 (PSP 2021), 2025 (PSP 2022) and 2026 (PSP 2023).
Vesting of the PSP 2020 and PSP 2021 awards are based 50% on growth in adjusted EPS and 50% on relative TSR
performance. Vesting of the PSP 2022 and PSP 2023 awards are based on 75% growth in adjusted EPS and 25% on
relative TSR performance. In order for any payment to be earned under the EPS element of awards, the Committee
must consider that a satisfactory level of ROATCE performance has been achieved. The ROATCE underpin will be
measured as the ROATCE in the third year of the performance condition and as defined in note 28 of the consolidated
financial statements.
EPS
The performance condition for PSP awards is that the average annual compound growth in the Company’s adjusted
EPS, over the three consecutive financial years following the financial year immediately prior to the grant, must
exceed the specified absolute figures. The performance targets are as follows:
Adjusted EPS growth (over three years)
14% p.a. (PSP 2020)
13% p.a. (PSP 2022) (PSP 2023)
12% p.a. (PSP 2021)
5% p.a.
Below 5% p.a.
% of awards
vesting
100
100
100
25
Nil
Where the Company’s adjusted EPS performance is between these percentage bands, vesting of the award is on a
straight-line basis. For the purposes of this condition, EPS is adjusted EPS as defined in note 28 to the consolidated
financial statements, and this definition remains consistent with the definition of adjusted EPS approved by the
Committee in previous years.
TSR
The performance condition compares the growth of the Company’s TSR over a three-year period to that of the
companies in a recognised broad equity market index of which the Company is a member. PSP awards 2020, 2021,
2022 used the FTSE 250 Index (excluding Investment Trusts). PSP award 2023 will use the FTSE 100 Index (excluding
Investment Trusts) which follows the Company’s promotion to the FTSE 100 Index in August 2023. When analysing the
impact of moving the relative TSR comparator group from FTSE 250 to FTSE 100, we completed a retrospective
comparison on PSP 2020, PSP 2019 and PSP 2018 and moving comparator group made no difference to the vesting
outcome. Hence, the Committee agreed that awards which were granted when the Company was part of the FTSE
250 would continue to be compared against this index and those granted after promotion would be measured
against the FTSE 100. The performance targets are as follows:
Adjusted EPS growth (over three years)
Upper quartile
Median
Below median
% of awards
vesting
100
25
Nil
Where the Company’s TSR performance is between these percentage bands, vesting of the award is calculated
based on ranking.
DIPLOMA PLC ANNUAL REPORT 2023 − 111
AWARDS VESTING IN 2023 (AUDITED)
The PSP award granted on 23 November 2020 (PSP 2020) to Johnny Thomson, was subject to the performance
conditions as set out on page 110 and independently assessed over a three-year period ended 30 September 2023.
The outcome of this award is presented in the table below:
Adjusted earnings per share
PSP (2020)
Base EPS
56.4p
EPS at
30 Sep 2023
CAGR in EPS
126.5p
30.9%
Maximum
target
14%
Maximum
award
50%
Vested
award
50%
The Committee has reviewed the ROATCE outturn and concluded that 18.1% is in line with expectations. The
Committee reviewed the topic of windfall gains for the 2020 grant and it determined that as a result of the share
price increase at the time of grant, there was no windfall gain concern. It was therefore the view of the Committee
that the formulaic vesting should proceed without any adjustments.
TSR growth against FTSE 250 (excluding Investment Trusts)
PSP (2020)
TSR at
30 Sep 2023
Median
Upper
quartile
20.2% p.a.
5.2% p.a.
12.1% p.a.
Maximum
award
50%
Vested
award
50%
Set out below are the shares which vested to Johnny Thomson at 30 September 2023 in respect of this award1.
Johnny Thomson PSP (2020)
2,306
3,004
100%
74,804
1,725
522
Share price at
date of grant
pence
Share price at
30 Sep 2023
pence
Proportion of
award vesting
Shares vested
number
Performance
element2
£000
Share
appreciation
element3
£000
Total
£000
2,247
1 Details of the PSP (2020) shares which vested to Barbara Gibbes at 30 September 2023 have been explained on page 112 as payment for loss of office.
2 The performance element represents the face value of awards that vested, having met the performance conditions set out above.
3 The share appreciation element represents the additional value generated through appreciation of the share price from the date the award was granted
to the end of the three-year performance period on 30 September 2023.
DIVIDEND EQUIVALENT PAYMENTS (AUDITED)
Dividend equivalent payments of £106,895 (2022: £74,881) are payable to Johnny Thomson in respect of the PSP
(2020) award which vested on 30 September 2023. Dividend equivalent payments cover all payments made in
the three-year vesting period.
LONG-TERM INCENTIVE PLAN – AWARDS GRANTED IN THE YEAR (AUDITED)
Johnny Thomson and Chris Davies received a grant of the PSP 2022 award on 18 January 2023 and 28 November 2022
respectively in the form of nil-cost options. This award was based on a share price of 2,848p and 2,862p respectively,
being the mid-market price of an ordinary share in the Company at close of business on the day immediately
preceding the awards. The PSP 2022 award for Johnny Thomson was 300% of base salary and for Chris Davies was
200% of base salary prorated based on his start date of 1 November 2022. Additionally, in line with the Remuneration
policy, Chris Davies also received grants of the PSP 2021 award on 28 November 2022 in the form of nil-cost options
to replace variable remuneration awards foregone in order to join the Group. This award was based on a share price of
2,862p being the mid-market price of an ordinary share in the Company at close of business on the day immediately
preceding the awards.
Under normal circumstances, the options will not become exercisable until the performance conditions are
determined after the end of the three-year measurement period which begins on the first day of the financial year
in which the award is made and provided the participating Director remains in employment. The level of vesting is
dependent on the achievement of specified performance criteria at the end of the three-year measurement period.
The performance conditions for this award are set out on page 110.
OUTSTANDING SHARE-BASED PERFORMANCE AWARDS (AUDITED)
Set out is a summary of the share-based awards outstanding at 30 September 2023, including both share awards
which have vested during the year (based on performance) and share awards which have been granted during the
year. The awards set out were granted based on a face value of 300% (250% for PSP 2021 and PSP 2020) of base
salary to Johnny Thomson and a face value of 200% of base salary, prorated based on his start date of 1 November
2022, to Chris Davies. No awards will vest unless the performance conditions set out on page 110 are satisfied.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 112 − DIPLOMA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION CONTINUED
DIPLOMA PLC 2020 (AS AMENDED) PERFORMANCE SHARE PLAN (AUDITED)
Face value
of the
award at
date of
grant
£000
Market price
at date of
award1
End of
performance
period
Vesting date
Shares over
which
awards held
at 1 Oct
2022
Shares over
which
awards
granted
during the
year
Vested
during the
period
Lapsed
during the
period
Johnny Thomson
PSP (2020)
PSP (2021)
PSP (2022)
Chris Davies
PSP (2021)2
PSP (2022)
2,306p
3,118p
2,848p
2,862p
2,862p
1,725
1,777
30 Sep 2023
30 Sep 2023
30 Sep 2024
30 Sep 2024
74,804
57,007
2,262
30 Sep 2025
30 Sep 2025
220
823
30 Sep 2024
30 Sep 2024
30 Sep 2025
30 Sep 2025
–
–
–
–
–
79,424
7,694
28,773
74,804
–
–
–
–
–
–
–
–
–
Shares
over
which
awards
held at 30
Sep 2023
–
57,007
79,424
7,694
28,773
1 The market price is the mid-market share price at the close of business on the day before the grant date as disclosed on page 111.
2 In line with the Remuneration Policy, Chris Davies was granted 7,694 shares as part of the PSP (2021) award to replace share based payment arrangements
forgone in order to join the Group.
The PSP awards vest on the date on which the performance conditions are determined and confirmed by the
Committee, following the end of the performance period. Shares will be held for a minimum of five years from
grant date in line with the Policy.
The PSP awards are granted in the form of nil-cost options (there is a notional exercise price of £1 per award).
To the extent that the awards vest, the options are then exercisable until the tenth anniversary of the award date.
Details of options exercised during the year and outstanding at 30 September 2023 are set out later in this report.
PAYMENTS FOR LOSS OF OFFICE (AUDITED)
In line with the approved Remuneration Policy as disclosed in the 2022 Annual Report, during 2023, Barbara Gibbes
received a total payment of £341,807 for loss of office from the Company equivalent to base salary, pension
allowance, benefits and legal costs. Barbara also received £516,718 (17,201 shares granted at a share price of 2,306p
and vested at a share price of 3,004p) in connection with 100% vesting of her PSP (2020) award, which included a
share appreciation benefit of £120,063. Dividend equivalent payments of £24,581 are payable to Barbara in respect
of the PSP (2020) award. As at 30 September 2023, Barbara had 6,829 share-based awards outstanding under the
PSP 2021 Performance Share Plan which were granted on 29 November 2021 at a share price of 3,118p, with a vesting
date of 30 September 2024.
CHAIR AND NON-EXECUTIVE DIRECTORS’ REMUNERATION (AUDITED)
Individual remuneration for the year ended 30 September was as follows:
David Lowden
Andy Smith
Anne Thorburn
Geraldine Huse
Dean Finch
Jennifer Ward1
Total fees
2023
£000
289
70
80
57
57
19
2022
£000
207
67
77
55
55
–
1 The fee for Jennifer Ward was prorated in 2023 following her appointment on 1 June 2023.
The Non-Executive Directors received a basic annual fee of £57,250 (2022: £54,500) during the year and additional
fees are paid of £12,500 (2022: £12,000) for chairing a Committee of the Board or £10,500 (2022: £10,000) for
acting as Senior Independent Director. No additional fee for chairing a Committee of the Board is payable to the
Chair of the Company. The fees for Non-Executive Directors are reviewed every year by the Board, taking into
account their responsibilities and required time commitment. From 1 October 2023, there has been a 6.1% increase
to the Non-Executive Director annual fee to £60,750 and a 6.2% increase to the Chair’s annual fee to £306,000.
The additional fee for chairing a Committee of the Board has increased by 6% to £13,250 per annum and the
additional fee for acting as Senior Independent Director has increased by 9.5% to £11,500 per annum. There
were no taxable employment benefits for Non-Executive Directors in 2023 and 2022.
DIPLOMA PLC ANNUAL REPORT 2023 − 113
EXECUTIVE DIRECTORS’ INTERESTS (AUDITED)
In options over shares
In respect of nil-cost options granted under the PSP, the remuneration receivable by an Executive Director is
calculated on the date that the options first vest. The remuneration of the Executive Directors is the difference
between the amount the Executive Directors are required to pay to exercise the options to acquire the shares
and the total value of the shares on the vesting date.
If the Executive Directors choose not to exercise the nil cost options on the vesting date (they may exercise the
options at any time up to the day preceding the tenth anniversary of the date of grant), any subsequent increase or
decrease in the amount realised will be due to movements in the underlying share price between the initial vesting
date and the date of exercise of the option. This increase or decrease in value reflects an investment decision by
the Executive Director and, as such, is not recorded as remuneration.
The nil-cost options outstanding at 30 September 2023 and the movements in the number of shares during the
year are as follows:
Johnny Thomson1, 2
Options as
at 1 Oct
2022
Exercised in
year
Vested
during the
year3
Options
unexercised
as at
30 Sep 2023
Exercise
price4
Earliest normal
exercise date
Expiry date
85,481
85,481
–
–
–
–
74,804
74,804
£1
£1
Nov 2022
Nov 2029
Nov 2023
Nov 2030
Year of
vesting
2022
2023
1 Johnny Thomson exercised 85,481 options on 22 November 2022 at a market price of 2,800p per share and the total proceeds before tax was £2,393,468
less the exercise price of £1.
2 On 22 November 2022, the aggregate number of shares received by the participant was reduced by 40,177 shares as part of arrangements under which the
company settled the PAYE liability that arose as a result of the exercise in full by the Executive Director of options held over shares.
3 The closing price of an ordinary share on 30 September 2023 was 3,004p (2022: 2,324p).
4 All awards have a notional exercise price of £1 per award.
Directors’ interests in ordinary shares
Johnny Thomson
Chris Davies
As at 30 Sep 2023
As at 30 Sep 2022
Ordinary
shares
148,624
4,974
Options
vested but
unexercised
Options with
performance
measures
74,804
–
136,431
36,467
Ordinary
shares
102,330
–
Options
vested but
unexercised
Options with
performance
measures
85,481
–
131,811
–
The minimum shareholding requirement (MSR) is 300% for the CEO and 250% for the CFO. As of 30 September
2023, Johnny Thomson’s shareholding was 720% of salary and therefore he has met his MSR. Chris Davies’
shareholding was 32% of salary and 50% of his Annual Performance Bonus will be deferred into shares until he
reaches his MSR as set out in the Policy.
The shareholding calculations are in line with the Company’s Shareholding Policy and includes shares from vested
PSP awards.
As of 20 November 2023, there have been no changes to these interests in ordinary shares of the Company.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 114 − DIPLOMA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION CONTINUED
CHAIR AND NON-EXECUTIVE DIRECTORS’ INTERESTS IN ORDINARY SHARES (AUDITED)
The Non-Executive Directors’ interests in ordinary shares of the Company at the start and end of the financial year
were as follows:
David Lowden
Andy Smith
Anne Thorburn
Geraldine Huse
Dean Finch
Jennifer Ward1
Interest in ordinary shares
As at
30 Sep 2023
As at
30 Sep 2022
2,896
7,941
5,441
2,441
1,036
–
2,500
7,545
5,045
2,045
640
–
1 Jennifer Ward was appointed on 1 June 2023.
As of 20 November 2023, there have been no changes to these interests in ordinary shares of the Company.
REMUNERATION IN CONTEXT
Chief Executive pay ratio (unaudited)
The table below sets out the Chief Executive pay ratios as at 30 September 2023.
The ratios compare the single total figure of remuneration of the CEO with the equivalent figures for the lower quartile
(P25), median (P50) and upper quartile (P75) UK employees. Option A has been used as it is the most statistically
accurate method, considered best practice by the Government and investors, and is directly comparable to the
CEO’s remuneration.
The employee data was measured on 30 September 2023, using the most up-to-date bonus estimates. The
approach used was the same as the single total figure methodology with the exception that bonus estimates were
used and colleagues who work part time were converted to full time equivalent and those who worked part of the
year were annualised.
Year
2023
2022
2021
2020
CEO
25th percentile
Median
75th percentile
Method
Option A
Option A
Option A
Option A
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
155:1
156:1
228:1
44:1
126:1
129:1
180:1
35:1
89:1
93:1
126:1
24:1
Base salary
£754,000
£24,053
£29,551
£39,782
Ratio of base
pay to CEO
base pay
n/a
31:1
26:1
19:1
Total pay and
benefits
£4,118,000
£26,609
£32,670
£46,272
We are satisfied that the median pay ratio reported this year is consistent with our wider pay, reward and progression
policies for employees. More detail on our approach to workforce pay and alignment to Executive Directors is
contained on page 121. The CEO is remunerated predominantly on performance-related elements (bonus and share
awards), which have delivered strong returns.
The median CEO pay ratio has remained at a similar level to prior year (2023: 126:1; 2022: 129:1). CEO pay has
increased due to a base pay increase and higher share price appreciation, whilst reducing pension contributions.
Total compensation for the UK workforce has increased double-digits due to higher wage increases in 2023 and
higher bonuses. Median total compensation for the UK workforce has increased by 12% and median base pay has
increased by 9% on prior year. Our UK businesses are moving towards the real living wage (with our businesses
already accredited or in the process of being accredited and new acquisitions tasked to move towards that goal).
We have also introduced life assurance for all UK colleagues who did not previously have it and have introduced
further healthcare plans.
DIPLOMA PLC ANNUAL REPORT 2023 − 115
Aligning pay with performance (unaudited)
The graph below shows the TSR performance of Diploma PLC for the ten-year period ended 30 September 2023
against the FTSE 250 Index (excluding Investment Trusts). The FTSE 250 Index (excluding Investment Trusts) was
chosen because this is a recognised broad equity market index of which the Company was a member of throughout
the ten years, with the exception of the final month of 2023.
Growth in the value of a hypothetical £100 holding over ten years
700
600
500
400
300
200
100
0
30 Sep 2013
30 Sep 2014
30 Sep 2015
30 Sep 2016
30 Sep 2017
30 Sep 2018
30 Sep 2019
30 Sep 2020
30 Sep 2021
30 Sep 2022
30 Sep 2023
Diploma PLC
FTSE 250 (excluding Investment Trusts)
FTSE 100 (excluding Investment Trusts)
TSR is defined as the return on investment obtained from holding a company’s shares over a period. It includes dividends
paid, the change in the capital value of the shares and other payments to or by shareholders within the period.
CHIEF EXECUTIVE OFFICER REMUNERATION COMPARED WITH ANNUAL GROWTH IN TSR (UNAUDITED)
Year
2023
2022
2021
2020
2019
2019
2018
2018
2018
2017
2016
2015
2014
Name
Johnny Thomson
Johnny Thomson
Johnny Thomson
Johnny Thomson
Johnny Thomson2
John Nicholas1
John Nicholas1
Richard Ingram2
Bruce Thompson2
Bruce Thompson
Bruce Thompson
Bruce Thompson
Bruce Thompson
CEO single
figure of total
remuneration
(£000)
Annual bonus
against
maximum
opportunity
Actual share
award vesting
against
maximum
opportunity
4,118
3,758
5,242
999
1,079
62
14
235
3,842
2,258
1,634
1,139
1,846
100%
100%
100%
25%
72%
–
–
–
100%
100%
95%
51%
65%
100%
100%
100%
–
–
–
–
–
99%
89%
45%
25%
61%
Annual
growth
in TSR
32%
-17%
+32%
+34%
+20%
+20%
+36%
+36%
+36%
+24%
+36%
-1%
+8%
1 John Nicholas was not eligible for an annual bonus or share award for service as interim Executive Chair for the period 28 August 2018 to 25 February 2019.
2 These amounts were prorated for the period served as CEO, with the exception of the annual bonus payable to Johnny Thomson, who joined the Company
on 25 February 2019.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 116 − DIPLOMA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION CONTINUED
RELATIVE IMPORTANCE OF EXECUTIVE DIRECTOR REMUNERATION (UNAUDITED)
Total employee remuneration
Total dividends paid
2023
£m
210.0
70.5
2022
£m
177.5
56.2
Change
£m
32.5
14.3
PERCENTAGE CHANGE IN REMUNERATION OF DIRECTORS AND EMPLOYEES (UNAUDITED)
Set out below is the change over the prior financial year in base salary/fees, benefits, pension and annual
performance bonus of the Board and the Group’s senior managers. Senior managers is a defined group of ca. 140
colleagues. The Committee chose senior managers for pay comparisons with the Board as it provided the most
closely aligned comparator group, considering the global and diverse nature of the Group’s business. The figures
for the Board are all on a full year basis to show the intended movement.
Executive Directors
Johnny Thomson2
Chris Davies3
Non-Executive Directors4
David Lowden5
Andy Smith
Anne Thorburn
Geraldine Huse
Dean Finch
Jennifer Ward6
Employees of the
Parent Company7
Senior management team
Base salary/fee change (%)1
Taxable benefits change (%)
Bonus change (%)
2023 vs
2022
2022 vs
2021
2021 vs
2020
2020 vs
2019
2023 vs
2022
2022 vs
2021
2021 vs
2020
2020 vs
2019
2023 vs
2022
2022 vs
2021
2021 vs
2020
2020 vs
2019
+6
n/a
+3 No change
n/a
n/a
+3
n/a
+2
n/a
+2
n/a
+4 No change
n/a
n/a
+6
n/a
+3
n/a
+300
n/a
-64
n/a
+40
n/a No change
n/a
+4
+4
+4
+4
n/a
n/a
+6
+3 No change No change
+6
+11
+3 No change
+185
n/a
n/a
+8
n/a
n/a
n/a
+1
+3
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
+5 No change No change No change No change
n/a
-6
n/a
+22
n/a
+77
n/a
-25
1 This does not take account of the voluntary pay reduction in 2020.
2 The reduction in pension was a voluntary reduction from 12.5% of base salary to 10.0% from 1 October 2021 and a further reduction to 4% from 1 January
2023.
3 Chris Davies was appointed on 1 November 2022.
4 The Non-Executive Directors do not receive any pension, bonus or taxable benefits.
5 The fee for David Lowden was prorated following his appointment as Chair on 19 January 2022. The like-for-like increase is +5%.
6 Jennifer Ward was appointed on 1 June 2023.
7 There are no employees of the Parent Company.
EXECUTIVES AND SENIOR MANAGEMENT BELOW THE BOARD (UNAUDITED)
Set out below is a summary of the share-based awards outstanding at 30 September 2023, which have been granted
to members of the Executive Team and other senior employees, including share awards which have vested during the
year based on performance and share awards which have been granted both last year and during this year. The
awards set out below were granted based on a fair value that varied between 10% and 100% of base salary. No
awards will vest unless the performance conditions set out on page 110 are achieved over a three-year measurement
period. The Committee anticipates making similar awards to members of the Executive Team and other senior
employees in December 2023.
Market price
at date
of award
Face value
of the award
at date
of grant
£000
End of
performance
period
Share over
which awards
held at
1 October
2022
Shares over
which awards
granted during
the year
PSP (2020)
PSP (2021)
PSP (2022)
2,306p
2,574p
2,682p
3,118p
2,712p
2,862p
3,032p
919 30 Sep 2023
39,860
2,565 30 Sep 2024
94,172
–
–
5,262 30 Sep 2025
–
190,872
Vested
during
the year
39,860
Shares over
which awards
held at
30 Sep
2023
–
Lapsed
during
the year
–
–
–
3,802
90,370
7,007
183,865
DIPLOMA PLC ANNUAL REPORT 2023 − 117
GOVERNANCE
Remuneration Committee
The Committee is chaired by Andy Smith and comprises the six Independent Non-Executive Directors; David Lowden,
Anne Thorburn, Dean Finch and Geraldine Huse, served on the Committee throughout the year and Jennifer Ward
was appointed on 1 June 2023. The Group CEO, the Group CFO and the Group HR Director attend meetings at the
invitation of the Committee to provide advice to help it make informed decisions. The Group Company Secretary
attends meetings as Secretary to the Committee.
The Remuneration Committee Report
The Annual Report on Remuneration and the Chair’s Statement will continue to be subject to an advisory vote
by shareholders at the 2024 AGM.
Remuneration principles and structure
The Committee has adopted remuneration principles which are designed to ensure that executive remuneration:
• is aligned to the business strategy and promotes the long-term success of the Company;
• supports the creation of sustainable long-term shareholder value;
• provides an appropriate balance between remuneration elements and includes performance-related elements
which are transparent, stretching and rigorously applied;
• provides an appropriate balance between immediate and deferred remuneration; and
• encourages a high-performance culture by ensuring performance-related remuneration constitutes a substantial
proportion of the remuneration package and by linking maximum payout opportunity to outstanding results.
These principles apply equally to those of senior management and align to those of the wider workforce.
SERVICES FROM EXTERNAL ADVISORS (UNAUDITED)
The Committee has continued to receive its remuneration advice from Willis Towers Watson (WTW). The fees are
agreed in advance with the advisor, based on the scope of work. All advisors are selected by the Committee based
on their technical expertise and independence. None of the advisors have any relationship with any Director and the
Committee is satisfied that the services of advisors are independent, which it validates by checking that the advisors
are not providing other services to the Company. Details are shown in the table below:
Advisor
Willis Towers Watson
Appointed by
Committee
Services provided to the Committee
Remuneration advice
Other services
provided to the
Company
None
Fees (£)
187,323
SHAREHOLDER VOTING AT PREVIOUS ANNUAL GENERAL MEETING (UNAUDITED)
The Directors' Remuneration Policy and the Remuneration Committee’s Annual Report (Report) for the year ended
30 September 2022 was approved by shareholders at the AGM held on 18 January 2023, with the following votes
being cast:
Votes for
Votes against
Withheld
Policy
2022 Report
104,630,292
96.18% 104,468,636
4,158,730
683,816
3.82%
4,849,065
–
155,137
95.56%
4.44%
–
At the AGM in January 2023, the 2022 DRR was approved with 95.56% of votes in favour. Given the positive voting
outcome there was no immediate need for shareholder follow up. Consultation was conducted during 2023 on the
2023 DRR. During consultation there was an opportunity to check with shareholders if they had any outstanding
issues from 2021 and none were raised.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 118 − DIPLOMA PLC ANNUAL REPORT 2023
REMUNERATION POLICY
REMUNERATION POLICY
This section of the Report sets out our Policy in detail. The current Policy for Executive Directors came into effect
from 18 January 2023, and remains unchanged. The Policy can be found on pages 120 to 128 of the 2022 Annual
Report and Accounts, which can be found on our Company website, www.diplomaplc.com, and a summary is set
out in this Report on pages 118 to 125.
The Committee reserves the right to approve payments on terms that differ from the Policy where the terms of the
payment were agreed before the Policy came into effect or were agreed at a time when the relevant individual was
not a Director of the Company.
The Committee may also make minor amendments to the arrangements for Directors described in the Policy without
shareholder approval for regulatory, tax or administrative purposes or to take account of a change in legislation.
EXECUTIVE DIRECTORS
Component
Base salary
Purpose and
link to strategy
To attract and retain
people of the
calibre and
experience needed
to develop and
execute the
Company’s strategy.
Operation
Maximum opportunity
Performance metrics
Salaries are reviewed annually, with
changes normally effective from
1 October.
Salary levels and
increases are
determined based
on a number of factors,
including individual and
business performance,
level of experience,
scope of responsibility,
salary increases both
for UK employees and
for senior management
more generally and the
competitiveness of total
remuneration against
companies of a similar
size and complexity.
No performance metric.
There is no maximum
limit set. Salaries will be
market competitive to
retain skilled executive
talent and attract new
talent as required.
Salary increases will
generally be no higher
than those awarded
to other employees,
although the Committee
retains discretion to
award larger increases
if it considers it
appropriate.
Maximum pension
contributions will be
no higher than the rate
offered to the majority
of our UK workforce
for UK-based Executive
Directors.
Maximum pension
contributions for
non-UK-based Executive
Directors will be aligned
with employees in the
relevant local market.
Pensions
Designed to be fair.
Pension contributions can either be
paid directly into a pension savings
scheme or taken as a separate cash
allowance.
DIPLOMA PLC ANNUAL REPORT 2023 − 119
Component
Benefits
Purpose and
link to strategy
To provide a
competitive
package of
benefits.
Annual
Performance
Bonus Plan
To incentivise and
reward Executive
Directors on the
achievement of the
annual budget and
other business
priorities for the
financial year.
Operation
Maximum opportunity
Performance metrics
No performance metric.
No maximum limit is
prescribed, but the
Committee monitors
annually the overall cost
of the benefit provision.
Maximum of 125% of base
salary for the Executive
Directors.
Performance below
threshold results in zero
payment. Achievement
of threshold performance
results in payment of 5%
of base salary. On-target
bonus is 50% of
maximum bonus.
Performance metrics
are selected annually
based on the current
business objectives.
The majority of the
bonus will be linked to
financial performance.
Personal or strategic
objectives, if used, will
account for no more
than 20% of the bonus.
Includes various cash/non-cash
benefits such as: payment in lieu of a
company car, life assurance, income
protection, annual leave, medical
insurance. The Committee may offer
any additional benefits it considers
appropriate in line with the interests
of the Company and local market
practice. Any renewable business
related expenses (including tax
thereon) can be reimbursed if
determined to be a taxable benefit.
Provides an opportunity for
additional reward based on annual
performance against targets set
and assessed by the Committee.
Where shareholding guidelines
have not been met, half of any annual
bonus awarded (net of tax) will be
used to purchase shares on behalf of
the Executive. The shares, which are
beneficially owned by the Executive,
are eligible for dividends and will
only be released once the Executive
reaches the minimum shareholding
requirement. The remaining bonus
shall be paid in cash following the
relevant year end.
