ANNUAL REPORT AND ACCOUNTS 2024
Diploma is a decentralised,
value-add distribution Group.
Our businesses deliver practical
and innovative solutions that
keep key industries moving.
We are a distribution Group with
a difference. Our businesses have
the technical expertise, specialist
knowledge and long-term
relationships to provide value-add
products and services that deliver
better outcomes for our customers
and make their lives easier.
STRATEGIC REPORT
01
2024 highlights
02
About us
06
Chair’s statement
08
CEO’s review
12
CFO’s review
14
Talent review
17
Market review
19
Business model
22
Strategy
26
KPIs
28
Sector review: Controls
34
Sector review: Seals
40
Sector review: Life Sciences
46
Financial review
50
Delivering Value Responsibly
54
Risk management and internal control
61
TCFD statement
68
Engagement with stakeholders
and section 172
72
Viability statement
73
Non-financial and sustainability
information statement
OTHER INFORMATION
179 Glossary
180 Subsidiaries of Diploma PLC
183 Alternative performance measures
185 Shareholder information
186 Five-year record
CORPORATE GOVERNANCE
75
Chair’s introduction to governance
77
Governance at a glance
79
Board of Directors
84
Audit Committee Report
90
Nomination Committee Report
96
Remuneration Committee Report
120 Directors’ Report
FINANCIAL STATEMENTS
124 Independent auditors’ report
132 Consolidated income statement
133 Consolidated statement
of comprehensive income
134 Consolidated statement
of changes in equity
135 Consolidated statement
of financial position
136 Consolidated cash flow statement
137 Notes to the consolidated
financial statements
168 Group accounting policies
176
Parent company statement
of financial position
176
Parent company statement
of changes in equity
177
Notes to the parent company
financial statements
OUR BOARD
The right skills
and experience
to govern the
Group
READ MORE ABOUT
PEERLESS AEROSPACE ON PAGES 32-33
YOU CAN FIND OUR LATEST
INFORMATION ON OUR WEBSITE
WWW.DIPLOMAPLC.COM
• About us
• Our businesses
• Sustainability
• Investors
• Our stories
DIPLOMA PLC ANNUAL REPORT 2024
CONTENTS
2024
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
6%
Organic revenue growth
Model: 5%
14%
Revenue growth
Model: 10%
20.9%
Adjusted operating
profit margin
Model: 20%+
15%
Adjusted EPS growth
Model: Double digit
101%
Free cash flow conversion
Model: 90%
READ MORE ON PAGE 26
1.3x
Net debt/EBITDA
Model: <2.0x
19.1%
ROATCE
Model: High teens
5%
Dividend growth
Model: 5%
NON-FINANCIAL HIGHLIGHTS
79%
Colleague engagement
survey index
FY23: 80%
READ MORE ON PAGE 27
30%
Women in senior
management team
FY23: 28%
90%
Suppliers aligned to
Diploma Supplier Code
FY23: 73%
5.7
Emissions intensity
(Scope 1 & 2 tCO2e/£1m)
FY23: 7.6
SUSTAINABLE QUALITY COMPOUNDING
WE ARE AMBITIOUS...
Diploma has a clear strategy focused on delivering
sustainable organic growth
READ MORE IN THE CEO REVIEW ON PAGE 08
...AND WE BALANCE THAT WITH DISCIPLINE...
Returns are our key measure of sustainable success.
We maintain a prudent balance sheet and are focused
on strong cash conversion
READ MORE IN THE CFO REVIEW ON PAGE 12
...BUILDING ON OUR LONG TRACK RECORD
Diploma has a long history of strong earnings growth
and shareholder returns
READ MORE IN THE CHAIR’S STATEMENT ON PAGE 06
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DIPLOMA PLC ANNUAL REPORT 2024
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Additional Information
Corporate Governance
Financial Statements
OUR
PURPOSE,
CULTURE
AND VALUES
An important shared purpose, a powerful
decentralised culture and the values that
guide us are core to our success.
OUR PURPOSE
Our purpose is to innovate, create
and deliver value-add solutions for
a better future.
As a decentralised and diversified
Group, a strong purpose ensures that
every colleague and every business
is aligned. Our businesses work
across a broad range of end markets
to deliver better outcomes for our
customers and make their lives easier
by innovating and creating solutions
to complex challenges in critical
applications and industries.
LEARN MORE ABOUT US ON OUR WEBSITE
WWW.DIPLOMAPLC.COM/ABOUT-US/
PURPOSE-AND-VALUES/
OUR CULTURE
Our culture is a commercial and
strategic advantage.
It is a reflection of our decentralised
model. Every Diploma business
has a strong local identity but a
common Group culture grounded
in commerciality and accountability
that fosters the agility, continuous
improvement and close customer
relationships that are critical to
our success.
OUR VALUES
Our Group values are a set of
guiding principles that reflect the
shared beliefs and behaviours of
our businesses and set the tone
for our culture.
Customer-centric
We are driven to add value and
help our customers grow.
Grow together
We collaborate to create success
and opportunity.
Do the right thing
We are ambitious about delivering
value responsibly.
Down to earth
We are low on ego – our performance
speaks for itself.
Accountable
We are all empowered to succeed.
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DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
ABOUT US
WHAT
WE DO
Supplying a wide range of products
and services across diverse industries,
our distribution businesses understand
their customers and deliver products
and services that they value.
We develop our businesses and work with
them to scale as they grow, so that they
become better not just bigger businesses.
Our three Sectors – Controls, Seals and
Life Sciences – provide an important
management structure without adding
bureaucracy or unnecessary cost.
READ ABOUT OUR STRATEGY ON PAGE 22
OUR SECTORS
CONTROLS
Our 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.
SEALS
Our Seals businesses supply
sealing and fluid power products
and solutions into aftermarket
repairs, original equipment
manufacturing, 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, their solutions
have mission-critical applications.
LIFE SCIENCES
Our Life Sciences businesses supply
and service equipment; and provide
consumables and instrumentation for
surgery, diagnosis of disease, and
critical care support. Our expert
teams 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.
CONTROLS REVENUE FY241
SEALS REVENUE FY241
LIFE SCIENCES REVENUE FY24
READ MORE ABOUT
OUR CONTROLS SECTOR
ON PAGES 28-33
READ MORE ABOUT
OUR SEALS SECTOR
ON PAGE 34-39
READ MORE ABOUT
OUR LIFE SCIENCES SECTOR
ON PAGE 40-45
52%
32%
16%
1 On a pro forma basis as stated on pages 30 and 36.
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Financial Statements
ABOUT US CONTINUED
HOW
WE DO IT
All of our businesses are different and they
deliver success in different ways through our
powerful decentralised culture. But, there are
some common characteristics to all Diploma
businesses: a strong value-add customer
proposition delivered by brilliant people with
strong leadership.
READ ABOUT OUR BUSINESS MODEL ON PAGE 19
The combination
of our value-
add model
and powerful
decentralised
culture is our
secret-sauce.
Preserving it
is key.
JOHNNY THOMSON
GROUP CEO
VALUE-ADD SERVICE
DISTRIBUTION MODEL
We’re a service business as much as we
are a distribution business. We supply
critical products that all come with a
value-add wrapper – whether that’s
technical expertise, responsive customer
service, or product customisation –
we create solutions that deliver better
outcomes for our customers and make
their lives easier. Our products and
services are critical to our customers’ value
chains 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 IN A POWERFUL
DECENTRALISED CULTURE
We believe in local accountability.
Our colleagues have the specialist
knowledge, close customer relationships
and market experience to deliver for their
customers. And, our businesses are
empowered to do it their way.
Decentralised doesn’t mean isolated.
As part of Diploma, our businesses can
leverage the resources, opportunities
and expertise of a large, international
and diversified Group to benefit their
customers, colleagues, suppliers and
communities. Our strong leadership teams
keep our shared culture and values alive
across the Group.
READ MORE ABOUT OUR PEOPLE
ON PAGE 14
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DIPLOMA PLC ANNUAL REPORT 2024
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Corporate Governance
Financial Statements
ABOUT US CONTINUED
SHAREHOLDER VALUE
STAKEHOLDER IMPACT
We have a differentiated business
model and proven strategy that
drive strong financial outcomes
that compound over time.
READ MORE IN THE CFO’S REVIEW
ON PAGE 12
Our financial model balances
ambition with discipline to deliver
sustainable shareholder value.
As part of Diploma, our businesses
are able to have a greater impact on
their stakeholders.
For colleagues, this includes
engagement programmes, training,
DEI initiatives and health & safety.
For the environment, we focus on
waste reduction and invest in lowering
emissions, and provide access to
best practice and our sustainability
framework, Delivering Value
Responsibly. As a distributor, the
greatest impact we can have is
driving positive change through
our supply chain.
Within our communities, we invest
in local skills development through
our Group-wide apprenticeship
programmes and fundmatch locally-
driven charitable initiatives.
READ MORE ABOUT DELIVERING VALUE
RESPONSIBLY ON PAGE 50
OUR
IMPACT AND
OUTCOMES
We have a long track-record of delivering
strong shareholder value and meaningful
stakeholder impact.
SUSTAINABLE QUALITY COMPOUNDING
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
20%+
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 WITH A
PROGRESSIVE DIVIDEND
5%
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DIPLOMA PLC ANNUAL REPORT 2024
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Financial Statements
ABOUT US CONTINUED
CHAIR’S STATEMENT
DAVID LOWDEN
CHAIR
DECENTRALISED
CULTURE
SHARED
VALUES
This year has been a strong one for
our Group, marked by both strategic
and financial success.
Our decentralised business model,
characterised by its entrepreneurial
spirit, accountability, and exceptional
leadership, has been instrumental in
delivering such a strong financial
performance, with increasing resilience,
even in challenging market conditions.
Strong financial performance
and strategic progress
Diploma has a long track record of excellent
shareholder returns. Over the last 15 years,
the Group has delivered average annual
revenue and adjusted earnings per share
growth of 15% and 16%, respectively,
accelerating to 20% and 18% over the last
5 years. The Group has added to this track
record in FY24, delivering another very
strong financial performance. Organic
revenue grew 6% and adjusted operating
margins increased to 20.9%, whilst cash
conversion exceeded 100% and ROATCE
rose to 19.1% – up 100bps year on year,
despite significant investment during
the year.
Also contributing to the performance were
the seven high-quality businesses acquired
during the year, adding 10% to reported
revenue. These businesses, acquired to
accelerate future organic growth, have had
a strong start under Diploma’s ownership,
particularly Peerless, which has achieved
impressive growth since joining the Group
in May. I am very pleased to warmly welcome
all our new colleagues to Diploma.
Colleagues and culture
Our colleagues are the cornerstone
of Diploma and are central to our identity.
Our culture and values play a pivotal role
in fostering employee engagement and
development. Engaged employees are key
to the Group’s success. That’s why we have
introduced employee engagement as part
of our executive remuneration package.
Diploma fosters a shared culture
that transcends business differences.
This means that leaders from diverse
industries, from healthcare to robotics,
can collaborate, understand each other’s
challenges, and learn from one another
while retaining their unique identity and
entrepreneurial spirit.
This Group culture is demonstrated in
common business systems, including
our values, our financial metrics and risk
management systems.
READ ABOUT THE CHANGES TO OUR
REMUNERATION POLICY ON PAGE 98
This has been a
strong year, building
on Diploma’s excellent
track record.
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Corporate Governance
Financial Statements
CHAIR’S STATEMENT CONTINUED
We have five core values that guide our
decision-making and actions. 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 and becoming greater
than the sum of our parts. And finally, we
are down to earth, maintaining a culture
of humility and approachability.
Our Group Colleague Engagement Survey
continues to indicate excellent levels of
engagement, at 79%. 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
that support the wellbeing and success
of our colleagues.
Board changes
Since becoming Chair of the Board in
2021, I have been fortunate to lead the
appointment of four new Non-Executive
Directors, each bringing considerable value
to the table. With the refresh of the Board
now complete, I am confident that we have
a very strong Board, which is well placed to
represent the interests of our shareholders
and wider stakeholders in the years ahead.
Our latest appointments are Katie
Bickerstaffe, who joined the Board on
1 October 2024 as Senior Independent
Director, and Ian El-Mokadem who will take
up the role of independent Non-Executive
Director during the first half of the year.
I also would like to thank the outgoing
Non-Executive Directors, Andy Smith
and Anne Thorburn, for their contributions
through an incredible period of growth
for the Group.
Dividends
The Board has a progressive dividend policy
that aims to increase dividend per share
by 5% each year. 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 42.0p (2023: 40.0p) taking
the total dividend to 59.3p (2023: 56.5p).
Subject to shareholder approval at the
Annual General Meeting, this dividend will
be paid on 31 January 2025 to shareholders
on the register at 17 January 2025 (ex-div
16 January 2025).
Conclusion
In conclusion, it has been another
strong year for Diploma. We have
not only delivered an excellent financial
performance, but have also continued
to evolve 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,
positions 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.
David Lowden
Chair
AUDIT
COMMITTEE
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
READ MORE ON PAGES 90-95
READ MORE ON PAGES 96-119
READ MORE ON PAGES 84-89
GOVERNANCE OVERVIEW
Our success is
rooted in the
entrepreneurial
spirit, accountability,
and exceptional
leadership that
define our
decentralised
business model.
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DIPLOMA PLC ANNUAL REPORT 2024
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Corporate Governance
Financial Statements
JOHNNY THOMSON
GROUP CEO
STRONG
FINANCIAL
PERFORMANCE
AND STRATEGIC
PROGRESS
Our strategy is delivering. We have
driven strong organic growth through
end-market expansion, geographical
penetration and product extension.
We have continued to accelerate this
organic growth through complementary
acquisitions at great returns on capital. And,
we are scaling our businesses and the Group
to support sustainable quality compounding
for the long term.
We have delivered another strong year, and I
would like to thank all my brilliant colleagues.
These results reflect the strength of our
value-add distribution model and diversified
portfolio, but they are delivered by 3,600
accountable, customer-centric people,
thriving in our decentralised culture.
In tougher markets, we delivered 6% organic
revenue growth. We added a further seven
high-quality acquisitions, contributing 10%
to reported revenue growth. We have
improved the Group operating margin by
120 basis points to 20.9%. We grew
adjusted earnings per share by 15%.
Importantly, we have delivered this with
discipline, improving ROATCE by 100 basis
points to 19.1%, free cashflow conversion
remained very strong at 101%, fuelling future
growth, and we disposed of three non-core
businesses shortly after the year end.
Overall, it’s been another strong year for
the Group.
Revenue diversification driving organic
growth and increasing resilience
The Group’s strategy is to build high-
quality, scalable businesses for
sustainable organic growth.
We drive organic growth in three ways:
expanding into 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 6%
in FY24. Double-digit growth in Controls,
driven by market tailwinds and share gains,
and a strong performance in Life Sciences,
led by share gains in Canada and Australia,
provided balance to the Seals Sector, which
delivered a resilient performance with
modest growth despite facing challenging
conditions across some of its end markets.
Revenue £m
Growth
FY 24
FY 23
Reported
Organic
Controls
652.4
568.4
+15%
+10%
Seals
489.1
419.0
+17%
+1%
Life Sciences
221.9
212.9
+4%
+6%
Group
1,363.4
1,200.3
+14%
+6%
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DIPLOMA PLC ANNUAL REPORT 2024
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Corporate Governance
Financial Statements
CEO’S REVIEW
Positioning behind structurally
growing end markets
Throughout the year we have continued to
drive expansion in structurally growing end
markets, delivering both improved growth
and increased resilience.
Most notably in FY24, our specialty fasteners
businesses operating in aerospace,
Clarendon, and our recent acquisition,
Peerless, have delivered outstanding growth
as they have navigated the complexities of
these markets to win share and solve their
customers’ complex problems. Whilst we
expect some normalisation of growth and
margins in this market, the underlying
growth drivers are expected to endure
for a number of years.
Datacentres are becoming increasingly
important to us with Windy City Wire
delivering accelerated organic growth as
their superior products and services are
valued in these critical applications. As these
centres evolve for the increased demands of
supporting AI, a number of other Controls
and Seals businesses are developing
solutions, for example, to support
liquid cooling.
In clinical diagnostics, our Life Sciences
businesses benefitted from growing public
and private investment in testing across a
wide range of applications from allergy and
autoimmune testing, to preconception and
cancer screening.
Electrification provides a wide range of
growth opportunities across our businesses
and a number of them are developing related
offers, from solar installation kits to smart
building solutions. This is an example of
our businesses collaborating to create
unique propositions.
Industrial automation is expected to
continue to benefit from the reshoring of
manufacturing and ageing installed bases
of CNC machines and robots that are
fuelling growth.
Renewables has been an area of success for
a number of our businesses and we expect
this to continue to build.
Water management has fuelled growth in a
number of our Seals businesses particularly
in Australia where our dewatering products
and services are critical to safely extracting
the minerals required for batteries for
energy storage.
Whilst the infrastructure segment has been
subdued this year, long term investment in
infrastructure in the US, the UK and Europe will
be a tailwind, particularly to our Seals Sector.
Penetrating further into core
developed economies
There is significant scope for geographic
expansion across our existing
developed markets.
With the acquisition of Peerless during the
year, around half of the Group’s revenue
is now generated in the US. It has also
extended our capabilities in specialty
fasteners beyond our previous presence
on the West Coast of the US, to national
coverage, as well as increasing exposure
to the aerospace market in Europe.
The FY23 acquisition of DICSA
established a platform for the Group
in Spain and extended our footprint
across Europe. We are in the early stages
of collaboration between DICSA and R&G
in the UK, and Hercules Aftermarket in the
US, supporting the gradual expansion
across these geographies.
Following on from the integration of our
Australian Life Sciences businesses last year
to create a scaled business with country-
wide reach, we have recently completed
a similar project in Canada. This enhances
geographical coverage across the Canadian
healthcare market providing our supply
partners with unparalleled access across
both medtech and diagnostics customers
from the West to the East.
Product range extension
Sourcing and developing new products are
key to sustainable organic growth for all of
our businesses, as we continually enhance
our customer proposition for existing and
new customers.
In Life Sciences, it is critical that our expert
teams remain at the forefront of product
innovation to support their customers in
delivering better healthcare outcomes. For
example, the introduction of an AI-enabled
endoscope to our Canadian portfolio is
delivering materially higher success rates
than a traditional scope in the identification
of abnormalities. We are increasingly looking
to leverage across our businesses, to bring
successful products from one geography
to another.
Acquisitions continue to play an important
role in accelerating product extension.
In our Seals Sector, we have extended
our fluid power capabilities further
through acquisitions into R&G, to grow our
addressable markets. In Controls, Peerless
specialises in airframe specialty fasteners,
which complements Clarendon’s specialism
in aircraft cabins. Over the coming years we
will seek opportunities to cross-sell Peerless
and Clarendon products. In a similar fashion,
the acquisition of DICSA has enabled
product expansion in R&G and Hercules
Aftermarket, and the acquisition of PAR,
which bolted on to R&G, drove an expanded
seals & gaskets portfolio into the UK.
Execution of our proven strategy drove
strong organic revenue growth of 6%
in the year
+6%
I’d like to thank my brilliant
colleagues for making this
a successful year.
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Corporate Governance
Financial Statements
CEO’S REVIEW CONTINUED
Complementary acquisitions
to accelerate growth
Diploma has a strong track record of
accelerating organic growth through
disciplined acquisitions with £1.3bn
invested in over 40 businesses with
Return on Adjusted Trading Capital
Employed (ROATCE) of 17% in the last
five years. In FY24, we acquired seven
high-quality businesses for a total of
£293m at an average EBIT multiple of
6x: Peerless, PAR and five bolt-ons.
In May, we completed the acquisition
of US-based Peerless for £243m. This
extended our established position in the
aerospace specialty fasteners market
and is highly complementary to Clarendon,
our existing specialty fasteners business,
both in product offering and geographic
footprint. Peerless has delivered an
exceptional performance in the period since
acquisition as positive tailwinds and share
gains in the aerospace market have driven
organic growth and margin expansion
ahead of our expectations. It is expected
to exceed 20% ROATCE in its first year in
the Group.
Also in May, we acquired PAR for £37m
into R&G, adding scale to its seals &
gasket division in the UK.
Importantly, we continue to execute
smaller bolt-on acquisitions, completing
five bolt-ons for £13m, with average EBIT
multiples of 4x and expected to exceed
20% ROATCE in year one.
Our Life Sciences business in Canada has
completed a significant scaling project,
including a new facility in a more strategic
location in the East, rationalising existing
sites and forming two distinct East and West
hubs. This will enhance collaboration across
our diagnostics and medtech business,
reduce shipment times, deliver operational
improvements and efficiencies, and increase
access to specialist talent.
As well as investing in facilities and
technology, we have also invested in talent
and have attracted experienced leaders to
a number of our businesses this year. Our
Leadership at Scale programme, now in its
second year, continues to develop leaders
from across our businesses.
Developing sales excellence is a Group-
wide focus. Our businesses have grown
well due to their agility, responsive
customer service and technical capabilities.
We want to add to that with more business
development capability, a more strategic
and structured approach to market
development and great B2B sales
processes. We’re providing the network,
workshops, best practices and investments
to help make this happen.
Delivering Value Responsibly
Across our businesses we make positive
impacts on society and our environment
through the delivery of life-saving healthcare
solutions, and supporting renewable energy
generation, water treatment and activities
supporting the circular economy. As part of
Diploma, our businesses place appropriate
focus on sustainability at a level they would
This is a people business. Our businesses
support their customer’s growth and help
them achieve their ambitions. We think this
works best in a decentralised culture where
our colleagues are empowered to innovate
and create tailored solutions. Investing in
talent development is therefore critical:
developing a cadre of great Managing
Directors; building sales, supply chain and
other functional leadership capabilities; and
evolving teams and structures to scale our
businesses. Ensuring we have diverse teams
is important and whilst we have much more
to do, I’m pleased that around half of our
senior hires this year were women.
Ultimately, if our people are engaged,
they will deliver the best results for our
customers, so I’m delighted with another
year of consistently high engagement. To
reflect the importance of maintaining high
engagement levels, this metric will be
introduced into my remuneration and the
incentive schemes of senior leaders in FY25.
We have developed 10 new facilities across
our businesses in the last five years. In FY24,
significant investment has been made in our
UK wire and cable business, Shoal. Three
previously standalone businesses have been
combined, moving into a new state-of-the-
art shared facility with integrated
technology and systems.
We have invested in a number of our Seals
businesses whilst market conditions have
been slower to position us for stronger
growth as conditions improve. This included
investment in talent and technology as well
as the culmination of facilities projects in the
UK and Europe.
The acquisitions made this year demonstrate
the compelling proposition Diploma offers
to owners selling their businesses:
preserving legacies, promoting autonomy
and accountability, and supporting growth
through investment and expertise.
Our acquisition pipeline remains strong
with active opportunities in all three Sectors
across fragmented markets in our core
geographies. We have robust processes
in place to maximise opportunities and we
remain a buyer of choice for the kind of
business we look for.
Portfolio discipline is a critical component
of sustainable quality compounding, and
if a business no longer fits our strategy,
we look to recycle capital. Having made four
disposals in recent years, we made a further
three shortly after the year end for ca. £45m
at a 7x multiple. In the Controls Sector,
we sold Gremtek, located in France, which
was part of our international interconnect
solutions business. In Seals, we disposed
of Kubo, an OEM-focused seals business in
Switzerland, and Pennine, a UK pneumatics
business, that was part of R&G.
READ MORE IN OUR SECTOR REVIEWS ON
PAGES 28-45.
Scaling the Businesses and the Group
To deliver sustainable quality compounding,
we must develop our businesses to deliver
great customer propositions at scale.
This can be through investment in talent,
technology, and facilities – building
capability and capacity to sustain growth
in our businesses. It also means developing
our Group to sustain execution as we grow.
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WHY INVEST
Diploma delivers sustainable quality compounding, consistently balancing ambition with
discipline. We have a long track record of profitable growth, delivering 16% compound
annual EPS growth over the last 15 years.
AMBITION
• Organic growth is our number one priority: delivered 5% average annual organic
growth over the long term.
• We complement this with disciplined acquisitions at high returns:
15% total revenue CAGR over the last 15 years.
• Significant ‘white space’ for all of our businesses to grow through geographic,
end market, and product expansion.
• Our scalable, value-add customer propositions underpin operating margin
of at least 20%.
DISCIPLINE
• Capital-light business model drives strong free cash conversion
of 90% to fuel future growth.
• Effective capital stewardship ensures strong returns,
with ROATCE well in excess of our cost of capital.
• Balance sheet discipline with net debt maintained below 2x EBITDA.
• Commitment to shareholder returns with a progressive dividend growing 5% annually.
CONSISTENCY
Our business model delivers resilience through the cycle:
• Our diversified portfolio drives revenue resilience.
• Our value-add propositions drive margin resilience.
• Our capital-light business model drives cash flow resilience.
This is underpinned by a powerful decentralised culture with accountable leaders
operating with specialised expertise in local markets.
LEARN MORE ON OUR WEBSITE:
WWW.DIPLOMAPLC.COM/INVESTORS/WHY-INVEST/
Having a workforce rich in diverse
perspectives will support stronger execution
over time. I’m pleased with the progress we
have made as we work towards gender
balance across our Senior Management
Team – now 30% female, up from 28% in
FY23 and 20% in FY19 – but there is still
work to do.
READ MORE ABOUT DVR ON PAGES 50-53.
Outlook
Whilst we remain mindful of the challenging
economic backdrop, the execution of our
strategy gives us confidence in our ability
to continue to deliver strong results.
• Our revenue is resilient: ongoing
diversification means we are exposed
to structurally growing end segments.
• Our margins are resilient: our focus on
value-add solutions that are 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.
We remain focused on executing our
strategy of building high-quality, scalable
businesses for organic growth. By
continuing to effectively balance ambition
and discipline we are confident in continuing
to deliver sustainable quality compounding
over the long term.
Johnny Thomson
Chief Executive Officer
be unlikely to do otherwise. As a result,
they benefit from accelerated progress
compared to their peers, which brings both
commercial advantage and positive impact.
Our Delivering Value Responsibly (DVR)
framework focuses on six metrics through
which we can have a meaningful, positive
impact on our businesses, our people and
our environment. I am pleased with the
progress we have made this year, but there
is more to be done.
Highlighting a few examples from across
the Group in the year:
We launched a Group-wide health and
safety programme – Stand Up for Safety –
to provide a consistent culture, approach
and framework. It has been very well
received and has driven a notable change
in behaviours by our businesses.
During the year, our target to reach net zero
by 2045 was validated by the Science Based
Targets initiative (SBTi). In the year we
reduced our emissions intensity (Scope 1&2)
to 5.7, down from 7.6 in FY23.
Sustaining our success is dependent on our
people. Maintaining high levels of colleague
engagement is critical. It is a competitive
advantage. We are once again delighted by
excellent levels of engagement throughout
the Group, at 79%.
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CHRIS DAVIES
GROUP CFO
SUSTAINABLE
QUALITY
COMPOUNDING
Sustainable quality compounding
combines ambition with discipline.
Our business model and strategy are
designed to support the delivery of
ambitious organic growth, at high
margins and with great capital
returns. As a result, we have a long
track record of delivering
compounding earnings growth.
Our financial model lays out how we will
continue to deliver this in a set of medium-
term financial outcomes. This has consistently
delivered superior shareholder returns for
more than 25 years. We have updated our
financial model to reflect structurally higher
operating margins of 20%+, up from 17%+.
Diversified portfolio drives strong,
resilient growth
Organic growth is our first priority and each
of our value-add businesses drives this
through end-market expansion, geographic
penetration and product extension. Our
diverse portfolio of businesses means that
this growth is both strong and resilient, with
the Group delivering around 5% organic
growth consistently over the long term.
Delivering 6% organic growth in FY24
against the backdrop of tougher markets is
therefore particularly pleasing. In
fragmented markets, we can accelerate this
organic growth through carefully selected,
disciplined acquisitions. We do not set
specific annual targets for acquisitions, but
our financial model demonstrates that we
can deliver double-digit revenue growth
within our leverage policy outlined below.
Reported revenue growth this year of 14%
is in line with our 15-year track record of
15% growth.
AMBITION...
FY24
Model
Organic growth is our first priority
6%
5%
Total revenue growth accelerated by quality acquisitions
14%
10%
Value-add drives strong adjusted operating margins
20.9%
20%+
Compounding adjusted EPS growth
15%
Double-digit
...WITH DISCIPLINE
FY24
Model
Capital-light business model drives strong cash conversion
101%
90%
Capital stewardship focused on strong ROATCE
19.1%
High teens
Balance sheet discipline maintains prudent leverage
1.3x
<2.0x
Return to shareholders with a progressive dividend
5%
5%
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Structurally higher operating margin
Diploma has achieved structurally higher
operating margins, this year reaching 20.9%.
This improvement has been driven by two
factors: operational leverage from the
growth of our value-add businesses, and
recent acquisitions with accretive margins.
Our diversified portfolio delivers a range of
operating margins, from the teens to the
thirties. Typically, our lower margin
businesses have lower asset intensity, whilst
those requiring more inventory to support
their customer propositions are
compensated with higher margins.
Our financial model recognises that each
business should deliver sustainable
operating leverage. However, the mix
between businesses means that, as a Group,
we may not expand margin every year.
This combination of growth and margin
drives double-digit earnings per share
growth. In FY24 we delivered 15% growth,
in line with our 15-year track record of
16% growth.
Consistently strong cash conversion
Our capital-light business model drives
strong cash conversion, targeting a
sustainable 90%. Capital expenditure is
carefully managed, usually accounting for
around 2% of revenue annually. This year,
capital expenditure was ca. 1.5% of revenue,
with significant scaling investments made in
new facilities in all three Sectors – in Shoal
(Controls Sector), Life Sciences North
America, and R&G (Seals Sector). We are
pleased to report 101% cash conversion
this year, ahead of our model, achieved by
disciplined working capital management,
and optimising inventory across
several businesses.
Strong and improving returns
We are obsessed with delivering excellent
returns on capital. Our key returns metric,
Return on Adjusted Trading Capital
Employed (ROATCE), adds back
accounting adjustments, such as
acquisition related amortisation, to
ensure that our performance is driven
by genuine economic factors. ROATCE in
the high teens, represents returns of around
twice our current cost of capital. Returns in
FY24 were particularly strong. We increased
ROATCE by 100 basis point, to 19.1%,
the highest level in the last five years.
Achieving this requires consistent operational
discipline and strategic initiatives, such
as the processes introduced by our North
American Seals businesses to drive a
significant reduction in inventory levels
whilst upholding customer service levels.
Maintaining strict discipline when making
acquisitions is critical to sustainable, high
returns. We have simple but strict criteria
for potential acquisitions, and decline
opportunities that will not meet our 20%
ROATCE expectations.
Our smaller bolt-on deals are expected
to deliver 20% returns in the first year,
and FY24 was no exception, with five new
businesses acquired at an average EBIT
multiple of 4x. From time to time, we will
make larger acquisitions. We are particularly
pleased with Peerless, which has delivered
an excellent performance in its first five
months, already expected to exceed 20%
ROATCE on £243m of capital invested.
Balance sheet discipline
Our Board policy is to maintain the net
debt to EBITDA ratio (leverage) below 2x,
with covenants allowing up to 3.5x (plus
an ‘acquisition spike’). In the course of
self-funding acquisitions, it is possible that
we may temporarily exceed our 2x target
for exceptional opportunities, with our
strong free cash flow then driving leverage
reduction at approximately 0.3x per annum.
Whilst deploying £293m on acquisitions in
the year, plus additional scaling investments
across the Group, we ended FY24 with a
leverage ratio of 1.3x.
During the year, we took further steps to
strengthen our balance sheet to provide the
capacity and flexibility to support sustained
profitable growth. Building on the revolving
credit facility refinanced in FY23, we issued
the Group’s first US private placement notes
in March, with a second issuance towards
the end of FY24.
Over the past 18 months, we have secured
£880m in facilities, termed in tranches out
to 2036.
We are as disciplined about the effective
recycling of capital as we are about its
deployment. Over the past five years, we
have completed seven disposals at average
multiples of 6x, including three disposals
following this year end.
Progressive dividend
Paying a progressive dividend is integral to
our discipline and we have a 25-year track
record of doing so. Last year, we reset our
dividend policy, decoupling it from growth
in earnings to grow at a more moderate 5%,
allowing more capital for redeployment
at high returns.
FY25 guidance
We have started FY25 well and our guidance
for the year reflects our confidence in the
resilience of our portfolio. At constant
currency, organic growth is expected to
be ca. 6% and operating margin ca. 21%.
Acquisitions announced to date, net
of disposals, will contribute ca. 2% to
reported revenue.
Chris Davies
Chief Financial Officer
READ MORE ABOUT OUR FY24 FINANCIAL
PERFORMANCE IN THE FINANCIAL REVIEW
ON PAGES 46-49.
ROATCE increased by 100 basis points
to 19.1%. Achieving strong returns
requires consistent discipline.
19.1%
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It is our colleagues that make
this business special. I am proud
of the unique culture Diploma
has and we will continue to create
an environment where all our
colleagues can thrive.
Developing brilliant leaders
We need leaders who can grow
businesses, thrive on accountability,
inspire colleagues and create inclusive
and high-performing cultures. This is
what delivers sustainable growth.
Having the right leadership in our business
is strategically critical and our track record
of growth means we are proactive about
developing leadership capability.
The role of a Managing Director is
exceptionally important at Diploma. This
is the role that owns the business, customer
and colleague agenda for each of our
businesses. We are focused on ensuring
we have the right leadership in each of these
key positions, driving greater diversity and
injecting strong commercial experience.
In FY25 we will implement Leadership
for Growth, a programme to support the
development of this cohort with specific
focus on inclusive leadership and driving
organic growth. This type of intervention
helps us to build connection and
collaboration across our businesses,
enabling shared learning and best practice.
We have strengthened remuneration at this
level with a focus on short-term incentives
to align reward closely with performance.
Beyond Managing Directors, our focus is on
building the bench strength required to drive
sustainable growth. Leadership at Scale, a
programme targeted at high potential leaders
from across our businesses, builds the skills
required to scale a business as it grows.
BRILLIANT
PEOPLE ENABLE
OUR STRATEGY
Capability and culture are critical
enablers of our ongoing scaling
journey. Our decentralised and
lean organisation, coupled with our
growth, places particular emphasis
on the people agenda.
We work hard to preserve our decentralised
structure and local ownership, prizing
minimal organisation layers to avoid
bureaucracy and ensure agility of execution.
In this context, we need brilliant leaders; a
strong pipeline of future talent that reflects
the communities within which we operate;
and, importantly, an engaging culture that
encourages colleagues to deliver brilliant
service to their customers every single day.
DONNA CATLEY
GROUP HR DIRECTOR
Additionally, we continue to build functional
depth across Sales, Finance, Operations and
HR. These are critical as our businesses grow
and scale.
Brilliant leadership, strong succession
and strong functional expertise are critical
enablers of growth in a lean, decentralised
organisation and we will remain focused
on this in years to come.
Investing in our people
It is our workforce of ca. 3,600 colleagues
that deliver for customers every day.
Investing in our people and ensuring they
can thrive in a culture of opportunity and
development is important to our success.
We know that the experience our colleagues
have with their managers has a profound
impact on them. To support our managers,
we have developed a line management
programme to equip them with the practical
people skills that make a difference and will
roll this out in FY25.
Developing the next generation of brilliant,
skilled colleagues is important. In the UK
we have expanded our apprenticeship
programme to cover all key businesses,
and we have something similar in other
geographies. We know this works, indeed
the Managing Director of M Seals – Thomas
Petersen – started his career as an apprentice
in the business. We are tremendously
proud of this.
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We have also invested in strengthening the
remuneration of colleagues. Three UK
businesses have become Real Living Wage
employers – this strengthens their ability to
attract and retain great talent. Beyond this,
R&G, our largest UK employer, has signed up
to the 5% Club, committing to 5% of their
workforce being in ‘earn and learn’ positions.
Continuing to invest in our people, ensuring
we have an inclusive culture across our
businesses so that people can grow will be
an evergreen priority for us.
Relentless focus is applied to our senior
hiring, and we have had notable success
in this space with around half of vacancies
filled by women during FY24, including
several key business leadership positions.
This means 38% of roles reporting directly
into an Executive Team member are held
by women.
We know that women can face challenges
to career progression, to address this we
have developed and launched Women in
Leadership. Created from the feedback
of over 100 women, the programme is
supporting the ongoing development of
female leaders across our global business.
We actively celebrate diversity across
Diploma and in FY24 held our inaugural
Diploma Pride and annual Diploma
International Women’s Day events.
These opportunities showcase the
amazing, diverse talent across Diploma
and demonstrate intentional and
inclusive leadership.
We are particularly proud of making positive
strides in our corporate centre where 49%
of colleagues are women and 38% of the
team identify as belonging to an ethnic
minority. Additionally, 11% of our workforce
identify as an ethnic minority and 10% of
our Top 150. Representing the communities
within which we operate continues to be a
focus for us.
Culture
The success of Diploma is founded upon our
unique culture, which is core to how we run
the Group. Our decentralised structure is
important, it helps us retain our culture of
local ownership and our lean organisation
minimises bureaucracy. We prize agility,
pace and accountability and work actively
to preserve this.
We are a service business and, as we
continue with our growth trajectory,
preserving employee engagement is
critical to value creation. We are proud
of the 87% response rate in our recent
colleague survey and our 79% engagement
score. In FY25 we will introduce engagement
into the remuneration of senior leaders
across Diploma, underscoring the
importance we place on colleagues
and culture.
Our people and culture are integral to our
success, preserving what makes us unique
whilst scaling as we grow is a critical priority.
We have strong momentum and there is
more to do.
Diversity, Equity and Inclusion
Our ambition is to be an organisation where
everyone can thrive. We have set targets to
reach gender balance (40%+) across our
Senior Management Team (SMT), which is
comprised of our top ca. 150 roles, by 2030.
We take this seriously as an Executive Team
and recently participated in an inclusive
leadership workshop designed to support
our own personal leadership journey.
Progress has been steady – 30% of the
SMT are now women, compared with 20%
in FY19, our efforts are intense to make
change happen.
SCAN THE QR CODE TO WATCH
ONE OF OUR SENIOR LEADERS
TALK ABOUT HER CAREER
AT DIPLOMA.
Our people and
culture are integral
to our success,
preserving what
makes us unique
whilst scaling as
we grow is a
critical priority.
We listen to our colleagues and are
pleased that 87% chose to share their
views and experiences through our
annual survey.