Malus and clawback provisions apply
to bonus awards.
The Committee may amend the
formulaic outcome should it not be
a fair reflection of the Company’s
underlying performance or in
exceptional circumstances.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 120 − DIPLOMA PLC ANNUAL REPORT 2023
REMUNERATION POLICY CONTINUED
Component
Performance
Share Plan
(PSP)
Purpose and
link to strategy
Incentivise
Executive Directors
to achieve superior
returns and
long-term value
growth.
Operation
Maximum opportunity
Performance metrics
Awards will be granted
subject to a
combination of financial
and strategic measures
closely aligned to the
Company’s strategy and
measured over a period
of no less than three
years.
Strategic non-financial
objectives, if used, will
account for no more
than 20% of the PSP.
Performance assessed over rolling
three-year performance periods.
Awards are discretionary and do
not vest until the date on which
the performance is measured.
If employment ceases during a
three-year performance period,
awards will normally lapse except
in the case of a ‘good leaver’.
The maximum
opportunity as a
percentage of salary is
300% for the CEO and
250% for other Executive
Directors.
No more than 25% of the
award will be payable at
threshold performance.
Executive Directors are required to
retain shares vesting under the PSP
(net of tax) until the fifth anniversary
of grant.
Awards may include dividend
equivalents which are cash
bonuses or shares in lieu of
dividends foregone on vested
shares, from the time of award
up to the time of vesting.
Malus and clawback provisions
apply.
The Committee may amend the
formulaic outcome should it not
be a fair reflection of the Company’s
underlying performance or in
exceptional circumstances.
CHAIR AND NON-EXECUTIVE DIRECTORS
Component
Purpose and
link to strategy
Chair and
Non-
Executive
Directors’
fees
To attract and
retain a Chair
and Independent
Non-Executive
Directors of the
required calibre
and experience.
Operation
Maximum opportunity
Performance metrics
No performance metric.
The Chair’s and
Non-Executive Directors’
fees are determined by
reference to the time
commitment and relevant
benchmark market data.
Paid quarterly in arrears
and reviewed each year.
Although Non-Executive Directors
currently receive their fees in cash,
the Company may pay part or all of
their fees in the form of shares.
Any reasonable business-related
expenses (including tax thereon if
determined to be a taxable benefit
can be reimbursed).
Selection of performance measures and targets for Annual Bonus and PSP
The Annual Bonus Plan is designed to drive the annual financial and strategic objectives of the business. Performance
measures selected are aligned to the Company’s strategic plan and key objectives. Targets are set by reference to
internal budget. Details of the measures selected for FY24 and the rationale behind the selection can be found in the
Annual Report on Remuneration.
The PSP is designed to drive the delivery of the Company’s longer-term objectives and support the delivery of value
for shareholders. Performance measures are selected to align with these objectives and targets are set by reference
to internal long-term business plans. Any major adjustment in the calculation of performance measures will be
disclosed to shareholders on vesting. Details of the measures selected for FY24 and the rationale behind the
selection can be found in the Annual Report on Remuneration.
DIPLOMA PLC ANNUAL REPORT 2023 − 121
Illustration of application of Policy
Pay-for-performance: Executive Directors’ potential value of 2024 remuneration packages.
Johnny Thomson
Chris Davies
Minimum
Target
Maximum
Stretch2
96
32
19
15
4
£878,000
Minimum
1
20
47
£2,620,000
Target
1
23
1
18
56
66
£4,362,000
Maximum
£5,591,000
Stretch2
96
35
22
17
4
£550,000
1
21
42
£1,506,000
1
26
1
21
52
62
£2,462,000
£3,099,000
Fixed:
Base salary and benefits
Pension
Variable:
Annual performance bonus
Long-term incentive plans
1 Base salary is as at 1 October 2023; benefits are as set out on page 108.
2 Stretch is calculated on the same basis as the Maximum bar; however, it includes a share price uplift of 50% over three years for the PSP.
On-target remuneration assumes an Annual Performance Bonus Plan of 50% of the maximum for the Executive
Directors. It has been assumed that a face value limit of 300% of base salary (CFO: 250%) applies to each PSP
award. On-target vesting of PSP awards assumes an adjusted EPS growth of 7.67% p.a. and TSR performance
which is equivalent to 50% of the maximum vesting under the PSP. Maximum remuneration assumes maximum annual
performance bonus and maximum vesting of PSP awards. No dividend equivalents are assumed, and no share price
growth is assumed other than in the Stretch bar.
Consideration of shareholder views
The Committee will consult with its major shareholders in advance of any significant changes to the approved Policy
or exercise of discretion, as appropriate, to explain their approach and rationale fully and to understand shareholders’
views. Additionally, the Committee considers shareholder feedback received in relation to each AGM alongside any
views expressed during the year. The Committee also reviews the executive remuneration framework in the context
of published investor guidelines or appropriate regulation including the UK Corporate Governance Code.
Differences in remuneration policy for other employees
The Group seeks to promote positive relations with colleagues. The Committee is mindful of the pay increases,
incentive outcomes and share award participation in relevant markets across the rest of the Group when considering
the remuneration of the Executive Directors.
The Board as a whole takes responsibility for gathering the views of Diploma’s workforce, and does so through
multiple channels of engagement. While the Committee does not consult employees directly when setting the
Executive Directors’ remuneration policy, the senior management team engages with employees, either on a
business-wide basis in the context of smaller focus groups, to solicit feedback generally on a wide range of
matters, including remuneration. Feedback is passed to the Committee via the Executive Team.
The Company reviews compensation arrangements including base salaries for the wider employee population
annually. In line with the Group’s decentralised model, compensation is agreed locally, with governance and guidance
provided by the Group. Salary increases for the wider population are determined based on a number of factors,
including individual and business performance, level of experience, scope of responsibility, external competitive
benchmarking, and general salary increases across the Group. The Company also seeks to provide an appropriate
range of competitive benefits (including pension) to employees in line with their local markets. Senior managers have
incentive plans aligned with the Executive Directors and there is a framework on remuneration which ensures
alignment at different levels. Bonus plans for the workforce are agreed locally with oversight from the Sector
management teams.
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REMUNERATION POLICY CONTINUED
Service contracts
The Executive Directors’ service contracts, including arrangements for early termination, are carefully considered
by the Committee and are designed to recruit, retain and motivate Directors of the calibre required to manage the
Company and successfully deliver its strategic objectives. The Committee considers that a rolling contract with
a notice period of one year is appropriate for existing and newly appointed Directors.
The Executive Directors’ service contracts, copies of which are held at the Company’s registered office, together
with any service contract for new appointments, contain provisions for compensation in the event of early termination
or change of control, equal to the value of salary, pension and contractual benefits for the Director’s notice period.
The Company may make a payment in lieu of notice in the event of early termination and the Company may make
any such payment in instalments with the Director being obliged in appropriate circumstances to mitigate loss (for
example by gaining new employment). The Committee considers that these provisions assist with recruitment and
retention and that their inclusion is therefore in the best interests of shareholders.
Details of the service contracts of the Executive Directors who served during the year are set out below:
Johnny Thomson
Chris Davies
Contract
date
15 Jan 2019
25 October 2022
Unexpired
term
Rolling
Rolling
Notice
period
Compensation payable
upon early termination
1 year
1 year
1 year
1 year
Payment for loss of office
The Committee has considered the Company’s policy on remuneration for Executive Directors leaving the Company
and is committed to applying a consistent approach to ensure that the Company pays no more than is fair and
reasonable in the circumstances.
The loss of office payment policy is in line with market practice and will depend on whether the departing Executive
Director is, or is deemed to be treated as, a ‘good leaver’ or a ‘bad leaver’. In the case of a ‘good leaver’ the Policy
includes:
• Notice period of 12 months’ base salary, pension and contractual benefits or payment in lieu of notice.
• Bonus payable for the period worked, subject to achievement of the relevant performance conditions. Different
performance measures (to the other Executive Directors) may be set for a departing Director as appropriate, to
reflect any change in responsibility.
• Vesting of award shares under the Company’s long-term incentive plan is not automatic and the Committee would
retain discretion to allow partial vesting depending on the extent to which performance conditions had been met
and the length of time the awards have been held. Time prorating may be disapplied if the Committee considers
it appropriate, given the circumstances. Performance will normally be measured to the end of the normal
performance period and, to the extent applicable, vest on the normal vesting date, save in exceptional
circumstances when the Committee may determine that early vesting should still apply.
• The Committee will provide for the leaver to be reimbursed for a reasonable level of legal fees in connection with
a settlement agreement and outplacement services, where appropriate.
When calculating termination payments, the Committee will take into account a variety of factors, including individual
and Company performance, the obligation for the Executive Director in appropriate circumstances to mitigate loss
(for example, by gaining new employment) and the Executive Director’s length of service.
The Committee reserves the right to make additional exit payments where such payments are made in good faith
in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of
settlement or compromise of any claim arising in connection with the termination of a Director’s office or
employment.
Change of control
Change of control provisions provide compensation equal to the value of salary, pension and contractual benefits
for the notice period. In the event of a change in control, vesting of an award of shares under the Company’s PSP
depends on the extent to which performance conditions had been met at that time. Time prorating may be disapplied
if the Committee considers it appropriate, given the circumstances of the change of control.
DIPLOMA PLC ANNUAL REPORT 2023 − 123
Malus and clawback
Malus provisions apply to all awards made under the Company’s long-term incentive and annual bonus plans which
give the Committee the right to cancel or reduce unvested share awards (or in the case of the Annual Performance
Bonus Plan, cash payments) in the event of material misstatement of the Company’s financial results, significant
reputational damage to the Company, miscalculation of a participant’s entitlement, individual gross misconduct
or of corporate failure (resulting in a liquidation or the appointment of administrators).
The clawback arrangements permit the Committee to recover amounts paid to Executive Directors in specified
circumstances and further safeguard shareholders’ interests.
Remuneration for new appointments
The Committee has determined that new Executive Directors will receive a compensation package in accordance
with the terms of the Group’s approved Policy in force at the time of appointment.
The Committee has agreed the following principles that will apply when arranging a remuneration package to recruit
new Executive Directors:
• The remuneration structure will be kept simple where practicable.
• The emphasis on linking pay with performance shall continue, with variable pay representing a significant
component of the Executive Directors’ total remuneration package.
• Initial base salary will take into account the experience and calibre of the individual and their existing remuneration
package. Where it is appropriate to offer a lower salary initially, a series of increases to the desired salary
positioning may be given over subsequent years subject to individual performance.
• The structure of variable pay will be in accordance with Diploma’s approved Policy detailed above with a maximum
aggregate variable pay opportunity of 425% of salary for the CEO and 375% for other Executive Directors. Different
performance measures may be set in the first year for the annual bonus, taking account of the responsibilities of
the individual and the point in the financial year that the executive joined the Company.
• Benefits will generally be provided in accordance with the approved Policy, with relocation expenses/an expatriate
allowance paid, if appropriate.
• In the case of an external recruitment, the Committee may also offer additional cash and/or share-based elements
when it considers these to be in the best interests of Diploma and shareholders, to replace variable remuneration
awards or arrangements that an individual has foregone in order to join the Group. This includes the use of awards
made under section 9.4.2 of the UK Listing Rules. Any such payments would take account of the details of the
remuneration foregone including the nature, vesting dates and any performance requirements attached to that
remuneration and any payments would not exceed the expected value being forfeited.
• In the case of an internal appointment, any outstanding variable pay awarded in relation to the previous role
will be allowed to pay out according to the terms of grant.
• For all new Executive Director appointments, the mandated shareholding requirement, deferral of annual
performance bonus and the Holding Period for PSP awards will apply in accordance with the Policy and the relevant
Plan rules.
• Fees for a new Chair or Non-Executive Director will be set in line with the approved Policy.
Committee discretion
The Committee operates the Annual Performance Bonus Plan and the Performance Share Plan (the Plans)
in accordance with the relevant Plan rules and, where appropriate, the Listing Rules and HMRC legislation.
The Committee will exercise its powers in accordance with the terms of the relevant Plan rules.
The Committee retains discretion over a number of areas relating to the operation and administration of the Plans.
These include, but are not limited to:
• selecting the Executive Director participants and wider employee participation parameters for the annual bonus
and PSP awards;
• timing of awards and grants of setting performance criteria each year;
• determining the quantum of grants and/or payments (within the limits set out in the Policy Table);
• adjusting the constituents of the TSR comparator group;
• determining the extent of vesting based on the assessment of performance;
• overriding formulaic outcomes and amending payouts under the Annual Bonus Plan and for PSP should it determine
that either it is not a fair reflection of the underlying performance of the business or in exceptional circumstances;
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 124 − DIPLOMA PLC ANNUAL REPORT 2023
REMUNERATION POLICY CONTINUED
• applying or disapplying time prorating;
• dealing with leavers;
• discretion to waive or shorten the holding period for shares acquired under the PSP;
• discretion to retrospectively amend performance targets in exceptional circumstances, including making the
appropriate adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events,
variation of capital and special dividends); and
• in respect of share awards, to adjust the number of shares subject to an award in the event of a variation
in the share capital of the Company.
Policy in respect of external board appointments for Executive Directors
The Committee recognises that external Non-Executive Directorships may be beneficial for both the Company and
Executive Director. At the discretion of the Board, Executive Directors are permitted to retain fees received in respect
of any such Non-Executive Directorship.
Employee and post-employment shareholding requirements
The Committee has adopted shareholding requirements for Executive Directors, to encourage substantial long-term
share ownership. These specify that, over a period of five years from the date of appointment, each Executive
Director should build up and then retain a holding of shares with a value equivalent to 300% of base salary in
the case of the CEO, and for other Executive Directors, to 250% of base salary (the MSR).
Vested PSP awards and deferred annual bonus payments which are issued as shares must be retained until the
required shareholding (net of tax) level is reached.
As explained in the long-term incentive award section on page 120, Executive Directors are required to hold shares
vesting under the PSP (net of tax) until the fifth anniversary of the grant (the Holding Period). The Holding Period
continues to apply to post-cessation of employment except where cessation is by reason of death, if there is a
change of control, or the Committee exercises its discretion.
In addition, a revised post-cessation shareholding requirement will apply being 50% of the MSR for two years after
the termination date (or if less than the MSR, the value of shares held at the cessation date). Post-cessation holding
continues to apply to shares granted under the PSP since the approval of the 2020 Policy.
CHAIR AND NON-EXECUTIVE DIRECTORS
Recruitment and term
The Board aims to recruit Non-Executive Directors of a high calibre, with broad and diverse commercial, international,
sectoral or other relevant experience. Non-Executive Directors are appointed by the Board on the recommendation
of the Nomination Committee. Appointments of the Non-Executive Directors are for an initial term of three years,
subject to election by shareholders at the first AGM following their appointment and subject to annual re-election
thereafter. The terms of engagement are set out in letters of appointment which can be terminated by either party
serving three months’ notice.
Fees
The Non-Executive Directors are paid a competitive basic annual fee which is approved by the Board on the
recommendation of the Chair and the Executive Directors. The Chair’s fee is approved by the Committee,
excluding the Chair. Additional fees may also be payable for chairing a Committee of the Board, for acting as Senior
Independent Director, or in respect of any other material additional responsibilities taken up. Fees are reviewed each
year and take account of the fees paid in other companies of a similar size and complexity, the responsibilities of the
role and the required time commitment.
If there is a temporary yet material increase in the time commitments for Non-Executive Directors, the Board
may pay extra fees on a pro rata basis to recognise the additional workload.
The Non-Executive Directors are not eligible to participate in any of the Company’s share plans, incentive plans
or pension schemes and there is no provision for payment in the event of early termination.
DIPLOMA PLC ANNUAL REPORT 2023 − 125
PROVISION 40 TABLE
The following table summarises how the Remuneration Policy fulfils the factors set out in Provision 40 of the 2018 UK
Corporate Governance Code.
Clarity
Remuneration arrangements should be transparent and promote
effective engagement with shareholders and the workforce.
Example: the structure of the Annual Performance Bonus Plan
is completely based on financial metrics which align with
published accounts.
The Committee is committed to providing open and
transparent disclosures to shareholders, the workforce and
other stakeholders with regard to executive remuneration
arrangements.
The Committee determines the Remuneration Policy and
agrees the remuneration of each Executive Director as well as
the remuneration framework for other senior managers. The
Company provides open and transparent disclosures of our
Executive Directors’ remuneration arrangements including
undertaking engagement with key shareholders when
considering changes to Remuneration Policy.
Simplicity
Remuneration structures should avoid complexity and their
rationale and operation should be easy to understand.
Our remuneration arrangements for Executive Directors, as well
as those throughout the organisation, are simple in nature and
well understood by participants.
Example: variable pay for Executive Directors is a simple Annual
Bonus Plan and a Performance Share Plan.
The structure for Executive Directors consists of fixed pay
(salary, benefits, pension) and variable pay (annual bonus plan
and a long-term incentive plan, the PSP).
Risk
Remuneration arrangements should ensure reputational and other
risks from excessive rewards, and behavioural risks that can arise
from target-based incentive plans, are identified and mitigated.
Example: the ROATCE underpin in the PSP reduces risk of low
quality earnings.
Targets are reviewed to ensure they do not encourage
excessive risk taking.
Malus and clawback provisions also apply to both the annual
bonus and long-term incentive plans.
Members of the Committee are provided with regular briefings
on developments and trends in executive remuneration.
Predictability
The range of possible values of rewards to individual Directors and
any other limits or discretions should be identified and explained at
the time of approving the Policy.
The potential value and composition of the Executive Directors’
remuneration packages at below threshold, target and
maximum scenarios are provided in the relevant policy.
Example: variable pay maximums are set out in the Policy.
Proportionality
The link between individual awards, the delivery of strategy and
the long-term performance of the Company should be clear.
Outcomes should not reward poor performance.
Example: 95% of budget must be achieved to trigger payment
of Annual Performance Bonus; 95% of budget only results in
5% payment.
Annual bonus payments and PSP awards require robust
performance against challenging conditions that are aligned
to the Company’s strategy.
The Committee has discretion to override formulaic results
to ensure that they are appropriate and reflective of
overall performance.
Alignment to culture
Incentive schemes should drive behaviours consistent with
company purpose, values and strategy.
The variable incentive schemes and performance measures
are designed to be consistent with the Group’s purpose,
values and strategy.
Example: one of the Diploma values is continuous improvement;
continuous improvement is required each year to reach
remuneration targets.
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DIRECTORS’ REPORT
This section comprises information which the Directors
are required by law and regulation to include within the
Annual Report & Accounts. The Directors who held office
during the year are set out on page 82.
SHAREHOLDERS
Incorporation and principal activity
Diploma PLC is domiciled in England and registered in
England and Wales under Company Number 3899848.
At the date of this report there were 134,091,975 ordinary
shares of 5p each in issue, all of which are fully paid up
and quoted on the London Stock Exchange.
The principal activity of the Group is the supply
of specialised technical products and services.
A description and review of the activities of the Group
during the financial year including the Company’s
business model and strategy, principal risks and
uncertainties facing the Group and how these are
managed and mitigated, together with an indication of
future developments is set out in the Strategic Report on
pages 1 to 75, which incorporates the requirements of the
Companies Act 2006 (the Act).
Annual General Meeting
The Annual General Meeting (AGM) will be held at
09.00am on Wednesday, 17 January 2024 in The
Charterhouse, Charterhouse Square, London EC1M 6AN.
The Notice of the AGM, which is a separate document,
will be sent to all shareholders and will be published
on the Diploma PLC website.
Substantial shareholdings
At 30 September 2023, the Company had received
formal notifications of the following holdings in its
ordinary shares in accordance with the requirements
of the Financial Conduct Authority’s Disclosure Guidance
and Transparency Rules (DTRs):
Capital Research Global Investors
Mawer Investment
Management Limited
Royal London Group
The Vanguard Group, Inc
Mondrian Investment Partners
Limited
BlackRock Inc
Percentage of
ordinary
shares
(September
2023)
13.0
Percentage of
ordinary share
capital
(November
2023)
12.97
4.99
4.95
3.42
No change
No change
No change
3.14
No change
Below 5% No change
Other than Capital Research Global Investors, there have
been no changes in the interests notified to the Company
pursuant to the DTRs up to the date of this report.
Share capital
The rights attaching to the Company’s ordinary shares,
as well as the powers of the Company’s Directors, are
set out in the Company’s Articles of Association (the
Articles), a copy of which is available on the Company’s
website. The Articles may be amended by special
resolution of the Company’s shareholders.
Shareholders
Shareholders are entitled to attend and speak at general
meetings of the Company and to appoint one or more
proxies, or corporate representatives. On a show of
hands each holder of ordinary shares shall have one
vote, as shall proxies. On a poll, every holder of ordinary
shares present in person or by proxy shall have one vote
for every share of which they are the holder. Electronic
and paper proxy appointments and voting instructions
must be received not later than 48 hours before a general
meeting.
The Company is not aware of any agreements between
shareholders that may result in restrictions on the
transfers of securities and/or voting rights. No person
holds securities in the Company carrying special rights
with regard to control of the Company.
DIPLOMA PLC ANNUAL REPORT 2023 − 127
Contracts of significance and change of control
There are a number of agreements that take effect,
alter or terminate upon a change of control of the
Company, principally bank facility agreements, the
Company’s Long-Term Incentive Plan and the Annual
Performance Bonus Plan.
Authority to make market purchases of own shares
An authority to make market purchases of up to 10% of
the issued share capital shares was given to the Directors
by a special resolution at the AGM of the Company held
on 18 January 2023. In the year to 30 September 2023,
the Company has not acquired any of its own shares.
Liability insurance and indemnities
As at the date of this report, the Company has granted
qualifying third-party indemnities to each of its Directors
against any liability that attaches to them in defending
proceedings brought against them, to the extent
permitted by the Companies Act. In addition, Directors
and officers of the Company and its subsidiaries have
been, and continue to be, covered by Director and officer
liability insurance.
Disclosures required under Listing Rule 9.8.4C
To comply with Listing Rule 9.8.4C, the following table
provides the information to be disclosed by the
Company in respect of Listing Rule 9.8.4R.
The Trustees of the Diploma PLC Employee
Benefit Trust waived dividends on all shares.
Listing Rule
9.8.4(12)R
and 9.8.6(13)R
Restrictions on transfer of shares
The Directors may refuse to register a transfer of a
certificated share that is not fully paid, provided that
the refusal does not prevent dealings in shares in the
Company from taking place on an open and proper
basis, or where the Company has lien over that share.
The Directors may also refuse to register a transfer of
a certificated share, unless the instrument of transfer is:
(i)lodged, duly stamped (if necessary), at the registered
office of the Company or any other place as the Board
may decide accompanied by the certificate for the
share(s), or (ii) in favour of not more than four persons.
Transfers of uncertificated shares must be carried out
using CREST and the Directors can refuse to register a
transfer of an uncertified share in accordance with the
regulations governing the operation of CREST.
There are no other restrictions on the transfer of ordinary
shares in the Company except certain restrictions
which may from time to time be imposed by laws and
regulations (for example insider trading laws); or where
a shareholder with at least a 0.25% interest in the
Company’s certificated shares has been served with a
disclosure notice and has failed to provide the Company
with information concerning interests in those shares.
Share allotment
A general allotment power and a limited power to allot
shares in specific circumstances for cash, otherwise
than pro rata to existing shareholders, were given to
the Directors by resolutions approved at the AGM of
the Company held on 18 January 2023.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 128 − DIPLOMA PLC ANNUAL REPORT 2023
DIRECTORS' REPORT CONTINUED
Equity raise
An allotment was made on 17 March 2023 otherwise
than to the holders of the Company’s equity shares in
proportion to their holdings of such equity shares and
which was not specifically authorised by the Company’s
shareholders. The details of the allotment are set out
below in accordance with LR 9.8.4R(7) and the most
recently published Pre-Emption Group Statement
of Principles (2022).
Transaction details
In aggregate, equity raised of 9,350,965 New Ordinary Shares (comprising 9,297,005
Placing Shares, 3,960 Subscription Shares and 50,000 Retail Shares) represented
approximately 7.5% of the Company's issued ordinary share capital.
Use of proceeds
Settlement for the New Ordinary Shares and Admission took place at 8.00 a.m.
on 21 March 2023.
The proceeds of the Placing, Subscription and Retail Offer was used to refinance
the consideration paid for the acquisition of Tennessee Industrial Electronics, LLC,
a market-leading, value-add distributor of aftermarket parts and repair services into
the fast-growing US industrial automation end market, with a focus on robotics and
computer numerical control (CNC) machines, and provide greater flexibility to execute
further acquisitions.
Quantum of proceeds
In aggregate, the equity raised gross proceeds of approximately £236 million and net
proceeds of approximately £232 million.
Discount
Allocations
The Placing Price of 2,525 pence represented a discount of 4.2% to the closing share
price of 2,636 pence on 16 March 2023.
Soft pre-emption has been adhered to in the allocations process. Management was
involved in the allocations process, which has been carried out in compliance with the
MiFID II Allocation requirements. Allocations made outside of soft pre-emption were
preferentially directed towards existing shareholders in excess of their pro rata, and
wall-crossed accounts.
Consultation
The Joint Bookrunners undertook a pre-launch wall-crossing process, including
consultation with major shareholders, to the extent reasonably practicable and
permitted by law.
Retail investors
The equity raise included a Retail Offer, for a total of 50,000 Retail Shares, via the
PrimaryBid platform.
Retail investors, who participated in the Retail Offer, were able to do so at the same
Placing Price as all other investors participating in the Placing and Subscription.
The Retail Offer was made available to existing shareholders and new investors in the UK.
Investors were able to participate through PrimaryBid's platform via its partner network
(covering 60+ FCA registered intermediaries) and through PrimaryBid's free-to-use
direct channel. Investors had the ability to participate in this transaction through ISAs
and SIPPs, as well as General Investment Accounts (GIAs). This combination of
participation routes meant that, to the extent practicable on the transaction timetable,
eligible UK retail investors (including certificated retail shareholders) had the opportunity
to participate in the equity raise alongside institutional investors.
Allocations in the Retail Offer were preferentially directed towards existing shareholders
in keeping with the principle of soft pre-emption.
DIPLOMA PLC ANNUAL REPORT 2023 − 129
Independent Auditors
Each of the persons who is a Director at the date of
approval of this Annual Report & Accounts confirms that
so far as the Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware;
and the Director has taken all the steps that he/she ought
to have taken as a Director in order to make himself/
herself aware of any relevant audit information and to
establish that the Company’s auditor is aware of that
information. This confirmation is given and should be
interpreted in accordance with the provisions of section
418 of the Companies Act 2006.
PricewaterhouseCoopers LLP (PwC) has expressed its
willingness to continue in office as independent auditor
and a resolution to reappoint PwC will be proposed at
the AGM to be held on 17 January 2024.
Directors’ assessment of going concern
The Directors continue to adopt the going concern
basis in preparing the Annual Report & Accounts. Their
assessment in reaching this conclusion is set out in the
notes to the consolidated financial statements on
page 173.
Statement of Directors’ responsibilities for preparing
the financial statements
The Directors are responsible for preparing the Annual
Report & Accounts and the financial statements in
accordance with applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group financial statements
in accordance with international accounting standards in
conformity with the requirements of the Companies Act
2006 and the Parent Company financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 Reduced Disclosure
Framework, and applicable law). Additionally, the
Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules require the Directors to prepare the
Group financial statements in accordance with United
Kingdom adopted International Accounting Standards.
NON-FINANCIAL INFORMATION
The Company has chosen, in accordance with section
414C(11) of the Companies Act 2006, to include certain
matters in its Strategic Report on pages 1 to 75 that
would otherwise be required to be disclosed in this
Directors’ Report.