87%
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Investing in our people, ensuring
they can thrive in a culture of
opportunity and development
is important to our success.
DONNA CATLEY
GROUP HR DIRECTOR
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Diploma operates across broad
industrial and healthcare markets.
We have a diverse customer base,
from original equipment
manufacturers and repair shops,
to surgeons and pathologists.
The products and services we supply
are typically low cost but essential
components of mission-critical
end applications.
Our customers span a wide range of end
markets, from aerospace and motorsport to
infrastructure and renewables. Each with
differing market trends and drivers.
We supply to customers across broad
geographies in developed markets.
Each with differing economic and
geopolitical dynamics.
The diversification of our portfolio brings
resilience to Group revenue, enabling
consistently strong performance even
through a more challenging trading
environment in FY24.
READ ABOUT OUR FINANCIAL PERFORMANCE
ON PAGES 12-13
READ ABOUT OUR STRATEGY
ON PAGES 22-25
IDEALLY
PLACED IN
GROWTH
MARKETS
>20
End markets served
ca. 50%
of Group revenue from US
BROAD EXPOSURE
ACROSS ATTRACTIVE
GEOGRAPHICAL
MARKETS
Diploma is an international business with
diverse exposure across the developed
markets of North America, the UK, Europe,
and Australasia. Over the last five years,
Diploma has increased its exposure to North
America, with around half of Group revenue
now generated in the US, a key growth
market for Diploma. There is high demand
for value-added solutions in markets with
strong projected growth supported by
significant investment.
REVENUE BY DESTINATION
North America
56%
UK
16%
Europe
18%
Australasia/other
10%
READ ABOUT OUR GEOGRAPHICAL
WHITE SPACE ON PAGE 24
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Increasing our exposure to fast
growth markets
By executing on our disciplined growth
strategy, we seek opportunities – both
organically and through selective
acquisitions – that increase exposure to
markets with positive structural investment
trends. Our customers in these markets have
complex needs that are met through our
value-add proposition.
Continuation of this strategy will further
increase our revenue resilience, as well
as actively positioning us in the
sustainable economy.
Over the last five years, the Group has
significantly grown its presence in
structurally growing end markets.
These include renewables, datacentres,
electrification, aerospace, industrial
automation, in vitro diagnostics,
and infrastructure.
These markets are expected to grow by an
annual average of between 7% and 11%. As
well as driving growth through exposure to
market tailwinds, we also seek to gain share
through strategic execution.
DIPLOMA’S
STRATEGY TAKES
OUR BUSINESS
ACROSS MANY
END MARKETS
The diversity of our end market
exposure has increased significantly
in recent years. Through the
execution of our strategy we have
grown organically into new
segments, and acquired new
businesses that expand our
customer base across end markets.
We have increased our exposure to
fast-growing end markets, which are
expected to see average annual
growth of
7-11%
OUR END MARKETS
We have broad customer bases across a wide range
of diverse end markets, including:
Aerospace
Agriculture
Automation
Automotive
Datacentres & digital infrastructure
Defence
Electrification
Energy
Food & beverage
In vitro diagnostics
Industrial
Infrastructure
Marine
Medical & pharma
Mining
Motorsport
Oil and gas
Rail
Renewables
Scientific
Space
Water management
SECTOR
CONTROLS
SEALS
LIFE SCIENCES
FAST-GROWTH END MARKETS
2023 – 2030 CAGR FORECAST
Approximate growth rates based on company market data and research.
Renewables
Datacentres
Aerospace
Industrial automation
In vitro diagnostics
Infrastructure
10%
Electrification
9%
8%
8%
7%
11%
7%
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DELIVERING
SUCCESS
Diploma is a Group of value-add distribution
businesses serving a wide range of industrial
and life sciences end markets.
All of our businesses are different and they
deliver success in different ways through
our powerful decentralised culture. But,
there are some common characteristics to
all Diploma businesses: a strong value-add
customer proposition delivered by brilliant
people with strong leadership. We develop
our businesses and work with them to scale
as they grow, so that they become better
not just bigger businesses.
We are a lean decentralised Group
meaning we’re not here to standardise
our businesses, suppress their unique
identities, disempower local leaders or
add bureaucracy or unnecessary cost.
We are here to drive ambitious growth
and deliver it with discipline.
Through this model, we have a long history
of delivering strong shareholder value and
meaningful stakeholder impact.
To understand Diploma, it is important to
recognise the role of the corporate centre,
the Sectors and the characteristics that
make our businesses special.
OUR GROUP STRUCTURE
CORPORATE CENTRE
Lean functional teams supporting our businesses
SECTORS
A management structure with lean senior teams providing
focused leadership and strategic oversight (ca. 2-3 people per Sector)
CONTROLS
SEALS
LIFE SCIENCES
INTERNATIONAL
CONTROLS
WINDY CITY
WIRE
INTERNATIONAL
SEALS
NORTH
AMERICAN SEALS
LIFE
SCIENCES
BUSINESSES
17 agile, entrepreneurial businesses with dynamic, accountable leaders
IS Group
International
interconnect
solutions
Peerless
US specialty
fasteners
Clarendon
International
specialty
fasteners
Shoal
UK wire and cable
T.I.E.
US industrial
automation
Techsil
UK specialty
adhesives
Windy
City Wire
US wire and cable
R&G
UK fluid power
DICSA
European
fluid power
M Seals
European sealing
solutions
Diploma
Australia Seals
Australian pump
and sealing
solutions
Hercules
Aftermarket
US sealing
solutions
VSP
US sealing
solutions
Hercules OEM
US sealing
solutions
Life Sciences
North America
Life Sciences
Europe
Life Sciences
Australasia
Our business model
gives investors
access to growthy,
entrepreneurial
businesses,
with a FTSE 100
control wrapper.
CHRIS DAVIES
GROUP CFO
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BUSINESS MODEL
CORPORATE CENTRE
The role of the Corporate Centre is to support effective execution of our strategy to deliver value for our shareholders and wider stakeholders.
There are a number of ways in which we do this:
SKILLED LEADERSHIP AND
PERFORMANCE MANAGEMENT
Getting the best out of our businesses requires
skilled leaders who balance high-performance intensity
with empowering our businesses to deliver success
in their own way – always staying true to our powerful
decentralised culture. Managing the mood of the
organisation is critical. We have a lean central team
comprising functional experts who support our
businesses to grow and scale, whilst also delivering
the compliance and control obligations of a FTSE 100
Group. We dislike bureaucracy and strive to focus
on value-adding activities that don’t place
unnecessary burdens on our businesses.
HIGHLY EFFECTIVE CAPITAL ALLOCATION
We are a capital-light business, investing around
2% of revenue annually in scaling our businesses by
upgrading facilities, enhancing the use of technology
and investing in talent. We are selective in these scaling
investments and require high returns from them. The
main use of capital is to make selective acquisitions
that will accelerate future organic growth. We have a
clear set of criteria to determine businesses that may
be a good fit for us, strategically and culturally:
1. a value-added customer proposition,
2. a clear growth trajectory,
3. strong leadership.
We are incredibly disciplined in our acquisition process
and have high return thresholds. We have a strong track
record that we intend to maintain.
STRATEGIC DIRECTION
We have a clear Group strategy that flows through
our Sectors, to our businesses, and results in specific
strategic plans being set to grow and scale each
business. These plans are set collaboratively between
the corporate centre, the Sector and each business,
and each leader is accountable for their delivery.
Having incentive structures that align with our
strategy is vitally important.
CREATING A GROUP GREATER THAN
THE SUM OF ITS PARTS
Decentralised doesn’t mean isolated. Although our
businesses are very diverse, there’s great value in their
collaboration and the effects of a group network. This
takes many forms – the sharing of expertise, experience
and best practice; exploring cross-sell opportunities;
leveraging customer and supplier relationships; and
benefiting from the reputation and firepower of being
part of a large, successful Group.
OUTPUTS
Sustainable quality compounding: Through the effective execution of our strategy, our business model enables strong organic growth,
consistently high returns and excellent cash generation, allowing us to reinvest in acquisitions which accelerate revenue growth,
and pay progressive dividends to shareholders.
Read about our financial model on page 5
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SECTORS
As Diploma has grown, we have introduced a Sector management structure to provide focused leadership and strategic oversight.
Read about our Sectors on pages 28-45
BUSINESSES
Diploma has a diverse portfolio of businesses, which all share some key characteristics that identify them as Diploma businesses.
OUR BUSINESSES SUPPORT CUSTOMERS :
•
With technically demanding applications
•
Requiring critical products and processes
•
Operating in highly regulated environments
•
With high cost of failure projects
DESPITE THESE CRITICAL CONSTRAINTS,
THE PRODUCTS THEIR CUSTOMERS REQUIRE
ARE TYPICALLY:
•
Low component cost
•
Funded from operating expenditure
WHAT THEIR CUSTOMERS NEED FROM
A DISTRIBUTION PARTNER:
•
Expertise and technical support
•
Bespoke solutions
•
Supply chain management
•
Responsive customer service
•
Product range and availability
•
Quality assurance and certification
WHY OUR BUSINESSES ARE
BEST PLACED TO PROVIDE THIS:
•
Empowered leadership
•
End-to-end accountability
•
Agility and responsiveness
•
Engaged teams
•
Differentiated customer service
•
Local focus
•
Long-term partnerships
OUTPUTS
Loyalty = share of wallet | Reputation = market share potential | Pricing power = strong margins
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BUSINESS MODEL CONTINUED
G
R
O
W
SC
ALE
VALUE-ADD BUSINESS MODEL AT SCALE
POWERFUL DECENTRALISED GROUP AT SCALE
COMPLEMENTARY ACQUISITIONS TO DRIVE
FUTURE ORGANIC GROWTH
ORGANIC GROWTH IN THREE BUCKETS
Geographic
penetration
Product
extension
2
End
markets
1
3
OUR STRATEGIC FRAMEWORK
OUR STRATEGY IS TO BUILD HIGH-QUALITY, SCALABLE BUSINESSES
FOR SUSTAINABLE ORGANIC GROWTH
Grow:
Organic growth is our priority.
We drive organic growth in three
‘buckets’. Complementary
acquisitions accelerate organic
growth at great returns.
READ MORE ON PAGES 23-24
Scale:
Building effective scale is key.
We develop our businesses and
the Group to become better, not
just bigger. This supports long-
term delivery.
READ MORE ON PAGE 25
DVR:
Our sustainability framework,
Delivering Value Responsibly,
ensures we grow and scale in a
way that is socially and
environmentally responsible.
READ MORE ON PAGES 50-53
OUR STRATEGY
CONTINUES TO
DELIVER
JILL TENNANT
STRATEGY DIRECTOR
We have a clear and ambitious
strategy executed with discipline
by brilliant people across our
decentralised Group. This strategy
continues to deliver growth at
attractive margins.
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OUR STRATEGY
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.
GROW:
Our strategy is focused on sustainable
organic growth. We drive growth through
our portfolio of value-add distribution
businesses and make complementary
acquisitions to accelerate organic growth.
We balance ambition with discipline, driving
sustainable growth at strong returns.
ORGANIC GROWTH IN THREE BUCKETS
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.
COMPLEMENTARY ACQUISITIONS DRIVE
FUTURE ORGANIC GROWTH
We make complementary acquisitions
to drive future organic growth,
positioning behind fast-growing end
markets, expanding our footprint in core
geographies, or extending our product
offering. Acquisitions also help us to build
scale and resilience, bring in new talent and
expertise, and drive great returns on capital.
The majority of our acquisitions are bolt-
ons to existing businesses but, occasionally,
we execute larger deals which provide
a platform for accelerated growth.
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.
Occasionally, we divest businesses that
no longer align with our strategy. We are
long-term holders of businesses – but it
is an important discipline in our effective
deployment of capital.
LEARN MORE ABOUT OUR APPROACH TO
ACQUISITIONS ON OUR WEBSITE
WWW.DIPLOMAPLC.COM/ABOUT-US/
ACQUISITIONS/
1. End markets
We have an exciting opportunity
to access structurally high-growth
end markets, such as renewables,
datacentres, electrification,
aerospace, industrial automation,
in vitro diagnostics, and infrastructure.
We have increased our exposure in
these markets, but still have a very
small share.
2. Geographic penetration
We remain focused on our core,
developed economies of North
America, UK, Europe, and Australasia.
We have minimal market share – or
none at all – in most of our product
verticals across our core geographies
and so we do not need to look to
higher-risk, developing markets for
growth. There is lots to go for in our
established geographies.
3. Product extension
We expand our addressable markets
by extending our product offering.
We do this through continuous
product innovation; coordinated
cross-selling across different Group
businesses; or, selectively, through
building out material new product lines
that fit our value-add distribution
model.
DISCIPLINED CAPITAL ALLOCATION
Diploma has made
seven acquisitions
and three disposals
since the start of
FY24 across
Controls and
Seals Sectors.
LEARN MORE ON
PAGES 28-39
Sustainable
organic growth
is the foundation
of quality
compounding.
CHRIS DAVIES
GROUP CFO
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OUR STRATEGY: GROW
OUR GEOGRAPHIC AND PRODUCT OPPORTUNITIES
MARKET SHARE
Significant
Moderate
Small
White space
We are only just
getting started. We
have massive white
space potential for
growth.
JOHNNY THOMSON
GROUP CEO
Exciting growth prospects: geographic
and product white space
We have significant white space
opportunity to expand our geographical
reach and extend our product offering.
In our core developed geographies, our
penetration remains very small and there
are opportunities to expand in all of these
markets. As well as extending product
ranges within existing product verticals,
we occasionally add new verticals which
pave the way for future expansion.
Geographical expansion and product
extension are delivered both organically
and through selective acquisitions.
ADDRESSABLE
MARKET
OUR
SECTORS
OUR PRODUCT
VERTICALS
OUR GEOGRAPHIC REACH
US
CANADA
UK &
IRELAND
GERMANY
FRANCE
SPAIN
OTHER
EU
ANZ
CURRENT
ADDRESSABLE
MARKET
CONTROLS
Wire & cable
Interconnect solutions
Specialty fasteners
Specialty adhesives
Industrial automation
SEALS
Seals
Gaskets
Hoses & fittings
Pumps & valves
LIFE
SCIENCES
In-vitro diagnostics
Medtech
Scientific
GROWING
ADDRESSABLE
MARKET
NEW PRODUCT
VERTICALS
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OUR STRATEGY:
GROW CONTINUED
SCALE:
Our differentiators are our value-add
business model and decentralised culture.
As we grow, we must also scale our
businesses and our Group to preserve and
enhance those differentiators and ensure
sustainable delivery for the long term.
VALUE-ADD BUSINESS MODEL AT SCALE
Scaling is a journey that needs careful
management in each business. Retaining
the qualities which underpin their success
whilst positioning each value-add business
model to be successful at scale. In line
with our decentralised culture, each of
our businesses has its own scaling plan.
Each plan includes the processes and
core competencies that underpin it, and
the capability – talent, technology, and
facility – required to deliver it.
Whilst the specifics are unique to each
business, there are core attributes and
competencies which are common to all:
value-add, route to market, operational
excellence, supply chain management,
commercial discipline, and sales
excellence. Strengthening these
competencies requires our businesses
to be more strategic, structured and
systematic. The discipline of continuous
improvement is essential to develop
the right capability for the future.
READ MORE ABOUT OUR BUSINESS MODEL
ON PAGE 19-21
POWERFUL DECENTRALISED GROUP
AT SCALE
Our powerful decentralised model means
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. We follow a few
core principles to preserve our
decentralised culture:
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.
We have lean structures with
dynamic leaders
By remaining lean, we ensure agility and
execution and avoid unnecessary
bureaucracy. This approach requires great
management, and so we have development
and engagement programmes to ensure this.
We stay in tune with the “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.
READ MORE ABOUT OUR DECENTRALISED
CULTURE ON PAGE 15
SCALING PLATFORMS FOR SUSTAINED GROWTH
As our businesses grow, they naturally
become more complex. The teams,
systems and process, and facilities that
drove success on a small scale require
conscious development to support
ambitious growth plans. Our strategy
supports the individual scaling journey of
each business to make them better, not
just bigger businesses.
SMALL
BUSINESS
• Hands-on business leader
• Individuals wear many hats
• Responsive service
• Manual
• Family feel
FROM:
TO:
SCALED
BUSINESS
• Strategic, structured leadership
• Broader management capability
• Seamless, customer-led
processes
• Technology-enabled: data
and automation
• Commercial, agile,
innovative
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OUR STRATEGY: SCALE
24
23
22
21
20
-7
+12
+15
+8
+6
24
23
22
21
20
538
787
1,013
1,200
1,363
24
23
22
21
20
16.2
18.9
18.9
19.7
20.9
24
23
22
21
20
56.4
85.2
107.5
126.5
145.8
24
23
22
21
20
113
103
90
100
101
24
23
22
21
20
19.1
17.4
17.3
18.1
19.1
Organic revenue growth
(%)
Our strategy is designed to
drive organic revenue
growth. This is our key
metric. We have a diversified
portfolio, giving resilience to
revenues.
Reported revenue
(£m)
We accelerate organic
growth with selective
high-quality acquisitions
across our three Sectors.
This metric includes organic
growth, inorganic growth
and the impacts of foreign
exchange translation.
Adjusted operating margin
(%)
Our differentiated value-add
solutions and customer-
focused approach drive
customer loyalty and create
pricing power, supporting
sustainable and attractive
margins.
Adjusted EPS
(p)
EPS growth is a measure of
how successful we have
been in growing organically
and through acquisition,
including capital allocation
and tax considerations.
Free cash flow conversion
(%)
A strong balance sheet and
cash flow fuel our growth.
Our low-capital intensity
enables strong cash flow
conversion.
ROATCE
(%)
Return on Adjusted Trading
Capital Employed (ROATCE)
measures how successful
we are at generating returns
on the investments we
make. It holds us to account
against initial investments
made, ensuring our
performance is driven by
genuine economic factors.
In year performance:
Growth in all three Sectors.
Double-digit growth in
Controls and a strong
performance in Life
Sciences provided balance
to more modest growth
in Seals.
In year performance:
Strong organic growth plus
10% contribution from
acquisitions, partially offset
by foreign exchange
headwind.
In year performance:
120 basis points increase
year on year, reflecting
operational leverage from
the growth of our value-add
businesses and recent
acquisitions with accretive
margins.
In year performance:
Strong contributions from
organic and inorganic
growth more than offset a
foreign exchange headwind
and higher interest and tax
charges
In year performance:
Strong cash conversion was
driven by a focus on
inventory optimisation across
a number of businesses, and
supported by low capital
requirements in the year, at
ca. 1.5% of revenue.
In year performance:
At 19.1%, returns are more
than twice our cost of
capital. This reflects strong
discipline across the Group,
including when making
acquisitions.
Financial model:
5%
Financial model:
10% growth (at constant
currency)
Financial model:
20%+
Financial model:
Double-digit growth
Financial model:
90%
Financial model:
High teens
Five-year performance:
7%
five-year average
Five-year performance:
20%
five-year compound
Five-year performance:
19%
five-year average
Five-year performance:
18%
five-year compound
Five-year performance:
101%
five-year average
Five-year performance:
18%
five-year average
READ ABOUT OUR ALTERNATIVE PERFORMANCE MEASURES ON PAGES 183-184
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KEY PERFORMANCE INDICATORS
FINANCIAL KPIS
Continued strong performance against our strategic objectives
(as set out on pages 22-25), our financial model (see page 5) and our
sustainability framework, Delivering Value Responsibly (see pages 50-53).
24
23
22
79
80
79
24
23
22
27
28
30
24
23
22
59
73
90
24
23
22
3.6
3.0
3.4
24
23
22
7,715
9,123
7,745
24
23
22
60
32
23
Colleague engagement
(%)
We value our colleagues and
want them to be engaged
and fulfilled in their roles.
As a service-led business,
this is a key commercial
differentiator.
Measuring and maintaining
high colleague engagement
supports the delivery of
sustainable growth and
value creation.
Women in Senior
Management Team (%)
Diversity, equity and
inclusion is a competitive
advantage that can
support our businesses’
growth by bringing diverse
perspectives and experience
to our workforce and driving
stronger outcomes.
Key suppliers aligned to
supplier code (%)
We expect our key suppliers
to adhere to ethical,
professional, and legal
standards and support our
environmental and social
commitments.
We ask them to work with us
to reduce waste, emissions,
and climate change impacts,
and uphold human rights
across the value chain.
Lost time incident
frequency rate (LTIFR)
We prioritise the safety of
our colleagues. Embedding
a strong health and safety
culture and practices will
enhance performance and
productivity and reduce
costs.
Our LTIFR reflects the
number of lost time
incidents (LTIs) per million
hours worked.
Total Scope 1&2 emissions
(tonnes CO2e)
We recognise the impact of
our operations on emissions.
Beyond the moral obligation,
we understand that reducing
emissions contributes to
long-term value creation
and supports the growth of
our businesses.
Waste to landfill
(%)
Across our sites, reducing
waste to landfill has a
positive environmental
impact and generates
cost savings by creating
efficiencies, such as
reducing packaging
and improving waste
management processes.
In year performance:
We achieved a consistently
high Colleague Engagement
Survey Index Score of 79%.
Importantly, this was
coupled with a high
response rate of 87%.
In year performance:
We made steady progress
against our target and ran
a number of initiatives to
support the inclusion and
retention of our female
colleagues.
In year performance:
90% of key suppliers are
aligned with our Supplier
Code, surpassing our target
and ensuring responsible
practices in our value chain.
In year performance:
Our LTIFR was 3.6. We
continue to drive actions
and culture on health and
safety, which will remain an
area of focus in FY25.
In year performance:
We reduced our Scope 1&2
market-based emissions by
15% against the prior year,
largely driven by renewable
energy procurement in
our businesses.
In year performance:
We reduced our proportion
of waste to landfill to 23%
through improved data
accuracy and waste
management processes
across our operations
FY30 target:
maintain >70%
FY30 target:
40%
FY30 target:
85%
FY30 target:
Zero harm
FY30 target:
>50%
Reduction in market-based
Scope 1&2 (FY22 baseline)
FY30 target:
<15%
READ ABOUT OUR ESG INITIATIVES IN OUR DELIVERING VALUE RESPONSIBLY SECTION ON PAGES 50-53
NON-FINANCIAL KPIS
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KEY PERFORMANCE INDICATORS CONTINUED
The Controls Sector businesses deliver a wide range
of products for technically demanding applications
across broad end markets, including aerospace,
infrastructure, energy, medical and rail.
CONTROLS
SECTOR
FINANCIAL HIGHLIGHTS
£652.4m
Revenue
FY23: £568.4m | +15% YoY
£169.9m
Adjusted operating profit
FY23: £136.6m | +24% YoY
£132.3m
Statutory operating profit
FY23: £112.9m | +17% YoY
+10%
Organic revenue growth
FY23: +11%
26.0%
Adjusted operating margin
FY23: 24.0% | +200bps
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SECTOR REVIEW: CONTROLS
WHO
WE ARE:
WHAT
WE SELL:
WHERE
WE SELL:
WHO WE
SELL TO:
REVENUE BY PRODUCT1
REVENUE BY GEOGRAPHY1
INTERNATIONAL CONTROLS1
IS Group
18% of Sector revenue | HQ: UK
Peerless
18% of Sector revenue | HQ: US
IS Group supplies electrical-mechanical interconnect
solutions to customers in defence, energy, medical
and industrial markets. Customers benefit from
tailored solutions, responsive customer service
and technical knowledge.
Peerless supplies a specialised range of high
performance fasteners to customers in the aerospace
market. Customers benefit from breadth of inventory,
technical expertise, quality assurance and
certification, full lot traceability, bespoke kitting and
automatic inventory replenishment.
Clarendon
12% of Sector revenue | HQ: UK
Shoal
6% of Sector revenue | HQ: UK
Clarendon supplies a range of specialty fasteners
to into aerospace, space, motorsport and defence
markets. Customers benefit from technical expertise,
quality assurance and certification, design, bespoke
kitting and automatic inventory replenishment.
Shoal supplies specialist wire & cable solutions to data
centres, rail, energy, marine and construction
industries. Customers benefit from same-day
despatch, technical support and custom-made
product and inventory solutions.
T.I.E.
4% of Sector revenue | HQ:US
Techsil
2% of Sector revenue | HQ: UK
T.I.E. provides components for the 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.
Techsil supplies specialty adhesives, to customers in
a broad range of industrial manufacturing markets.
Customers benefit from innovative and bespoke
solutions, inventory and supply chain management,
kitting and deep technical support.
WINDY CITY WIRE1
Windy City Wire
40% of Sector revenue | HQ: US
Windy City Wire supplies low-voltage wire and cable
management solutions into broad industrial and
infrastructure markets and datacentres. Customers
benefit from innovative solutions, expert technical
support and significant cost and time savings –
from concept to completion.
OUR END MARKETS
Aerospace
Automation
Automotive
Datacentres & digital
Defence
Electrification
Energy
Industrial
Infrastructure
Marine
Medical & pharma
Motorsport
Oil & gas
Rail
Renewables
Space
OUR CUSTOMERS
Our Controls businesses supply a wide range of
customers across complex supply chains in
technically demanding applications often with high
regulatory requirements. Customers include Original
Equipment Manufacturers, large infrastructure
project managers and businesses providing
maintenance and repair services.
LEARN MORE ABOUT OUR CONTROLS
SECTOR ON OUR WEBSITE: WWW.
DIPLOMAPLC.COM/OUR-BUSINESSES/
CONTROLS/
1 Revenue on a pro forma basis as stated on page 30.
46% Wire & cable
30% Specialty fasteners
18% Interconnect solutions
4% Industrial automation
2% Specialty adhesives
67% North America
15% United Kingdom
14% Europe
4% Other
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SECTOR REVIEW: CONTROLS CONTINUED
2024 HIGHLIGHTS
12%
Strong performance in International
Controls with organic revenue growth of
12% driven by share gains in fast growing
end markets.
7%
Windy City Wire (WCW) grew organic
revenue 7%, with particularly strong
performance from datacentres.
26%
Adjusted operating margin up 200 basis
points to 26%, driven by positive leverage
from volume growth, mix benefits and
margin accretive acquisitions and
disposals in the current and prior year.
Strategic acquisition of Peerless builds
scale and expands our specialty fasteners
presence in US and European aerospace
and defence markets.
International Controls has
delivered a very strong
performance with double-digit
organic growth.
It has been another great year for
Windy City Wire and we are well
positioned for more growth in the
year ahead.
RICH GALGANO
CEO, WINDY CITY WIRE
DAVID GOODE
CEO, INTERNATIONAL
CONTROLS
International Controls
(60%1 of Controls Sector revenue) delivered
12% organic growth in the year. The Sector
continues to benefit from market share
gains and strong customer demand in civil
aerospace and space markets as well as
tailwinds in UK and European defence and
energy markets as a result of sustained
investment. In the year, International
Controls further penetrated exciting end
markets in medical, solar, renewables and
eVTOL (electric Vertical Take-Off and
Landing). Operating margin increased
materially, driven by positive operating
leverage on volume growth and accretion
from the acquisition of Peerless.
Windy City Wire (WCW)
(40%1 of Controls Sector revenue) has
delivered another strong result, with an
acceleration in growth in the second half,
driven by increasing exposure to fast-
growth markets, particularly datacentres
behind AI growth and continued expansion
into distributed antenna systems.
Performance in its core buildings market has
held up well and delivered good growth in
the year. WCW’s operating margin has
continued to improve, benefitting from
positive operating leverage and its growing
presence in diversified end markets.
Revenue diversification driving
organic growth
Our interconnect solutions business, IS
Group, delivered high single-digit growth,
principally driven by strong performance in
the UK with growth within the motorsport,
aerospace and defence markets. Revenues
in Germany also grew well, driven by share
gains in the energy market and ongoing
investment into the transmission
infrastructure. Also in Germany, we gained
share and benefitted from momentum in
the growing medical market, supported
by the acquisition of a small bolt-on,
which widens our product offering and
strengthens internal capability into this
high-growth end market.
Clarendon, one of our specialty fasteners
businesses, delivered double-digit growth
during the year. In the civil aerospace
market, customer demand was high and
Clarendon gained further share in both
Europe and the US. Significant contract wins
with key customers in the space market also
contributed to the strong performance.
We welcomed another specialty fasteners
business, Peerless, to the Group at the start
of May. It has made a very strong start,
benefitting from market share gains and
high customer demand. Like Clarendon,
Peerless is an agile business, able to provide
rapid and bespoke solutions for customers
in a complex civil aerospace supply chain.
We have won key civil aerospace and
defence contracts covering seats, cabin and
airframe across Clarendon and Peerless as
well as Clarendon securing contract wins in
1 Pro forma revenue is stated after total adjustments
of £68.1m to reported revenue for acquisitions
completed during the year and disposals relating
to assets held for sale.
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SECTOR REVIEW: CONTROLS CONTINUED
Capital discipline
In continuing our disciplined approach to
portfolio management, in October 2024, we
disposed of Gremtek, which was part of our
international interconnect solutions
business, for ca. £5m. Gremtek is located in
France and supplies different end markets
to the rest of IS Group.
Outlook
The year has started well with continued
momentum across the Sector.
Whilst we expect Peerless and Clarendon to
continue delivering strong growth in the civil
aerospace market, we expect performance
to moderate somewhat from the high
growth of FY24 as other businesses within
the Sector deliver improved performance.
With increasing exposure to structurally
growing end markets, and having invested in
facilities, technology and talent in a number
of businesses throughout FY24, we have
positioned our businesses well to deliver
another strong year of growth in FY25.
Targeted acquisitions to accelerate growth
In May, the Sector completed the acquisition
of Peerless for £243m, expanding our
presence in the specialty fasteners market
in civil aerospace and defence from the
interior of aircraft to the airframe. This
exciting new addition to the Sector is highly
complementary to our Clarendon business.
Peerless drives product expansion and
deepens geographic penetration in the
key US and European markets.
Two smaller bolt-on acquisitions were
completed in the year, both in Germany.
CTS joined the ISG group of companies,
broadening our medical product and
capability offering, and the addition of
Technisil expands Techsil’s specialty
adhesives offering in the German market.
Building scale
During the second half of the year, Shoal
completed the integration of its three UK
wire and cable businesses into one state-of-
the-art automated facility, also introducing a
shared ERP platform. This significant project
is pivotal to Shoal’s scaling journey and will
deliver operational efficiencies and
meaningful commercial benefits through
enhanced cross-selling capabilities. A larger
footprint increases capacity through which
to drive future organic growth. This was a
major change programme, and whilst it
positions us well for the future, it did impact
operational performance in the second
half of the year.
Shoal’s state-of-the-art, automated
facility houses its newly integrated
UK wire & cable business. This
scaling project delivers operational
efficiencies, better collaboration
and cross-selling opportunities.
the space market. We continue to diversify
into eVTOL and UAVs (Unmanned Aerial
Vehicles) and see these as key markets of
the future. Geographic diversification has
been a theme in both aerospace and
defence with important wins in Europe
and the US.
T.I.E., our industrial automation business,
saw momentum towards the end of the year,
after a more challenging start to the year,
principally due to disruption from strike
action in the automotive markets and
cautious capital spending across the
customer base. Since acquiring T.I.E. in
FY23, we have invested in enhancing the
commercial operation of the business,
including expansion of the sales team to
drive geographic expansion across the US.
In Shoal, our UK wire and cable business, the
impact of softer demand in UK construction
and wholesale end markets was partially
mitigated by stronger export sales, a strong
solar offering and exposure to major
infrastructure projects. Shoal is increasing
its exposure to the fast growing datacentre
market in the UK. In the US, Windy City Wire
is similarly accelerating growth through its
expansion into datacentres.
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SECTOR REVIEW: CONTROLS CONTINUED
PEERLESS
AEROSPACE
A GREAT
STRATEGIC FIT
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SECTOR REVIEW: CONTROLS
CASE STUDY
PEERLESS AEROSPACE FASTENERS
Diploma welcomed Peerless to the
Group in May 2024.
Peerless is a leading supplier of specialty
fasteners to the aerospace and defence
markets in the US and Europe.
Founded in 1952 and headquartered in
Farmingdale, New York, Peerless has
established itself as one of the largest
independent value-add distributors of
aerospace fasteners.
Led by longstanding CEO, Bill Way, and
President, Don Russo, the business is
renowned for its high-quality products,
excellent customer service, and innovative
solutions. Customers also benefit from
product tracking and traceability, scheduled
inventory management, bespoke and
automated vendor-managed inventory
solutions, and custom kitting.
Great strategic fit
Peerless has attractive, Diploma-style
characteristics: a clear, value-add customer
proposition, excellent growth potential, and
a strong management team. The acquisition
is firmly aligned with Diploma’s strategy:
extending our range of specialty products;
growing our geographical footprint; and
increasing our exposure to the fast growth
aerospace market.
Peerless is complementary to Diploma’s
existing Clarendon business, extending the
product offering from aircraft cabin to
airframe fastening solutions. The acquisition
strengthens and expands Diploma’s
positions in the US and Europe. In the US, it
extends Diploma’s footprint from the West
Coast, where Clarendon has a strong
presence, to the East Coast.
Peerless significantly enhances Diploma’s
capabilities and market presence in the
attractive aerospace sector. The aerospace
fasteners market, valued at close to £6bn,
is highly fragmented and critical to aircraft
manufacturing. Commercial aircraft require
up to 400,000 individual fasteners in the
airframe while for larger wide-body aircraft
this rises to as many as one million. There is
a significant production backlog in civil
aerospace of over 10 years.
There are clear opportunities for
Peerless and Clarendon to work together,
leveraging their individual offerings,
combined expertise, supplier and
customer relationships.
Why Diploma is a good home for Peerless
Peerless has a strong culture, a history as a
close family-run business, and it has a great
reputation. The owners and managers of
Peerless wanted to find the right home for
their business – one that would preserve its
legacy. Diploma’s track record as an
acquirer was key to the decision, particularly
for Bill and Don, who have led the business
for decades, and continue to do so in their
current roles, with full accountability for its
operations and performance. At the same
time they, and their employees, also benefit
from being part of a large, international
Group with the resources, networks and
expertise that brings. The Peerless team was
particularly excited about the opportunities
to collaborate with Clarendon – seeing the
complementary customer relationships and
market exposure as strong growth drivers.
A strong start
Peerless has a market-leading reputation,
built over decades. This, combined with its
deep customer and supplier relationships
and extensive inventory of high quality
specialty fasteners, positions it well for
continued growth. Peerless has a long track
record of strong revenue growth and high
operating margins. In the first five months of
ownership, the business exceeded
Diploma’s expectations as it leveraged its
strong position and agility as a supplier in
the complex aerospace supply chain.
Peerless is an
excellent acquisition
for Diploma, aligned
to our strategy of
building high quality,
scalable businesses
for sustainable
organic growth.
DAVID GOODE
CEO, INTERNATIONAL CONTROLS
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SECTOR REVIEW: CONTROLS
CASE STUDY CONTINUED
HEADQUARTERS
Farmingdale,
NY
The Seals Sector businesses supply sealing and
fluid power products and solutions into aftermarket
repairs, Original Equipment Manufacturing (OEM) and
Maintenance, Repair and Overhaul projects (MRO)
across wide-ranging end markets.
SEALS
SECTOR
SECTOR REVIEW: SEALS
FINANCIAL HIGHLIGHTS
£489.1m
Revenue
FY23: £419.0m | +17% YoY
£90.7m
Adjusted operating profit
FY23: £79.0m | +15% YoY
£62.2m
Statutory operating profit
FY23: £55.8m | +11% YoY
+1%
Organic revenue growth
FY23: +5%
18.5%
Adjusted operating margin
FY23: 18.9% | -40bps
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WHO
WE ARE:
WHAT
WE SELL:
WHERE
WE SELL:
WHO WE
SELL TO:
REVENUE BY BUSINESS1
REVENUE BY GEOGRAPHY1
44% Seals
25% Gaskets
24% Hoses & fittings
7% Pumps & valves
45% North America
24% United Kingdom
17% Europe
14% Australasia/other
OUR END MARKETS
Aerospace
Agriculture
Automotive
Defence
Electrification
Energy
Food & beverage
Industrial
Infrastructure
Marine
Medical & pharma
Mining
Oil & gas
Rail
Renewables
Water management
OUR CUSTOMERS
Our Seals businesses sell to a wide range of
customers across the product lifecycle from Original
Equipment Manufacturers (OEMs) to Aftermarket,
and including Maintenance, Repair and Overhaul
(MRO) projects.
LEARN MORE ABOUT OUR SEALS
SECTOR ON OUR WEBSITE: WWW.
DIPLOMAPLC.COM/OUR-BUSINESSES/SEALS/
INTERNATIONAL SEALS1
R&G
23% of Sector revenue | HQ: UK
DICSA
15% of Sector revenue | HQ: Spain
R&G delivers high-quality, reliable fluid power
solutions tailored to the needs of its diverse customer
base. R&G mainly supplying into aftermarket
applications and their customers benefit from their
extensive experience, expertise, product knowledge
and inventory.
Specialising in high-quality stainless steel hydraulic
fittings, DICSA supplies a range of fluid power
solutions across many end markets. Customers benefit
from product assembly and testing, deep technical
expertise, breadth of inventory, and advanced
international logistics.
M Seals
6% of Sector revenue | HQ: Denmark
Diploma Australia Seals (DAS)
10% of Sector revenue | HQ: Australia
M Seals supplies high-quality custom sealing solutions
for a wide range of industrial applications. Customers
benefit from bespoke services including design and
engineering support, and quality control and testing.
DAS supplies premium mechanical
engineering products, parts and servicing for equipment
in markets including mining and water management.
Customers benefit from reduced lifecycle costs through
improved efficiency and reliability, and reduced energy
consumption and downtime.
NORTH AMERICAN SEALS1
Hercules Aftermarket
19% of Sector revenue | HQ: US
VSP
14% of Sector revenue | HQ: US
Hercules Aftermarket supplies an extensive range of
sealing products and custom kits to customers
repairing heavy machinery and hydraulic equipment
across many industries. Customers benefit from
next-day delivery, technical assistance, usage and
installation instructions, kitting and custom seals,
quality assurance and training.
VSP is an engineering-focused company providing
bespoke solutions for high-cost-of-failure
applications in the transportation, chemical
processing, energy, and marine industries. Customers
benefit from technical expertise, custom engineering,
ongoing support and significant cost savings.
Hercules OEM
13% of Sector revenue | HQ: US
Hercules OEM provides a wide range of products and
technical solutions to OEMs. Customers benefit from
bespoke services including design and engineering
support, and quality control and testing.