NON-FINANCIAL AND SUSTAINABILITY
INFORMATION STATEMENT
Other information that is relevant to the Directors’ Report
and which is incorporated by reference into this report,
can be viewed in the section on Delivering Value
Responsibly on pages 54 to 75 and includes:
• Our employees
• Environmental matters
• Health & Safety
• Greenhouse gas emissions
• Climate-related disclosures
• Human rights
• Business ethics, corruption and bribery
• Modern slavery
• Community
Other related information can also be found as follows:
• Business model – pages 6 to 10.
• Principal risks and how they are managed or mitigated
– pages 44 to 48.
• Non-financial key performance indicators – page 54.
• Employee engagement – pages 55 to 56.
• Stakeholder engagement – pages 50 to 53.
• Corporate governance statement - page 76.
FINANCIAL
Results and dividends
The profit for the financial year attributable to
shareholders was £117.7m (2022: £94.7m). The Directors
recommend a final dividend of 40.0p (2022: 38.8p) per
ordinary share, to be paid, if approved, on 2 February
2024. This, together with the interim dividend of 16.5p
(2022: 15.0p) per ordinary share, amounts to 56.5p for
the year (2022: 53.8p).
The results are shown more fully in the audited
consolidated financial statements on pages
140 to 180 and summarised in the Financial Review
on pages 36 to 40.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 130 − DIPLOMA PLC ANNUAL REPORT 2023
DIRECTORS' REPORT CONTINUED
Under company law, Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Group and Parent Company and of the profit or loss
of the Group for that period. In preparing the financial
statements, the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• state whether applicable international accounting
standards in conformity with the requirements of
the Companies Act 2006 have been followed for
the Group financial statements and United Kingdom
Accounting Standards, comprising FRS 101 have been
followed for the Parent Company financial statements,
subject to any material departures disclosed and
explained in the financial statements;
• make judgements and accounting estimates that
are reasonable and prudent; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and Parent Company will continue in business.
The Directors are responsible for safeguarding the assets
of the Group and Parent Company and hence for taking
reasonable steps for the prevention and detection of
fraud and other irregularities.
DIRECTORS’ CONFIRMATIONS
The Directors consider that the Annual Report
& Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group’s and Parent
Company’s position and performance, business model
and strategy. Each of the Directors, whose names and
functions are listed in the Board of Directors confirm that,
to the best of their knowledge:
• the Group financial statements, which have been
prepared in accordance with UK-adopted International
Accounting Standards in conformity with the relevant
financial reporting framework;
• the Parent Company financial statements, which have
been prepared in accordance with United Kingdom
Accounting Standards, comprising FRS 101, give a
true and fair view of the assets, liabilities and financial
position of the Parent Company; and
• the Strategic Report includes a fair review of the
development and performance of the business
and the position of the Group and Parent Company,
together with a description of the principal risks
and uncertainties that it faces.
In the case of each Director in office at the date
the Directors’ report is approved:
The Directors are also responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group’s and Parent Company’s transactions
and disclose with reasonable accuracy at any time the
financial position of the Group and Parent Company and
enable them to ensure that the financial statements and
the Directors’ Remuneration Report comply with the
Companies Act 2006.
• so far as the Director is aware, there is no relevant
audit information of which the Group’s and Parent
Company’s auditors are unaware; and
• they have taken all the steps that they ought to have
taken as a Director in order to make themselves aware
of any relevant audit information and to establish that
the Group’s and Parent Company’s auditors are aware
of that information.
The Directors are responsible for the maintenance and
integrity of the Parent Company’s website. Legislation
in the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
The Strategic Report and the Directors’ Report were
approved by the Board of Directors on 20 November
2023 and are signed on its behalf by:
JD Thomson
Chief Executive Officer
C Davies
Chief Financial Officer
Registered office:
10-11 Charterhouse Square
London
EC1M 6EE
Registered Number:
3899848
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DIPLOMA PLC
DIPLOMA PLC ANNUAL REPORT 2023 − 131
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion:
• Diploma PLC’s Group financial statements and Company financial statements (the “financial statements”) give a true
and fair view of the state of the Group’s and of the Company’s affairs as at 30 September 2023 and of the Group’s
profit and the Group’s cash flows for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK-adopted international
accounting standards as applied in accordance with the provisions of the Companies Act 2006;
• the Company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure
Framework”, and applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”),
which comprise: the Consolidated and Parent Company Statements of Financial Position as at 30 September 2023;
the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated and Parent
Company Statements of Changes in Equity and the Consolidated Cash Flow Statement for the year then ended; and
the notes to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard
were not provided.
Other than those disclosed in the Audit Committee Report and Note 26 to the Consolidated Financial Statements,
we have provided no non-audit services to the Company or its controlled undertakings in the period under audit.
Our audit approach
Overview
Audit scope
• The Group is structured as three Sectors (Life Sciences, Seals and Controls) and we have conducted audit
work across all of them. Through our full scope component audits, audit of the consolidation and additional audit
procedures performed at a Group level we have achieved coverage of 69% (2022: 74%) of consolidated adjusted
profit before tax and 68% (2022: 75%) of consolidated revenue.
Key audit matters
• Valuation of the intangibles for the DICSA and TIE acquisitions (Group)
• Carrying value of investments in subsidiaries and recoverability of intercompany receivables (Company)
Materiality
• Overall Group materiality: £10.8m (2022: £6.2m) based on approximately 5% of adjusted profit before tax
(2022: profit before tax).
• Overall Company materiality: £6.1m (2022: £3.3m) based on 1% of total assets.
• Performance materiality: £8.1m (2022: £4.7m) (Group) and £4.6m (2022: £2.5m) (Company).
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 132 − DIPLOMA PLC ANNUAL REPORT 2023
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement
in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the
audit of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Valuation of the intangibles for the DICSA and
TIE acquisitions (Group)
Refer to page 179 Significant accounting estimates and
critical judgements (Acquisition accounting) and Note 22
(Acquisitions and disposals of businesses) within the
consolidated financial statements.
The Group acquired DICSA and TIE for a combined
consideration of £234.8m (net of cash acquired).
Acquired intangible assets of £125.6m were identified
and recognised in respect of these acquisitions.
The valuation of the acquired intangibles for these two
acquisitions has been determined to be a significant risk
due to its material quantum and the level of estimation
associated with determination of fair values.
We have identified a significant risk associated with the
valuation of the intangibles due to the magnitude of the
acquisitions, the significant level of estimation involved in
determining the fair value of the acquired intangibles and
their sensitivity to changes in key assumptions.
The valuation of the identifiable intangible assets requires
management estimation as it is dependent on a number
of key assumptions including forecast revenue growth
rates, discount rates and average historical customer
attrition rates. In considering such assumptions, there is
an inherent level of estimation uncertainty and
subjectivity.
The procedures we undertook to address the significant
risk identified included:
• Validation of the mathematical accuracy of
management’s models and appropriateness of the
methodologies used to determine the fair values, with
support from our internal valuation experts.
• Obtaining an understanding of the assumptions used
to determine the value of acquired intangibles, and in
particular considering the following key assumptions:
β Discount rates: We engaged our valuation experts to
corroborate the reasonableness of the discount rates
using comparable market data, for example discount
rates of other companies in similar industries.
β Forecast revenue growth rates and margins: We
compared the assumptions in respect of forecast
revenue growth rates and margins to historical
trading experience and the actual trading
performance of the businesses post acquisition.
In addition, we compared the forecasts used in
the valuations to the Board approved budgets,
comparable companies and industry reports.
β Customer attrition rates: We corroborated the
attrition rate assumptions and forecast cash flows to
underlying support. We compared the assumptions in
respect of forecast cash flows to historical customer
sales and we engaged our valuation experts to assist
in the evaluation of the methodology used by
management.
From the procedures performed we concluded that
management’s estimate of the fair values of the acquired
intangibles are appropriate.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DIPLOMA PLC CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 133
Key audit matter
How our audit addressed the key audit matter
Carrying value of investments in subsidiaries and
recoverability of intercompany receivables (Company)
Refer to the Parent Company Statement of Financial
Position and Note D (“Investments”) within the Company
financial statements.
At the balance sheet date, the Company had investments
in subsidiaries of £372.4m (2022: £297.2m) and
intercompany receivables of £246.9m (2022: £35.8m).
We have focused our audit efforts on this balance given
the significance of it. The carrying amount of the
Company’s investments in subsidiaries represents 60%
of the Company’s total assets (2022: 89%). Given the
trading performance of the underlying subsidiary
investments, we do not consider the valuation of these
investments to be at a high risk of material misstatement
or to be subject to a significant level of impairment
judgement/estimation. However, due to their materiality
in the context of the Company financial statements as a
whole, it is considered to be the area on which the most
audit effort is focused within the audit.
In assessing whether the carrying value of the Company’s
investment in subsidiaries was supportable, we verified
that the net asset positions of the individual investments
were in excess of the carrying value of the investment in
those subsidiaries. We also considered whether through
the work performed throughout the audit identified any
other impairment indicators regarding the recoverability
of the carrying value of those investments at the balance
sheet date. We have no issues to report in respect of
this work.
With regards to the recoverability of intercompany
receivables, we have obtained and reviewed
management’s IFRS 9 assessment regarding the ability
for the counterparty to settle the balances with liquid
resources available at the balance sheet date taking into
account other commitments.
We have no issues to report in respect of this work.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the Group and the Company, the accounting
processes and controls, and the industry in which they operate.
The Group is structured as three core Sectors (Life Sciences, Seals and Controls) with operations primarily
geographically located in Australia, Canada, the USA, the UK and Continental Europe. Within the aforementioned
Sectors are a number of businesses/management reporting entities which are consolidated by Group management.
The financial statements are a consolidation of multiple reporting components representing the operating businesses
within these three core Sectors. Our audit scope was determined by considering the significance of each
component’s contribution to adjusted profit before tax and contribution to individual financial statement line items,
with specific consideration given to obtaining sufficient coverage over significant audit risks and other areas of higher
risk.
We identified 18 financial reporting components across eight countries for which we determined that full scope
audits would need to be performed, and one additional component in another country for which we performed audit
procedures over specific large balances. Through our full scope audits, the audit of the consolidation and other audit
procedures performed at a Group level, we have achieved coverage of 69% of the Group’s adjusted profit before tax
and 68% of the Group’s revenue, giving us the evidence we needed for our opinion on the financial statements as a
whole. The reporting components, excluding those audited by the Group engagement team, were audited by eight
component teams.
The Group engagement team attended audit clearance meetings via video conference or in-person, held in-person
meetings with management from certain UK and USA businesses and discussed the audit approach and audit
findings with all reporting component teams. Our attendance at each full scope component clearance meeting,
reviews of the component reporting, and review and discussion of the audit working papers of a number of overseas
locations, together with the additional procedures performed at Group level, gave us the evidence we needed for our
opinion on the financial statements as a whole.
Our audit procedures at the Group level included the audit of the consolidation, fair value adjustments and intangible
asset valuations on acquisitions, goodwill and investment impairment assessments, UK pensions and certain tax
procedures. The Group engagement team also performed the audit of the Company and four UK components.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 134 − DIPLOMA PLC ANNUAL REPORT 2023
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the process they have adopted to assess the
extent of the potential impact of climate change risk on the financial statements and to support the disclosures made
in relation to climate risk within the Strategic report, TCFD report and the Delivering Value Responsibly section.
In addition to enquiries with management, we also read management’s experts report, which underpins the overall
assessment of climate risk.
The Board has made commitments to achieve net zero carbon emissions across their value chain by 2045,
with a 50% reduction in scope 1 & 2 emissions by 2030.
Management has assessed that there is no material impact on the financial reporting judgements and estimates
arising from their considerations, consistent with previous assessments made by the Group.
Using our knowledge of the business, we evaluated management’s risk assessment and related disclosures. In
particular we have considered how climate risk would impact the assumptions made in the forecasts used in their
goodwill impairment assessments and going concern analysis.
We also considered the consistency of disclosures in relation to climate change contained in the Strategic report,
TCFD report and the Delivering Value Responsibly section within the Annual Report with the financial statements
and our knowledge from our audit.
Our procedures, which included review of the disclosures made in relation to climate change in the TCFD report by
our specialists did not identify any material impact in the context of our audit of the financial statements as a whole,
or our key audit matters for the year ended 30 September 2023.
Our responsibility over other information is further described in the “Reporting on other information” section on
our report. We have not been engaged to provide assurance over the accuracy of these disclosures.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - Group
Financial statements - Company
Overall materiality
£10.8m (2022: £6.2m).
£6.1m (2022: £3.3m).
How we determined it
Approximately 5% of adjusted profit before
tax (2022: profit before tax)
1% of total assets
A typical measure used by
shareholders in assessing the
performance of a holding company
and a generally accepted auditing
benchmark.
Rationale for benchmark
applied
Based on the benchmarks used in the Annual
Report, adjusted profit before tax is
considered as the primary measure used by
the shareholders in assessing the underlying
performance of the Group. This benchmark
excludes the impact of adjustments in
respect of amortisation of acquired
intangible assets, acquisition items, profit or
loss on disposal of operations, and other
costs. We changed our benchmark in the
current year to adjusted profit before tax
which is a generally accepted auditing
benchmark given the Group continues to be
acquisitive in nature and is considered to be
a more reasonable metric on which to
measure underlying performance.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DIPLOMA PLC CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 135
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group
materiality. The range of materiality allocated across components was between £450,000 and £9.9m. Certain
components were audited to a local statutory audit materiality that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality
in determining the scope of our audit and the nature and extent of our testing of account balances, classes of
transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75%
(2022: 75%) of overall materiality, amounting to £8.1m (2022: £4.7m) for the Group financial statements and £4.6m
(2022: £2.5m) for the Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk
assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end
of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£537,500 (Group audit) (2022: £312,000) and £305,000 (Company audit) (2022: £165,000) as well as misstatements
below those amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group's and the Company’s ability to continue to adopt the going
concern basis of accounting included:
• Reviewing management’s going concern assessment to ensure it was based upon the latest Board approved
forecasts and that the cashflow assumptions were consistent with our understanding of the outlook for the sectors
and the wider market;
• Testing the mathematical accuracy of the model, including forecast compliance with covenants;
• Corroborating key model inputs to independent evidence obtained over the course of the audit;
• Discussing conclusions with management across the business, including sector heads, to ensure consistency
and gain perspective on the developments within the business;
• Comparison of the prior year forecasts against current year actual performance to assess management’s ability
to forecast accurately;
• Reviewing the latest signed financing agreements to validate covenants used in the modelling and the timing
of debt maturities; and
• Reviewing management's downside and severe but plausible scenarios to ensure these appropriately reflect
the risk of potential performance below forecast levels, and that there remains sufficient headroom both against
covenant compliance and liquidity.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Group's and the Company’s ability to
continue as a going concern for a period of at least twelve months from when the financial statements are authorised
for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee
as to the Group's and the Company's ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether
the directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 136 − DIPLOMA PLC ANNUAL REPORT 2023
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and
our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial
statements does not cover the other information and, accordingly, we do not express an audit opinion or, except
to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material
inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a
material misstatement of the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors' report, we also considered whether the disclosures required
by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report
certain opinions and matters as described below.
Strategic report and Directors' report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report
and Directors' report for the year ended 30 September 2023 is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the
course of the audit, we did not identify any material misstatements in the Strategic report and Directors' report.
Directors' Remuneration
In our opinion, the part of the Annual Report on Remuneration to be audited has been properly prepared
in accordance with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and
that part of the corporate governance statement relating to the Company’s compliance with the provisions of the UK
Corporate Governance Code specified for our review. Our additional responsibilities with respect to the corporate
governance statement as other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the financial statements and our knowledge obtained
during the audit, and we have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the
going concern basis of accounting in preparing them, and their identification of any material uncertainties to the
Group’s and Company’s ability to continue to do so over a period of at least twelve months from the date of
approval of the financial statements;
• The directors’ explanation as to their assessment of the Group's and Company’s prospects, the period this
assessment covers and why the period is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due over the period of its assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DIPLOMA PLC CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 137
Our review of the directors’ statement regarding the longer-term viability of the Group and Company was
substantially less in scope than an audit and only consisted of making inquiries and considering the directors’
process supporting their statement; checking that the statement is in alignment with the relevant provisions
of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial
statements and our knowledge and understanding of the Group and Company and their environment obtained
in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the corporate governance statement is materially consistent with the financial statements and our
knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Company's
position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control
systems; and
• The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the
Company’s compliance with the Code does not properly disclose a departure from a relevant provision of the
Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities for preparing the financial statements, the
directors are responsible for the preparation of the financial statements in accordance with the applicable framework
and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control
as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or
to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 138 − DIPLOMA PLC ANNUAL REPORT 2023
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance
with laws and regulations related to data protection laws (including GDPR) and health and safety and we considered
the extent to which non-compliance might have a material effect on the financial statements. We also considered
those laws and regulations that have a direct impact on the financial statements such as the UK Listing Rules, the
Companies Act 2006, indirect and direct tax legislation and pension rules. We evaluated management’s incentives
and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls),
and determined that the principal risks were related to fraudulent journal entries to manipulate the financial
performance and management bias in significant accounting estimates, in order to achieve management
incentive scheme targets and market consensus. The Group engagement team shared this risk assessment
with the component auditors so that they could include appropriate audit procedures in response to such risks
in their work. Audit procedures performed by the Group engagement team and/or component auditors included:
• enquiring of Group and local management, including consideration of known or suspected instances of non-
compliance with laws and regulations and fraud, and review of internal audit reports;
• enquiring of entity staff in tax and compliance functions to identify any instances of non-compliance with laws
and regulations;
• reviewing minutes of meetings of those charged with governance;
• challenging assumptions and judgements made by management in their accounting estimates (due to the risk
of management bias), including the inventory provision and accounting for acquisitions;
• incorporating elements of unpredictability into our work;
• reviewing financial statement disclosures and testing to supporting documentation to assess compliance
with applicable laws; and
• auditing the risk of management override of controls, including through testing certain journal entries and other
adjustments for appropriateness.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that are not closely related to events and transactions
reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using
data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than
testing complete populations. We will often seek to target particular items for testing based on their size or risk
characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population
from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DIPLOMA PLC CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 139
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not
been received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the Company financial statements and the part of the Annual Report on Remuneration to be audited are
not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 1 March 2018 to audit
the financial statements for the year ended 30 September 2018 and subsequent financial periods. The period of total
uninterrupted engagement is six years, covering the years ended 30 September 2018 to 30 September 2023.
OTHER MATTER
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R,
these financial statements will form part of the ESEF-prepared annual financial report filed on the National Storage
Mechanism of the Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF
RTS’). This auditors’ report provides no assurance over whether the annual financial report will be prepared using the
single electronic format specified in the ESEF RTS.
Richard Porter (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
20 November 2023
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information
140 − DIPLOMA PLC ANNUAL REPORT 2023
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2023
Revenue
Operating expenses
Operating profit
Financial expense, net
Profit before tax
Tax expense
Profit for the year
Attributable to:
Shareholders of the Company
Minority interests
Earnings per share (p)
Adjusted/Basic earnings
Adjusted/Diluted earnings
Note
3,4
2
6
7
21
9
9
Adjustments1
£m
-
(53.7)
(53.7)
(7.3)
(61.0)
14.7
(46.3)
(46.3)
-
(46.3)
Adjusted1
2023
£m
1,200.3
(963.3)
237.0
(20.4)
216.6
(52.0)
164.6
164.0
0.6
164.6
126.5p
125.9p
Total
2023
£m
1,200.3
(1,017.0)
183.3
(27.7)
155.6
(37.3)
118.3
117.7
0.6
118.3
90.8p
90.4p
Adjustments1
£m
-
(46.9)
(46.9)
(3.2)
(50.1)
10.9
(39.2)
(39.2)
-
(39.2)
Adjusted1
2022
£m
1,012.8
(821.6)
191.2
(11.6)
179.6
(45.0)
134.6
133.9
0.7
134.6
107.5p
107.3p
Total
2022
£m
1,012.8
(868.5)
144.3
(14.8)
129.5
(34.1)
95.4
94.7
0.7
95.4
76.1p
75.9p
1 Adjusted figures exclude certain items as set out and explained in the Financial Review and as detailed in notes 2, 3, 4, 6 and 7. All amounts relate to
continuing operations.
The Group has re-presented the Consolidated Income Statement to reflect the analysis of expenses based on their
nature. Together with note 2, this provides more information that is relevant to the users of the financial statements
and better aligns to how management information is reported internally.
The notes on pages 144 to 180 form part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2023
Profit for the year
Items that will not be reclassified to the Consolidated Income Statement
Actuarial (loss)/gain on the defined benefit pension schemes
Deferred tax on items that will not be reclassified
Items that may be reclassified to the Consolidated Income Statement
Exchange differences on translation of foreign operations
Gains on fair value of cash flow hedges
Net changes to fair value of cash flow hedges transferred to the Consolidated Income
Statement
Deferred tax on items that may be reclassified
Total Other Comprehensive Income
Total Comprehensive (Expense)/Income for the year
Attributable to:
Shareholders of the Company
Minority interests
Note
25
7,14
19
19
7,14
2023
£m
118.3
(0.9)
0.2
(0.7)
(46.3)
1.8
(3.8)
0.5
(47.8)
(48.5)
69.8
69.3
0.5
69.8
2022
£m
95.4
10.6
(2.8)
7.8
76.8
4.5
(0.4)
(1.1)
79.8
87.6
183.0
182.2
0.8
183.0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2023
DIPLOMA PLC ANNUAL REPORT 2023 − 141
Share
capital
£m
Share
premium
£m
Translation
reserve
£m
Hedging
reserve
£m
Retained
earnings £m
Shareholders’
equity
£m
Minority
interests
£m
Note
At 1 October 2021
Total Comprehensive Income
Share-based payments
Tax on items recognised
directly in equity
Notional purchase of own
shares
Acquisition of business
Disposal of business
Minority interest put option on
acquisition
Minority interest put option
disposal
Minority interest acquired
Dividends
At 30 September 2022
Total Comprehensive Income
Issue of share capital
Share-based payments
Tax on items recognised
directly in equity
Notional purchase of own
shares
Dividends
5
7
21
8,21
5
7
8,21
6.3
188.6
–
–
–
–
–
–
–
–
–
–
6.3
–
0.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
188.6
–
231.6
–
–
–
–
12.1
76.7
0.2
3.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
88.8
(46.3)
3.2
(1.5)
–
–
–
–
-
–
–
–
-
-
329.1
102.5
2.8
0.4
(2.8)
–
–
(1.9)
1.2
–
(56.2)
375.1
117.1
-
4.1
0.5
(1.9)
(70.5)
At 30 September 2023
6.8
420.2
42.5
1.7
424.4
The notes on pages 144 to 180 form part of these consolidated financial statements.
536.3
182.2
2.8
0.4
(2.8)
–
–
(1.9)
1.2
–
(56.2)
662.0
69.3
232.1
4.1
0.5
(1.9)
(70.5)
895.6
4.7
0.8
–
–
–
2.5
(1.3)
–
–
(0.3)
(0.2)
6.2
0.5
–
–
–
–
(0.3)
6.4
Total
equity
£m
541.0
183.0
2.8
0.4
(2.8)
2.5
(1.3)
(1.9)
1.2
(0.3)
(56.4)
668.2
69.8
232.1
4.1
0.5
(1.9)
(70.8)
902.0
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 142 − DIPLOMA PLC ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2023
Non-current assets
Goodwill
Acquisition intangible assets
Other intangible assets
Property, plant and equipment
Leases – right-of-use assets
Retirement benefit assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Borrowings
Trade and other payables
Current tax liabilities
Other liabilities
Lease liabilities
Net current assets
Total assets less current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Other liabilities
Retirement benefit obligations
Deferred tax liabilities
Net assets
Equity
Share capital
Share premium
Translation reserve
Hedging reserve
Retained earnings
Total shareholders’ equity
Minority interests
Total equity
Note
2023
£m
2022
£m
10
11
11
12
13
25
14
15
16
18
24
17
7
20
13
24
13
20
25
14
21
439.1
520.1
4.2
59.2
71.5
6.8
0.2
372.3
455.0
4.1
49.6
62.4
6.4
0.2
1,101.1
950.0
232.7
193.1
62.4
488.2
(0.3)
(191.9)
(16.6)
(12.7)
(15.0)
(236.5)
251.7
1,352.8
(316.8)
(65.2)
(9.9)
(0.3)
(58.6)
(450.8)
902.0
6.8
420.2
42.5
1.7
424.4
895.6
6.4
902.0
217.4
169.9
41.7
429.0
(30.5)
(189.5)
(11.8)
(19.0)
(12.7)
(263.5)
165.5
1,115.5
(340.1)
(56.4)
(12.4)
-
(38.4)
(447.3)
668.2
6.3
188.6
88.8
3.2
375.1
662.0
6.2
668.2
The consolidated financial statements on pages 140 to 180 were approved by the Board of Directors on 20 November
2023 and signed on its behalf by:
JD Thomson
Chief Executive Officer
C Davies
Chief Financial Officer
The notes on pages 144 to 180 form part of these consolidated financial statements.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2023
DIPLOMA PLC ANNUAL REPORT 2023 − 143
Operating profit
Acquisition related and other charges
Non-cash items and other
Increase in working capital
Cash flow from operating activities
Interest paid, net (including borrowing fees)
Tax paid
Net cash inflow from operating activities
Cash flow from investing activities
Acquisition of businesses (net of cash acquired)
Deferred consideration paid
Proceeds from sale of business (net of cash disposed)
Purchase of property, plant and equipment
Purchase of other intangible assets
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Cash flow from financing activities
Proceeds from issue of share capital
Share issue costs
Dividends paid to shareholders
Dividends paid to minority interests
Acquisition of minority interests
Notional purchase of own shares on exercise of share options
Proceeds from borrowings
Repayment of borrowings
Principal elements of lease payments
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rates on cash and cash equivalents
Cash and cash equivalents at end of year
Note
23
20
22
12
11
8
21
21
18
2023
£m
183.3
53.7
24.5
(4.2)
257.3
(26.7)
(41.4)
189.2
2022
£m
144.3
46.9
18.1
(28.7)
180.6
(15.0)
(40.6)
125.0
(258.5)
(173.0)
(12.3)
21.5
(21.6)
(1.5)
1.5
(270.9)
236.1
(4.2)
(70.5)
(0.3)
–
(1.9)
579.5
(617.3)
(13.9)
107.5
25.8
41.7
(5.1)
62.4
(7.1)
13.7
(14.3)
(1.1)
9.9
(171.9)
–
–
(56.2)
(0.2)
(0.3)
(2.8)
154.8
(20.0)
(10.9)
64.4
17.5
24.8
(0.6)
41.7
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 144 − DIPLOMA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
1. GENERAL INFORMATION
Diploma PLC is a public company limited by shares incorporated in the United Kingdom, registered and domiciled
in England and Wales and listed on the London Stock Exchange. The address of the registered office is 10-11
Charterhouse Square, London EC1M 6EE. The consolidated financial statements comprise the Company and its
subsidiaries (together referred to as ‘the Group’) and were authorised by the Directors for publication on
20 November 2023. These statements are presented in UK sterling, with all values rounded to the nearest
100,000, except where otherwise indicated.
The consolidated financial statements of the Group have been prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting
under those standards. The financial statements of the Parent Company, Diploma PLC, have been prepared in
accordance with FRS 101 (Reduced Disclosure Framework) and are set out in a separate section of the Annual Report
& Accounts on pages 181 to 183. A full list of subsidiary and other related undertakings is set out on pages 185 to 187.