1 Revenue on a pro forma basis as stated on page 36
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SECTOR REVIEW: SEALS CONTINUED
2024 HIGHLIGHTS
1%
Organic revenue growth of 1%
demonstrating resilient performance
against a challenging market backdrop.
£90.7m
Adjusted operating profit of £90.7m, up
15%, reflects the full-year contribution of
DICSA, current year acquisitions and the
impact of investments made in facilities,
technology and talent to support future
growth.
Margin decline of 40 basis points reflects
ongoing investment in the segment to
better position for future growth.
I am pleased with our resilient
performance against a tougher
market backdrop.
We have invested in facilities,
technology and talent to
prepare ourselves for the
opportunities ahead.
ALESSANDRO LALA
CEO, INTERNATIONAL
SEALS
TED MESSMER
CEO, NORTH AMERICAN
SEALS
International Seals
(54%1 of Seals Sector revenue) was resilient,
delivering organic revenue growth of 1%.
Strong growth in Australia mitigated the
impact of the challenging market backdrop
in Europe. The Sector continues to expand
into markets that are structurally growing
and that benefit from sustained investment.
We made a number of quality acquisitions in
the UK in the year, extending product range,
expanding end markets and further
penetrating the UK. Investment in facilities,
technology and talent in the year positions
the Sector well for FY25.
North American Seals
(46%1 of Seals Sector revenue) delivered
organic growth of 1%, despite contraction in
the US manufacturing market. Solid growth
in the core aftermarket repair segment
mitigated the impact of reduced activity
across OEM and some aftermarket reseller
customers. Performance in the year was
driven by new contract wins, product
extension and expansion into end markets
including energy, water, and hydraulics.
Investment in talent and technology in the
year will support future growth.
Revenue diversification driving
organic growth
In challenging market environments, the
quality of our Seals portfolio has shone
through with a resilient revenue
performance. In International Seals, Diploma
Australia Seals delivered strong growth as its
value-add customer proposition drove share
gains in markets benefitting from sustained
infrastructure investments as well as
continuous strong demand for the mining
of the minerals required for batteries for
energy storage. Our UK fluid power
business, R&G, was impacted by delays to
infrastructure projects in the mining, rail,
and naval sectors.
M Seals delivered a strong second half,
securing new contract wins for projects in its
Nordic markets. As expected DICSA, our
Spanish fluid power business acquired in
FY23, delivered modest growth reflecting
destocking in the first half of the year
and the ongoing challenging backdrop
in Europe.
In North American Seals, VSP delivered very
strong organic growth across all its core
markets in the year. This performance was
supported by new contract wins in the
transportation market, product extension
to broaden the range available to industrial
customers, and cross-selling opportunities
arising from prior year acquisitions.
1 Pro forma revenue is stated after total adjustments of
(£34.8m) to Reported revenue for acquisitions
completed during the year and disposals relating to
assets held for sale.
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SECTOR REVIEW: SEALS CONTINUED
Capital discipline
Continuing our disciplined approach to
portfolio management, in October 2024,
we made two disposals in the Seals Sector:
Kubo, a Swiss OEM-focused business, and
Pennine Pneumatics, a UK business, which
was part of R&G. Kubo, which was sold for
ca. £28m, has a strong value-add
proposition but requires increased vertical
integration to support future growth.
Pennine, with a less-scalable proposition,
was sold for ca. £12m to its largest supplier.
Outlook
The Seals Sector remained resilient and
continued to grow through difficult trading
conditions in FY24. This is testament
to the diversification of the portfolio
and the strength of our value-add
customer propositions.
Whilst customer activity remains cautious,
we expect a stronger performance in FY25
in both our International and North American
Seals businesses. We anticipate a
resumption of investment across
infrastructure and industrial end markets in
the US, the UK and Europe following a
recent period of uncertainty in many
countries in which we operate.
Having invested in our businesses in our
North America and International Seals
businesses throughout FY24, they are well
positioned to drive stronger growth as
market conditions improve.
Building scale
During a period of slower growth, we have
taken the opportunity to invest in our Seals
businesses to build a stronger platform from
which to grow when the trading environment
improves. Across the Sector, we have
invested in talent to strengthen and develop
areas including sales and supply chain
management. In Hercules Aftermarket, we
have also enhanced our digital platforms
and customisation capabilities. We also
undertook a restructuring project to better
position the Sector for growth.
Significant investments in facilities in
International Seals are important steps on
M Seals’ and R&G’s scaling journeys. M Seals
opened its new state-of-the-art facility in
Denmark, creating a Nordic hub for the
Sector, providing improved warehousing
capabilities and a wide range of value-add
services to support future growth. In the UK,
R&G created a National Distribution Centre
in Lincoln as the main stocking location for
its Hydraulics businesses and also
introduced a hose assembly Centre of
Excellence in Liverpool. In Diploma Australia
Seals, an integration project to combine
three previously standalone businesses into
one has been successful and provides a
solid platform to further build on the strong
performance of this business.
Targeted acquisitions to accelerate growth
During the year, four new UK businesses
were welcomed into R&G, expanding end
market exposure, extending our product
range, and penetrating the UK market
more widely.
PAR Group significantly expands our
aftermarket seals & gaskets capabilities
in the UK and further diversifies R&G’s
customer base and end market exposure.
The acquisition presents strong opportunities
for organic growth, synergies and cross-
selling. Fast Gaskets is a distributor of
soft gaskets and rubber sheets, and is
an approved supplier to the UK defence
industry. PTFE Flex is a specialist solution
provider into the food & beverage,
pharmaceutical, and chemical end markets.
Abbey Hose, a specialist hydraulic and
industrial hose distributor, extends R&G’s
geographical reach within the UK and
creates access to key infrastructure
projects and customers.
Our new M Seals facility, which
opened in January this year, creates
a Nordic hub for the Seals Sector.
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SECTOR REVIEW: SEALS CONTINUED
DIPLOMA
AUSTRALIA SEALS
SOLVING
COMPLEX
CHALLENGES
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SECTOR REVIEW: SEALS
CASE STUDY
FINDING SOLUTIONS TO
COMPLEX CHALLENGES
THE CHALLENGE
• Diploma Australia Seals’ customer – a
bulk sand supplier – faced suppressed
production capability, high overhead
costs and non-compliant processes
THE SOLUTION
• Customer approached DAS business,
FITT Resources
• Drawing on technical product expertise,
they designed a new solution and
leveraged exclusive distribution rights
to deliver it to the customer
THE OUTCOME
• Customer more than doubled output,
reduced overheads and complied with
council-enforced operating restrictions
Diploma Australia Seals (DAS) specialises
in the supply of premium mechanical
engineering products, parts and servicing
for a range of industrial applications.
They work closely with their customers to
understand their challenges, build solutions
that save their customers cost and improve
reliability, efficiency and safety.
The challenge
DAS business, FITT Resources, was
approached by a bulk sand supplier
operating their own quarry on the Gold
Coast. The customer was using a dredge to
transport sand from their quarry pond to a
processing plant located 1km away. The
dredge they were using was inefficient,
labour intensive to operate, and didn’t
comply with council-enforced noise and
operating limits. Furthermore, it struggled
to maintain production of 150,000 tonnes
of sand per year.
The solution
FITT Resources was able to draw on its
in-house expertise on product and
application use to design the right dredge
solution for the customer. Importantly,
they were able to leverage their exclusive
distribution agreement for Australia and
New Zealand with a global dredge supplier.
The outcome
The package system FITT Resources
designed and delivered for the customer
comprised a dredge with a pump and GPS
automation, which supports remote and
autonomous dredge operation and allows
for consistent and continuous flow of
product to the process plant.
Importantly, the ability to operate the
dredge remotely from a centralised control
significantly reduces health and safety risk
as operators are no longer required to enter
high-risk zones.
The new system allowed the customer to
more than double their annual production
of sand to over 330,000 tonnes, and
reduce their overheads as a result of
the autonomous capability. Overall, the
customer achieved a 50% per tonne
reduction in operational costs.
Finding solutions
to our customers’
challenges is what
we’re here to do.
ALESSANDRO LALA
CEO, INTERNATIONAL SEALS
HEADQUARTERS
Lisarow, NSW
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SECTOR REVIEW: SEALS
CASE STUDY CONTINUED
SECTOR REVIEW: LIFE SCIENCES
FINANCIAL HIGHLIGHTS
£221.9m
Revenue
FY23: £212.9m | +4% YoY
£46.8m
Adjusted operating profit
FY23: £43.2m | +8% YoY
£35.3m
Statutory operating profit
FY23: £36.4m | -3% YoY
+6%
Organic revenue growth
FY23: +8%
21.1%
Adjusted operating margin
FY23: 20.3% | +80bps
The Life Sciences Sector sources and supplies
technology-driven, value-add solutions across
the in vitro diagnostics, scientific and medtech
segments of the global healthcare market.
LIFE
SCIENCES
SECTOR
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WHO
WE ARE:
WHAT
WE SELL:
WHERE
WE SELL:
WHO WE
SELL TO:
REVENUE BY BUSINESS
REVENUE BY GEOGRAPHY
36% In vitro diagnostics
59% Medtech
5% Scientific and other
44% North America
36% Europe inc. UK
20% Australasia/other
OUR END MARKETS
Food & beverage
In vitro diagnostics
Medical & pharma
Medtech
Scientific
OUR CUSTOMERS
Our Life Sciences businesses supply public and
private hospitals, clinics and diagnostics
laboratories. They also support research for
pharmaceutical, biotech, and clinical research
organisations and supply into food & beverage
industry, and manufacturing laboratories.
LEARN MORE ABOUT OUR LIFE SCIENCES
SECTOR ON OUR WEBSITE WWW.
DIPLOMAPLC.COM/OUR-BUSINESSES/
LIFE-SCIENCES/
LIFE SCIENCES
Our Life Sciences businesses typically operate in fragmented markets providing an
effective route into markets which would otherwise be unviable for manufacturers to
service. For customers, we serve as a trusted long-term partner providing access to a
broad portfolio and pipeline of cutting-edge healthcare solutions, ultimately delivering
improved patient care. Customers benefit from technical product knowledge, clinical
expertise, consultative support, training and technical support, regulatory assistance,
and equipment maintenance.
Life Sciences North America
44% of Sector revenue | HQ: Canada
Life Sciences Europe
36% of Sector revenue | HQ: Denmark
Life Sciences North America delivers advanced
diagnostic technologies, allowing for early disease
detection and monitoring, and innovative surgical
instruments and medical devices, specialising
in endoscopes.
Life Sciences Europe supplies diagnostic and
scientific technologies, surgical instruments, medical
devices, endoscopes, patient monitoring equipment,
specialist hospital supplies and clinical nutrition.
Life Sciences Australasia
20% of Sector revenue | HQ: Australia
Life Sciences Australasia delivers diagnostic
technologies, surgical instruments, consumables
and patient positioning devices.
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SECTOR REVIEW: LIFE SCIENCES CONTINUED
2024 HIGHLIGHTS
+6%
Organic revenue growth of +6%
reflecting outperformance in stabilised
markets.
Strong performance and market share
gains in Australia and Canada.
+8%
Adjusted operating profit was up +8%1,
reflecting good organic growth and scale
benefits. Operating margins increased 80
basis points year on year despite scaling
investments, driven by improved margins
in Europe and operational leverage in
Australia.
Significant investments in scaling to
support future growth in Canada.
1 Statutory operating profit reduced by 3%,
principally due to higher acquisition related
charges that arose on the settlement of deferred
consideration in FY24 as per note 2 of the
consolidated financial statements.
We’ve made great progress and
the Sector is well positioned to
build on the good momentum
of the last two years.
Revenue diversification driving
organic growth
Life Sciences North America delivered
impressive double-digit revenue growth at
the same time as implementing a significant
scaling project. This strong performance
was driven by the continued adoption and
implementation of new technologies by
hospitals within the urology, gynaecology
and endoscopy specialties creating
opportunities to broaden our product
range and grow market share in the
medtech space. In in vitro diagnostics
(IVD), we are supporting further adoption
of automated solutions, reflecting the
increased investment and growth in IVD
testing in the Canadian market.
Leveraging the benefits of our integrated
business in Life Sciences Australasia,
following scaling investment in the prior
year, we have delivered double-digit growth.
Our new integrated platform has supported
growth in IVD. We have extended our
proposition in allergy and autoimmunity
testing to existing customers, and
benefitted from growing demand
for genetic preconception screening,
which is being supported by increased
government funding.
In Life Sciences Europe, we have
restructured and rationalised our portfolio
as we seek to build a more scalable and
sustainable model in this geography. This
project has resulted in a slight reduction in
revenue year on year despite continued
growth in IVD and critical care portfolios in
the UK and Ireland, and tender wins in the
Nordics. We have already seen improved
margins as a result of the action taken to
optimise the portfolio.
Targeted acquisitions to
accelerate growth
The latest acquisition, GM Medical, which
was brought into the Sector in FY23,
performed very well during the year and
was successfully integrated into our Nordics
platform, extending its product portfolio.
We have a strong pipeline of acquisition
opportunities in Life Sciences across our
geographies, with a number of bolt-ons
currently being evaluated.
PETER SOELBERG
CEO, LIFE SCIENCES
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SECTOR REVIEW: LIFE SCIENCES CONTINUED
Our new Mississauga facility
successfully brought our three
Canadian Life Sciences businesses
under one roof, creating East and
West hubs.
OUR BUSINESSES
LEARN MORE ABOUT
OUR BUSINESSES
ON OUR WEBSITE:
WWW.DIPLOMAPLC.
COM/OUR-
BUSINESSES/
OUR PEOPLE
LEARN MORE ABOUT
OUR PEOPLE ON OUR
WEBSITE:
WWW.DIPLOMAPLC.
COM/ABOUT-US/
PURPOSE-AND-
VALUES/
OUR STORIES
READ MORE OF OUR
CASE STUDIES ON
OUR WEBSITE:
WWW.DIPLOMAPLC.
COM/OUR-STORIES/
Building scale
Following a successful scaling project
in Australia in FY23, a project of similar
significance was undertaken in Canada
during the year, rationalising existing sites
in the East of the country and forming two
distinct East and West hubs. This large-scale
project provides the right platforms to
further enhance the already high levels of
customer support our local teams provide,
ultimately improving patient care outcomes.
The new facility in Mississauga, Ontario,
provides a more scaled and strategically
located platform, with increased capacity
to support sustainable growth through an
enhanced customer proposition.
As our Life Sciences businesses continue
on their scaling journeys, we increasingly
leverage the benefits of expertise, as well
as customer and supplier relationships, to
enhance our customer proposition across
our geographies.
Outlook
The Sector is well positioned to build on
the good momentum of the last two years,
with favourable market dynamics and the
benefits from our continuing scaling
investments and portfolio rationalisation.
We expect another strong year in FY25.
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SECTOR REVIEW: LIFE SCIENCES CONTINUED
LIFE SCIENCES
AUSTRALASIA
LIFE SAVING
TECHNOLOGIES
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SECTOR REVIEW: LIFE SCIENCES
CASE STUDY
IMPROVING OUTCOMES FOR LUNG
CANCER PATIENTS IN AUSTRALASIA
THE CHALLENGE
• Lung carcinoma is the most common
cause of death worldwide
• The most common form of lung cancer
is often late-diagnosed
• The existing diagnostic test required an
invasive tumour sampling procedure
and took up to 18 days from sampling
to initiation of treatment
THE SOLUTION
• Life Sciences Australasia business,
Abacus dx, brought new technology to
market
THE OUTCOME
• Fully automated, less invasive test that
delivers results within 2.5 hours
• Reduced time from sample to
treatment to 1-2 days
SECTOR REVIEW: LIFE SCIENCES
CASE STUDY CONTINUED
Our Life Sciences businesses work
alongside healthcare practitioners to
navigate a complex regulatory
environment and deliver innovative,
market-leading solutions that improve
patient outcomes.
The challenge
Lung carcinoma remains the most
common cause of cancer death
worldwide. Nearly 85% of lung cancers
are non-small cell lung cancer. This is
often diagnosed at an advanced and
metastatic stage. As a result, the
prognosis of patients with this type of
lung cancer remains poor, with average
five-year survival rates at ca. 16%.
Existing market-standard diagnostic
methods meant that it could take over 18
days between tumour sampling and
initiation of treatment.
The solution
Our Life Sciences Australasia business,
Abacus dx, has worked closely with an
existing supplier to bring a new diagnostic
technology to the Australasian market,
which significantly reduces the time from
biopsy to diagnosis, improving patient
survival rates.
The outcome
The fully automated test brought to market
by Abacus dx delivers results within 2.5
hours, reducing the time between sample
to treatment to one or two days. Requires
under two minutes of ‘hands-on’ time, and
it is significantly less invasive than existing
testing methods.
The test also avoids the challenge of
obtaining samples of sufficient size and
quality, encountered with traditional
testing, by requiring a significantly
smaller sample.
The value we deliver
Abacus dx has demonstrated its value to
patients across Australia and New Zealand,
its customers, and its supplier in bringing
this product to market.
Laboratories and hospitals have assurance
of a steady and reliable supply of reagents
for this urgent and much needed test,
and have access to ongoing support in
the repair and maintenance of the
testing platform.
In addition to providing suppliers with an
efficient route to market, Abacus dx
promotes the product nationally,
publishing articles about the testing
platform and engaging key opinion leaders
and medical experts to raise awareness of
faster testing at scientific and oncology
conferences. All of these actions result in
better outcomes for cancer patients.
HEADQUARTERS
The innovative
solutions we bring
to market can really
be life changing –
and sometimes life
saving – for
patients.
PETER SOELBERG
CEO, LIFE SCIENCES
Brisbane, QLD
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Financial Statements
The Group reports under UK-adopted International
Accounting Standards (UK-adopted IAS) 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,
UK-adopted IAS measures. These are detailed in
note 29 to the consolidated financial statements.
£4.4m (2023: £5.9m) of fair value
adjustments to inventory acquired through
acquisitions recognised in cost of
inventories sold; £10.2m of acquisition
related expenses (2023: £6.3m) and £3.6m
of restructuring costs (2023: £nil). There
were no disposals during the year, whilst
the prior year included a £12.2m net gain
on disposals.
Acquisition related finance charges include
fair value movement and the unwind of
discount on acquisition liabilities of £3.2m
charge (2023: £0.4m charge); £0.9m charge
(2023: £5.9m charge) for the amortisation
and write-off of capitalised borrowing fees
on acquisition related borrowings; fair value
remeasurements of put options for future
minority interest purchases of £0.1m income
(2023: £1.8m charge); and net income from
interest and settlement of acquisition
and disposal related items of £0.2m
(2023: £0.8m net income).
The Group’s adjusted effective rate of
tax on adjusted profit before tax was 24%
(2023: 24%). The Group’s tax strategy was
approved by the Board and is published
on our website.
Adjusted earnings per share increased by
15% to 145.8p (2023: 126.5p). Basic earnings
per share increased by 6% to 96.5p (2023:
90.8p) reflecting the profit on disposal in
the prior year.