2. ANALYSIS OF OPERATING EXPENSES/INCOME
Cost of inventories sold
Employee costs (note 5)
Depreciation of property, plant and
equipment (note 12)
Depreciation of right-of-use assets (note 13)
Amortisation (note 11)
Net impairment losses on trade receivables
(note 16)
Other operating expenses/(income)
Operating expenses
Adjusted
2023
£m
652.1
206.2
12.8
14.8
1.0
2.5
73.9
963.3
Adjustments
£m
5.9
3.8
-
-
52.9
-
(8.9)
53.7
Total
2023
£m
658.0
210.0
12.8
14.8
53.9
2.5
65.0
1,017.0
Adjusted
2022
£m
561.3
173.1
10.4
12.7
0.4
3.4
60.3
821.6
Adjustments
£m
-
4.4
-
-
42.4
-
0.1
46.9
Total
2022
£m
561.3
177.5
10.4
12.7
42.8
3.4
60.4
868.5
Adjustments relate to acquisition related and other charges as defined in note 28.2 of £53.7m (2022: £46.9m) and
comprise principally of £52.9m (2022: £42.4m) of amortisation of acquisition intangible assets, £6.3m of acquisition
related expenses (2022: £10.5m), £5.9m of fair value adjustments to inventory acquired through acquisitions
recognised in cost of inventories sold (2022: £nil) and a £12.2m net gain (2022: £7.3m) on the disposal of
businesses, which is set out in note 22.
3. BUSINESS SECTOR ANALYSIS
The Chief Operating Decision Maker (“CODM”) for the purposes of IFRS 8 is the CEO. The financial performance of
the business Sectors is reported to the CODM on a monthly basis and this information is used to allocate resources
on an appropriate basis.
For management reporting purposes, the Group is organised into three main reportable business Sectors: Life
Sciences, Seals and Controls. These Sectors are the Group’s operating segments as defined by IFRS 8 and form
the basis of the primary reporting format disclosures below. The CODM reviews discrete financial information at
this operating segment level. The principal activities of each of these Sectors are described in the Strategic Report
on pages 24 to 35. Sector revenue represents revenue from external customers; there is no material inter-Sector
revenue. Sector results, assets and liabilities include items directly attributable to a Sector, as well as those that
can be allocated on a reasonable basis.
Sector assets exclude cash and cash equivalents, deferred tax assets, acquisition related assets and corporate assets
that cannot be allocated on a reasonable basis to a business Sector. Sector liabilities exclude borrowings (other than
lease liabilities), retirement benefit obligations, deferred tax liabilities, acquisition liabilities and corporate liabilities
that cannot be allocated on a reasonable basis to a business Sector. These items are shown collectively in the
following analysis as “unallocated assets” and “unallocated liabilities”, respectively.
0.9
212.9
43.1
0.1
43.2
(6.8)
36.4
75.2
102.4
66.5
244.1
–
188.6
41.0
–
41.0
1.5
42.5
74.0
106.2
74.9
255.1
DIPLOMA PLC ANNUAL REPORT 2023 − 145
Life Sciences
Seals
Controls
Corporate
Group
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
2022
£m
212.0
188.6
387.7
331.4
550.2
492.8
–
–
–
–
–
–
(21.8)
(18.2)
50.4
1,149.9 1,012.8
–
1,200.3 1,012.8
191.2
225.4
18.2
568.4
131.9
4.7
–
492.8
105.8
–
31.3
419.0
72.2
6.8
79.0
(23.2)
55.8
–
331.4
62.6
–
62.6
(16.6)
46.0
136.6
105.8
(21.8)
(23.7)
(30.5)
–
112.9
75.3
(21.8)
–
–
(18.2)
(1.3)
(19.5)
11.6
237.0
(53.7)
183.3
–
191.2
(46.9)
144.3
264.1
169.4
195.4
628.9
207.5
125.2
100.2
432.9
214.9
167.3
258.2
640.4
211.5
140.9
279.9
632.3
–
–
–
–
0.2
62.4
3.0
6.8
3.5
–
–
–
–
0.2
41.7
1.8
6.4
8.6
554.2
439.1
493.0
372.3
520.1
455.0
1,513.4 1,320.3
0.2
62.4
3.0
6.8
0.2
41.7
1.8
6.4
3.5
8.6
1,589.3 1,379.0
(237.6)
(259.0)
244.1
(43.3)
255.1
628.9
432.9
640.4
632.3
75.9
58.7
(41.7)
(119.6)
(103.3)
(96.1)
(92.6)
–
–
(58.6)
(38.4)
(58.6)
(38.4)
(0.3)
(22.6)
(29.7)
–
(31.4)
(32.8)
(0.3)
(22.6)
(29.7)
–
(31.4)
(32.8)
(317.1)
(370.6)
(317.1)
(370.6)
(43.3)
(41.7)
(119.6)
(103.3)
(96.1)
(92.6)
(428.3)
(473.2)
(687.3)
(710.8)
Revenue – existing
Revenue – acquisitions
Revenue
Adjusted operating profit – existing
Adjusted operating profit – acquisitions
Adjusted operating profit
Acquisition related and other charges
Operating profit
Operating assets
Goodwill
Acquisition intangible assets
Unallocated assets:
– Deferred tax assets
– Cash and cash equivalents
– Acquisition related assets
– Retirement benefit obligations
– Corporate assets
Total assets
Operating liabilities
Unallocated liabilities:
– Deferred tax liabilities
– Retirement benefit obligations
– Acquisition related liabilities
– Corporate liabilities
– Borrowings
Total liabilities
Net assets/(liabilities)
200.8
213.4
509.3
329.6
544.3
539.7
(352.4)
(414.5)
902.0
668.2
Other Sector information
Capital expenditure
Depreciation and amortisation
Revenue recognition
– immediately on sale
– over a period of time
Life Sciences
Seals
Controls
Corporate
Group
2023
£m
7.9
4.0
2022
£m
8.0
2.9
2023
£m
9.0
5.0
2022
£m
3.7
3.5
2023
£m
5.9
4.6
2022
£m
2.7
4.6
2023
£m
0.3
0.2
2022
£m
0.9
0.2
2023
£m
23.1
13.8
2022
£m
15.3
11.2
198.9
14.0
212.9
176.4
12.2
188.6
399.6
315.6
563.0
492.8
19.4
15.8
5.4
–
419.0
331.4
568.4
492.8
–
–
–
–
–
–
1,161.5
984.8
38.8
28.0
1,200.3 1,012.8
Accrued income (“contract assets”) at 30 September 2023 of £1.0m (2022: £0.1m) and deferred revenue (“contract
liabilities”) of £3.1m at 30 September 2023 (2022: £3.5m) are included in trade and other receivables (note 16) and
trade and other payables (note 17), respectively.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 146 − DIPLOMA PLC ANNUAL REPORT 2023
4. GEOGRAPHIC SEGMENT ANALYSIS BY ORIGIN
United Kingdom
Rest of Europe
USA
Rest of world
Revenue
Adjusted operating profit
Non-current assets1
Trading capital employed
Capital expenditure
2023
£m
267.1
210.3
537.6
185.3
2022
£m
209.7
166.7
465.5
170.9
1,200.3
1,012.8
2023
£m
28.8
34.5
132.2
41.5
237.0
2022
£m
21.0
29.3
104.6
36.3
191.2
2023
£m
207.3
308.1
470.0
106.3
1,091.7
2022
£m
193.6
169.1
464.3
112.0
939.0
2023
£m
195.0
354.1
567.9
111.2
2022
£m
202.2
179.8
557.2
119.3
1,228.2
1,058.5
2023
£m
9.3
1.6
4.3
7.9
23.1
2022
£m
3.4
1.7
8.9
1.3
15.3
1 Non-current assets excludes deferred tax assets, derivative assets and retirement benefit assets.
The Group has re-presented the prior year geographic segment analysis to reflect USA separately due to the
increasing operations in that territory as this provides more information that is relevant to the users of the
financial statements.
5. GROUP EMPLOYEE COSTS
Average number of employees
Life Sciences
Seals
Controls
Corporate
Number of employees – average
Number of employees – year end
Group employee costs, including key management
Wages and salaries
Social security costs
Other pension costs
Share-based payments
Key management short-term remuneration, including Directors
Salaries and short-term employee benefits
Compensation to Directors for loss of office
Pension costs
Share-based payments
2023
450
1,496
1,026
38
3,010
3,319
2023
£m
183.2
15.1
7.6
4.1
210.0
2023
£m
5.4
–
0.2
3.0
8.6
2022
423
1,174
981
36
2,614
2,909
2022
£m
154.8
13.3
6.6
2.8
177.5
2022
£m
5.0
0.4
0.2
2.4
8.0
The Group considers key management personnel as defined in IAS 24 (Related Party Disclosures) to be the Directors
of the Company and the members of the Executive team.
The Executive Directors’ remuneration and their interests in shares of the Company are given on pages 102 to 125
in the Remuneration Committee Report. The charge for share-based payments of £3.0m (2022: £2.4m) relates
to the Group’s PSP, described in the Remuneration Committee Report.
Directors’ short-term remuneration
Non-Executive Directors
Executive Directors
2023
£m
0.6
2.7
3.3
2022
£m
0.5
2.6
3.1
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 147
6. FINANCIAL EXPENSE, NET
Interest expense/(income) and similar charges
– bank facility and commitment fees
– interest income on short term deposits
– interest expense on bank borrowings
– notional interest income on the defined benefit pension scheme (note 25)
– amortisation of capitalised borrowing fees
– interest on lease liabilities
Net interest expense and similar charges
– acquisition related finance charges, net
Financial expense, net
2023
£m
1.6
(0.4)
16.6
(0.4)
0.2
2.8
20.4
7.3
27.7
2022
£m
1.0
(0.1)
7.9
–
0.2
2.6
11.6
3.2
14.8
Acquisition related finance charges as adjusted in the Consolidated Income Statement includes fair value
remeasurements of put options for future minority interest purchases of £1.8m charge (2022: £1.4m charge),
fair value movement and unwind of discount on acquisition liabilities of £0.4m charge (2022: £0.4m charge),
£5.9m charge (2022: £1.4m charge) for the amortisation and write-off of capitalised borrowing fees on acquisition
related borrowings, and interest income on previous disposal of business of £0.8m (2022: nil). Acquisition related
finance charges are adjusted due to their consistent nature with acquisition related and other charges, as defined
in note 28.2.
7. TAX EXPENSE
Current tax
The tax charge is based on the profit for the year and comprises:
UK corporation tax
Overseas tax
Adjustments in respect of prior year:
UK corporation tax
Overseas tax
Total current tax
Deferred tax
The net deferred tax credit based on the origination and reversal of timing differences comprises:
United Kingdom
Overseas
Total deferred tax
Total tax on profit for the year
2023
£m
10.4
31.2
41.6
1.2
0.1
42.9
(2.7)
(2.9)
(5.6)
37.3
2022
£m
10.0
30.8
40.8
(0.2)
0.1
40.7
(3.1)
(3.5)
(6.6)
34.1
In addition to the above credit for deferred tax included in the Consolidated Income Statement, a deferred tax
credit relating to the retirement benefit scheme and cash flow hedges of £0.7m was recognised in the Consolidated
Statement of Comprehensive Income (2022: £3.9m charge). A further £0.5m was credited (2022: £0.4m) to the
Consolidated Statement of Changes in Equity.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information
148 − DIPLOMA PLC ANNUAL REPORT 2023
Factors affecting the tax charge for the year
The difference between the total tax charge calculated by applying the effective blended rate of UK corporation tax
of 22.0% to the profit before tax of £155.6m and the amount set out above is as follows:
Profit before tax
Tax on profit at UK effective corporation tax rate of 22.0% (2022: 19.0%)
Effects of:
higher tax rates on overseas earnings
adjustments in respect of UK and Overseas corporation tax in prior years
other permanent differences
Total tax on profit for the year
Tax effect on adjusting items
Adjusted tax expense
2023
£m
155.6
34.2
3.8
1.3
(2.0)
37.3
14.7
52.0
2022
£m
129.5
24.6
6.7
(0.1)
2.9
34.1
10.9
45.0
The tax adjustment in the consolidated income statement of £14.7m (2022: £10.9m) reflects the tax effect
of the acquisition related and other charges, and acquisition related finance charges.
The Group earns its profits in the UK and overseas. The Group prepares its consolidated financial statements for
the year to 30 September and the blended statutory tax rate for UK corporation tax in respect of the year ended
30 September 2023 was 22.0% (2022: 19.0%) and this rate has been used for tax on profit in the above reconciliation.
The Group’s net overseas tax rate is higher than that in the UK, primarily because profits earned in the US,
Canada, Germany and Australia are taxed at higher rates than the UK. The UK deferred tax assets and liabilities at
30 September 2023 have been calculated by reference to the UK corporation tax rate of 25.0% (2022: 25.0%).
At 30 September 2023, the Group had outstanding tax liabilities of £16.6m (2022: £11.8m). These amounts are
expected to be paid within the next financial year.
During 2021, the OECD published a framework for the introduction of a global minimum effective tax rate of
15%, applicable to large multinational groups. The legislation implementing these ‘Pillar Two’ rules in the UK was
substantively enacted on 20 June 2023 and will apply to the Group from the financial year ending 30 September
2025 onwards. The Group is reviewing the legislation and monitoring the implementation of the rules outside of the
UK to understand the potential impact. We have applied the temporary exception under IAS 12 from the requirement
to recognise and disclose deferred taxes arising from the implementation of the Pillar Two rules.
8. DIVIDENDS
Interim dividend, paid in June
Final dividend of the prior year, paid in February
2023
pence per
share
2022
pence
per share
16.5
38.8
55.3
15.0
30.1
45.1
2023
£m
22.1
48.4
70.5
2022
£m
18.7
37.5
56.2
The Directors have proposed a final dividend in respect of the current year of 40.0p per share (2022: 38.8p), which
will be paid on 2 February 2024 subject to approval by shareholders at the Annual General Meeting (AGM) on
17 January 2024. The total dividend for the current year, subject to approval of the final dividend, will be 56.5p per
share (2022: 53.8p).
During the year, the Directors became aware that approximately £2.5m of the FY21 interim dividend declared on
17 May 2021 was paid other than in accordance with the technical requirements of the Companies Act 2006. This
was because interim accounts had not been filed at Companies House prior to the declaration of the dividend.
It is intended that this technical issue, which has no impact on the Company's financial position, be ratified by a
shareholders’ resolution to be proposed at the Annual General Meeting to be held on 17 January 2024. The approach
that the Company is proposing with regard to this matter is consistent with the approach taken by other UK quoted
and listed companies that have, similarly, made distributions otherwise than in accordance with the Act. Further
information can be found in the Parent Company Statement of Changes in Equity on page 181.
The Diploma PLC Employee Benefit Trust holds 67,431 (2022: 71,033) shares, which are ineligible for dividends.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 149
9. EARNINGS PER SHARE
Basic and diluted earnings per share
Basic earnings per ordinary 5p share is calculated on the basis of the weighted average number of ordinary shares
in issue during the year of 129,675,581 (2022: 124,533,060) and the profit for the year attributable to shareholders
of £117.7m (2022: £94.7m). Basic earnings per share is 90.8p (2022: 76.1p). Diluted earnings per share is 90.4p
(2022: 75.9p) and is based on the average number of ordinary shares (which includes any potentially dilutive shares)
of 130,260,868 (2022: 124,855,007).
An equity placing was completed in March 2023, resulting in the issuance of 9,350,965 (7.5% increase) of 5p ordinary
shares at a share price of 2,525 pence per placing share, with corresponding fees of £4.2m.
Further description of the Company’s share capital is set out in note (E) to the Parent Company Financial Statements
on page 183.
Adjusted earnings per share
Adjusted EPS, which is defined in note 28, is 126.5p (2022: 107.5p).
Profit before tax
Tax expense
Minority interests
2023
pence per
share
Basic
2023
pence per
share
Diluted
2022
pence
per share
Basic
2022
pence
per share
Diluted
2023
£m
155.6
(37.3)
(0.6)
Earnings for the year attributable to shareholders of the
Company
Acquisition related and other charges and acquisition related
finance charges, net of tax
Adjusted earnings
90.8
90.4
76.1
75.9
117.7
35.7
126.5
35.5
125.9
31.4
107.5
31.4
107.3
46.3
164.0
2022
£m
129.5
(34.1)
(0.7)
94.7
39.2
133.9
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 150 − DIPLOMA PLC ANNUAL REPORT 2023
10. GOODWILL
At 1 October 2021
Acquisitions
Exchange adjustments
At 30 September 2022
Acquisitions
Disposals
Exchange adjustments
At 30 September 2023
Life Sciences
£m
81.4
19.0
5.8
106.2
1.3
–
(5.1)
102.4
Seals
£m
60.0
56.8
8.4
125.2
48.1
–
(3.9)
169.4
Controls
£m
119.3
5.2
16.4
140.9
39.5
(4.3)
(8.8)
167.3
Total
£m
260.7
81.0
30.6
372.3
88.9
(4.3)
(17.8)
439.1
The Group tests goodwill for impairment at least once a year. For the purposes of impairment testing, goodwill is
allocated to each of the Group’s three cash-generating units ("CGUs"), which are the three operating Sectors: Life
Sciences; Seals; and Controls. This represents the lowest level within the Group at which goodwill is monitored by
management and reflects the Group’s strategy of acquiring businesses to drive synergies across a Sector, rather than
within an individual business. The impairment test requires a ‘value in use’ valuation to be prepared for each Sector
using discounted cash flow forecasts. The cash flow forecasts are based on a combination of annual budgets
prepared by each business and the Group’s strategic plan.
The key assumptions used to prepare the cash flow forecasts relate to operating margins, revenue growth rates,
the discount rates and climate related risks. The operating margins are assumed to remain sustainable, which is
supported by historical experience; revenue growth rates generally approximate to the average rates for the markets
in which the business operates, unless there are particular factors relevant to a business. The cash flow forecasts use
the budgeted figures for FY24, and then the three-year strategy cash flows for the next two years. From year four
onwards a long-term growth rate of 2% is utilised.
The cash flow forecasts are discounted to determine a current valuation using market derived pre-tax discount rates;
Life Sciences 13.2% (2022: 13.9%), Seals 13.3% (2022: 13.8%) and Controls 13.2% (2022: 13.8%). The equivalent
post-tax discount rates for FY23 are: Life Sciences 10.0% (2022: 10.4%), Seals 10.1% (2022: 10.3%) and Controls
10.0% (2022: 10.3%). These rates are based on the characteristics of lower risk, non-technically driven, distribution
businesses operating generally in well-developed markets and with robust capital structures.
Based on the criteria set out above, no impairment in the value of goodwill in the CGUs was identified.
The Directors have also carried out sensitivity analysis on the key assumptions noted above to determine whether
a ‘reasonably possible adverse change’ in any of these assumptions, including the net financial impact of climate
related risks and opportunities, would result in an impairment of goodwill. The analysis indicates that a ‘reasonably
possible adverse change’ would not give rise to an impairment charge to goodwill in any of the three CGUs.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED
DIPLOMA PLC ANNUAL REPORT 2023 − 151
11. ACQUISITION AND OTHER INTANGIBLE ASSETS
Customer
relationships
£m
Supplier
relationships
£m
Trade names,
brands and
databases
£m
Technology
£m
Total
acquisition
intangible
assets
£m
Other
intangible
assets
£m
Cost
At 1 October 2021
Additions
Acquisitions
Disposals
Exchange adjustments
At 30 September 2022
Additions
Acquisitions
Disposals
Transfers
Exchange adjustments
At 30 September 2023
Amortisation
At 1 October 2021
Acquisitions
Charge for the year
Disposals
Exchange adjustments
At 30 September 2022
Acquisitions
Charge for the year
Disposals
Exchange adjustments
At 30 September 2023
Net book value
At 30 September 2023
At 30 September 2022
392.4
–
96.2
–
59.3
547.9
–
137.3
(1.1)
–
(30.2)
653.9
90.8
3.6
32.0
–
13.7
140.1
4.1
41.4
(1.1)
(7.8)
176.7
477.2
407.8
28.8
–
–
–
2.1
30.9
–
–
–
–
(1.6)
29.3
21.1
–
1.8
–
1.7
24.6
–
1.7
–
(1.2)
25.1
4.2
6.3
41.5
–
3.7
–
8.5
53.7
–
6.2
–
–
(4.4)
55.5
5.9
0.4
4.6
–
1.9
12.8
0.2
5.5
–
(1.0)
17.5
38.0
40.9
–
–
–
–
–
–
–
0.8
–
–
(0.1)
0.7
–
–
–
–
–
–
–
–
–
–
–
462.7
–
99.9
–
69.9
632.5
–
144.3
(1.1)
–
(36.3)
739.4
117.8
4.0
38.4
–
17.3
177.5
4.3
48.6
(1.1)
(10.0)
219.3
0.7
–
520.1
455.0
7.6
1.0
0.8
(1.1)
1.0
9.3
1.5
–
(0.1)
(0.3)
(0.2)
10.2
4.2
–
0.8
(0.4)
0.6
5.2
–
1.0
–
(0.2)
6.0
4.2
4.1
Acquisition intangible assets relate to items acquired through business combinations which are fair-valued and
amortised over their useful economic lives.
Customer relationships
Supplier relationships
Trade names, brands and databases
Technology
Economic life
5–16 years
8–10 years
5–11 years
5 years
Customer relationships principally relate to: Windy City Wire (£163.0m – 13 years useful life remaining), DICSA (£92.6m
– 16 years useful life remaining), R&G (£38.0m – 9 years useful life remaining) and VSP (£23.7m – 6 years useful life
remaining). Trade names and brands principally relate to Windy City Wire (£29.6m – 9 years useful life remaining)
and DICSA (£5.9m - 10 years useful life remaining). Technology relates to DICSA (5 years useful life remaining).
Other intangible assets comprise computer software that is separately identifiable from IT equipment and includes
software licences.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 152 − DIPLOMA PLC ANNUAL REPORT 2023
12. PROPERTY, PLANT AND EQUIPMENT
Freehold
properties
£m
Leasehold
properties
£m
Plant and
equipment
£m
Hospital field
equipment
£m
Cost
At 1 October 2021
Additions
Acquisitions of businesses
Disposals
Exchange adjustments
At 30 September 2022
Additions
Acquisitions of businesses (note 22)
Disposals
Exchange adjustments
At 30 September 2023
Depreciation
At 1 October 2021
Charge for the year
Disposals
Exchange adjustments
At 30 September 2022
Charge for the year
Disposals
Exchange adjustments
At 30 September 2023
Net book value
At 30 September 2023
At 30 September 2022
1.9
–
1.5
–
0.2
3.6
0.3
-
(0.6)
(0.2)
3.1
0.9
0.1
–
0.1
1.1
0.1
(0.3)
(0.1)
0.8
2.3
2.5
7.8
2.2
2.5
(0.4)
1.1
13.2
4.3
1.8
(0.9)
(0.8)
17.6
4.0
1.0
(0.3)
0.5
5.2
1.0
(0.3)
(0.3)
5.6
12.0
8.0
46.9
5.3
2.7
(3.2)
9.5
61.2
9.5
4.3
(2.5)
(5.2)
67.3
22.3
7.1
(2.7)
6.0
32.7
7.9
(1.7)
(3.3)
35.6
31.7
28.5
12.8
6.8
–
(1.4)
1.5
19.7
7.5
0.1
(1.1)
(1.3)
24.9
6.8
2.2
(0.7)
0.8
9.1
3.8
(0.5)
(0.7)
11.7
13.2
10.6
Leasehold properties includes £3.2m (2022: £nil) of assets under construction.
Land included within freehold properties above which is not depreciated is £1.0m (2022: £1.0m).
Capital commitments contracted, but not provided, were £2.2m (2022: £0.2m).
Freehold properties include ca. 150 acres of land at Stamford (the Stamford Land) that comprises mostly farm
land and former quarry land. In the Directors’ opinion, the current fair value of its land at 30 September 2023
is £1.0m (2022: £1.0m) with a book value of £nil (2022: £nil).
Total
£m
69.4
14.3
6.7
(5.0)
12.3
97.7
21.6
6.2
(5.1)
(7.5)
112.9
34.0
10.4
(3.7)
7.4
48.1
12.8
(2.8)
(4.4)
53.7
59.2
49.6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 153
13. LEASES – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
Right-of-use assets
Land &
buildings
£m
Plant &
machinery
£m
Motor
vehicles
£m
IT & office
equipment
£m
Cost
At 1 October 2021
Additions
Disposals
Exchange adjustments
At 30 September 2022
Additions
Disposals
Exchange adjustments
At 30 September 2023
Depreciation
At 1 October 2021
Charge for the year
Disposals
Exchange adjustments
At 30 September 2022
Charge for the year
Disposals
Exchange adjustments
At 30 September 2023
Net book value
At 30 September 2023
At 30 September 2022
55.7
19.8
(1.1)
6.7
81.1
24.8
(1.3)
(3.7)
100.9
13.7
10.7
(0.5)
1.4
25.3
12.3
(0.7)
(0.9)
36.0
64.9
55.8
0.6
0.2
–
–
0.8
0.1
(0.1)
–
0.8
0.2
0.1
–
–
0.3
0.1
(0.1)
–
0.3
0.5
0.5
4.2
4.9
(0.9)
0.1
8.3
2.7
(1.0)
(0.1)
9.9
2.3
1.5
(0.8)
–
3.0
2.0
(0.5)
–
4.5
5.4
5.3
1.1
0.5
–
0.1
1.7
0.5
(0.1)
(0.1)
2.0
0.5
0.4
–
–
0.9
0.4
–
–
1.3
0.7
0.8
Right-of-use assets represent those assets held under leases which IFRS 16 requires to be capitalised.
Lease liabilities
The movement on the lease liability is set out below:
At 1 October
Additions
Disposals
Lease repayments
Interest on lease liabilities
Exchange movements
At 30 September
Analysed as:
Repayable within one year
Repayable after one year
2023
£m
69.1
29.7
(0.8)
(16.7)
2.8
(3.9)
80.2
£m
15.0
65.2
Total
£m
61.6
25.4
(2.0)
6.9
91.9
28.1
(2.5)
(3.9)
113.6
16.7
12.7
(1.3)
1.4
29.5
14.8
(1.3)
(0.9)
42.1
71.5
62.4
2022
£m
48.3
26.6
(0.9)
(13.5)
2.6
6.0
69.1
£m
12.7
56.4
Leases of low-value assets and short-term leases are accounted for applying paragraph 6 of IFRS 16. Lease costs
of £1.7m (2022: £2.0m) in respect of low-value assets, short-term leases, and variable lease payments not included
in the measurement of lease liabilities have been recognised within administration costs. The total cash outflow
in respect of leases was £18.4m (2022: £15.5m).
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 154 − DIPLOMA PLC ANNUAL REPORT 2023
14. DEFERRED TAX
The movement on the net deferred tax liability is as follows:
At 1 October
Credited to the income statement (note 7)
Acquisitions and disposals (note 22)
Accounted for in Other Comprehensive Income or directly in Equity
Exchange adjustments
At 30 September
2023
£m
(38.2)
5.6
(26.9)
0.7
0.4
(58.4)
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there
is an intention to settle the balances on a net basis.
Property, plant and equipment
Goodwill and intangible assets
Retirement benefit assets/obligations
Inventories
Share-based payments
Trading losses
Leases
Other temporary differences
Deferred tax offset
Assets
2023
£m
-
-
0.1
3.4
2.0
-
1.6
7.1
14.2
(14.0)
0.2
2022
£m
0.1
–
–
3.1
1.4
–
1.2
5.1
10.9
(10.7)
0.2
Liabilities
2023
£m
(7.4)
(63.4)
(1.4)
(0.1)
-
-
-
(0.3)
(72.6)
14.0
(58.6)
2022
£m
(5.8)
(42.0)
(1.0)
(0.1)
–
–
–
(0.2)
(49.1)
10.7
(38.4)
Net
2023
£m
(7.4)
(63.4)
(1.3)
3.3
2.0
-
1.6
6.8
(58.4)
-
(58.4)
2022
£m
(21.9)
6.6
(17.6)
(3.9)
(1.4)
(38.2)
2022
£m
(5.7)
(42.0)
(1.0)
3.0
1.4
–
1.2
4.9
(38.2)
–
(38.2)
No deferred tax has been provided on unremitted earnings of overseas Group companies as the Group controls the
dividend policies of its subsidiaries. Unremitted earnings may be liable to overseas withholding tax (after allowing for
double taxation relief) if they were to be distributed as dividends. The aggregate amount for which deferred tax has
not been recognised in respect of unremitted earnings from overseas businesses of £208.7m (2022: £184.9m) was
£10.5m (2022: £9.3m).
15. INVENTORIES
Finished goods at 30 September
2023
£m
232.7
2022
£m
217.4
Inventories are stated net of impairment provisions of £26.7m (2022: £24.3m). During the year £4.3m (2022: £4.0m)
was recognised as a charge against cost of sales, comprising the write-down of inventories to net realisable value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 155
16. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: loss allowance
Other receivables
Prepayments and accrued income
At 30 September
The maximum exposure to credit risk for trade receivables at 30 September, by currency, was:
UK sterling
US dollars
Canadian dollars
Euros
Other
Trade receivables at 30 September, before loss allowance, are analysed as follows:
Not past due
Past due
Receivables impaired
2023
£m
185.3
(10.1)
175.2
9.3
8.6
193.1
2023
£m
43.7
73.9
13.1
36.9
17.7
185.3
2023
£m
143.5
31.7
10.1
185.3
The ageing of trade receivables classified as past due, with no loss allowance, as at 30 September is as follows:
Up to one month past due
Between one and two months past due
Between two and four months past due
The movement in the loss allowance for impairment of trade receivables is as follows:
At 1 October
Charged against profit, net
Set up on acquisition
Utilised by write-off
At 30 September
2023
£m
25.6
4.0
2.1
31.7
2023
£m
7.2
2.5
0.9
(0.5)
10.1
2022
£m
158.9
(7.2)
151.7
9.8
8.4
169.9
2022
£m
41.3
70.1
12.6
18.0
16.9
158.9
2022
£m
124.9
26.8
7.2
158.9
2022
£m
20.7
4.5
1.6
26.8
2022
£m
3.6
3.4
0.6
(0.4)
7.2
Concentrations of credit risk with respect to trade receivables are very limited, reflecting the Group’s customer base
being large and diverse. The Group has a history of low levels of losses in respect of trade receivables. Management
is satisfied that the loss allowance takes into account the historical loss experience and forward-looking expected
credit losses in line with IFRS 9 (Financial Instruments).
As at 30 September 2023, the Group had £9.8m (2022: £nil) of trade receivables that were covered by credit
insurance in relation to DICSA.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 156 − DIPLOMA PLC ANNUAL REPORT 2023
17. TRADE AND OTHER PAYABLES
Trade payables
Other payables
Other taxes and social security
Accruals and deferred income
At 30 September
2023
£m
94.4
31.8
11.8
53.9
191.9
The maximum exposure to foreign currency risk for trade payables at 30 September, by currency, was:
UK sterling
US dollars
Canadian dollars
Euros
Other
2023
£m
24.7
36.9
1.7
22.9
8.2
94.4
18. CASH AND CASH EQUIVALENTS
Cash at bank
Short-term deposits
At 30 September
UK
£m
10.6
1.0
11.6
US$
£m
12.6
0.5
13.1
C$
£m
3.2
0.1
3.3
Euro
£m
Other
£m
14.9
8.6
23.5
10.4
0.5
10.9
2023
Total
£m
51.7
10.7
62.4
UK
£m
15.2
–
15.2
US$
£m
7.1
0.1
7.2
C$
£m
2.3
1.8
4.1
Euro
£m
Other
£m
7.8
–
7.8
6.4
1.0
7.4
The short-term deposits and cash at bank are both interest bearing at rates linked to the UK base rate, or
equivalent rate.
2022
£m
96.4
25.8
11.0
56.3
189.5
2022
£m
24.1
50.2
0.8
14.1
7.2
96.4
2022
Total
£m
38.8
2.9
41.7
19. FINANCIAL INSTRUMENTS
The Group’s overall management of financial risks is carried out by a central treasury team under policies and
procedures which are reviewed and approved by the Board. The treasury team identifies, evaluates and, where
appropriate, hedges financial risks in close co-operation with the Group’s operating businesses. The treasury
team does not undertake speculative foreign exchange dealings for which there is no underlying exposure.
The Group’s principal financial instruments, other than a number of forward foreign currency and fixed interest
rate contracts, comprise cash and short-term deposits, trade and other receivables and trade and other payables,
borrowings and other liabilities. Trade and other receivables and trade and other payables arise directly from the
Group’s day-to-day operations.
The financial risks to which the Group is exposed are those of credit, liquidity, foreign currency, interest rate and
capital management. An explanation of each of these risks, how the Group manages these risks and an analysis
of sensitivities is set out below.
a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations; this arises principally from the Group’s trade and other receivables from customers and
from cash balances (including deposits) held with financial institutions.
The Group is exposed to customers ranging from government backed agencies and large public and private
wholesalers, to small privately owned businesses and the underlying local economic risks vary throughout the world.
Trade receivable exposures are managed locally in the operating units where they arise and credit limits are set as
deemed appropriate for each customer.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 157
The Group establishes a loss allowance that represents its estimate of potential losses in respect of specific trade
and other receivables where it is deemed that a receivable may not be recoverable (see below) and considers factors
which may impact risk of default. Where appropriate, we have grouped these receivables with the same overall risk
characteristics. When the receivable is deemed irrecoverable, the provision is written off against the underlying
receivable. During the year, the Group had no significant unrecoverable trade receivables.
Exposure to counterparty credit risk with financial institutions is controlled by the Group treasury team which
establishes and monitors counterparty limits. Centrally managed funds are invested entirely with counterparties
whose credit rating is ‘A’ or better. There are no significant concentrations of credit risk. There has been no historical
or expected credit loss on cash and cash equivalents.
The Group’s maximum exposure to credit risk was as follows:
Trade receivables
Other receivables
Cash and cash equivalents
At 30 September
Carrying amount
2023
£m
175.2
9.3
62.4
246.9
2022
£m
151.7
9.8
41.7
203.2
There is no material difference between the book value of the financial assets and their fair value at each reporting
date. An analysis of the ageing and currency of trade receivables and the associated loss allowance is set out in
note 16. An analysis of cash and cash equivalents is set out in note 18.
Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables and accrued income.
The expected loss rates are based on the payment profiles of revenues over a period of 48 months ended
30 September 2023 and the corresponding historical credit losses experienced within this period. The historical loss
rates are adjusted to reflect current and forward-looking information including macroeconomic factors by obtaining
and reviewing relevant market data affecting the ability of the customers to settle the receivables.
The Group has identified the current health of the economy (such as market interest rates and growth rates), of the
countries in which it sells its goods to be the most relevant factors and accordingly adjusts the historical loss rates
based on expected changes in these factors. An increase in credit risk is presumed if a debtor is more than 30 days
past due in making a contractual payment. Where objective evidence exists that a trade receivable balance may be
impaired, provision is made for the difference between its carrying amount and the present value of the estimated
cash that will be recovered.
Evidence of impairment may include factors such as a change in credit risk profile of the customer, the customer
being in default on a contract, or the customer entering insolvent administration proceedings. All significant balances
are reviewed individually on a monthly basis for evidence of impairment.
b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group
continually monitors net cash and forecasts cash flows to ensure that sufficient resources are available to meet the
Group’s requirements in the short, medium and long term.
On 17 July 2023, the Group entered into a new committed multi-currency revolving credit facility agreement ("RCF")
with an aggregate principal amount of £555.0m. The RCF is due to expire in July 2028 with an option to extend
for two further 12-month periods. The RCF replaced the Group’s previous debt facility agreement which as at
30 September 2022 comprised an RCF with an aggregate principal amount of £359.7m, an amortising term loan for
an aggregate principal amount of £114.2m ($127.5m), a bullet term loan for an aggregate principal amount of £59.1m
($66.0m) and a further bullet term loan for an aggregate principal amount of £45.3m.
Additionally, compliance with bank covenants is monitored regularly and during 2023 all bank covenant tests were
complied with. The applicable financial covenants are interest cover and leverage, whereby EBITDA must be at least
4x net finance charges (as defined by the SFA); and the ratio of net debt to EBITDA must not exceed 3.5x.
The Group’s debt facilities are subject to interest at variable rates. During FY22 and FY23, the Group entered into
interest rate swap contracts with the effect of fixing the interest rate on $200.0m (£163.9m) of debt. The effective
fixed rate debt was 52% of total debt.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information
158 − DIPLOMA PLC ANNUAL REPORT 2023
The undrawn committed facilities available at 30 September are as follows:
Expiring within one year
Expiring after one year
The Group’s financial liabilities at 30 September are as follows:
Trade payables
Other payables
Other liabilities
Borrowings
The maturities of the financial liabilities are as follows:
Less than one year
One to two years
Two to five years
2023
£m
–
234.1
2023
£m
94.4
31.8
22.6
317.1
465.9
139.1
6.6
320.2
465.9
2022
£m
–
204.0
2022
£m
96.4
25.8
35.0
370.6
527.8
171.7
48.7
307.4
527.8
There is no material difference between the book value of these financial liabilities and their undiscounted value
at each reporting date, nor are they relevant to the Group's reporting.
c) Currency risk
The Group’s principal currency risk comprises translational and transactional risk from its exposure to movements in
US dollars, Canadian dollars and Euros. The transactional exposure arises on trade receivables, trade payables and
cash and cash equivalents and these balances are analysed by currency in notes 16, 17 and 18, respectively.
The Group holds forward foreign exchange contracts in certain of the Group’s businesses to hedge forecast
transactional exposure to movements in the US dollar, Euro, UK Sterling and Swedish Krona. These forward foreign
exchange contracts are classified as cash flow hedges and are stated at fair value. The notional value of forward
contracts as at 30 September 2023 was £68.6m (2022: £35.0m). The net fair value of forward foreign exchange
contracts used as hedges at 30 September 2023 was £0.1m asset (2022: £1.3m asset).
For hedges of foreign currency transactions, the Group enters into hedge relationships where the critical terms of the
hedging instrument match with the terms of the hedged item, ineffectiveness may arise if the timing of the forecast
transaction changes from what was originally estimated, or if there are changes in the credit risk of the derivative
counterparty. The amount removed from Other Comprehensive Income as a result of the maturing of the hedged
instrument and taken to the Consolidated Income Statement in cost of sales during the year was £1.3m debit (2022:
£0.4m debit). The change in the fair value of cash flow hedges taken to Other Comprehensive Income during the year
was £0.1m credit (2022: £1.4m credit).
Management considers that the most significant foreign exchange risk relates to the US dollar, Canadian dollar and
Euro. The Group’s sensitivity to a 10% strengthening in UK sterling against each of these currencies (with all other
variables held constant) is as follows:
Decrease in adjusted operating profit (at average rates)
US dollar: UK sterling
Canadian dollar: UK sterling
Euro: UK sterling
Decrease in total equity (at spot rates)
US dollar: UK sterling
Canadian dollar: UK sterling
Euro: UK sterling
2023
£m
13.1
2.8
2.5
11.3
14.2
7.0
2022
£m
10.3
2.6
1.7
12.6
12.9
5.4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 159
d) Interest rate risk
Interest rate risk is the risk that changes in interest rates will affect the Group’s results. The Group’s interest rate risk
arises primarily from its cash funds and borrowings. The Group uses interest rate swaps to hedge a proportion of
the external borrowings. These interest rate swaps are classified as cash flow hedges and are stated at fair value.
The notional value of interest rate swap contracts as at 30 September 2023 was £163.9m (2022: £89.6m). The net fair
value of interest rate swap contracts used as hedges at 30 September 2023 was £2.3m asset (2022: £3.1m asset) and
is included within Trade and other receivables on the balance sheet. The amount removed from Other Comprehensive
Income as a result of the settlement of interest rate swaps, and taken to the Consolidated Income Statement in
finance costs during the year was a debit of £2.5m (2022: £nil). The change in the fair value of cash flow hedges
taken to Other Comprehensive Income during the year was £1.7m credit (2022: £3.1m credit).
All cash deposits, held in the UK and overseas, are held on a short-term basis at floating rates or overnight rates,
based on the relevant UK base rate, or equivalent rate. Surplus funds are pooled and deposited with commercial
banks that meet the credit criteria approved by the Board, for periods of between one and six months at rates
that are generally fixed by reference to the relevant UK base rate, or equivalent rate.
An increase of 1% in interest rates would have a ca. £2.4m (2022: £1.4m) impact on adjusted profit before tax.
e) Fair values
There are no material differences between the book value of financial assets and liabilities and their fair value.
The basis for determining fair values are as follows:
Derivatives
Forward exchange contracts are designated as level 2 assets (in the ‘fair value hierarchy’) and valued at year end
forward rates, adjusted for the forward points to the contract’s value date with gains and losses taken to equity.
No contract’s maturity date is greater than 24 months from the year end.
For hedges of foreign currency transactions, the Group enters into hedge relationships where the critical terms of
the hedging instrument match with the terms of the hedged item, ineffectiveness may arise if the timing of the
forecast transaction changes from what was originally estimated, or if there are changes in the credit risk of the
derivative counterparty.
Interest rate swap contracts are designated as level 2 assets (in the ‘fair value hierarchy’) and valued at year
end as the net present value of the cash flows using current forward market interest rates, with gains and losses
taken to equity.
The Group enters into interest rate swaps that have similar critical terms as the hedged item, such as reference
rate, payment dates, maturities and notional amount. The Group has established a hedge ratio of 1:1 for the
hedging relationships as the underlying risk of the interest rate swap is identical to the hedged risk component.
The hedge ineffectiveness can arise from differences in timing or cash flows of the hedged item and hedging
instrument, or the counterparties’ credit risk differently impacting the fair value movements of the hedging
instrument and hedged item.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 160 − DIPLOMA PLC ANNUAL REPORT 2023
Trade and other receivables/payables
As the receivables/payables have a remaining life of less than one year, the book value is deemed to reflect
the fair value.
Borrowings
The fair value of the borrowings equate to the book value.
Other liabilities
The carrying amount of the items included within note 20 represents a discounted value of the expected liability
which is deemed to reflect the fair value and are designated as level 3 assets (in the ‘fair value hierarchy’).
f) Capital management risk
The Group’s capital structure comprises the retained earnings reserve (£424.4m), cash funds (£62.4m) and medium-
term bank borrowing facilities (£316.8m). The Group’s objective when managing capital is to safeguard its ability
to continue as a going concern and to maintain robust capital ratios to support the development of the business
including executing acquisitions and providing strong returns to shareholders.
In order to maintain or adjust the capital structure, the Group may change the amount of dividends paid
to shareholders, return capital to shareholders, issue new shares or increase bank borrowings.
20. OTHER LIABILITIES
Future purchases of minority interests
Deferred consideration
At 30 September
Analysed as:
Due within one year
Due after one year
The movement in the liability for future purchases of minority interests is as follows:
At 1 October
Minority interest put options arising on acquisition
Minority interest put options removed on disposal
Exchange movements
Fair value remeasurements
At 30 September
2023
£m
9.2
13.4
22.6
12.7
9.9
2023
£m
7.4
-
-
-
1.8
9.2
2022
£m
7.4
24.0
31.4
19.0
12.4
2022
£m
5.2
1.9
(1.2)
0.1
1.4
7.4
At 30 September 2023, the Group’s minority interests retained put options to sell their minority interests of 10%
in M Seals, 5% in Techsil, 2% in R&G Fluid Power Group and 5% in Pennine Pneumatic Services.
At 30 September 2023, the estimate of the financial liability to acquire these outstanding minority shareholdings was
reassessed by the Directors, based on their current estimate of the future performance of these businesses and to
reflect foreign exchange rates at 30 September 2023. This led to a remeasurement of the options and the liability
increased by £1.8m (2022: £1.4m increase) reflecting a revised estimate of the future performance of these
businesses and in aggregate, £1.8m (2022: £1.4m) has been debited to the Consolidated Income Statement
in respect of this remeasurement of the liability.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 161
Deferred consideration comprises the following:
Biospecifix
Kungshusen
Techsil
AHW
R&G
AMG Sealing
Hydraproducts
ACT
Silicone Solutions
Eurobond
ITG
Fluid Power Services
Hedley
Valves Online
GP&S
GM Medical
Hex
Lantech
1 Oct 2022
£m
Additions
£m
Discount
unwind
£m
Payments
£m
Revaluation
£m
Foreign
Exchange
£m
30 Sep
2023
£m
0.3
5.4
1.2
4.9
8.6
0.5
0.5
2.3
0.3
-
-
-
-
-
-
-
-
-
24.0
–
-
-
-
-
-
-
-
-
0.2
0.2
0.7
2.0
0.6
1.4
0.4
1.6
0.3
7.4
–
0.2
0.1
0.3
-
0.1
-
-
-
-
-
0.1
0.1
-
-
-
0.1
-
1.0
(0.3)
(1.7)
(1.3)
-
(6.3)
(0.2)
(0.2)
(2.0)
(0.3)
-
-
-
-
-
-
-
-
-
–
(3.8)
-
0.2
(1.5)
-
-
-
-
-
-
-
(0.8)
-
-
-
-
-
(12.3)
(5.9)
-
(0.1)
-
(0.5)
-
-
-
(0.3)
-
-
-
-
-
-
-
-
0.1
-
(0.8)
-
-
-
4.9
0.8
0.4
0.3
-
-
0.2
0.2
0.8
1.3
0.6
1.4
0.4
1.8
0.3
13.4
At 30 September 2023, the estimate of the financial liability in relation to outstanding deferred consideration was
reassessed by the Directors, based on their current estimate of the most likely outcome in respect of performance-
based conditions, foreign exchange rates and the latest relevant discount rates as at 30 September 2023.
21. MINORITY INTERESTS
At 1 October 2022
Acquisition of business
Minority interest acquired
Disposal of business
Share of profit
Dividends paid
Exchange adjustments
At 30 September 2022
Share of profit
Dividends paid
Exchange adjustments
At 30 September 2023
£m
4.7
2.5
(0.3)
(1.3)
0.7
(0.2)
0.1
6.2
0.6
(0.3)
(0.1)
6.4
External shareholders, represented by management in each business, hold a 10% minority interest in M Seals, a 5%
minority interest in Techsil, a 2% minority interest in R&G Fluid Power Group, and a 5% minority interest in Pennine
Pneumatic Services.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 162 − DIPLOMA PLC ANNUAL REPORT 2023
22. ACQUISITIONS AND DISPOSALS OF BUSINESSES
Acquisition of Tennessee Industrial Electronics, LLC
On 6 March 2023, the Group acquired 100% of the share capital of Tennessee Industrial Electronics, LLC (“T.I.E.”),
a distributor of aftermarket parts and repair services into the US industrial automation end market. The total
investment, net of cash acquired was £75.1m ($90.3m).
The provisional fair value of T.I.E.’s net assets acquired excluding acquisition intangibles, related deferred tax and
cash is £10.8m following fair value adjustments of £1.0m. The principal fair value adjustments relate to a net increase
in inventory (£0.2m) and provisions held against trade receivables (£0.4m), recognition of previously unrecognised
liabilities (£0.3m) and write down of property plant and equipment (£0.5m).
Acquisition expenses of £1.5m have been recognised in respect of this transaction in the financial year.
From the date of acquisition to 30 September 2023, T.I.E. contributed £16.6m to revenue and £4.0m to adjusted
operating profit. If it had been acquired at the beginning of the financial year, it would have contributed on a pro
forma basis £28.3m to revenue and £6.9m to adjusted operating profit. However, these amounts should not be
viewed as indicative of the results that would have occurred if T.I.E. had been completed at the beginning of the year.
Acquisition of Distribuidora Internacional Carmen, S.A.U.
On 12 July 2023, the Group acquired 100% of the share capital of Distribuidora Internacional Carmen, S.A.U.
(“DICSA”). DICSA, based in Spain, is engaged in the manufacture and commercialisation of stainless steel fittings
and in the distribution of hydraulic and pneumatic conductions and components. The total investment, net of cash
acquired is £159.7m (€186.6m).
The provisional fair value of DICSA’s net assets acquired excluding acquisition intangibles, related deferred tax and
cash is £45.4m following fair value adjustments of £1.4m. The principal fair value adjustments relate to a net increase
in provisions held against inventory (£0.2m) and trade receivables (£0.1m), recognition of previously unrecognised
liabilities (£1.0m) and write down of property plant and equipment (£0.1m).
Acquisition expenses of £2.7m have been recognised in respect of this transaction in the financial year.
From the date of acquisition to 30 September 2023, DICSA contributed £16.5m to revenue and £4.0m to adjusted
operating profit. If it had been acquired at the beginning of the financial year, it would have contributed on a pro
forma basis £79.5m to revenue and £19.2m to adjusted operating profit. However, these amounts should not be
viewed as indicative of the results that would have occurred if DICSA had been completed at the beginning of
the year.
Other acquisitions
The Group completed a further ten acquisitions in the year. This comprised the trade and assets of Shrinktek
Polymers International Limited (“Shrinktek”) (11 January 2023), Eurobond Adhesives Limited (“Eurobond”) (23 March
2023) and International Technologies Group, LLC (“ITG”) (30 March 2023); 100% of the share capital of Fluid Power
Services Limited (“FPS”) (3 October 2022), Hedley DMB Limited (“Hedley”) (4 October 2022), Valves Online Limited
(“Valves Online”) (14 March 2023), Gaskets, Packings & Seals Enterprises, LLC (“GP&S”) (14 April 2023), GM Medical
Group A/S (“GM Medical”) (11 July 2023), Hex Technology, LLC (“Hex”) (17 July 2023) and Lantech Solutions Limited
("Lantech") (18 September 2023).
The combined initial consideration for these acquisitions was £23.6m, net of cash acquired of £2.4m. Deferred
consideration with a fair value of £7.4m is payable based largely on the performance of the businesses in the
period subsequent to their acquisitions.
Acquisition expenses of £0.9m have been recognised in respect of these transactions in the financial year.
The provisional fair value of the total net assets acquired excluding intangibles, related deferred tax and
cash is £5.4m.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 163
The following table summarises the consideration paid for the acquisitions completed in the year and fair value
of assets acquired and liabilities assumed, with fair values being provisional pending completion of a final valuation
of T.I.E. and DICSA.
Acquisition intangible assets1
Deferred tax
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Net assets acquired
Goodwill
Minority interests
Cash paid
Cash acquired
Deferred consideration
Total investment
T.I.E.
DICSA
Others
Total
Book value
£m
Fair value
£m
Book value
£m
Fair value
£m
Book value
£m
Fair value
£m
Book value
£m
Fair value
£m
–
–
1.3
11.2
4.3
(5.0)
11.8
–
–
25.9
–
0.8
11.4
3.9
(5.3)
36.7
38.4
–
79.6
(4.5)
–
75.12
–
–
4.7
35.4
18.8
(12.1)
46.8
–
–
99.7
(24.9)
4.6
35.2
18.7
(13.1)
120.2
39.5
–
174.3
(14.6)
–
159.7
–
–
0.8
3.3
4.9
(3.4)
5.6
–
–
18.2
(2.0)
0.8
3.4
4.8
(3.6)
21.6
9.4
–
26.0
(2.4)
7.4
31.0
–
–
6.8
49.9
28.0
(20.5)
64.2
–
–
143.8
(26.9)
6.2
50.0
27.4
(22.0)
178.5
87.3
–
279.9
(21.5)
258.4
7.4
265.8
1 On the acquisitions completed in the current year, acquired intangibles relate to customer relationships (£136.8m), brand (£6.2m) and technology (£0.8m).
2 Diploma acquired T.I.E. on a cash free/debt free basis. The total investment amounts to £75.1m being cash paid net of cash acquired. Of the initial cash paid,
the vendor directed the funds in escrow to settle outstanding debt of £11.7m, which is excluded from the purchase consideration in accordance with IFRS 3.
Acquisitions revenue and adjusted operating profit
From the date of acquisition to 30 September 2023, each acquired business contributed the following to Group
revenue and adjusted operating profit:
FPS
Hedley
Shrinktek
T.I.E.
Valves Online
Eurobond
ITG
GP&S
GM Medical
DICSA
Hex
Lantech
Acquisition date
03 Oct 2022
04 Oct 2022
11 Jan 2023
06 Mar 2023
14 Mar 2023
23 Mar 2023
30 Mar 2023
14 Apr 2023
11 Jul 2023
12 Jul 2023
17 Jul 2023
18 Sep 2023
Revenue
£m
3.0
3.7
1.0
16.6
1.9
0.6
0.4
5.6
0.9
16.5
0.1
0.1
50.4
Adjustments2
£m
-
-
0.4
11.7
1.6
0.5
0.4
6.6
3.4
63.0
0.4
2.7
90.7
Pro forma
revenue
£m
Operating
profit1
£m
3.0
3.7
1.4
28.3
3.5
1.1
0.8
12.2
4.3
79.5
0.5
2.8
141.1
0.7
0.5
0.3
4.0
0.4
0.4
0.1
1.1
0.1
4.0
-
-
11.6
Adjustments2
£m
-
-
0.1
2.9
0.3
0.3
-
1.3
0.4
15.2
-
0.8
21.3
Pro forma
operating
profit1
£m
0.7
0.5
0.4
6.9
0.7
0.7
0.1
2.4
0.5
19.2
-
0.8
32.9
1 Adjusted operating profit.
2 Pro forma revenue and adjusted operating profit has been extrapolated (as prescribed under IFRS) from the actual results reported since acquisition to
indicate what these businesses would have contributed if they had been acquired at the beginning of the financial year on 1 October 2022. These amounts
should not be viewed as confirmation of the results of these businesses that would have occurred if these acquisitions had been completed at the
beginning of the year.
Disposals
On 31 March 2023, the Group disposed of its interest in Hawco Limited (“Hawco”) for total proceeds of £24.5m.
Cash of £21.5m was received, net of cash disposed of £2.0m and with a further £1.0m deferred for 12 months.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 164 − DIPLOMA PLC ANNUAL REPORT 2023
23. RECONCILIATION OF OPERATING PROFIT TO CASH FLOW FROM OPERATING ACTIVITIES
Operating profit
Acquisition related and other charges (note 2)
Adjusted operating profit
Depreciation or amortisation of tangible, other intangible assets and leases – right-of-use assets
Share-based payments expense (note 5)
Defined benefit pension scheme payment in excess of interest
Profit on disposal of assets
Acquisition and disposal expenses paid
Other non-cash movements
Non-cash items and other
Operating cash flow before changes in working capital
Decrease/(increase) in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Increase in working capital
Cash flow from operating activities
24. NET DEBT
The movement in net debt during the year is as follows:
Net increase in cash and cash equivalents
Decrease/(increase) in bank borrowings
Effect of exchange rates and other non-cash movements
Decrease/(increase) in net debt
Net debt at beginning of year
Net debt at end of year
Comprising:
Cash and cash equivalents
Bank borrowings:
- Revolving credit facility, including accrued interest
- Overdraft facilities
- Term loan, including accrued interest
- Capitalised debt fees
Net debt at end of year
Analysed as:
Repayable within one year
Repayable after one year
2023
£m
183.3
53.7
237.0
28.6
4.1
(0.6)
(1.1)
(6.0)
(0.5)
24.5
261.5
10.8
(8.8)
(6.2)
(4.2)
257.3
2023
£m
25.8
43.8
69.6
4.6
74.2
(328.9)
(254.7)
2022
£m
144.3
46.9
191.2
23.9
2.8
(0.6)
(1.6)
(6.5)
0.1
18.1
209.3
(35.6)
(10.6)
17.5
(28.7)
180.6
2022
£m
17.5
(131.3)
(113.8)
(33.7)
(147.5)
(181.4)
(328.9)
62.4
41.7
(321.1)
(0.3)
–
4.3
(317.1)
(254.7)
(0.3)
(316.8)
(201.0)
–
(174.3)
4.7
(370.6)
(328.9)
(30.5)
(340.1)
On 17 July 2023, the Group entered into a new committed multi-currency revolving credit facility agreement ("RCF")
with an aggregate principal amount of £555.0m. The RCF is due to expire in July 2028 with an option to extend
for two further 12-month periods. The RCF replaced the Group’s previous debt facility agreement which as at
30 September 2022 comprised an RCF with an aggregate principal amount of £359.7m, an amortising term loan
for an aggregate principal amount of £114.2m ($127.5m), a bullet term loan for an aggregate principal amount
of £59.1m ($66.0m) and a further bullet term loan for an aggregate principal amount of £45.3m.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED
DIPLOMA PLC ANNUAL REPORT 2023 − 165
The Group’s debt facilities are subject to interest at variable rates. During FY22 and FY23, the Group entered into
interest rate swap contracts with the effect of fixing the interest rate on $200.0m (£163.9m) of debt. The effective
fixed rate debt was 52% of total debt.