Strong growth at high margins
Year ended 30 September 2024
Year ended 30 September 2023
Adjusted
£m
Adjustments
£m
Total
£m
Adjusted
£m
Adjustments
£m
Total
£m
Revenue
1,363.4
-
1,363.4
1,200.3
-
1,200.3
Operating expenses
(1,078.4)
(77.6)
(1,156.0)
(963.3)
(53.7)
(1,017.0)
Operating profit
285.0
(77.6)
207.4
237.0
(53.7)
183.3
Financial expense, net
(27.0)
(3.8)
(30.8)
(20.4)
(7.3)
(27.7)
Profit before tax
258.0
(81.4)
176.6
216.6
(61.0)
155.6
Tax expense
(61.9)
15.3
(46.6)
(52.0)
14.7
(37.3)
Profit for the year
196.1
(66.1)
130.0
164.6
(46.3)
118.3
Earnings per share
Adjusted/Basic
145.8p
96.5p
126.5p
90.8p
Reported revenue increased by 14% to
£1,363.4m (2023: £1,200.3m), driven by
organic growth of 6% and a 10%
contribution from acquisitions, partly
offset by adverse movements in foreign
exchange translation.
Adjusted operating profit increased by
20% to £285.0m (2023: £237.0m) as the
operational leverage from the increased
revenue, disciplined cost management and
accretive acquisitions drove a year-on-year
improvement of 120 basis points in the
adjusted operating margin to 20.9% (2023:
19.7%). Statutory operating profit increased
13% to £207.4m (2023: £183.3m), with prior
year benefitting from an exceptional £12.2m
profit on disposal of Hawco.
Adjusted net finance expense increased to
£27.0m (2023: £20.4m), principally due to
higher average gross debt as all acquisitions
in the year were debt funded. The blended
cost of all bank debt marginally decreased
to 5.3% largely due to the issuance of
£319.8m of private placement notes
(2023: 5.6%).
Adjusted profit before tax increased 19%
to £258.0m (2023: £216.6m).
Statutory profit before tax was £176.6m
(2023: £155.6m) and is stated after charging
acquisition and other related charges. The
adjustments to operating expenses made in
relation to acquisition related and other
charges total £77.6m (2023: £53.7m)
comprised of £59.4m (2023: £52.9m) of
amortisation of acquisition intangible assets;
46
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
FINANCIAL REVIEW
Net capital expenditure was lower this year
at £14.0m, primarily consisting of £19.7m
investment in new field and demo
equipment and a premise move in Life
Sciences as well as ongoing investments
in plant and equipment across the Group,
partly offset by £5.7m of disposals which
were largely property related.
The Group funded the Company’s Employee
Benefit Trust with £2.3m (2023: £1.9m) in
connection with the Company’s long term
incentive plan.
Acquisitions accelerate growth
Net cash flow from acquisitions of £311.0m
(2023: £255.3m) included £270.5m of cash
paid for the acquisitions of Peerless, PAR
Group and five smaller bolt-ons; £11.3m of
acquisition related deferred consideration
paid and £30.2m of acquisition related
costs, partly offset by £1.0m received in
relation to the disposal of Hawco in the
prior year.
The Group’s liabilities to shareholders of
acquired businesses at 30 September 2024
was £25.4m (2023: £22.6m) 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.
Interest payments reduced by £0.5m to
£17.4m (2023: £17.9m) driven largely by the
change in interest payment profile on the
private placement notes during the year.
Tax payments increased by £17.0m to
£58.4m (2023: £41.4m) with the cash tax rate
increasing to 23% (2023: 19%), mainly due
to timing of payments in the US and the
increase in the UK corporation tax rate.
Our effective cash tax rate remains lower
than our Group effective tax rate, mainly
due to tax deductible acquisition goodwill
in the US.
Depreciation and other non-cash items
includes £32.2m (2023: £28.6m) of
depreciation and amortisation of tangible,
intangible and right of use assets and
net £1.2m (2023: £1.9m) of other
non-cash items, primarily share-based
payments expense.
Working capital increased by £8.5m
in support of business growth.
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.
For FY24, the Board has recommended a
final dividend of 42.0p per share, making
the proposed full year dividend 59.3p
(2023: 56.5p).
Strong cash flow
Free cash flow increased by 21% to £197.9m
(2023: £163.8m). Statutory cash flow from
operating activities increased by 9% to
£279.7m (2023: £257.3m). Free cash flow
conversion for the year was 101% (2023:
100%), ahead of the 90% in our financial
model, demonstrating the highly cash-
generative qualities of our businesses and
the results of targeted inventory reductions.
Funds flow
Year ended
30 Sep 2024
£m
Year ended
30 Sep 2023
£m
Adjusted operating profit
285.0
237.0
Depreciation and other non-cash items
33.4
30.5
Working capital movement
(8.5)
(4.2)
Interest paid, net (excluding borrowing fees)
(17.4)
(17.9)
Tax paid
(58.4)
(41.4)
Capital expenditure, net of disposal proceeds
(14.0)
(21.6)
Lease repayments
(19.9)
(16.7)
Notional purchase of own shares on exercise of options
(2.3)
(1.9)
Free cash flow
197.9
163.8
Acquisition and disposals1
(311.0)
(255.3)
Proceeds from issue of share capital (net of fees)
–
231.9
Dividends paid to shareholders and minority interests
(77.2)
(70.8)
Foreign exchange and other non-cash movements
25.4
4.6
Net funds flow
(164.9)
74.2
Net debt
(419.6)
(254.7)
1 Net of cash acquired/disposed and including acquisition expenses, deferred consideration, and payments of pre-
acquisition debt-like items.
47
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
FINANCIAL REVIEW CONTINUED
(Gremtek) as held for sale under IFRS5. All
three disposals were completed on 31
October 2024, with total consideration (on a
cash-free and debt-free basis) of
ca. CHF31.3m (ca. £28.1m) for Kubo,
ca. £12.0m for Pennine and ca. €5.5m
(ca. £4.6m) for Gremtek. No gain or loss was
recognised in the Consolidated Income
Statement on classification of the above
assets and liabilities held for sale.
Dividends of £77.2m (2023: £70.8m)
were paid to ordinary and minority
interest shareholders.
Attractive returns
Return on adjusted trading capital employed
(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 2024, the Group’s ROATCE
increased by 100 basis points to 19.1%
(2023: 18.1%). This increase was driven by
strong operating profit growth from the
existing businesses and accretive
acquisitions completed during the year
which is expected to generate year one
returns in excess of 20%.
now contractually due to expire across July
2028 (£40.0m) and July 2029 (£515.0m). A
24-month extension option in respect of
£40.0m and a second 12-month extension
option in respect of £515.0m can be
exercised in July 2025. At 30 September
2024, the Group had utilised £165.1m of the
RCF (2023: £320.9m), with £389.9m of the
revolving facility remaining undrawn.
At 30 September 2024, net debt of £419.6m
(2023: £254.7m) represented leverage of
1.3x (2023: 0.9x) against a banking covenant
of 3.5x. The Group maintains strong liquidity,
with year-end headroom (comprised of
undrawn committed facilities and cash
funds) of £450m (2023: £297m). The table
below outlines the composition of the
Group’s net debt at 30 September 2024:
• 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
(disposed of subsequent to the period
end, as noted below). These options are
valued at £9.0m (2023: £9.2m), based on
the latest estimate of EBIT when these
options crystallise.
• The liability for deferred consideration
payable at 30 September 2024 was
£16.4m (2023: £13.4m). This liability
represents the best estimate of any
outstanding payments based on the
expected performance of the relevant
businesses during the measurement
period. The increase in the year is primarily
due to the addition of Peerless and PAR
Group deferred consideration and
revaluation increases, somewhat offset by
payments made in the year.
Goodwill at 30 September 2024 was
£541.1m (2023: £439.1m). 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 of the related Cash Generating Units at
the year end.
As at 30 September 2024, the Group
classified the assets and liabilities of Kubo
Tech AG and its subsidiary Kubo Tech GmbH
(Kubo); Pneumatic Services Limited and its
subsidiary Pennine Pneumatic Services
Limited (Pennine); and Gremtek SAS
Improved funding
At 30 September 2024, the Group’s net
debt stood at £419.6m (2023: £254.7m).
During the year, the Group issued US private
placement notes for an aggregate principal
amount of £207.9m (€250.0m) with
maturities of 7 years (€75m), 10 years
(€100m) and 12 years (€75m) and for an
aggregate principal amount of £111.9m
($150.0m) with maturities of 8 years ($100m)
and 11 years ($50m).
The Group has a multi-currency revolving
credit facility agreement (RCF) with an
aggregate principal amount of £555.0m. In
July 2024, the Group exercised the first of
two 12-month extension options for the RCF,
which was accepted by banks committing
£515.0m of the aggregate total. The RCF is
Type
Currency
Amount
GBP
equivalent
Interest rate
exposure
PP 7 year maturity
EUR
€75.0m
£62.4m
Fixed 4.18%
PP 10 year maturity
EUR
€100.0m
£83.1m
Fixed 4.27%
PP 12 year maturity
EUR
€75.0m
£62.4m
Fixed 4.38%
PP 8 year maturity
USD
$100.0m
£74.6m
Fixed 5.39%
PP 11 year maturity
USD
$50.0m
£37.3m
Fixed 5.52%
RCF
USD
$83.0m
£61.9m
Floating
RCF
EUR
€64.0m
£53.2m
Floating
RCF
GBP
£50.0m
£50.0m
Floating
Capitalised debt fees
£(5.1)m
Gross debt drawn at 30 September 2024
£479.8m
Cash & equivalents and cash held in assets
held for sale at year end
£(60.2)m
Net debt at 30 September 2024
£419.6m
48
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
FINANCIAL REVIEW CONTINUED
be reviewed for its relevance to the Scheme.
As the Court of Appeal has only just
delivered its verdict, the Scheme pension
advisors have not yet completed any
analysis and therefore no adjustments have
been made to the Consolidated Financial
Statements as at 30 September 2024.
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 (FY23: £0.5m). The pension deficit in
the Swiss scheme was £1.0m (FY23: £0.3m)
and formed part of the liabilities held for
sale as at 30 September 2024.
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 FY23,
the average Sterling exchange rate is
stronger against most of the major
currencies in which the Group operates and
the impact from translating the results of the
Group’s overseas businesses into UK sterling
has led to a decrease in Group revenues of
£34.4m and a decrease in the Group’s
adjusted operating profit of £8.5m.
The impact to net debt is a reduction of
£26.0m when compared with prior year
closing rates.
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 and Accounts.
Pensions
The Group maintains a legacy closed
defined benefit pension scheme (the
Scheme) in the UK. In the year, the Group
funded this scheme with cash contributions
of £0.5m (2023: £0.6m).
On 26 March 2024, the Trustees completed
a Buy-In of the remaining pensioner
liabilities in the Scheme with Just Retirement
Limited. The Scheme paid £25.1m to Just
Retirement Limited to fund 100% of the
Buy-In premium. At 30 September 2024, the
UK defined benefit scheme was in a surplus
position of £1.5m (2023: £6.8m). As at 30
September 2024, 94% of the scheme
assets are concentrated in the Buy-In
policy and we expect to make no further
funding payments.
The Group is aware of a UK High Court legal
ruling in June 2023 between Virgin Media
Limited and NTL Pension Trustees II Limited,
which decided that certain historic rule
amendments were invalid if they were not
accompanied by actuarial certifications. The
ruling was subject to an appeal with a
judgment delivered on 25 July 2024. The
Court of Appeal unanimously upheld the
decision of the High Court and concluded
that the pre-April 2013 conditions applied to
amendments to both future and past
service. Whilst this ruling was in respect of
another scheme, this judgment will need to
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 and 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 a
severe but plausible 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 severe but plausible 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.
49
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
FINANCIAL REVIEW CONTINUED
GROWTH WITH
POSITIVE IMPACT
We have a focused strategy
that supports our businesses
in delivering their value-add
missions. It simultaneously
delivers environmental and
societal value, and commercial
benefit to Diploma.
PHIL PRATT
GROUP SUSTAINABILITY
DIRECTOR
DELIVERING
VALUE
RESPONSIBLY
COLLEAGUE
ENGAGEMENT
DIVERSITY,
EQUITY &
INCLUSION
DELIVERING
FOR OUR
PEOPLE
DOING
BUSINESS
RESPONSIBLY
SUPPLY
CHAIN
HEALTH
& SAFETY
DELIVERING
FOR THE
ENVIRONMENT
CLIMATE
ACTION
WASTE
REDUCTION
POSITIVE IMPACT REVENUE
OUR DVR STRATEGY
We are determined to make a difference.
Through our DVR framework, we have
objectives that are linked to our business
model and embedded in the business
strategy and commercial and operational
activities.
Our businesses are positioned for
a transitioning economy and our
sustainability framework, Delivering
Value Responsibly, is embedded
across our businesses.
Our commitment
We are committed to executing our strategy
whilst being environmentally, socially and
ethically responsible. We support our
businesses in making Diploma an even safer,
better and fairer place to work. We
collaborate with our colleagues, suppliers
and customers to deliver our sustainability
targets, including our SBTi-approved net
zero targets.
Our framework
Our DVR framework is integrated across our
businesses, focusing on three key areas: our
people, the environment, and responsible
business practices. By concentrating the
efforts of our large, diverse, and
decentralised Group on these core areas,
we can drive meaningful progress against
our sustainability targets.
Projects, like our
new M Seals facility,
have added over
500kW to our solar
coverage this year.
50
DIPLOMA PLC ANNUAL REPORT 2024
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Corporate Governance
Financial Statements
DELIVERING VALUE RESPONSIBLY
FY24
FY23
FY22
79%
80%
79%
DELIVERING FOR
OUR PEOPLE
FOCUS AREA
TARGET 2030
PROGRESS
IN 2024
STATUS
PERFORMANCE
Colleague
engagement
70%+
Maintain an
engagement
index of 70%+
79%
On track
We continue to maintain high
engagement scores, with a response
rate of 87% and an engagement
index score of 79%. Every business
has an engagement plan in place
to ensure we maintain strong
engagement scores in the long term.
Diversity, equity
and inclusion
40%+
Women to
represent 40%+
of Senior
Management
Team (SMT)
30%
On track
We are pleased with the momentum
we have made this year, with 30% of
our SMT roles now filled by women.
We recognise there is still more to
do, and it will remain an area of
focus for us.
COLLEAGUE ENGAGEMENT
We are pleased to have maintained our
strong engagement index score of 79%
and high response rate of 87%. Areas of
particular engagement include: customer
service, clarity on objectives, and finding
work meaningful.
Areas of improvement, albeit with
relatively high engagement, include:
regular feedback, development and
training, and recognition and praise. All of
our businesses have plans in place to
address the results of their survey scores.
DIVERSITY, EQUITY & INCLUSION
We increased gender diversity of the SMT
to 30% women vs 28% in the prior year.
We are making steady progress and 45%
of SMT vacancies during the year were
filled by women.
We are pleased to have made particular
progress in the gender diversity of roles
reporting directly into the Executive Team
(excluding admin and support staff),
which is now 38% women. Gender
diversity across the full workforce is
consistent with the prior year at 31%.
COLLEAGUE ENGAGEMENT
79%
Colleague Engagement Survey Index
Colleague Engagement
Our colleagues have great technical
expertise and in-depth knowledge.
Engagement ensures we retain that
valuable talent and experience and nurture
the unique culture that binds the Group.
We held our fourth Group Colleague
Engagement Survey this year, achieving a
response rate of 87% and index score of
79% (FY23: 80%). Every business has an
engagement plan to address the themes
of their survey results. This is prioritised at
every level of the business, and we have
introduced engagement targets into our
remuneration package for our Executive
Team and Managing Directors for FY25.
Colleague turnover of 20% (FY23: 17.7%)
was driven by facility moves in Life Sciences
and Controls.
Diversity, Equity and Inclusion
We continue to support diversity, equity
and inclusion through educational events
and initiatives, such as our Women in
Leadership programme, inaugural Diploma
Pride event and annual celebration of
International Women’s Day.
This was supplemented with more formal
training for our Executive Team, which
attended an inclusive leadership workshop.
We also introduced an inclusive hiring toolkit
for our businesses. Ethnic diversity
increased to ca. 10% (FY23: 8%) for the
Senior Management Team.
LEARN MORE ABOUT DELIVERING FOR OUR
PEOPLE WWW.DIPLOMAPLC.COM/
SUSTAINABILITY/PEOPLE/
FY24
FY23
FY22
30%
28%
27%
GENDER DIVERSITY AT SMT
30%
Women in SMT roles
51
DIPLOMA PLC ANNUAL REPORT 2024
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Additional Information
Corporate Governance
Financial Statements
DELIVERING VALUE RESPONSIBLY CONTINUED
FY24
FY23
FY22
3.6
3.0
3.4
DOING BUSINESS
RESPONSIBLY
FOCUS AREA
TARGET 2030
PROGRESS
IN 2024
STATUS
PERFORMANCE
Supply chain
management
85%
of key suppliers
aligned to our
Supplier Code
of Conduct
90%
Passed
target
In FY24, we surpassed our target of
85%.
Health and
safety
Zero
Harm
no lost time
incidents (LTIs)
3.6LTIFR
Area of
focus
In FY24, performance saw total
incidents increase from 18 to 23, with
our LTI frequency rate (LTIFR) rising
from 3.0 to 3.6
HEALTH AND SAFETY
In order to align with industry standards,
we have updated our leading metric to a
lost time incident frequency rate (LTIFR),
defined as total Lost Time Incidents (LTIs)
per 1,000,000 hours worked.
In FY24, our LTIFR was 3.6. Driving
meaningful change takes time and we have
developed a more hands-on approach to
H&S for acquisitions, including inductions
for leadership, post-acquisition audits,
colleague training and action plans.
Despite an increase in total LTIs to
23 (vs 18 in FY23), our total injury days
decreased, resulting in a severity rate
of 9.9 (vs 13.8 in FY23). We have also seen a
strong improvement in both the quality and
volume of potential hazard reporting, which
has increased by 82% vs the prior year.
It is encouraging that responses to this
year’s Colleague Engagement Survey
indicated an improvement in H&S culture.
93% of colleagues agreed that H&S is
taken seriously in their business vs 88% in
the prior year.
Although we have made strong strategic
progress during the year, we remain
focused on reducing our LTIFR rate. We will
continue to drive our Stand Up for Safety
programme across our businesses and
senior management during FY25. We will
also continue our audit programme, with
external H&S audits planned for all
businesses, including acquisitions.
LTIFR (LOST TIME INCIDENTS PER 1M
HOURS WORKED)
3.6
Health and safety
Our Group health and safety (H&S)
programme, Stand Up for Safety, covers
four key areas: governance, leadership,
training, and audits. This year, we engaged
external experts, Safety Management
Limited, to deliver masterclasses, training,
and comprehensive audits at our key sites.
Every business has an FY25 action plan to
address the outcomes of their audits and
risk assessments and we expect to see the
impact of that during the year.
Our Group-wide H&S network offers
peer-to-peer support, best practices,
resources and learnings.
Supply chain management
We have surpassed our FY30 target and
90% of key suppliers (accounting for >50%
of supplier spend in aggregate) have agreed
to comply with our Supplier Code.
Charitable giving
Our fund matching programme ensures we
give to the local causes that matter most to
our businesses and colleagues. This year we
donated ca. £134,000 (FY23: £54,000) to
charity. No political donations were made.
LEARN MORE ABOUT DOING BUSINESS
RESPONSBLY WWW.DIPLOMAPLC.COM/
SUSTAINABILITY/RESPONSIBILITY/
52
DIPLOMA PLC ANNUAL REPORT 2024
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Financial Statements
DELIVERING VALUE RESPONSIBLY CONTINUED
DELIVERING FOR
THE ENVIRONMENT
FOCUS AREA
TARGET 2030
PROGRESS
IN 2024
STATUS
PERFORMANCE
Climate
action
50%
reduction of
Scope 1 & 2
emissions (vs.
FY22)
30%
reduction of
Scope 3 (vs.
FY22)
15%
reduction
24%
reduction
On track
On track
We achieved a 15% reduction in
Scope 1 and 2 emissions during FY24
vs prior year. Against our FY22
baseline, performance was flat.
We reduced our FY23 Scope 3
emissions, keeping us on track to
meet our targets.
Waste
reduction
<15%
waste to landfill
23%
On track
We reduced waste to landfill to 23%
(vs 32% in FY23) and achieved a 69%
recycling rate.
Our total operational emissions were down
15% vs prior year and largely flat against
our FY22 baseline. This is primarily due to
the procurement of renewable energy,
which now represents 44% of the Group’s
energy consumption vs 7% in FY23.
We also undertook four facility
consolidation and upgrade projects
during the year and expect to see the
benefit of those during FY25. In line
with our strategy to increase our on-site
renewable energy generation capacity,
and through a combination of new builds
and retrofitting, we have added 577kW to
our solar coverage. Our emissions intensity
decreased significantly from 7.6 in FY23
to 5.7 this year.
Although we saw a reduction of 24% in
Scope 3 emissions vs FY22 baseline, this
was primarily due to better data and
changes in emissions factors as we move
away from cost-based calculations to
primary data.
EMISSIONS
9%
34%
6%
51%
FY22: 198,882* CO²e
13%
25%
9%
53%
FY23: 152,111 CO²e
Climate action
In January, our net zero targets were
approved by the Science Based Targets
initiative, covering Scope 1, 2 and 3.
During the year, our businesses continued to
effectively execute on our operational
(scope 1 and 2) emissions strategy:
understand, reduce, generate, procure.
Scope 3 remains a complex challenge,
especially in a decentralised environment. In
calculating our FY23 footprint, we focused
on educating and engaging our businesses
with the most material emissions.
Waste
Following a significant decrease in waste to
landfill from 60% in FY22 to 32% in FY23, we
have seen this taper off slightly, achieving
23% waste to landfill in FY24, as we tackle
the more challenging materials and
geographies (US and Australia). This is great
progress against our target of <15% waste
to landfill by FY30.
Total waste has increased primarily due to
the impact of acquisitions1. As a result, our
waste intensity has also increased to 3.6
(FY23: 3.3). We expect these to decrease
as new businesses are brought into the
DVR framework.
1 Excluding Peerless, for which data was not yet available
SCOPE 1 AND 2 GHG EMISSIONS
Purchased goods and services
Capital goods
Upstream transportation and distribution
Other
*FY22 Scope 3 emissions were recalculated during
the year using updated emissions factors
Emissions intensity (tonnes CO2e per £m revenue)
SCOPE 3 GHG EMISSIONS
FY24 SCOPE 1 AND 2 EMISSIONS AND ENERGY USAGE
Scope 1
Scope 2
Gross
FY24 market-based (tonnes CO2e)
3,881
3,864
7,745
FY24 location-based (tonnes CO2e)
3,881
5,663
9,545
UK energy consumption: 3,181,062 kWh (total: 17,755,337 kWh).
7.6
7.6
5.7
FY22
FY23
FY24
1000 tonnes CO²e
10
6
4
2
0
8
LEARN MORE ABOUT DELIVERING FOR THE
ENVIRONMENT WWW.DIPLOMAPLC.COM/
SUSTAINABILITY/ENVIRONMENT/
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DELIVERING VALUE RESPONSIBLY CONTINUED
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.
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
LOCAL
MANAGEMENT TEAMS
EXECUTIVE
TEAM
AUDIT
COMMITTEE
BOARD OF
DIRECTORS
Bottom up
Our businesses
continually identify risks
and opportunities to
feed into Sector and
Group risk reviews.
Top down
Diploma adopts horizon
scanning for emerging
risks, review of principal
risks, internal controls,
processes and risk
management
frameworks.
OUR BUSINESSES
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RISK MANAGEMENT AND INTERNAL CONTROL
Each of our 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.
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 to provide a net score
post-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.
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.
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
Identifying and monitoring material risks
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.
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.
The most critical emerging risks under
active consideration across the Group –
Electrification and Disruptive Technology –
remain the same as last year, and continue
to be monitored.
Electrification risk
Electric power substituting
hydraulic power
The adoption of electric power over
hydraulic power in various industrial
applications may render certain seal
applications redundant.
Electrification of industrial machinery
The widespread adoption of electrification
in industrial machinery could alter existing
maintenance regimes designed for internal
combustion engines (ICE).
Disruptive technology risk
Step change in wireless infrastructure
Advances in wireless infrastructure could
diminish the demand for wired connections
by our wire and cable businesses.
Digitalisation of value-add
The increasing use of AI and other
technologies facilitating the digitalisation of
value-added services may provide customers
with access to specialised knowledge
currently provided by our businesses.
Mass availability of affordable 3D printing
The widespread availability of 3D printing
technology could empower customers to
produce their own bespoke component
parts, potentially impacting some of our
vertical integration processes.
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RISK MANAGEMENT AND INTERNAL CONTROL CONTINUED
There have been several changes to the
Group's principal risks during the year:
• Loss of key suppliers and supply chain
disruption have been integrated into
a single category. Given their closely
related nature and shared characteristics,
managing them together enables a more
efficient approach, focusing on the
interdependent challenges within the
supply chain.
• The risk of failing to deliver major projects
has been introduced. The growing number
and complexity of change initiatives
across the Group have amplified the
challenges of successfully executing
business and technology transformation
programmes.
• Pandemic risk has been removed,
as businesses now have more robust
continuity and disaster recovery plans
that address pandemics and similar
disruptions. Additionally, new health
and safety protocols have been integrated
into operating procedures, eliminating
the need to treat a pandemic as a
separate risk.
• Cybersecurity risk has been downgraded
from major to moderate consequence.
While the threat of cyber incidents
remains, our decentralised structure,
enhanced security measures and
strengthened risk management have
collectively reduced the likelihood
of severe impact.
The Group’s decentralised operating
model helps mitigate the potential
impact of our principal risks.
The Group risk matrix represents the risks
and uncertainties faced by the Group, and
steps taken to mitigate them.
These risks, identified by the Board through
a robust risk evaluation described on the
previous page, are considered significant
enough to have a material impact on the
performance, position or future prospects
of the Group.
The Group’s principal risks are highlighted
in the upper right four quadrants of the
matrix. These risks and their corresponding
mitigating actions are summarised in the
table opposite.
GROUP RISK MATRIX
Operational
1 Health and safety
2 Inventory
obsolescence
3 Key systems
failure
4 M&A activity
5 Cybersecurity
6 Talent &
capability
7 Product liability
8 Failure to deliver
major projects
Strategic
9 Supply chain
disruption
Loss of key
customer
Macro
Climate - max
legislation
Climate - max
impact
Market disruption
Geopolitical
environment
Risk assessment
High risk
Medium risk
Low risk
LIKELY
50-100%
chance
MODERATE
10-50%
chance
UNLIKELY
1-10% chance
PROBABILITY
MINOR
Some disruption possible
MODERATE
Significant time/resources
required
MAJOR
Potential for severe damage
CONSEQUENCES
PRINCIPAL RISKS
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RISK MANAGEMENT AND INTERNAL CONTROL CONTINUED
DESCRIPTION AND ASSESSMENT
Overpaying for a target company, limited growth of the
acquired business, or the potential loss of key customers
or suppliers following integration.
Cultural misfit as smaller businesses struggle to adapt
to the requirements of a listed company.
These issues may arise from inadequate due diligence,
ineffective integration, or unrealistic assumptions made
in the investment case.
MITIGATION
A process to build and maintain a pipeline of opportunities,
including thorough screening to ensure alignment with our
agreed strategy and cultural fit.
Rigorous due diligence and contract negotiation
processes involving comprehensive input from experts
across our businesses, functions and, where appropriate,
external advisors.
Clear value-focused return criteria for investments,
supported by expertise in valuation techniques and
a commercially-driven approach to negotiation.
A robust integration planning process linked with
the due diligence process and strong governance
for post-acquisition execution and review.
DESCRIPTION AND ASSESSMENT
A successful attack on our systems, sites, data or a
third party, means that confidential information is lost
or business critical systems become unavailable that
may lead to negative customer or supplier impacts,
regulatory action, reputational damage and/or loss
of business and revenue.
MITIGATION
Controls in place consist of both technical and
organisational protection measures, such as firewalls,
anti-malware software, staff training and awareness,
procedures to update security patches, regular security
testing and incident response processes.
Regular assessments based on a cybersecurity
framework and ongoing enhancement of security
controls, which includes investment in employee
education and awareness, as well as expanding
security testing capabilities.
PRINCIPAL RISK
4 M&A activity
The acquisition pipeline
remains healthy and we
retain our disciplined
approach to acquiring
high-quality, value-
enhancing businesses.
RISK CATEGORY
Operational
BOARD RISK APPETITE
Cautious
CHANGE IN RISK
No change
PRINCIPAL RISK
5 Cybersecurity
We will enforce a minimum
set of cybersecurity
controls that must be
consistently implemented
across all business units.
RISK CATEGORY
Operational
BOARD RISK APPETITE
Cautious
CHANGE IN RISK
Reduced
consequence
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RISK MANAGEMENT AND INTERNAL CONTROL CONTINUED
DESCRIPTION AND ASSESSMENT
If we are not able to attract, develop and retain the
necessary high-performing employees and capabilities,
we may not be able to meet our ambitious strategic goals
and maintain customer service levels and relationships.
MITIGATION
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.
Ensuring a challenging working environment where
managers feel they have control over, and responsibility
for their businesses.
Employee engagement and retention initiatives, alongside
a diversity, equity and inclusion policy to ensure a diverse
and inclusive workplace to attract a wide range of talent.
PRINCIPAL RISK
6 Talent & capability
We need the right talent
and diversity across the
Group, along with the
resources and processes
to ensure we retain them.
RISK CATEGORY
Operational
BOARD RISK APPETITE
Cautious
CHANGE IN RISK
No change
DESCRIPTION AND ASSESSMENT
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.
The risk that a key supplier revokes a supply agreement
and accesses the market through a competitor or directly.
The risk of loss of a key supplier due to insolvency.
MITIGATION
Maintain strong relationships with suppliers and keep
customers updated of any changes to retain key business.
Regularly engage with key customers to gain insights into
their product requirements and evolving market trends.
Collaborate with supply chain partners to ensure
they adhere to our standards for acceptable working
conditions, financial stability, ethics and technical
competence, in full adherence to our Supplier Code
of Conduct.
Value-add service to supply partners, enabling them to
access markets in the most efficient and effective way.
Regular monitoring of revenue by key supplier to assess
supplier concentration.
Continue to pursue diversification strategies and regularly
seek alternative sourcing.
We aim to continue securing long-term, multi-year
exclusive contracts with suppliers with change of control
clauses, where appropriate, to provide protection or
compensation in the event of an acquisition. Some of
these contracts have already been established.
PRINCIPAL RISK
9 Supply chain
disruption
We prioritise securing
backup supply options
and supplier diversification
wherever feasible,
particularly to reduce
reliance on single-source
regions.
RISK CATEGORY
Strategic
BOARD RISK APPETITE
Cautious
CHANGE IN RISK
No change
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DESCRIPTION AND ASSESSMENT
The risk of increasing environmental legislation that adds
cost or complexity to products and services and/or
renders some products obsolete.
MITIGATION
Leverage our technical expertise to specify
the appropriate compound materials and enjoy
long-term, meaningful relationships with suppliers.
We also expect suppliers to pivot and adapt to comply
with evolving legislation.
Increased oversight, due diligence and engagement
with suppliers.
Net zero targets have been set across our value chain
including waste and greenhouse gas emissions.
READ MORE ON OUR NET ZERO TARGETS ON PAGE 53
PRINCIPAL RISK
Climate – max
legislation
We actively engage with
environmental legislation
to identify and capitalise on
commercial opportunities
arising from regulatory
changes.
RISK CATEGORY
Macro
BOARD RISK APPETITE
Tolerant
CHANGE IN RISK
No change
DESCRIPTION AND ASSESSMENT
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.
MITIGATION
Identify key market drivers, trends and forecasts while
maintaining close relationships with key customers,
who can provide an early warning of slowing demand.
Continually assess what is valuable to our customers and
the optimal ways to deliver this at an appropriate return
for the Group.
The annual budget and strategy planning process
considers longer term actions and initiatives to mitigate
and counter any prolonged downturn.
PRINCIPAL RISK
Market disruption
We aim to operate in
markets with stable GDP
growth, prioritising long-
term stability over short-
term gains. We deliberately
avoid targeting high-risk,
high-return sectors to
minimise volatility and
ensure consistent,
sustainable growth.
RISK CATEGORY
Macro
BOARD RISK APPETITE
Cautious
CHANGE IN RISK
No change
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RISK MANAGEMENT AND INTERNAL CONTROL CONTINUED
DESCRIPTION AND ASSESSMENT
Future global destabilisation impacts our international
business activities, increasing operating costs, additional
trade sanctions, supply chain delays, and/or hinders
passage of products between our sites with delays
and higher costs.
MITIGATION
Continually monitor the existing markets in which the
Group operates to identify potential uncertainties that
could impact our service to customers at the regional,
national, or global level.
Through strong supplier relationships, we identify
potential supply vulnerabilities and ensure appropriate
resilience measures are in place.
Geopolitical risks are also evaluated as part of the
due diligence process when assessing potential
acquisition targets.
We regularly monitor revenue by key supplier
to evaluate supplier concentration and continue
to invest in compliance intelligence and capabilities.
PRINCIPAL RISK
Geopolitical
environment
We aim to operate a
geographically diverse
business, with a strong
preference for established
economies that have
stable political and legal
systems.
RISK CATEGORY
Macro
BOARD RISK APPETITE
Cautious
CHANGE IN RISK
No change
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RISK MANAGEMENT AND INTERNAL CONTROL CONTINUED
Climate change is a pressing global
challenge and we recognise our
responsibility to address and mitigate
its impacts. We are committed to
collaborative efforts across our
businesses to support the transition
to a lower-carbon economy.
Our decentralised model enables us to
effectively assess and manage climate-
related risks and opportunities (CRROs)
while staying connected to our local
markets and stakeholders.
By implementing our sustainability
framework, Delivering Value Responsibly
(DVR), we set clear, strategic objectives
that integrate into our businesses,
driving both commercial success
and environmental change.
Opposite is a summary of our climate-
related financial disclosures, prepared
in accordance with the four TCFD
recommendations: Governance,
Strategy, Risk Management, and
Metrics and Targets.
These disclosures align with the TCFD’s
11 supporting disclosures, as required by
Listing Rule 6.6.6(R)(8) and align with the
TCFD framework outlined in the June 2017
report, 'Recommendations of the Task Force
on Climate-related Financial Disclosures'.
TCFD GUIDANCE – 11 DISCLOSURE RECOMMENDATIONS
Recommendations
Description
Consistency
Pages
Governance
a) Board oversight of CRROs.
62
b) Management’s role in assessing and
managing CRROs.
62-63
Strategy
a) CRROs identified over short, medium, and
long terms.
64
b) Impact of these CRROs on business, strategy,
and financial planning.
64
c) Strategy resilience under various climate
scenarios
64
Risk management
a) Processes for identifying and assessing
climate-related risks.
63
b) How we manage these risks.
63
c) Integration of these processes into overall
risk management.
63
Metrics and targets
a) Metrics used to assess CRROs.
67
b) Disclosure of Scope 1, 2, and 3 GHG
emissions and associated risks.
53, 67
c) Targets for managing CRROs, and
performance against them.
26, 53, 67
Full
Partial
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TASK FORCE ON CLIMATE-RELATED FINANCIAL
DISCLOSURES (TCFD)
GOVERNANCE STRUCTURE
GOVERNANCE
Our DVR strategy is supported by a
strong governance framework, with the
Board holding ultimate oversight and
accountability for CRROs.
Board oversight of CRROs
The Board plays a central role in
overseeing CRROs, embedding climate
factors into strategic decisions, risk
management, budgets, and business
planning. Responsibilities include setting
performance objectives, monitoring
outcomes, and managing key investments
and acquisitions with a climate focus.
The Board stays informed on climate
issues through:
• Monthly performance reports
(financial and non-financial).
• Regular updates from the CEO
on DVR and climate strategy.
• Annual briefings from the Group
Sustainability Director.
• Annual deep-dives into macroeconomic
and climate risks trends.
• Quarterly reviews of climate risk
management
The Board leverages ESG expertise
and external insights, having engaged
consultants to enhance emissions
reporting, including Scope 3 data.
They also receive updates on our net
zero progress, covering renewable energy
advancements and the shift to non-ICE
(internal combustion engine) vehicles.
Management’s role in assessing
and managing CRROs
Executive Directors on the Group
DVR Steering Committee lead the
implementation of our DVR strategy
and on our commitment to reach net zero
by 2045. They oversee the integration of
CRROs into operations and their alignment
with strategic objectives.
Management collaborates with the Board
to refine mitigation strategies, effectively
managing climate risks while seizing
opportunities to drive business and
environmental success.
READ MORE
RISK MANAGEMENT FRAMEWORK ON PAGE 54
BOARD AND COMMITTEE ATTENDANCE ON
PAGES 84, 90, 96
BOARD ACTIVITY AND FOCUS AREAS CAN BE
FOUND ON PAGE 76
THE BOARD’S SKILLS AND EXPERIENCE ON
PAGES 79-80
THE BOARD
Oversight of all CRROs; DVR governance; strategy; targets and performance;
and the Group’s risk management framework.
AUDIT COMMITTEE
Reviews CRROs, outcome of qualitative modelling, mitigation and TCFD disclosures.
EXECUTIVE COMMITTEE
Oversees and agrees approach to identifying and manage CRROs; management
of Sector & Group DVR performance, governance and strategy.
DVR STEERING COMMITTEE
Responsible for setting DVR strategy, framework and governance; oversight of monthly
reporting & performance development; sharing resources, best practice and support.
SENIOR MANAGEMENT TEAM
Accountable for DVR performance and initiatives in their businesses; identification
and management of local climate-related risks.
DVR COMMITTEES & NETWORKS
Sharing resources, best practice and building knowledge expertise.
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DISCLOSURES (TCFD) CONTINUED
RISK MANAGEMENT
In line with our decentralised model, each
business unit addresses relevant risks,
including environmental risks, in a way
that fits their unique circumstances. With
in-depth knowledge of their customers,
industries, and products, our businesses
are empowered to make local decisions
and manage risks effectively.
Processes for identifying and
assessing climate-related risks
We work with our businesses and Sector
leadership to identify and evaluate all risks,
including CRROs, drawing on expertise
from relevant teams and Group functions.
Business units identify and monitor material
risks and CRROs, assessing controls,
evaluating mitigations, and determining
necessary actions.
Environmental impacts, climate risks,
and regulatory compliance for acquisition
targets are also evaluated, with Sector and
Group-level reviews conducted with Board
oversight. This ensures alignment with our
sustainability and strategic goals.
How we manage these Risks
We empower business units to manage
CRROs and other risks locally using
tailored mitigation strategies.