At 30 September 2023, the Group’s Net Debt/EBITDA ratio is 0.9x, as illustrated in note 28.
As at 30 September 2023, the Group has utilised £320.9m of the revolving facility. There remains £234.1m undrawn
on the revolving facility. Borrowings include £0.2m (2022: £1.0m) of accrued interest and the carrying amount of
capitalised debt fees is £4.3m (2022: £4.7m).
As at 30 September 2023 the Group's net debt is £254.7m (2022: £328.9m) and excludes lease liabilities of £80.2m
(2022: £69.1m).
25. RETIREMENT BENEFIT ASSET AND OBLIGATIONS
The Group maintains two pension arrangements which are accounted for under IAS 19 (Revised) (Employee Benefits).
The principal arrangement is the defined benefit pension scheme in the UK, maintained by Diploma Holdings PLC and
called the Diploma Holdings PLC UK Pension Scheme (the Scheme). This Scheme provides benefits based on final
salary and length of service on retirement, leaving service or death and has been closed to further accrual since
5 April 2000.
The second and smaller pension arrangement is operated by Kubo, a business based in Switzerland and provides
benefits on retirement, leaving service or death for the employees of Kubo in accordance with Swiss law. The Kubo
pension scheme is a defined contribution based scheme, which for technical reasons, is required under IFRS to be
accounted for in accordance with IAS 19 (Revised).
The amount of pension asset/(deficit) included in the Consolidated Statement of Financial Position in respect
of these two pension arrangements is:
Diploma Holdings PLC UK Pension Scheme
Kubo Pension Scheme
Pension scheme net asset
2023
£m
6.8
(0.3)
6.5
The amounts included in the Consolidated Income Statement in respect of these two pension arrangements are:
Diploma Holdings PLC UK Pension Scheme
Kubo Pension Scheme
Amounts credited to the Consolidated Income Statement
2023
£m
0.4
0.5
0.9
2022
£m
6.4
–
6.4
2022
£m
–
0.5
0.5
Defined contribution schemes operated by the Group’s businesses are not included in these disclosures.
Diploma Holdings PLC UK Pension Scheme
The Scheme is subject to the Statutory Funding Objective under the Pensions Act 2004. A valuation of the Scheme
is carried out at least once every three years to determine whether the Statutory Funding Objective is met. As part
of the process the Company must agree with the Trustees of the Scheme the contributions to be paid to meet the
Statutory Funding Objective. The most recent triennial actuarial valuation carried out as at 30 September 2022
reported that the Scheme had a funding surplus of £2.2m and held assets which covered 107% of its liabilities at that
date. The next triennial actuarial valuation of the Scheme will be carried out as at 30 September 2025 and the results
of the valuation will be reported in the 2026 Annual Report & Accounts. There were no Scheme amendments,
curtailments or settlements during the year.
On 28 September 2018, the Trustees completed a Buy-In of the pensioner liabilities in the Scheme with Just
Retirement Limited. The Scheme paid £12.3m to Just Retirement Limited on 28 September 2018 to fund 95%
of the Buy-In premium and £0.7m was paid on 22 October 2018 to fund the remaining 5% of the premium.
The impact of this transaction has been reflected in the pension disclosures set out below.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 166 − DIPLOMA PLC ANNUAL REPORT 2023
The Scheme is managed by a set of Trustees appointed in part by the Company and in part from elections by
members of the Scheme. The Trustees have responsibility for obtaining valuations of the fund, administering benefit
payments and investing the Scheme’s assets. The Trustees delegate some of these functions to their professional
advisors where appropriate.
The Scheme exposes the Company, and therefore the Group, to a number of risks:
• Investment risk: The Scheme holds investments in asset classes that have volatile market values and while these
assets are expected to provide broadly matching real returns over the long term, the short-term volatility can
cause additional funding to be required if deficits emerge.
• Interest rate risk: The Scheme’s liabilities are assessed using market yields on high-quality corporate bonds to
discount the liabilities. As the Scheme is predominantly invested in government bonds, the value of the assets
is expected to move broadly in the same way as the liabilities.
• Inflation risk: A significant proportion of the benefits under the Scheme are linked to inflation. Although the
Scheme’s assets are expected to provide a good hedge against inflation over the long term, movements over
the short term could lead to funding deficits emerging.
• Mortality risk: In the event that members live longer than assumed, deficits may emerge in the Scheme.
a) Pension asset / (deficit) included in the Consolidated Statement of Financial Position
Market value of Scheme assets:
Equities1
Gilts
Buy-In policy2
Cash
Present value of Scheme liabilities
Pension scheme net asset
2023
£m
–
24.5
7.0
0.1
31.6
(24.8)
6.8
2022
£m
20.7
3.9
7.3
–
31.9
(25.5)
6.4
1 Quoted market price in an active market.
2 The Buy-In policy was valued on the same basis as the underlying pensioner liabilities.
In addition to the Buy-in policy, the pension scheme holds £1.8m of historic annuity policies. Their inclusion would
have no impact on the net IAS 19 financial position, as the insurance policy exactly matches the related obligation, and
members are paid directly by insurers.
b) Amounts charged to the Consolidated Income Statement
Charged to operating profit
Interest cost on liabilities
Interest on assets
Credited to financial expense, net (note 6)
Amounts credited to the Consolidated Income Statement
c) Amounts recognised in the Consolidated Statement of Comprehensive Income
Investment loss on Scheme assets in excess of interest
Effect of changes in financial assumptions on Scheme liabilities
Effect of changes in demographic assumptions on Scheme liabilities
Experience adjustments on Scheme liabilities
Actuarial (loss)/gain charged in the Consolidated Statement of Comprehensive Income
2023
£m
–
(1.3)
1.7
0.4
0.4
2023
£m
(1.1)
1.2
–
(0.7)
(0.6)
2022
£m
–
(0.8)
0.8
–
–
2022
£m
(6.5)
15.4
0.3
(0.7)
8.5
The cumulative amount of actuarial losses recognised in the Consolidated Statement of Comprehensive Income,
since the transition to IFRS, is £1.8m (2022: £1.2m).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED d) Analysis of movement in the pension asset/(deficit)
Asset/(deficit) as at 1 October
Amounts credited to the Consolidated Income Statement
Contributions paid by employer
Net effect of remeasurements of Scheme assets and liabilities
Asset as at 30 September
e) Analysis of movements in the present value of the Scheme liabilities
At 1 October
Experience adjustments on Scheme liabilities
Interest cost on liabilities
Impact from changes in actuarial assumptions
Benefits paid
At 30 September
f) Analysis of movements in the present value of the Scheme assets
At 1 October
Interest on assets
Return on Scheme assets
Contributions paid by employer
Benefits paid
At 30 September
DIPLOMA PLC ANNUAL REPORT 2023 − 167
2023
£m
6.4
0.4
0.6
(0.6)
6.8
2023
£m
25.5
0.7
1.3
(1.2)
(1.5)
24.8
2023
£m
31.9
1.7
(1.1)
0.6
(1.5)
31.6
2022
£m
(2.7)
–
0.6
8.5
6.4
2022
£m
41.0
0.7
0.8
(15.7)
(1.3)
25.5
2022
£m
38.3
0.8
(6.5)
0.6
(1.3)
31.9
The actual return on the Scheme assets (including interest on assets) during the year was a gain of £0.6m (2022:
£5.7m loss).
Assets
The Scheme’s assets are held in passive unit funds managed by Legal & General Investment Management and at 30
September 2023, the major categories of assets were as follows:
North America equities
UK equities
European equities (non-UK)
Asia-Pacific and Emerging Markets equities
Gilts
Buy-In policy
Principal actuarial assumptions for the Scheme at balance sheet dates
Inflation rate
Expected rate of pension increases
Discount rate
– RPI
– CPI
– CPI
2023
%
3.4
3.0
3.0
5.6
2022
%
3.6
3.2
3.2
5.3
2023
%
2022
%
–
–
–
–
78
22
2021
%
3.4
3.0
3.0
2.0
28
12
11
12
14
23
2020
%
2.9
1.9
1.9
1.5
The increase in the Scheme surplus was due to a combination of a slight rise in corporate bond yields, which has led
to a higher discount rate and therefore a lower value being placed on the liabilities, and a slight fall in the market’s
expectation of future inflation, which has also reduced the value placed on the liabilities. The Scheme had 78%
of its assets in bonds as at 30 September 2023, with no exposure to LDI.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 168 − DIPLOMA PLC ANNUAL REPORT 2023
Demographic assumptions
Mortality table used:
Year the mortality table was published:
Allowance for future improvements in longevity:
S3PA
CMI 2021
Year of birth projections, with a long-term improvement
rate of 1.0%
Allowance made for members to take a cash lump sum
on retirement:
Members are assumed to take 100% of their maximum cash
sum (based on current commutation factors)
The weighted average duration of the defined benefit obligation
is around 13 years
Sensitivities
The sensitivities of the 2023 pension liabilities to changes in assumptions are as follows:
Factor
Discount rate
Inflation
Life expectancy
Assumption
Decrease by 0.5%
Increase by 0.5%
Increase by one year
Impact on pension liabilities
Estimated
increase
%
Estimated
increase
£m
6.0
2.8
2.4
1.5
0.7
0.6
Risk mitigation strategies
When setting the investment strategy for the Scheme, the Trustees, in conjunction with the employer, take into
account the liability profile of the Scheme. Annuity policies have been taken out in respect of some historic
pensioners, but the Scheme has not purchased annuities for retirements since 2005. In addition to these individual
annuity policies, the Trustees have purchased a Buy-In policy for all existing pensioners as at 1 September 2018. The
Buy-In policy secures the Scheme against both market and mortality risk relating to these pensioners. The Scheme
however remains liable ultimately for the liabilities, should the insurance company which sold the liabilities go into
insolvent liquidation.
In FY23, the Trustees have considered all asset classes and have gained exposure to fixed interest index-linked
Gilts and bulk annuity. The Trustees consider these assets to reduce the risk of the assets failing to meet the liabilities
over the long term.
Effect of the Scheme on the Group’s future cash flows
The Company is required to agree a schedule of contributions with the Trustees of the Scheme following each
triennial actuarial valuation. Following the triennial actuarial valuation carried out as at 30 September 2022, the
Company agreed to contribute £0.6m in cash to the Scheme annually increasing at 2% per year. The current year
contribution was £0.6m. No one-off contributions were made in the year (2022: none).
The Kubo Pension Scheme (the Kubo Scheme)
In accordance with Swiss law, Kubo’s pension benefits are contribution based with the level of benefits varying
according to category of employment. Swiss law requires certain guarantees to be provided on such pension
benefits. Kubo finances its Swiss pension benefits through the ASGA Pensionskasse, a multi-employer plan of non-
associated companies which pools risks between participating companies. Set out below is a summary of the key
features of the Kubo Scheme.
a) Pension deficit included in the Consolidated Statement of Financial Position
Assets of the Kubo Scheme1
Actuarial liabilities of the Kubo Scheme
Pension scheme net deficit
1 The assets of the Kubo Scheme are held as part of the employee funds managed by ASGA Pensionskasse.
2023
£m
14.3
(14.6)
(0.3)
2022
£m
13.5
(13.5)
–
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED
b) Amounts charged to the Consolidated Income Statement
Service cost
Amount charged to operating profit in the Consolidated Income Statement
c) Analysis of movement in the pension deficit
At 1 October
Amounts charged to the Consolidated Income Statement
Contributions paid by employer
Net effect of remeasurements of Kubo Scheme assets and liabilities
Exchange adjustments
At 30 September
DIPLOMA PLC ANNUAL REPORT 2023 − 169
2023
£m
(0.5)
(0.5)
2023
£m
–
(0.5)
0.5
(0.3)
-
(0.3)
2022
£m
(0.5)
(0.5)
2022
£m
(2.2)
(0.5)
0.5
2.1
0.1
–
d) Amounts recognised in the Consolidated Statement of Comprehensive Income
The actuarial loss charged to the Consolidated Statement of Comprehensive Income is £0.3m (2022: £2.1m gain).
Investment gain/(loss) on Scheme assets in excess of interest
Effect of changes in financial assumptions on Scheme liabilities
Effect of changes in demographic assumptions on Scheme liabilities
Experience adjustments on Scheme liabilities
Adjustment in respect of IFRIC 14
Actuarial (loss)/gain charged in the Consolidated Statement of Comprehensive Income
Principal actuarial assumptions for the Kubo Scheme at balance sheet dates
Expected rate of pension increase
Expected rate of salary increase
Discount rate
Interest credit rate
Mortality
Sensitivities
The sensitivities of the 2023 pension liabilities to changes in assumptions are as follows:
Factor
Discount rate
Life expectancy
Assumption
Decrease by 0.25%
Increase by one year
Effect of the Kubo Scheme on the Group’s future cash flows
Best estimate of employer’s contribution in 2024
Best estimate of employees’ contribution in 2024
2023
£m
0.3
(0.9)
-
(0.1)
0.4
(0.3)
2023
0%
1.3%
2.0%
1.5%
2022
£m
(1.3)
4.2
–
(0.4)
(0.4)
2.1
2022
0%
1.0%
2.3%
1.0%
BVG2020
BVG2020
Impact on pension liabilities
Estimated
increase
%
Estimated
increase
£m
3.8
1.8
0.5
0.3
£m
0.5
0.4
The weighted average duration of the defined benefit obligation is approximately 15 years (2022: 15 years).
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 170 − DIPLOMA PLC ANNUAL REPORT 2023
26. AUDITORS’ REMUNERATION
During the year the Group paid fees for the following services from the auditors:
Fees payable to the auditors for the audit of:
– the Company’s Annual Report & Accounts
– the Company’s subsidiaries
Audit fees
2023
£m
1.3
0.3
1.6
Non-audit fees of £75,700 (2022: £29,200) were paid to the Group’s auditor for carrying out an interim review
(2022: 'agreed upon procedures') on the Half Year Announcement (which is unaudited), and subscription costs
for access to a market-wide technical accounting database.
27. EXCHANGE RATES
The exchange rates used to translate the results of the overseas businesses are as follows:
US dollar (US$)
Canadian dollar (C$)
Euro (€)
Swiss franc (CHF)
Australian dollar (AUD)
Average
Closing
2023
1.23
1.66
1.15
1.13
1.85
2022
1.27
1.63
1.18
1.20
1.79
2023
1.22
1.65
1.15
1.12
1.89
2022
£m
1.1
0.4
1.5
2022
1.12
1.53
1.14
1.10
1.74
28. ALTERNATIVE PERFORMANCE MEASURES
The Group reports under International Financial Reporting Standards (IFRS) and references alternative performance
measures where the Board believes that they help to effectively monitor the performance of the Group and support
readers of the Financial Statements in drawing comparisons with past performance. Certain alternative performance
measures are also relevant in calculating a meaningful element of Executive Directors’ variable remuneration and our
debt covenants. Alternative performance measures are not considered to be a substitute for, or superior to, IFRS
measures. The definitions of the alternative performance measures and the comparisons to their closest IFRS
measures can be found on pages 188-189.
28.1 Revenue Growth
As a multi-national Group of companies who trade in a large number of currencies and also acquire and sometimes
dispose of companies, organic performance is also referred to throughout the Annual Report. These strip out the
effects of the movement in exchange rates and of acquisitions and disposals. The Board believe that this allows
users of the financial statements to gain a better understanding of how the Group has performed.
A reconciliation of the movement in revenue compared to the prior year is given below.
September 2022 Reported revenue
Organic
Acquisitions and Disposals
Exchange
September 2023 Reported revenue
£m
1,012.8
87.8
82.1
17.6
1,200.3
%
8
8
3
19
The Organic revenue growth percentage is the incremental revenue generated under Diploma’s ownership compared
to the revenue in the same period prior to acquisition, at prior period exchange rates.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED
DIPLOMA PLC ANNUAL REPORT 2023 − 171
The impact of acquisitions on growth is the revenue of the acquiree prior to the acquisition by Diploma for the
comparable period at prior year exchange rates. The impact of disposals on growth is the removal of the revenue
of the disposed entity in the comparable post disposal period at prior year exchange rates. The Acquisitions and
Disposals growth percentage is calculated as the impact of acquisition and disposals divided by the reported
revenue in the prior period.
Exchange translation movements are assessed by re-translating current year reported values to prior year
exchange rates.
28.2 Adjusted operating profit and adjusted operating margin
Adjusted operating profit is the operating profit before adjusting items that would otherwise distort operating profit,
currently and more recently being amortisation of acquisition intangible assets or goodwill, acquisition expenses,
post-acquisition related remuneration costs and adjustments to deferred consideration, the costs of a significant
restructuring or rationalisation and the profit or loss relating to the sale of businesses. These are treated as adjusting
items (referred to as acquisition related and other charges) as they are considered to be significant in nature and/or
quantum and where treatment as an adjusting item provides all our stakeholders with additional useful information
to assess the year-on-year trading performance of the Group on a like-for-like basis. Adjusted operating margin
is the Group’s adjusted operating profit divided by the Group’s reported revenue.
A reconciliation between operating profit as reported under IFRS and adjusted operating profit is given below:
Revenue
Operating profit as reported under IFRS
Add: Acquisition related and other charges
Adjusted operating profit
Adjusted operating margin
Note
2,3
2023
£m
1,200.3
183.3
53.7
237.0
19.7%
2022
£m
1,012.8
144.3
46.9
191.2
18.9%
28.3 Adjusted earnings per share
Adjusted earnings per share (“adjusted EPS”) is calculated as the total of adjusted profit before tax, less income
tax costs, but including the tax impact on the items included in the calculation of adjusted profit, less profit/(loss)
attributable to minority interests, divided by the weighted average number of ordinary shares in issue during the year
of 129,675,581 (2022: 124,533,060), as set out in note 9. The Directors believe that adjusted EPS provides an important
measure of the earnings capacity of the Group.
28.4 Free cash flow and free cash flow conversion
Free cash flow is defined as net cash flow from operating activities, less net capital expenditure on tangible and
intangible assets, and including proceeds received from property disposals, but before expenditure on business
combinations/investments (including any pre-acquisition debt like items such as pensions or tax settled post-
acquisition) and proceeds from business disposals, borrowings received to fund acquisitions, net proceeds from
issues of share capital and dividends paid to both minority shareholders and the Company’s shareholders. “Free cash
flow conversion” reflects free cash flow as a percentage of adjusted earnings. The Directors believe that free cash
flow gives an important measure of the cash flow of the Group, available for future investment or distribution to
shareholders.
Net increase in cash and cash equivalents
Add: Dividends paid to shareholders and minority interests
Acquisition of minority interests
Acquisition/disposal of businesses (including net expenses)
Deferred consideration paid
Proceeds from issue of share capital (net of fees)
Net repayment of/(proceeds from) borrowings (including borrowing fees)
Free cash flow
Adjusted earnings1
Free cash flow conversion
Note
9
2023
£m
25.8
70.8
-
243.0
12.3
(231.9)
43.8
163.8
164.0
100%
2022
£m
17.5
56.4
0.3
170.4
7.1
-
(131.3)
120.4
133.9
90%
¹ Adjusted earnings is shown on the face of the condensed consolidated income statement as profit for the year attributable to shareholders of the
Company.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information
172 − DIPLOMA PLC ANNUAL REPORT 2023
28.5 Leverage
Leverage is net debt, defined as cash and cash equivalents and borrowings translated at average exchange rates
for the reporting period, divided by EBITDA as defined in the Group’s external facility covenants, which is the Group’s
adjusted operating profit adjusting for depreciation and amortisation of tangible and other intangible assets, the
share of adjusted operating profit attributable to minority interests and the annualisation of EBITDA for acquisitions
and disposals made during the financial year, excluding the impact of IFRS 16 (Leases). The Directors consider this
metric to be an important measure of the Group’s financial position.
Cash and cash equivalents
Borrowings
Re-translation at average exchange rates
Net debt at average exchange rates
Adjusted operating profit
Depreciation and amortisation of tangible and other intangible assets
IFRS 16 impact
Minority interest share of adjusted operating profit
Pro forma adjustments1
EBITDA
Leverage
1 Annualisation of adjusted EBITDA, including that of acquisitions and disposals in the year.
Note
24
24
28.2
2
2023
£m
62.4
(317.1)
1.2
(253.5)
237.0
13.8
(1.7)
(0.8)
21.0
269.3
0.9x
2022
£m
41.7
(370.6)
23.1
(305.8)
191.2
11.2
1.2
(1.1)
10.2
212.7
1.4x
28.6 Trading Capital Employed and ROATCE
Trading capital employed is defined as net assets less cash and cash equivalents and retirement benefit assets, after
adding back borrowings (other than lease liabilities), deferred tax, retirement benefit obligations and net acquisition
liabilities in respect of future purchases of minority interests, deferred consideration payable on acquisitions, and
acquisition receivables in respect of previously completed disposals. Adjusted trading capital employed is reported
as being trading capital employed plus goodwill and acquisition related charges previously charged to the income
statement (net of deferred tax on acquisition intangible assets) and re-translated at the average exchange rates for
the reporting period. Return on adjusted trading capital employed ("ROATCE") is defined as the pro forma adjusted
operating profit, divided by adjusted trading capital employed, where pro forma adjusted operating profit is the
annualised adjusted operating profit including that of acquisitions and disposals in the period. The Directors believe
that ROATCE is an important measure of the profitability of the Group.
Net assets as reported under IFRS
Add/(deduct):
– Deferred tax, net
– Retirement benefit assets, net
– Net acquisition related liabilities
– Net debt
Trading capital employed
– Historic goodwill and acquisition related charges, net of deferred tax and currency
movements
Adjusted trading capital employed
Adjusted operating profit
Pro forma adjustments¹
Pro forma adjusted operating profit
ROATCE
1 Annualisation of adjusted operating profit, including that of acquisitions and disposals in the year.
Note
24
28.2
2023
£m
902.0
58.4
(6.5)
19.6
254.7
1,228.2
189.4
1,417.6
237.0
19.4
256.4
18.1%
2022
£m
668.2
38.2
(6.4)
29.6
328.9
1,058.5
99.6
1,158.1
191.2
9.7
200.9
17.3%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED GROUP ACCOUNTING POLICIES
FOR THE YEAR ENDED 30 SEPTEMBER 2023
DIPLOMA PLC ANNUAL REPORT 2023 − 173
1.1 BASIS OF PREPARATION
The consolidated financial statements have been
prepared on a consistent basis to prior year and also
under the historical cost convention, except for derivative
financial instruments which are held at fair value.
Going concern
The consolidated financial statements have been
prepared on a going concern basis. The Group’s business
activities, together with the factors likely to affect its
future development, performance and position are set
out in the Strategic Report on pages 1 to 75. The financial
position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the Financial
Review on pages 36 to 40. In addition, pages 156 to 160
of the Annual Report & Accounts include the Group’s
objectives, policies and processes for managing its
capital; its financial risk management objectives; details
of its financial instruments and hedging activities; and its
exposures to credit risk and liquidity risk.
The Group continues to operate against a backdrop
of macroeconomic disruption, including widespread
global inflation, rising interest rates, and accordingly,
the Directors have considered a comprehensive going
concern review. The Group has considerable financial
resources, together with a broad spread of customers
and suppliers across different geographic areas and
sectors, often secured with longer term agreements.
As a consequence, the Directors believe that the Group
is well placed to manage its business risks successfully
as described further on pages 44 to 48.
Liquidity and financing position
The Group’s liquidity and funding arrangements are
described in notes 24 and 28 to the consolidated
financial statements.
Financial modelling
The Group has modelled a base case and downside
case in its assessment of going concern. The base case
is driven off the Group’s detailed budget which is built up
on a business by business case and considers both the
micro and macroeconomic factors which could impact
performance in the industries and geographies in which
that business operates. The downside case models steep
declines in revenues and operating margins resulting in
materially adverse cash flows. These sensitivities factor
in a continued unfavourable impact from a prolonged
downturn in the economy.
The purpose of this exercise is to consider if there is
a significant risk that the Group could breach either
its facility headroom or financial covenants. Both
scenarios indicate that the Group has significant
liquidity and covenant headroom on its borrowing
facilities to continue in operational existence for
the foreseeable future.
Going concern basis
Accordingly and after making enquiries, the
Directors have a reasonable expectation that the
Group has adequate resources to continue in operational
existence for the foreseeable future and they continue
to adopt the going concern basis in preparing the Annual
Report & Accounts.
1.2 BASIS OF CONSOLIDATION
The consolidated financial statements incorporate
the financial statements of the Company and entities
controlled by the Company (its subsidiaries and
Employee Benefit Trust (EBT)). Control exists when
the Company is exposed or has rights to variable returns
from its involvement with the entity and has the ability
to affect those returns through its power over the entity.
The assets, liabilities and results of subsidiaries acquired
or disposed of during the year are included in the
Consolidated Income Statement from the effective
date of acquisition or up to the effective date of
disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting
policies into line with those detailed herein to ensure
that the Group financial statements are prepared on a
consistent basis. All intra-Group transactions, balances,
income and expenses are eliminated in preparing the
consolidated financial statements.
Non-controlling interests, defined as minority interests, in
the net assets of consolidated subsidiaries are identified
separately from the Group’s equity therein. Minority
interests consist of the amount of those interests at
the date of the original business combination and the
minority’s share of changes in equity since the date of
the combination.
1.2.a. New accounting standards adopted
There have been no new accounting standards adopted
during the year that have a material impact over the
consolidated financial statements.
1.3 ACQUISITIONS
Acquisitions are accounted for using the acquisition
method as at the acquisition date, which is the date
on which control is transferred to the Group. Goodwill at
the acquisition date represents the cost of the business
combination (excluding acquisition related costs, which
are expensed as incurred) plus the amount of any non-
controlling interest in the acquiree in excess of the fair
value of the identifiable tangible and intangible assets,
liabilities and contingent liabilities acquired.
Minority interests may be initially measured at fair value
or, alternatively, at the minority interest’s proportionate
share of the recognised amounts of the acquiree’s
identifiable net assets. The choice of measurement
basis is made for each business combination separately.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 174 − DIPLOMA PLC ANNUAL REPORT 2023
1.4 DIVESTMENTS
The results and cash flows of major lines of businesses
that have been divested are classified as discontinued
businesses. There were no discontinued operations in
either the current or prior year.
1.5 REVENUE RECOGNITION
Revenue is measured as the fair value of the
consideration received or receivable for goods and
services supplied to customers, after deducting sales
allowances and value-added taxes; revenue receivable
for services supplied to customers, as opposed to
goods, is ca. 3% of Group revenue. Under IFRS 15,
each customer contract is assessed to identify the
performance obligation. An assessment of the timing
of revenue recognition is made for each performance
obligation. Revenue is recognised at a point in time for all
standard revenue transactions when control of the goods
provided is transferred to the customer. Revenue is also
recognised at a point in time for contracts that contain
multiple elements (service contracts) when the agreed
output is produced by the customer, unless there are
specific performance obligations to deliver other
services over time. The revenue on such service contracts
is not material in the context of the Group’s total revenue.
The transaction price is allocated to each performance
obligation based on the relative stand-alone selling
prices of the goods or services provided. If a stand-
alone selling price is not available, the Group will
estimate the selling price with reference to the price that
would be charged for the goods or services if they were
sold separately. There are no contracts with variable
consideration.
Provision is made for returns and in the few instances
where rebates are provided, though neither are material.
There are no capitalised contract costs recognised by
the Group.
1.6 EMPLOYEE BENEFITS
The Group operates a number of pension plans, both
of the defined contribution and defined benefit type.
a) Defined contribution pension plans: Contributions
to the Group’s defined contribution schemes are
recognised as an employee benefit expense when
they fall due.
b) Defined benefit pension plan: The deficit/asset
recognised in the balance sheet for the Group’s
defined benefit pension plan is the present value of
the defined benefit obligation at the balance sheet
date less the fair value of the scheme assets. The
defined benefit obligation/asset is calculated by
independent actuaries using the projected unit cost
method and by discounting the estimated future cash
flows using interest rates on high-quality corporate
bonds. The pension expense for the Group’s
defined benefit plan is recognised as follows:
i) Within the Consolidated Income Statement:
– Service cost of current members of the
Kubo Scheme.
– Gains and losses arising on settlements and
curtailments – where the item that gave rise
to the settlement or curtailment is recognised
in operating profit.
– Any interest cost on the net deficit of the plan
– calculated by applying the discount rate to
the net defined benefit liability at the start of
the annual reporting period.
ii) Within the Consolidated Statement of
Comprehensive Income (Other
Comprehensive Income):
– Actuarial gains and losses arising on the assets
and liabilities of the plan related to actual
experience and any changes in assumptions
at the end of the year.
c) Share-based payments: Equity-settled transactions
(which are where the Executive Directors and certain
senior employees receive a part of their remuneration
in the form of shares in the Company, or rights over
shares) are measured at fair value at the date of grant.
The fair value determined at the grant date uses the
Monte Carlo method and takes account of the effect
of market based measures, such as Total Shareholder
Return ("TSR") targets upon which vesting of part
of the award is conditional and is expensed to the
Consolidated Income Statement on a straight-line
basis over the vesting period, with a corresponding
credit to equity. The cumulative expense recognised
is adjusted to take account of shares forfeited by
Executives who leave during the performance or
vesting period and, in the case of non-market related
performance conditions, where it becomes unlikely
that shares will vest. For the market-based measure,
the Directors have used a Monte Carlo model to
determine fair value of the shares at the date of grant.
The Group operates an EBT for the granting of shares
to Executives. The cost of shares in the Company
purchased by the EBT are shown as a deduction
from equity.
GROUP ACCOUNTING POLICIESFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 175
1.7 FOREIGN CURRENCIES
The individual financial statements of each Group entity
are prepared in their functional currency, which is the
currency of the primary economic environment in which
that entity operates. For the purpose of the consolidated
financial statements, the results and financial position of
each entity are translated into UK sterling, which is the
presentational currency of the Group.
a) Reporting foreign currency transactions in functional
currency: Transactions in currencies other than the
entity’s functional currency (foreign currencies) are
initially recorded at the rates of exchange prevailing
on the dates of the transactions. At each subsequent
balance sheet date:
i) Foreign currency monetary items are retranslated
at the rates prevailing at the balance sheet date.
Exchange differences arising on the settlement or
retranslation of monetary items are recognised in
the Consolidated Income Statement.
ii) Non-monetary items measured at historical cost
in a foreign currency are not retranslated.
iii) Non-monetary items measured at fair value
in a foreign currency are retranslated using the
exchange rates at the date the fair value was
determined. Where a gain or loss on non-monetary
items is recognised directly in equity, any exchange
component of that gain or loss is also recognised
directly in equity and conversely, where a gain or
loss on a non-monetary item is recognised in the
Consolidated Income Statement, any exchange
component of that gain or loss is also recognised
in the Consolidated Income Statement.
b) Translation from functional currency to
presentational currency: When the functional
currency of a Group entity is different from the
Group’s presentational currency, its results and
financial position are translated into the presentational
currency as follows:
i) Assets and liabilities are translated using exchange
rates prevailing at the balance sheet date.
ii) Income and expense items are translated at average
exchange rates for the year, except where the use
of such an average rate does not approximate
the exchange rate at the date of the transaction,
in which case the transaction rate is used.
iii) All resulting exchange differences are recognised
in Other Comprehensive Income; these cumulative
exchange differences are recognised in the
Consolidated Income Statement in the period
in which the foreign operation is disposed of.
c) Net investment in foreign operations: Exchange
differences arising on a monetary item that forms
part of a reporting entity’s net investment in a foreign
operation are recognised in the Consolidated Income
Statement in the separate financial statements
of the reporting entity or the foreign operation as
appropriate. In the consolidated financial statements
such exchange differences are initially recognised
in Other Comprehensive Income as a separate
component of equity and subsequently recognised
in the Consolidated Income Statement on disposal
of the net investment.
1.8 TAXATION
The tax expense relates to the sum of current tax
and deferred tax.
Current tax is based on taxable profit for the year, which
differs from profit before taxation as reported in the
Consolidated Income Statement. Taxable profit excludes
items of income and expense that are taxable (or
deductible) in other years and also excludes items that
are never taxable or deductible. The Group’s liability for
current tax, including UK corporation tax and overseas
tax, is calculated using rates that have been enacted
or substantively enacted at the balance sheet date.
Deferred tax is accounted for using the balance
sheet liability method. Deferred tax is recognised on
differences between the carrying amounts of assets
and liabilities in the financial statements and the
corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available
against which deductible temporary differences can be
utilised. Temporary differences arise primarily from the
recognition of the deficit on the Group’s defined benefit
pension scheme, the difference between accelerated
capital allowances and depreciation and for short-term
timing differences where a provision held against
receivables or inventory is not deductible for taxation
purposes. However, deferred tax assets and liabilities
are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than
in a business combination) of other assets and liabilities
in a transaction that affects neither the taxable profit,
nor the accounting profit.
Deferred tax liabilities are also recognised for
taxable temporary differences arising on investments
in subsidiaries, except where the Group is able to
control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in
the foreseeable future. No deferred tax is recognised on
the unremitted earnings of overseas subsidiaries, as the
Group controls the dividend policies of its subsidiaries.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 176 − DIPLOMA PLC ANNUAL REPORT 2023
Deferred tax is calculated at the tax rates that are
expected to apply to the period when the asset
is realised or the liability is settled. Deferred tax
is charged or credited to the Consolidated Income
Statement, except when the item on which the tax
or charge is credited or charged directly to equity, in
which case the deferred tax is also dealt with in equity.
The carrying amount of deferred tax assets is reviewed
at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profits
will be available to allow all or part of the assets to be
recovered. Tax assets and liabilities are offset when there
is a legally enforceable right to enforce current tax assets
against current tax liabilities and when the deferred
income tax relates to the same fiscal authority.
1.9 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost
less accumulated depreciation and accumulated
impairment losses. Cost comprises the purchase price
plus costs directly incurred in bringing the asset into use.
All repairs and maintenance expenditure is charged to the
Consolidated Income Statement in the period in which
it is incurred.
Freehold land is not depreciated. Depreciation on
other items of property, plant and equipment begins
when the asset is available for use and is charged to the
Consolidated Income Statement on a straight-line basis
to write off the cost, less residual value of the asset, over
its estimated useful life as follows:
Freehold property
– between 20 and 50 years
Leasehold property
– term of the lease
Plant and equipment
– plant and machinery between
3 and 7 years
– IT hardware between
3 and 5 years
– fixtures and fittings between
5 and 15 years
Hospital field
equipment
– 5 years
The depreciation method used, residual values and
estimated useful lives are reviewed and changed,
if appropriate, at least at each financial year end.
An asset’s carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount
is greater than its estimated recoverable amount.
Gains and losses arising on disposals are determined
by comparing sales proceeds with carrying amount and
are recognised in the Consolidated Income Statement.
1.10 INTANGIBLE ASSETS
All intangible assets, excluding goodwill arising on a
business combination, are stated at their amortised cost
or fair value at initial recognition less any provision for
impairment. Amortisation of intangible assets is
recognised as an administration cost.
a) Research and development costs
Research expenditure is written off as incurred.
Development costs are written off as incurred
unless forecast revenues for a particular project exceed
attributable forecast development costs in which case
they are capitalised and amortised on a straight-line
basis over the asset’s estimated useful life. Costs are
capitalised as intangible assets unless physical assets,
such as tooling, exist when they are classified as
property, plant and equipment.
b) Computer software costs
Where computer software is not integral to an item
of property, plant or equipment its costs are capitalised
as other intangible assets. Amortisation is provided on
a straight-line basis over its useful economic life of
between three and seven years.
c) Acquired intangible assets – business combinations
Intangible assets that may be acquired as a result of
a business combination, include, but are not limited to,
customer lists, supplier lists, databases, technology and
software and patents that can be separately measured at
fair value, on a reliable basis, are separately recognised
on acquisition at the fair value, together with the
associated deferred tax liability. Amortisation is charged
on a straight-line basis to the Consolidated Income
Statement over the expected useful economic lives.
Fair values of customer and supplier relationships
on larger acquisitions are valued using a discounted
cash flow model; databases are valued using a
replacement cost model. For smaller acquisitions,
intangible assets are assessed using historical
experience of similar transactions.
d) Goodwill – business combinations
Goodwill arising on the acquisition of a subsidiary
represents the excess of the aggregate of the fair value
of the consideration over the aggregate fair value of the
identifiable intangible, tangible and current assets and
net of the aggregate fair value of the liabilities (including
contingent liabilities of businesses acquired at the date
of acquisition). Goodwill is initially recognised as an asset
at cost and is subsequently measured at cost less any
accumulated impairment losses. Transaction costs are
expensed and are not included in the cost of acquisition.
GROUP ACCOUNTING POLICIESFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED 1.11 IMPAIRMENT OF TANGIBLE
AND INTANGIBLE ASSETS
An impairment loss is recognised to the extent that
the carrying amount of an asset or a CGU exceeds
its recoverable amount.
The recoverable amount of an asset or CGU is the higher
of: (i) its fair value less costs to sell; and (ii) its value in
use. Its value in use is the present value of the future
cash flows expected to be derived from the asset or
CGU, discounted using a pre-tax discount rate that
reflects current market assessments of the time value
of money and the risks specific to the asset or CGU.
Impairment losses are recognised immediately in the
Consolidated Income Statement.
a) Impairment of goodwill
Goodwill acquired in a business combination is allocated
to a CGU; CGUs for this purpose are the Group’s three
Sectors which represent the lowest level within the Group
at which the goodwill is monitored by the Group’s Board
of Directors for internal and management purposes.
CGUs to which goodwill has been allocated are tested
for impairment annually, or more frequently when there
is an indication that the unit may be impaired.
If the recoverable amount of the CGU is less than
the carrying amount of the unit, the impairment loss
is allocated first to reduce the goodwill attributable
to the CGU. Impairment losses cannot be
subsequently reversed.
b) Impairment of other tangible and intangible assets
Other tangible and intangible assets are reviewed for
impairment when events or changes in circumstances
indicate the carrying value may not be recoverable.
Impairment losses and any subsequent reversals are
recognised in the Consolidated Income Statement.
1.12 INVENTORIES
Inventories are stated at the lower of cost (generally
calculated on a FIFO or weighted average cost basis
depending on the nature of the inventory) and net
realisable value, after making due allowance for any
obsolete or slow moving inventory. Cost comprises
direct materials, duty and freight-in costs.
Net realisable value represents the estimated selling
price less all estimated costs of completion and the
estimated costs necessary to make the sale.
DIPLOMA PLC ANNUAL REPORT 2023 − 177
1.13 FINANCIAL INSTRUMENTS
Financial assets and liabilities are recognised in the
Group balance sheet when the Group becomes a party
to the contractual provisions of the instrument.
a) Trade receivables and loss allowance
Trade receivables are initially measured at fair value, do
not carry any interest and are reduced by a charge for
impairment for estimated irrecoverable amounts. Such
impairment losses are recognised in the Consolidated
Income Statement, calculated under IFRS 9.
b) Trade payables
Trade payables are non-interest bearing and are initially
measured at their nominal value.
c) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand,
interest bearing deposits, bank overdrafts that have
a legal right of offset and short-term highly liquid
investments with original maturities of three months or
less that are readily convertible to a known amount of
cash and are subject to an insignificant risk of changes in
value. Bank overdrafts are repayable on demand and can
form an integral part of the Group’s cash management.
Bank overdrafts (where used) are presented net of cash
and cash equivalents on the balance sheet, where there
is a legal right of offset.
d) Put options held by minority interests
The purchase price of shares to be acquired under
options held by minority shareholders in the Group’s
subsidiaries are calculated by reference to the estimated
profitability of the relevant subsidiary at the time of
exercise, using a multiple based formula. The net present
value of the estimated future payments under these put
options is shown as a financial liability. The corresponding
entry is recognised in equity as a deduction against
retained earnings. At the end of each year, the estimate
of the financial liability is reassessed and any change
in value is recognised in the Consolidated Income
Statement, as part of finance income or expense.
Where the liability is in a foreign currency, any change
in the value of the liability resulting from changes
in exchange rates is recognised in the Consolidated
Income Statement.
e) Derivative financial instruments
and hedge accounting
The Group holds derivative financial instruments in
the form of forward foreign exchange contracts to
hedge its foreign currency exposure and interest rate
swaps to hedge its exposure to market interest rates.
These derivatives are designated as cash flow hedges.
The Group has elected to continue to apply the hedge
accounting requirements of IAS 39, as allowed
under IFRS 9.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 178 − DIPLOMA PLC ANNUAL REPORT 2023
Derivatives are initially recognised at fair value on
the date a derivative contract is entered into and
subsequent changes in the fair value of foreign
currency derivatives which are designated and effective
as hedges of future cash flows are recognised in equity
in the hedging reserve and in Other Comprehensive
Income and are reclassified to profit or loss on maturity
of the derivative. Changes in the fair value of foreign
currency derivatives which are ineffective or do not
meet the criteria for hedge accounting in accordance
with IAS 39 are recognised immediately in the
Consolidated Income Statement.
The Group documents, at the inception of the
transaction, the relationship between hedging
instruments and hedged items, as well as its risk
management objectives and strategy for undertaking
various hedging transactions. The Group also documents
its assessment, both at hedge inception and on an
ongoing basis, of whether the derivatives that are
used in hedging transactions are highly effective in
offsetting changes in cash flows of hedged items.
No derivative contracts have been designated as fair
value hedges or net investment hedges.
f) Borrowings
Borrowings are initially recognised at the fair value of the
consideration received. They are subsequently measured
at amortised cost. Borrowings are classified as non-
current when the repayment date is more than 12 months
from the period end date or where they are drawn on
a facility with more than 12 months to expiry.
Borrowings include overdraft facilities that do not have
a legal right of offset.
1.14 LEASES
The Company recognises a right-of-use asset and a
lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, being the
initial amount of the lease liability adjusted for any lease
payments made at or before commencement date.
Lease liabilities are recorded at the present value of
lease payments. Leases are discounted at the Group’s
incremental borrowing rate, being the rate that the Group
would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
Right-of-use assets are depreciated on a straight-line
basis over the lease term, or useful life if shorter.
Interest is recognised on the lease liability, resulting in a
higher finance cost in the earlier years of the lease term.
Lease payments relating to low value assets or to short-
term leases are recognised as an expense on a straight-
line basis over the lease term. Short-term leases are
those with 12 months or less duration.
1.15 OTHER LIABILITIES
Other liabilities are recognised when the Group has legal
or constructive obligation as a result of a past event and
it is probable that the Group will be required to settle
that obligation. Other liabilities are measured at the
Directors’ best estimate of the expenditure required
to settle the obligation at the balance sheet date.
1.16 DIVIDENDS
The annual final dividend is not provided for until
approved at the AGM; interim dividends are charged
in the period they are paid.
1.17 SHARE CAPITAL AND RESERVES
Ordinary shares are classified as equity and details of the
Group’s share capital is disclosed in note (e) of the Parent
Company’s financial statements. Incremental costs
directly attributable to the issue of new shares are shown
in equity as a deduction, net of tax, from the proceeds.
The Group also maintains the following reserves:
a) Translation reserve – The translation reserve
comprises all foreign exchange differences arising
from the translation of the financial statements of
foreign businesses.
b) Hedging reserve – The hedging reserve comprises the
effective portion of the cumulative net change in the
fair value of cash flow hedging instruments that are
determined to be an effective hedge.
c) Retained earnings reserve – The retained earnings
reserve comprises total cumulative recognised income
and expense attributable to shareholders. Bonus
issues of share capital and dividends to shareholders
are also charged directly to this reserve. In addition,
the cost of acquiring shares in the Company and the
liability to provide those shares to employees,
is accounted for in this reserve.
GROUP ACCOUNTING POLICIESFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED DIPLOMA PLC ANNUAL REPORT 2023 − 179
1.20 SIGNIFICANT ACCOUNTING ESTIMATES
AND CRITICAL JUDGEMENTS
The preparation of the Group’s consolidated financial
statements requires management to make critical
accounting judgements, assumptions or estimates with
regard to assets or liabilities that could potentially have
a material adjustment to the carrying amount of assets
or liabilities in the next 12 months.
1.20.1 Acquisition accounting (estimate)
Acquisition accounting is a significant accounting
estimate.
When the Group makes an acquisition it recognises the
identifiable assets and liabilities, including intangible
assets, at fair value with the difference between the fair
value of net assets acquired and the fair value of
consideration paid comprising goodwill. Acquisitions are
accounted for using the acquisition method as described
in the Group Accounting Policies. The key assumptions
and estimates used to determine the valuation of
intangible assets acquired are the forecast cash flows,
the discount rate and customer/supplier attrition.
Customer and supplier relationships are valued using an
excess earnings cash flow model. Acquisitions often
comprise an element of deferred consideration and may
include a minority interest, which are subject to put
options. These put options are valued at fair value at the
date of acquisition. Deferred consideration is fair valued
based on the Directors’ estimate of future performance
of the acquired entity.
The significant assumptions in valuing the T.I.E. and
DICSA intangible assets, which were acquired in the year,
together with the sensitivity analysis, are set out below.
Discount rate + 1% (all intangibles)
ca. £(1.4)m
ca. £(6.1)m
Discount rate - 1% (all intangibles)
ca. £1.1m
ca. £6.7m
T.I.E.
DICSA
Revenue growth rate +1% (all
intangibles)
Revenue growth rate -1% (all
intangibles)
Customer attrition rate +1%
(customer relationships)
Customer attrition rate -1%
(customer relationships)
ca. £(1.0)m
ca. £0.9m
ca. £1.6m
ca. £(0.1)m
ca. £(1.4)m
ca. £(6.2)m
ca. £1.2m
ca. £6.8m
Where any Group company purchases the Company’s
equity share capital and holds that share either directly
as treasury shares or indirectly within an ESOP trust, the
consideration paid, including any directly attributable
incremental costs (net of income taxes), is deducted
from equity attributable to the Company’s equity holders
until the shares are cancelled, reissued or disposed of.
Where such shares are subsequently sold or reissued,
any consideration received, net of any directly
attributable incremental transaction costs and the
related income tax effects, is included in equity
attributable to the Company’s equity holders. These
shares are used to satisfy share awards granted to
Directors under the Group’s share schemes. The Trustee
purchases the Company’s shares on the open market
using loans made by the Company or a subsidiary of
the Company.
1.18 RELATED PARTIES
There are no related party transactions (other than with
key management) that are required to be disclosed in
accordance with IAS 24. Details of their remuneration are
given in note 5 to the consolidated financial statements.
1.19 ACCOUNTING STANDARDS, INTERPRETATIONS
AND AMENDMENTS TO PUBLISHED STANDARDS
NOT YET EFFECTIVE
The IASB has published a number of new IFRS standards,
amendments and interpretations to existing standards
which are not yet effective, but will be mandatory for
the Group’s accounting periods beginning on or after
1 October 2023.
IFRS 17 ‘Insurance contracts’ which is ultimately
intended to replace IFRS 4, will become effective in the
consolidated Group financial statements for the financial
year ending 30 September 2024;
IFRS 16 amendments ‘Lease liability in a sale and
leaseback’, which will become effective in the
consolidated Group financial statements for the
financial year ending 30 September 2025, subject
to UK endorsement;
IAS 1 - Presentation of Financial Statements - in relation
to non-current liabilities with covenants and deferral of
effective date, and the Disclosure of Accounting Policies;
IAS 8 - Accounting Policies in relation to the definition
of Accounting Estimates;
IAS 12 – Deferred tax related to assets and liabilities
arising from a single transaction and International tax
reform – pillar two model rules.
The Group does not anticipate that the adoption of these
standards and interpretations that are effective for the
year ending September 2024 will have a material effect
on its financial statements.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 180 − DIPLOMA PLC ANNUAL REPORT 2023
Management are also required to make judgements,
assumptions and estimates relating to certain assets
and liabilities that could potentially have a material
impact over the longer term. These relate to:
1.20.2 Goodwill impairment (estimate)
The Group has material amounts of goodwill and
intangible assets (principally customer and supplier
relationships) recognised in the Consolidated Statement
of Financial Position. As set out in note 1.11 of the Group
Accounting Policies, goodwill is tested annually to
determine if there is any indication of impairment.
Assumptions are used to determine the recoverable
amount of each CGU, principally based on the present
value of estimated future cash flows to derive the ‘value
in use’ to the Group of the capitalised goodwill. The key
estimates made and assumptions used in performing
impairment testing this year are set out in note 10 to
the consolidated financial statements.
1.20.3 Inventory provisions (estimate)
Inventories are stated at the lower of cost and net
realisable value as set out in note 1.12 of the Group
Accounting Policies. In the course of normal trading
activities, estimates are used to establish the net
realisable value of inventory and impairment charges
are made for obsolete or slow-moving inventories and
against excess inventories.
The decision to make an impairment charge is based
on a number of factors including management’s
assessment of the current trading environment,
aged profiles and historical usage and other matters
which are relevant at the time the consolidated financial
statements are approved.
1.20.4 Defined benefit pension (estimate)
Defined benefit pensions are accounted for as set
out in note 1.6 of the Group Accounting Policies.
Determining the value of the future defined benefit
obligation requires estimates in respect of the
assumptions used to calculate present values.
These include discount rate, future mortality and
inflation rate. Management makes these estimates in
consultation with an independent actuary. For the year
ended 30 September 2023, the Defined benefit pension
obligation for the UK defined benefit pension scheme is
an asset rather than an obligation due to the increase in
bond yields impacting on discount rate and a fall in the
market’s expectations of future inflation, whilst the Kubo
defined benefit pension scheme is a net liability. Detail
of the estimates and key sensitivities made in calculating
the defined benefit asset at 30 September 2023 are set
out in note 25 to the consolidated financial statements.
GROUP ACCOUNTING POLICIESFOR THE YEAR ENDED 30 SEPTEMBER 2023CONTINUED
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2023
DIPLOMA PLC ANNUAL REPORT 2023 − 181
Fixed assets
Investments
Debtors: amounts falling due within one year
Amounts owed by Group undertakings
Creditors: amounts falling due within one year
Amounts owed to Group undertakings
Net assets
Capital and reserves
Share capital
Share premium
Retained earnings1
Total shareholders’ equity
1
Includes profit after tax for the year of £122.8m (2022: £125.5m).
Note
D
E
2023
£m
372.4
–
246.9
(1.6)
–
617.7
6.8
420.2
190.7
617.7
2022
£m
297.2
–
35.8
–
–
333.0
6.3
188.6
138.1
333.0
The financial statements of Diploma PLC and the notes on 181 to 183, which form part of these financial statements,
company number 3899848, were approved by the Board of Directors on 20 November 2023 and signed on its
behalf by:
JD Thomson
Chief Executive Officer
C Davies
Chief Financial Officer
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2023
At 1 October 2021
Total Comprehensive Income
Dividends paid
Settlement of LTIP awards
At 30 September 2022
Total Comprehensive Income
Shares Issued
Dividends paid
Settlement of LTIP awards
At 30 September 2023
Note
A
F
A
F
Share
capital
£m
6.3
Share
premium
£m
188.6
–
–
–
6.3
–
0.5
–
–
6.8
–
–
–
188.6
–
231.6
–
–
420.2
Retained
earnings
£m
Total
shareholders’
equity
£m
67.6
125.5
(56.2)
1.2
138.1
122.8
–
(70.5)
0.3
190.7
262.5
125.5
(56.2)
1.2
333.0
122.8
232.1
(70.5)
0.3
617.7
During the year, the Directors became aware that approximately £2.5m of the FY21 interim dividend declared on
17 May 2021 was paid other than in accordance with the technical requirements of the Companies Act 2006. This
was because interim accounts had not been filed at Companies house prior to the declaration of the dividend.
It is intended that this technical issue, which has no impact on the Company's financial position, be ratified by a
shareholders’ resolution to be proposed at the Annual General Meeting to be held on 17 January 2024. The approach
that the Company is proposing with regard to this matter is consistent with the approach taken by other UK quoted
and listed companies that have, similarly, made distributions otherwise than in accordance with the Act.
The Directors will propose a resolution at the Annual General Meeting to be held on 17 January 2024 to authorise the
appropriation of distributable profits to the payment of the interim dividend and remove the right of the Company to
pursue shareholders or directors for repayment. The effect of this resolution will be to return all parties to the position
that they would have been in, had the FY21 interim dividend been made in full compliance with the Companies Act
2006. As the Directors believe that passing this resolution will be in the best interests of the members, no adjustment
has been made to the Statement of Changes in Equity presented above.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 182 − DIPLOMA PLC ANNUAL REPORT 2023
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2023
A) ACCOUNTING POLICIES
a.1) Basis of accounting
The Parent Company Financial Statements (the Financial Statements) have been prepared consistently in accordance
with the Companies Act 2006 and FRS 101 (Reduced Disclosures Framework). The Directors confirm they have a
reasonable expectation that the Company has adequate resources to continue in operational existence for the
foreseeable future and accordingly, they continue to adopt the going concern basis in preparing the Financial
Statements. The Financial Statements, which are prepared on a historical cost basis, are presented in UK
sterling and all values are rounded to the nearest 100,000 except when otherwise indicated.
Diploma PLC is a public company limited by shares incorporated in the United Kingdom, and registered and
domiciled in England and Wales and listed on the London Stock Exchange. The address of the registered office
is 10-11 Charterhouse Square, London EC1M 6EE. The financial statements were authorised by the Directors for
publication on 20 November 2023.
The following disclosures have not been provided as permitted by FRS 101:
• a cash flow statement and related notes;
• a comparative period reconciliation for share capital;
• disclosures in respect of transactions with wholly-owned subsidiaries;
• disclosures in respect of capital management;
• the effects of new but not yet effective IFRS; and
• disclosures in respect of the compensation of key management personnel as required.
The Company has also taken the exemption under FRS 101 available in respect of the requirements of paragraphs
45(b) and 46 to 52 of IFRS 2 (Share-based Payment) in respect of Group settled share-based payments as the
consolidated financial statements of the Company include the equivalent disclosures within the Remuneration
Committee Report.
a.2) Total Comprehensive Income
Total Comprehensive Income comprises dividends received from subsidiaries and interest payable or receivable on
intercompany balances at the UK base rate, plus 1.5% and that are repayable on demand.
a.3) Dividend income
Dividend income is recognised when received. Final dividend distributions are recognised in the Company’s Financial
Statements in the year in which the dividends are approved by the Company’s shareholders. Interim dividends are
recognised when paid.
a.4) Investments
Investments are stated at cost less provision for impairment.
a.5) Diploma PLC Employment Benefit Trust and employee share schemes
Shares held by the Diploma PLC Employee Benefit Trust (the Trust) are stated at cost and accounted for as
a deduction from shareholders’ equity in accordance with IAS 32, as applied by FRS 101. Shares that are held by
the Trust are not eligible for dividends until such time as the awards have vested and options have been exercised
by the participants.
a.6) Auditors’ remuneration
Fees payable to the auditors for the audit of the Company’s financial statements of £3,500 (2022: £3,500)
were borne by a fellow Group undertaking.
DIPLOMA PLC ANNUAL REPORT 2023 − 183
B) DIRECTORS’ AND EMPLOYEES’ REMUNERATION
No remuneration is paid directly by the Company; information on the Directors’ remuneration (which is paid by
a subsidiary company) and their interests in the share capital of the Company are set out in the Remuneration
Committee Report on pages 102 to 125 and note 5 to the Consolidated Financial Statements on page 146.
The Company had no employees (2022: none).
C) COMPANY PROFIT AND LOSS ACCOUNT
As permitted by section 408 of the Companies Act 2006, no separate profit and loss account is presented for the
Company. There were no gains or losses either in the current or preceding years recognised in Other Comprehensive
Income. The Company’s profit for the year was £122.8m (2022: profit of £125.5m), before settlement of LTIP awards.
D) INVESTMENTS
Shares in Group undertakings held at cost
At 30 September
2023
£m
2022
£m
372.4
297.2
A full list of subsidiary and other related undertakings is set out on pages 185 to 187. Investments in subsidiaries are
reviewed annually for any indicators of impairment. No indicators have been noted (2022: none).
E) SHARE CAPITAL
Issued, authorised and fully paid ordinary shares of 5p each
At 30 September
134,034,491
124,616,170
2023
Number
2022
Number
2023
£m
6.8
2022
£m
6.3
An equity placing was completed in March 2023, resulting in the issuance of 9,350,965 (7.5% increase) of 5p ordinary
shares at a share price of 2,525 pence per placing share, with corresponding fees of £4.2m. The equity placing
resulted in total net proceeds of £231,939,152 recognised as an increase to share capital of £467,548 and an increase
to share premium of £231,471,604.
As described in the Remuneration Committee Report on page 108, restricted shares (net 3,984 shares at a share
price of 2,776 pence per share) were issued to Chris Davies that are subject to a holding period of two years to
replace share-based payment arrangements forgone in order for him to join the Group. The issue of the shares
was recognised as an increase to share capital of £199 and an increase to share premium of £110,497.
During the year, 66,974 ordinary shares in the Company (2022: 72,262) were transferred from the Trust to participants
on an after income tax basis in connection with the exercise of options in respect of awards which had vested under
the 2011 Long-Term Incentive Plan, as set out in the Remuneration Committee Report.
A further 63,372 shares were issued to the Trust during the year at 5p par value, recognised as an increase to share
capital of £3,169.
At 30 September 2023, the Trust held 67,431 (2022: 71,033) ordinary shares in the Company representing 0.1%
of the called up share capital. The market value of the shares at 30 September 2023 was £2.0m (2022: £1.7m).
F) DIVIDENDS
Details in respect of dividends proposed and paid during the year by the Company are included in note
8 to the consolidated financial statements.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 184 − DIPLOMA PLC ANNUAL REPORT 2023
GLOSSARY
AGM
ACT
ARGA
Annual General Meeting
GP&S
Anti-Corrosion Technology, a Diploma Seals
Sector business
Gaskets. Packings & Seals Enterprises, LLC,
a Diploma Seals Sector business
The Group
The Company and its subsidiaries
The Audit, Reporting and Governance
Authority
Hedley
Hedley DMB Limited, a Diploma Seals Sector
business
The Board
The Board of Directors of the Company
CAGR
CBAM
CGU
CODM
Compound annual growth rate
Carbon border adjustment mechanism
Cash-generating unit
Chief operating decision maker
The Code
The UK Corporate Governance Code 2018
The Company
Diploma PLC
Consolidated
Financial
Statements
Constant
Currency
CNC
CRROs
DEI
DRR
DVR
DICSA
Directors
DTRs
EBITDA
EBT
EPS
ERP
ESG
EV
Executive
Directors
Eurobond
FCA
FRC
FPS
GHG
GIA
The Financial Statements for the Group from
the year ended 30 September 2023
Compares current period’s results with the
prior period’s results translated at the current
period’s exchange rates
computer numerical control
Climate-related risks and opportunities
Diversity, equity and inclusion
Directors’ remuneration report
Delivering value responsibly – our ESG
programme
Distribuidora Internacional Carmen S.A.U.
The Directors of the Company
The Financial Conduct Authority’s Disclosure
Guidance and Transparency Rules
Earnings before interest and tax plus
depreciation and amortisation
Employee Benefit Trust
Earnings per share
Enterprise resource planning
Environmental, social and governance
Electric vehicle
The Executive Directors of the Company
Eurobond Adhesives Limited, within Diploma
Controls Sector
Financial Conduct Authority
The Financial Reporting Council
Fluid Power Services Limited, a Diploma
Seals Sector business
Greenhouse gas emissions
General investment accounts
GM Medical
GM Medical Group A/S, a Diploma Life
Sciences Sector business
Hex
IFRS
ITG
KPI
LTI
LTIP
MD
MRO
MSR
Hex Technology, LLC, a Diploma Seals Sector
business
International financial reporting standards
International Technologies Group, LLC,
within Diploma Seals Sector
Key performance indicator
Lost time incident
Long-term incentive plan
Managing Director
Maintenance, repair and overhaul
Minimum shareholding requirement
Non-Executive
Directors
The Non-Executive Directors of the
Company
OEM
PILON
PPA
PSP
PwC
R&G
RCF
Original equipment manufacturer
Payment in lieu of notice
Purchase price allocation
Performance share plan
PricewaterhouseCoopers LLP
R&G Fluid Power Group, a Diploma Seals
Sector business
Revolving credit facility
the Regulations EU Audit Directive and Audit Regulation 2014
ROATCE
Return on adjusted trading capital employed
s172
SBTi
Section 172 of the Companies Act 2006
Science-Based Targets initiative
The Scheme
The Diploma Holdings PLC UK Pension
Scheme
Shrinktek
Shrinktek Polymers International Limited,
within Diploma Controls Sector
SLT
SMT
TCFD
TDC
T.I.E.
TSR
Senior leadership team
Senior management team
Task force on climate-related financial
disclosures
Total direct compensation
Tennessee Industrial Electronics, a Diploma
Controls Sector business
Total shareholder return
Valves Online
Valves Online Limited, a Diploma Seals
Sector business
WTW
Willis Towers Watson
SUBSIDIARIES OF DIPLOMA PLC
DIPLOMA PLC ANNUAL REPORT 2023 − 185
Registered office address*
Registered office address*
Grimsby Hydraulic Services Limited2 & (98% owned)
Pneumatic Services Limited2 & (93.1% owned)
AMG (Brighouse) Limited2 & (98% owned)
Millennium Coupling Company Limited2 & (98% owned)
Fluid Power Products Limited1 & (98% owned)
Industrial Hose & Pipe Fittings Limited2 & (98% owned)
Millennium Engineering (2012) Limited2 & (98% owned)
Anti-Corrosion Technology Pty Limited
Distribuidora Internacional Carmen, S.A.U.
DICSA America LLC
Distribuidora Internacional Carmen SRL
Gaskets, Packings & Seals Enterprises, LLC
Valves Online Limited2 & (98% owned)
Lantech Solutions Limited2 & (98% owned)
Fluid Power Services Limited2 & (98% owned)
Hedley DMB Limited2 & (98% owned)
Hedley Hydraulics (Holdings) Limited2 & (98% owned)
Hedley Hydraulics Limited2 & (98% owned)
Hedley Connectors Limited1 & (98% owned)
Hex Technology, LLC
Ecohydraulics Limited1 & (98% owned)
A
A
A
A
A
A
A
AH
AI
AJ
AK
AL
A
A
A
A
A
A
A
AQ
A
1 Dormant company.
2 These subsidiaries, which are incorporated in England, are exempt from
the requirements of the UK Companies Act 2006 relating to the audit of
individual accounts by virtue of section 479A of the Act, with Diploma PLC
providing the relevant guarantee.
All subsidiaries are wholly owned, except where otherwise indicated.
All subsidiaries are owned through ordinary shares.
* Registered office address shown overleaf.
Seals
HB Sealing Products, Inc.
HKX, Inc.
RTD Seals Corp.
VSP Technologies, Inc.
HB Sealing Products Limited
M Seals A/S(90% owned)
M Seals AB(90% owned)
M Seals UK (Technical Distribution) Limited
(previously M Seals UK Limited)2
Diploma (Tianjin) Trading Co. Limited
FPE Seals Limited2
DMR Seals (Holdings) Limited2
DMR Gaskets Limited2
M Seals UK (Engineered Seals Division) Limited
(previously DMR Seals Limited)2
FPE Seals BV
Kubo Tech AG
Kubo Tech GmbH
PumpNSeal Australia Pty Limited
TotalSeal Group Australia Pty Limited
TotalSeal New Caledonia SAS
Fitt Management Pty Limited
Fitt Resources Pty Limited
Fitt Trading Pty Limited
Merseyflex Limited2 & (98% owned)
R&G Investments Limited2 & (98% owned)
One Stop Fluid Power Limited2 & (98% owned)
Pearson Hose & Hydraulics Limited2 & (98% owned)
Northern Hose & Hydraulics Limited1 & (98% owned)
Exeter Hose & Hydraulics Limited2 & (98% owned)
North Devon Hose & Hydraulics Limited2 & (98% owned)
Pressurelines Hose & Hydraulics Limited2 & (98% owned)
Somerset Hose & Hydraulics Limited2 & (98% owned)
West Cornwall Hose & Hydraulics Limited2 & (98% owned)
Pearson Hydraulics Limited2 & (98% owned)
Henry Gallacher Limited2 & (98% owned)
Fluidair Power Limited2 & (98% owned)
GHS Limited2 & (98% owned)
Global Hydraulic Services Limited2 & (98% owned)
Pennine Pneumatic Services Limited2 & (93.1% owned)
Compcon Limited2 & (93.1% owned)
Norman Walker (Machinery) Limited2 & (93.1% owned)
Rubberfast Limited2 & (98% owned)
Rubberlast Group Limited2 & (98% owned)
Hydraulic & Offshore Supplies Limited2 & (98% owned)
Lancashire Hose and Fittings Limited2 & (98% owned)
Hyphose Limited2 & (98% owned)
AMG Sealing Limited2 & (98% owned)
Hydraproducts Limited2 & (98% owned)
Century Hose & Couplings Limited
(previously Century Hose Limited)2 & (98% owned)
Flexicon Industrial Supplies Limited2 & (98% owned)
Integraflex Limited2 & (98% owned)
Intrico Products1 & (98% owned)
Hose & Hydraulics Group Limited2 & (98% owned)
D
E
C
C
Q
M
N
A
V
A
A
A
A
J
K
L
R
S
U
AB
AB
AB
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 186 − DIPLOMA PLC ANNUAL REPORT 2023
SUBSIDIARIES OF DIPLOMA PLC CONTINUED
Registered office address*
Registered office address*
Life Sciences
Somagen Diagnostics Inc.
Acernis Medical Inc.
Big Green Surgical Company Pty Limited
Diagnostic Solutions Pty Limited
Sphere Surgical Pty Limited
Aspire Surgical Pty Limited
Big Green Surgical NZ Limited
Techno-Path (Distribution) Limited
Abacus dx Pty Limited
Abacus dx Limited
Simonsen and Weel A/S
Simonsen and Weel AB
Kungshusen Medicinska AB
Accu-Science Ireland Limited
Medilink Services (NI) Limited2
GM Medical A/S
F
P
R
R
R
R
T
W
R
T
AC
AA
AD
AF
AE
AO
Controls
IS-Rayfast Limited
IS-Motorsport, Inc.
Clarendon Specialty Fasteners Limited
Clarendon Specialty Fasteners (Asia) Limited
Clarendon Specialty Fasteners, Inc.
Clarendon Speciality Fasteners GmbH
Cabletec Interconnect Component Systems Limited1
Sommer GmbH
Filcon Electronic GmbH
Gremtek SAS
Gremco UK Limited1
Gremtek GmbH1
Ascome SARL
Cablecraft Limited1
Krempfast Limited2
Abbeychart Limited1
IS Group (Europe) Limited1
FS Cables Limited1
FSC Global Limited1
Shoal Group Limited
Specialised Wiring Accessories Limited2
M-Tec Limited1 & (95% owned)
Techsil Limited2 & (95% owned)
Glueline Limited1 & (95% owned)
Windy City Wire Cable & Technology Products, LLC
LJR Electronics, LLC
Buy Deutsch Connectors, LLC
Tennessee Industrial Electronics, LLC
The Parker Group, Inc.
A
C
A
X
B
Y
A
G
H
O
A
I
O
A
A
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A
A
A
A
A
A
A
A
Z
AG
AG
AM
AN
Registered office address*
Intermediate holding companies
Diploma Holdings PLC
Diploma Holdings, Inc.
Diploma UK Holdings Limited (previously Pride Limited)2
Diploma Australia Holdings Limited2
Diploma Canada Holdings Limited2
Diploma Overseas Limited
Diploma Europe Holdings Limited
(previously Napier Group Limited)
Williamson, Cliff Limited2
Diploma One Limited1
Diploma Two Limited1
Newlandglebe Limited2
Diploma Holding Germany GmbH
Diploma Canada Healthcare Inc.
Diploma Australia Healthcare Pty Limited
Diploma Australia Seals Pty Limited
Techsil Group Holdings Limited2 & (95% owned)
Techsil Holdings Limited2 & (95% owned)
R&G Fluid Power Holdings Limited2
R&G Fluid Power Group Limited2 & (98% owned)
M Seals UK Limited2
Diploma Iberia Holdings, SL
(previously Mindrabay Invest, SL)
A
C
A
A
A
A
A
A
A
A
A
G
F
R
R
A
A
A
A
A
AP
1 Dormant company.
2 These subsidiaries, which are incorporated in England, are exempt from
the requirements of the UK Companies Act 2006 relating to the audit of
individual accounts by virtue of section 479A of the Act, with Diploma PLC
providing the relevant guarantee.
All subsidiaries are wholly owned, except where otherwise indicated.
All subsidiaries are owned through ordinary shares.
* Registered office address shown opposite.
DIPLOMA PLC ANNUAL REPORT 2023 − 187
A
B
C
D
E
F
10-11 Charterhouse Square, London, EC1M 6EE, UK.
5716 Corsa Avenue, Ste 110, Westlake Village, CA 91362-7354, USA.
919 North Market Street, Suite 950, Wilmington, DE 19801, USA.
17888 67th Court North, Loxahatchee, FL 33470-2525, USA.
4505 Pacific Highway East, Suite C2, Fife, WA 98424-2638, USA.
3400 First Canadian Centre, 350-7th Avenue SW, Calgary, Alberta
T2P 3N9, Canada.
G Kraichgaustrasse 5, D-73765, Neuhausen, Germany.
H
I
J
K
L
Rotwandweg 5, D-82024, Taufkirchen/München, Germany.
20-24 Robert Bosch Strasse, 25451 Quickborn, Germany.
Industrieterrein Dombosch 1, Elftweg 38, 4941 VP Raamsdonksveer,
the Netherlands.
Im Langhag 5, 8307 Illnau-Effretikon, Switzerland.
Gewerbeallee 12a, 4221 Steyregg, Austria.
M Bybjergvej 13, DK 3060, Espergaerde, Denmark.
N
Industrivagen 17, SE-302, 41 Halmstad, Sweden.
O 58 rue du Fosse blanc, 92230 Gennevilliers, France.
P
333 Bay St., Suite 2400, Toronto, Ontario M5H 2T6, Canada.
Q 226 Lockhart Road, Barrie, Ontario, L4N 9G8, Canada.
R
S
T
U
V
46 Albert Street, Preston, Victoria, 3072, Australia.
72 Platinum Street, Crestmead, Queensland, 4132, Australia.
Office of Bendall & Cant Ltd, Southern Cross Building,
61 High Street, Auckland, New Zealand.
22 Avenue des Géomètres Pionniers, ZAC PANDA – 98835, Dumbéa,
New Caledonia.
18 Fuyuandao Road, Wuqing Development Area, Tianjin, China.
W Fort Henry Business Park, Ballina, Co. Tipperary, Ireland.
X
Y
Z
98/155 Soi Supapong 1 Yak 6, Srinakarin Road, Nongbon, Bangkok,
Thailand.
Kriegackerstrasse 32, 72469 Messtetten, Germany.
386 Internationale Drive Suite H Bolingbrook, IL 60440, USA.
AA Flöjelbergsgatan 8 A, 43137 Mölndal, Sweden.
AB 27 Awaba Street, Lisarow NSW 2250, Australia.
AC Vejlegårdsvej 59, 2665 Vallensbæk Strand, Denmark.
AD Kikarvägen 14, 647 35 Mariefred, Sweden.
AE 81 Sydenham Road, Belfast, Antrim, BT3 9DJ.
AF Unit C3, M7 Business Park, Newhall, NAAS Kildare, Ireland.
AG 2072 Byers Rd, Miamisburg, OH, 45342-1167, USA.
AH 3/13 Selhurst St, BRISBANE QLD 4108, Australia.
AI
Polígono Industrial Alcalde Caballero, calle Virgen del Buen
Acuerdo, s/n, Zaragoza, 50014, Spain.
AJ
2875 NE 191 STREET, STE 302, Aventura, Florida, 33180, USA.
AK 1179, Via Emilia Ovest, Modena (MO), CAP 41123, Italy.
AL
2323 Garfield Ave, Parkersburg, West Virginia, 26101, USA.
AM Corporate Trust Centre, 1209 Orange Street, Wilmington, New
Castle, Delaware, 19801, USA.
AN 44810 Vic Wertz Drive, Clinton Township, Michigan, 48036, USA.
AO Blokken 11, 1., Birkerød, 3460, Denmark.
AP 112, Principe De Vergara, Madrid, 28002, Spain.
AQ 500 E 4th Street Ste 601, Austin, TX 78701, USA.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 188 − DIPLOMA PLC ANNUAL REPORT 2023
ALTERNATIVE PERFORMANCE MEASURES
MEASURE
Organic growth
CLOSEST IFRS
MEASURE
Reported revenue
increase
Adjusted operating
profit
Operating profit
DEFINITION AND RECONCILIATION
PURPOSE
Organic growth strips out the effects
of the movement in exchange rates
and of acquisitions and disposals.
Statutory operating profit excluding
separately disclosed items and
can be found on the face of the
Group Income Statement in the
Adjusted column.
Allows users of the financial statements
to gain understanding of how the Group
has performed on a like-for-like basis,
excluding the effects of exchange rates
and of acquisitions and disposals.
Adjusted operating profit is a key
performance measure for the Executive
Directors’ annual bonus structure and
management remuneration.
It also provides all stakeholders with
additional useful information to assess
the year-on-year trading performance of
the Group.
Adjusted operating
margin
Operating profit
divided by revenue
Adjusted operating profit divided
by revenue.
Adjusted operating margin is a measure
used to assess and compare profitability.
Adjusted earnings per
share
Basic earnings per
share
Return on adjusted
total capital employed
("ROATCE")
Operating profit and
net assets
Free cash flow
Net cash generated
from operating
activities
Net debt
Borrowings less cash
It also allows for ongoing trends and
performance of the Group to be
measured by the Directors, management
and interested stakeholders.
Adjusted earnings per share is widely
used by external stakeholders,
particularly in the investment community.
ROATCE gives an indication of the
Group’s capital efficiency and is an
element of a performance measure for
the Executive Directors’ remuneration.
Free cash flow allows us and external
parties to evaluate the cash generated by
the Group’s operations and is also a key
performance measure for the Executive
Directors‘ annual bonus structure and
management remuneration.
Net debt is the measure by which the
Group and interested stakeholders
assesses its level of overall indebtedness.
Adjusted earnings (being adjusted
profit after tax attributable to equity
shareholders) for the period
attributable to shareholders of the
Company divided by the weighted
average number of shares in issue,
excluding those held in the Employee
benefit trust which are treated as
cancelled.
Pro forma adjusted operating profit
(being the annualised adjusted
operating profit including that of
acquisitions and disposals) divided by
adjusted trading capital employed.
Adjusted trading capital employed is
reported as being trading capital
employed plus goodwill and
acquisition related charges previously
written off (net of deferred tax on
acquisition intangible assets) and
re-translated at the average exchange
rates for the reporting period.
The cash flow equivalent of adjusted
profit after tax.
Cash and cash equivalents (cash
overnight deposits, other short-term
deposits) offset by borrowings which
compose of bank loans, excluding
lease liabilities.
DIPLOMA PLC ANNUAL REPORT 2023 − 189
CLOSEST IFRS
MEASURE
Operating profit
MEASURE
Earnings Before
Interest and Tax plus
Depreciation and
Amortisation (“EBITDA”)
Leverage
No direct equivalent
DEFINITION AND RECONCILIATION
PURPOSE
EBITDA is used as a key measure to
understand profit and cash generation
before the impact of investments (such
as capital expenditure and working
capital). It is also used to derive the
Group’s gearing ratio.
The leverage ratio is considered a key
measure of balance sheet strength and
financial stability by which the Group and
interested stakeholders assesses its
financial position.
EBITDA is calculated by taking
adjusted operating profit and adding
back depreciation and amortisation.
The ratio of net debt to EBITDA over
the last 12 months, after making the
following adjustments to EBITDA:
including any annualised EBITDA for
businesses acquired by the Group
during that period; the reversal of IFRS
16 accounting; the exclusion of any
EBITDA businesses disposed by the
Group during that period; and the
exclusion of the profit or loss
attributable to minority interest.
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 190 − DIPLOMA PLC ANNUAL REPORT 2023
FINANCIAL CALENDAR AND SHAREHOLDER INFORMATION
ANNOUNCEMENTS (PROVISIONAL DATES)
Q1 Trading Update released
Annual General Meeting (2023)
Half Year Results announced
Q3 Trading Update released
17 January 2024
17 January 2024
20 May 2024
18 July 2024
Preliminary Results announced
w/c 18 November 2024
Annual Report posted to
shareholders
6 December 2024
Annual General Meeting (2024)
15 January 2025
SHAREHOLDERS’ ENQUIRIES
If you have any enquiry about the Company’s business or
about something affecting you as a shareholder (other
than questions dealt with by Computershare Investor
Services PLC) you are invited to contact the Group
Company Secretary at the address shown below.
GROUP COMPANY SECRETARY
AND REGISTERED OFFICE
John Morrison
10-11 Charterhouse Square
London EC1M 6EE
Telephone: 020 7549 5700
DIVIDENDS (PROVISIONAL DATES)
Registered in England and Wales, number 3899848.
Interim announced
Paid
Final announced
Paid (if approved)
20 May 2024
June 2024
WEBSITE
Diploma’s website is www.diplomaplc.com
w/c 18 November 2024
February 2025
ANNUAL REPORT & ACCOUNTS
Copies can be obtained from the Group Company
Secretary at the address shown opposite.
SHARE REGISTRAR
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0370 7020010
The Registrar's website for shareholder enquiries is:
www.computershare.co.uk
DIPLOMA PLC ANNUAL REPORT 2023 − 191
ADVISORS
CORPORATE STOCKBROKERS
Deutsche Numis
45 Gresham Street
London EC2V 7BF
Morgan Stanley
25 Cabot Square
London E14 4QA
INDEPENDENT AUDITOR
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
BANKERS
Barclays Bank PLC
1 Churchill Place
London E14 5HP
HSBC Bank plc
City Corporate Banking Centre
60 Queen Victoria Street
London EC4N 4TR
Strategic ReviewCorporate GovernanceFinancial StatementsOther Information 192 − DIPLOMA PLC ANNUAL REPORT 2023
FIVE YEAR RECORD
Year ended 30 September
Revenue
Adjusted operating profit
Net interest and similar charges
Adjusted profit before tax
Acquisition related and other charges1
Acquisition related finance charges, net
Profit before tax
Tax expense
Profit for the year
Capital structure
Equity shareholders’ funds
Minority interest
Add/(deduct): cash and cash equivalents
borrowings
retirement benefit (asset)/obligations, net
net acquisition related liabilities2
deferred tax, net
Reported trading capital employed
Add: historic goodwill and acquisition related charges, net of
deferred tax
Adjusted trading capital employed
Net (decrease)/increase in net (debt)/funds
Add: dividends paid
acquisition of businesses (including minority interests),
net of disposals
proceeds from issue of share capital (net of fees)
Free cash flow3
Per ordinary share (p)
Basic earnings
Adjusted earnings4
Free cash flow3
Dividends
Total shareholders’ equity5
Dividend cover6
Ratios
Return on adjusted trading capital employed (“ROATCE”)7
Working capital: revenue
Adjusted operating margin
2023
£m
1,200.3
237.0
(20.4)
216.6
(53.7)
(7.3)
155.6
(37.3)
118.3
895.6
6.4
(62.4)
317.1
(6.5)
19.6
58.4
2022
£m
1,012.8
191.2
(11.6)
179.6
(46.9)
(3.2)
129.5
(34.1)
95.4
662.0
6.2
(41.7)
370.6
(6.4)
29.6
38.2
1,228.2
1,058.5
189.4
1,417.6
69.6
70.8
255.3
(231.9)
163.8
90.8
126.5
126.3
56.5
668
2.2
%
18.1
16.0
19.7
99.6
1,158.1
(113.8)
56.4
177.8
–
120.4
76.1
107.5
96.7
53.8
532
2.0
%
17.3
15.6
18.9
2021
£m
787.4
148.7
(6.8)
141.9
(44.4)
(0.9)
96.6
(26.9)
69.7
536.3
4.7
(24.8)
206.2
4.9
23.7
21.9
772.9
129.6
902.5
(395.5)
53.2
450.5
0.6
108.8
56.1
85.2
87.4
42.6
431
2.0
%
17.4
15.8
18.9
2020
£m
538.4
87.1
(2.7)
84.4
(17.3)
(0.4)
66.7
(16.9)
49.8
527.0
3.7
(206.8)
–
18.3
11.5
7.9
361.6
99.4
461.0
224.0
23.4
14.9
(189.8)
72.5
43.5
56.4
64.0
30.0
423
1.9
%
19.1
16.0
16.2
2019
£m
544.7
97.2
(0.7)
96.5
(13.1)
0.1
83.5
(21.1)
62.4
321.3
3.3
(27.0)
42.1
17.8
11.3
8.3
377.1
84.3
461.4
(51.9)
30.1
78.3
–
56.5
54.7
64.3
49.9
29.0
284
2.2
%
22.9
16.5
17.8
1 Acquisition related and other charges comprise the amortisation and impairment of acquisition intangible assets, acquisition related expenses, fair value
adjustments to inventory acquired through acquisitions recognised in cost of inventories sold, adjustments to deferred consideration, profits/losses on
disposal of businesses and other one-off costs.
2 Net acquisition related liabilities comprise amounts payable for the future purchases of minority interests, deferred consideration and acquisition related
receivables.
3 Free cash flow is defined in note 28 to the consolidated financial statements. Free cash flow per share is the free cash flow balance divided by the weighted
average number of ordinary shares in issue during the year.
4 Adjusted earnings per share is calculated in accordance with note 9 to the consolidated financial statements.
5 Total shareholders’ equity per share has been calculated by dividing total shareholders' equity by the number of ordinary shares in issue at the year end.
6 Dividend cover is calculated on adjusted earnings as defined in note 28 to the consolidated financial statements.
7 ROATCE represents adjusted operating profit, before acquisition related and other charges (adjusted for the full year effect of acquisitions and disposals),
as a percentage of adjusted trading capital employed. Trading capital employed and adjusted trading capital employed are calculated as defined in note
28 to the consolidated financial statements.
Designed and produced by Gather.London
The material used in this Report is from
100% recycled material. The paper mill and
printer are both registered with the Forestry
Stewardship Council (FSC) ® and
additionally have the Environmental
Management System ISO 14001.
It has been printed using 100% offshore
wind electricity sourced from UK wind.
Printed by Park Communications.
10 - 11 Charterhouse Square
London EC1M 6EE
T +44 (0)20 7549 5700
www.diplomaplc.com