Businesses use a quantitative framework
that assigns scores based on likelihood,
impact, and net effect post-mitigation.
This prioritisation identifies which risks
need further treatment or control measures.
Integration of these processes
into overall risk management
At the Sector and Group-level, risks are
consolidated to provide a comprehensive
risk profile and a similar exercise is
performed.
The Group’s risk profile is reviewed with
Board oversight to ensure alignment with
strategic objectives.
Scenario Analysis
In FY24, we revisited our qualitative scenario
analysis to reassess the principal CRROs.
The process was conducted internally,
involving operational, business, and
functional leaders across the Group.
We use a probability-impact matrix to
assess the likelihood of CRROs materialising
over different timeframes and evaluate their
potential impact and material significance
to the Group.
This assessment was conducted on a net
basis, factoring in any mitigating measures
or actions in place.
READ MORE ABOUT OUR APPROACH TO
IDENTIFYING AND MANAGING RISKS ON
PAGES 55-60
SCENARIO ANALYSIS
PROBABILITY-IMPACT MATRIX
Short to medium-term risks
We consider risks material if they
exceed 5% of the Group’s adjusted
profit before tax, consistent with our
Financial Statement audit methodology,
in the year reflected in the latest long-
term strategic plan.
'Short-term' covers risks up to 2030,
while 'medium-term' encompasses
risks from 2030 to 2040.
Long-term risks
For long-term risks, spanning 2040 to
2050, we apply a materiality threshold
twice that of short- to medium-term risks.
This accounts for the Group’s expected
growth, increased uncertainty over longer
periods, and the time available to
implement mitigation strategies.
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STRATEGY
To effectively identify and assess
CRROs, we analysed both physical
and transitional climate scenarios.
This assessment considered regulatory
impacts, environmental changes at key
locations, and shifting market dynamics
that could affect our customer base and
supply chain.
Recognising the importance of
understanding future climate risks, we used
Representative Concentration Pathways
(RCPs) from the Intergovernmental Panel
on Climate Change. These scenarios
illustrate potential climate outcomes
based on different levels of greenhouse
gas emissions, allowing us to evaluate the
impact of global warming on our business
and strategic resilience.
CRROs identified over short,
medium, and long terms
We identified two primary categories of
CRROs; physical risks and transitional risks.
Physical risks: these include damage from
extreme weather events, such as flooding,
wildfires, extreme heat, and hurricanes,
which can significantly disrupt operations
and our supply chain.
For example, our Hercules Aftermarket
site has been identified as vulnerable to
hurricane damage, prompting investment
in targeted mitigation measures.
Transitional Risks:
These involve regulatory changes and
evolving customer expectations as
economies transition to low-carbon models.
Key concerns include the EU’s proposed
ban on certain chemicals, such as PFAS,
impacting our Seals businesses and
increased carbon pricing affecting
logistics costs.
Additionally, our downstream market faces
increasing scrutiny of emissions, requiring
proactive adjustments in product offerings.
Impact of these CRROs on business,
strategy, and financial planning
Our financial analysis indicates that
the overall impact of these risks on our
performance and viability is relatively low.
Mitigating factors include our broad
geographical footprint, a diversified
customer and supplier base, and strong
risk management strategies. However,
we remain vigilant, recognising the
potential for regulatory and market
shifts to influence future operating
costs and market competitiveness.
Strategy resilience under various
climate scenarios
Our decentralised model strengthens
our ability to adapt quickly to market
and regulatory changes.
Local teams leverage their in-depth
knowledge of customers, suppliers, and
market conditions to implement effective
risk management and resilience strategies
Key initiatives include supplier engagement,
targeted decarbonisation efforts, organic
growth in low-carbon markets, and value-
add services to absorb potential cost
impacts from decarbonisation.
Scenario: fossil-fuelled growth
This scenario envisions limited global
decarbonisation, leading to a 4°C
temperature increase by 2100, consistent
with RCP 8.5. The result is more severe
and frequent weather events.
Impact Assessment:
We conducted a risk assessment of
10 critical sites, representing ca. 50%
of our revenue, focusing on vulnerabilities
such as flooding, wildfires, and hurricanes.
We have implemented comprehensive
disaster recovery plans, including
insurance and physical safeguards,
to mitigate these risks.
Despite the increased frequency of
extreme weather events, our diverse
geographical presence and proactive
risk management strategies help minimise
financial disruption.
Scenario: steady path to sustainability
This scenario assumes coordinated global
efforts to limit temperature rise to 2°C, in
line with RCP 2.6, and achieving net zero
by 2050.
Impact Assessment:
We evaluated regulatory and market
impacts on our operations, including
potential cost increases from stricter
environmental standards.
Our analysis highlights the need for
ongoing investment in low-carbon
technologies and supply chain
decarbonisation.
Opportunities from this transition
include expanding our product offerings
in renewable energy markets and circular
economy initiatives.
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DISCLOSURES (TCFD) CONTINUED
As a global company, we face evolving environmental
regulations across key markets. A significant risk is the EU’s
proposed ban on PFAS, impacting our Seals businesses,
where around 6% of our revenue comes from PFAS-
containing products. Additionally, there is increasing
pressure to decarbonise our products to align with
customer sustainability demands.
KEY RISKS
Fragmented regulations could increase costs and
reduce product competitiveness in regions with strict
environmental standards.
The EU’s PFAS ban may lead to higher raw material
costs and limited market access, impacting revenue.
Inability to decarbonise products may restrict access
to markets prioritising low-carbon solutions, reducing
competitiveness.
MITIGATION
Knowledge sharing: we share best practices across
the Group to navigate regulatory changes, using insights
from businesses experienced with stricter rules.
Supplier collaboration: our decentralised model enables
strong supplier relationships, ensuring quick adaptation
to new regulations. Our North American Seals business,
for instance, has already developed PFAS-free products.
Proactive measures: we prioritise high-risk material
identification, supplier engagement for accurate
emissions data, and training to meet regulatory
expectations, ensuring we stay ahead of compliance
and remain competitive.
The global shift toward decarbonisation could increase
operating costs, particularly for inventory procurement
and logistics. This is driven by tightening environmental
laws, such as carbon taxes, fuel levies, and emissions
trading schemes. Logistics expenses, accounting for
around 26% of our Scope 3 emissions, are especially
vulnerable to these changes.
KEY RISKS
New regulations, like the EU’s Carbon Border Adjustment
Mechanism (CBAM), could increase product and raw
material costs.
Carbon taxes and investments in low-carbon technology
could raise logistics and operational expenses.
Government emissions mandates may add further cost
pressures, affecting profitability.
MITIGATION
Cost management: We mitigate rising costs by passing
them to customers where feasible and improving
operational efficiency.
Sustainable investments: Collaborate with logistics
partners to adopt low-carbon freight options and
cost-effective sustainable practices.
Regulatory engagement: Actively engage with
policymakers to stay ahead of new regulations
and adapt quickly to minimise financial impact.
SCENARIO
Steady path to
sustainability
TRANSITIONAL RISK:
Product decarbonisation
due to stricter climate
policies and market shifts
CATEGORY:
Policy & Legal/Market
TIMEFRAME:
Medium term
FINANCIAL IMPACT:
Low
SCENARIO
Steady path to
sustainability
TRANSITIONAL RISK:
Decarbonisation costs
CATEGORY:
Policy & Legal
TIMEFRAME:
Short, Medium, Long term
FINANCIAL IMPACT:
Low
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Financial Statements
TASKFORCE ON CLIMATE-RELATED FINANCIAL
DISCLOSURES (TCFD) CONTINUED
Extending product lifespans through repair, maintenance,
and refurbishment is a core part of our commitment
to the circular economy. By embedding circularity into
our business model, we actively reduce waste, conserve
resources, and offer products that support the long-term
sustainability of our customers’ operations.
Our focus on resource efficiency provides a distinct
competitive advantage, as customers increasingly seek
solutions that align with their sustainability objectives.
The global transition to a low-carbon economy, occurring
at different paces across regions, also presents substantial
growth opportunities.
For example, Diploma Australia Seals removes, repairs,
and reinstalls pump equipment for a national water
company. Similarly, T.I.E. has an innovative refurbishment
process that ensures arm and controller systems meet
OEM standards for durability and repeatability. We are
well-positioned to capitalise on emerging demands by
continuing to innovate and offer solutions tailored to
evolving environmental standards.
POTENTIAL BENEFIT
Open up new revenue streams by capturing customers
in the renewable energy and infrastructure sectors.
Strengthen our market position through proactive
identification of future industry needs and aligning
our offerings accordingly.
Establish ourselves as a leader in sustainable products
and services, driving business growth while meeting
global decarbonisation goals.
Our sustainable supply chain initiatives focus on reducing
emissions and transportation costs while improving overall
efficiency. Through measures like route optimisation,
reverse logistics, and shipment consolidation, we not
only decrease fuel consumption but also minimise the
environmental impact of our operations.
By integrating efficient supply chain practices, we are able
to attract new business, improve cost management, and
support our overarching emissions reduction targets.
We promote sustainable practices throughout our
supply chain and actively collaborate with suppliers
and third-party logistics providers to achieve shared
environmental goals. Our focus on greener delivery
solutions reinforces our commitment to being an
industry leader in sustainability.
POTENTIAL BENEFIT
Achieve significant cost savings and enhance
our environmental reputation.
Attract customers seeking low-carbon transportation
and logistics options.
Foster partnerships with suppliers and couriers to further
reduce emissions and improve logistics, contributing to
our long-term sustainability targets.
SCENARIO
Steady path to
sustainability
OPPORTUNITY:
Product and market
opportunities
CATEGORY:
Policy & Legal/Market
TIMEFRAME:
Short, Medium, Long term
SCENARIO
Steady path to
sustainability
OPPORTUNITY:
Enhanced logistics
efficiency
CATEGORY:
Policy & Legal
TIMEFRAME:
Medium
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Financial Statements
TASKFORCE ON CLIMATE-RELATED FINANCIAL
DISCLOSURES (TCFD) CONTINUED
Resilience of the Organisation’s Strategy
Our strategy is designed to stay resilient to
Climate-Related Risks and Opportunities
(CRROs) through several key measures:
Decentralised Model: Empowers our
businesses to leverage deep product
knowledge and strong local relationships,
enabling swift adaptation to regulatory,
market, and technological shifts.
Risk Diversification: Low reliance on
individual customers and suppliers
ensures broad risk coverage.
Cost Absorption: Value-added services
and disciplined pricing protect margins
from decarbonisation costs.
Organic Growth: Focus on emerging
opportunities in the low-carbon
economy to reduce exposure to
high-carbon markets.
DVR Alignment: Comprehensive
integration of our decarbonisation,
value creation, and resilience (DVR)
framework ensures all business units
are aligned with our net zero goals.
Flexible Model: Our low capital intensity
provides the agility needed for a smooth
transition with minimal risk to asset values.
In July 2024, we strengthened our
commitment to sustainability by updating
our Supplier Code of Conduct and
Environmental Policy. The new policies
emphasise reducing greenhouse gas
emissions, waste, and landfill use, while
setting science-based targets. We’ve
introduced initiatives like green logistics
and enhanced supplier engagement to
ensure transparency and further progress
toward our long-term climate goals.
METRICS AND TARGETS
Metrics used to assess CRROs
To effectively manage CRROs, we
monitor and measure several key metrics.
Central to our strategy is the reduction of
absolute GHG emissions, which is crucial
in achieving our net-zero target by 2045.
Additionally, we track waste management,
recognising its significance for operational
efficiency and supporting a circular
economy, even though it is not a major
emissions source. Supplier engagement
is also critical, as aligning our suppliers with
our Scope 3 emissions targets is essential
to our overall net-zero strategy and this is
embedded in our Supplier Code.
Disclosure of Scope 1, 2, and 3 GHG
emissions and associated risks
We are committed to significantly reducing
our environmental impact and aligning with
global climate goals. As part of our net-
zero ambition for 2045, we have clear and
ambitious short-term targets. By FY2030,
we aim to cut our absolute Scope 1 and 2
GHG emissions by 50% and reduce our
absolute Scope 3 emissions by 30%, using
FY2022 as our baseline. These targets are
aligned with the 1.5°C pathway, consistent
with the latest climate science and the
Paris Agreement.
Our long-term strategy aims to achieve
a 90% reduction in emissions across all
Scope, 1,2 & 3 from our FY2022 baseline.
The Science Based Targets initiative (SBTi)
approved these targets in December 2023,
validating our transparent and robust path
toward carbon neutrality.
SEE PAGE 53 FOR KEY CLIMATE
RELATED METRICS
Targets for managing CRROs,
and performance against them
Our commitment to meeting and
exceeding climate action requirements
is evident in our structured approach.
We have established science-based,
near-term targets to ensure that our
emissions reductions are impactful
and aligned with global standards.
The short-term goal of reducing Scope 1
and 2 emissions by 50% and Scope 3
emissions by 30% by FY2030 sets a clear
path. For the long term, achieving a 90%
reduction by 2045 underscores our
dedication to a sustainable future.
STRATEGY CONTINUED
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Financial Statements
TASKFORCE ON CLIMATE-RELATED FINANCIAL
DISCLOSURES (TCFD) CONTINUED
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.
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 81 to 83 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.
SECTION 172
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.
Shoal Group, Life Sciences Canada
and M Seals Denmark completed the
build of their brand new, state-of
the-art facilities, contributing to our
increased solar coverage.
Investing
We all play a role at keeping our
colleagues safe at work. During May
2024, we rolled out a ‘Stand up for
Safety’ campaign across our business
as part of our Group-wide drive to
keep health and safety culture at the
forefront of minds.
Safety
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Financial Statements
ENGAGEMENT WITH STAKEHOLDERS
AND SECTION 172 STATEMENT
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 76.
Set out overleaf are some examples of
decisions made by the Board in the year.
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.
In addition to the initiatives and actions mentioned in this statement, the table below
references other parts of the report which provide more detail on how the Board has
regard to the s.172 factors:
s.172 Factor
Information can be found on
(a) The likely consequences
of any decisions in the
long-term
Our business model: pages 19-21
Our strategy: pages 22-25
Risk management and internal control: pages 54-60
(b) Interests of employees
Talent review: pages 14-16
Engagement survey outcome: page 51
Remuneration Committee Report : pages 96-119
(c) Fostering the Company’s
business relationships
with suppliers, customers
and others
Market review: pages 17-18
Our business model: pages 19-21
Non-Financial and Sustainability Information Statement: page 73
(d) Impact of operations on
the community and
environment
Delivering Value Responsibly: pages 50-53
TCFD statement: pages 61-67
(e) Maintaining a reputation
for high standards of
business conduct
Our business model: pages 19-21
Non-financial and sustainability information statement: page 73
Risk management and internal control: pages 54-60
Audit Committee Report: pages 84-89
(f) Acting fairly between
members of the company
Delivering Value Responsibly: pages 50-53
Non-financial and sustainability information statement: page 73
Remuneration Committee Report: pages 96-119
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.
More information on acquisitions completed
throughout the year can be found on pages
28-39.
The Board is committed
to effective engagement
with all stakeholders
and has established a
culture that ensures this
commitment is adopted
within our businesses
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Financial Statements
ENGAGEMENT WITH STAKEHOLDERS
AND SECTION 172 STATEMENT CONTINUED
HOW WE ENGAGE WITH OUR STAKEHOLDERS
OUR COLLEAGUES
OUR BUSINESSES
OUR CUSTOMERS
WHY WE ENGAGE
Diploma’s success depends on its
ability to attract and retain qualified
and experienced employees.
HOW WE ENGAGE
• Group Colleague Engagement Survey,
listening groups and engagement plans
• Feedback from the Group Colleague
Engagement Survey
• 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
• Leadership at Scale programme,
more on page 14
• Regular updates from the Group CEO,
Group HR Director, Group Corporate
Development Director and Sector CEOs
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:
• Apprenticeship Week celebration
• Stand up for Safety campaign
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.
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 R&G Fluid Power Group (UK),
Shoal Group (UK), IS-Group (UK),
Clarendon Specialty Fasteners (UK)
and Windy City Wire (USA)
OUTCOMES/ACTION TAKEN
• Onboarding programmes for all
acquisitions, including Peerless
Aerospace
• National Apprenticeship Week, hosted
by Clarendon Specialty Fasteners gave
UK apprentices the opportunity to meet
their peers, learn more about Diploma
and ask questions of the Group CEO,
Johnny Thomson
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.
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
• Product innovations across Life
Sciences and other Sectors
• Workshops and customer
education at our facilities
• Providing value-add services
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ENGAGEMENT WITH STAKEHOLDERS
AND SECTION 172 STATEMENT CONTINUED
R&G took on the Yorkshire Three Peaks Challenge
to raise over £4000 for local charity, Children Today
Charitable Trust.
HOW WE ENGAGE WITH OUR STAKEHOLDERS CONTINUED
OUR INVESTORS
OUR SUPPLY CHAIN
ENVIRONMENT AND COMMUNITIES
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
• Results presentations by CEO and CFO
• One-on-one meetings undertaken by
CEO, CFO and Head of Investor
Relations throughout the year
• Comprehensive roadshow programme
across the UK, Europe and North America
• Annual General Meeting
• Trading updates, regulatory news
items and website updates
• ESG rating schemes
• 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
• Consultations on remuneration
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.
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
OUTCOMES/ACTION TAKEN
• Strong, mutually beneficial partnerships
• Increased number of key suppliers
aligned to Group Supplier Code
• Ongoing collaboration to realise
innovation
• Strategic alignment and growth
opportunities
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
• Updates from biannual DVR Committees
• Training on climate-related issues
and trends
OUTCOMES/ACTION 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
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Financial Statements
ENGAGEMENT WITH STAKEHOLDERS
AND SECTION 172 STATEMENT CONTINUED
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 2027, 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 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
downside 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 page 159.
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.
The Directors confirm that this robust
assessment also considers the principal
risks and emerging risks facing the Group,
as described on pages 55-60, 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 downside 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.
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 deemed 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 2027. 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.
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Financial Statements
VIABILITY STATEMENT – DIPLOMA PLC
This table signposts related non-financial information in this report.
Reporting
requirement
Policies
Reference in 2024
Annual report
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
Code of conduct
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
Diversity, equity &
inclusion (DEI)
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.
Further detail can be
found in our talent
review on pages
14-16 and DVR on
pages 50-53
Equal opportunity
Our Group-wide diversity and inclusion commitment is for all
candidates to be considered fairly, regardless of their gender,
race, age, sexual orientation or any other protected characteristics.
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
Environment
Our updated policy reflects our commitment to environmental
protection and sustainable operations, aiming for net zero emissions
by 2045. It focuses on carbon reduction, circular economy practices,
water and waste management, biodiversity protection, and
sustainable logistics. Key priorities include compliance with
environmental standards, ongoing improvement, and engaging
stakeholders to minimise environmental impact.
Further detail can be
found on our website
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.
Further detail can be
found in our TCFD
statement on pages
61-67
Reporting
requirement
Policies
Reference in 2024
Annual report
Health and safety
Our policy commits to ensuring the wellbeing of colleagues, visitors,
and partners by fostering a proactive health and safety culture.
It highlights the importance of establishing a proactive culture,
with ongoing improvements in health and safety practices through
audits and governance mechanisms.
Further detail can be
found on our website
and DVR on pages
50-53
Human rights &
labour conditions
Our Human Rights Policy commits us to respecting internationally
recognised human rights in line with the principles and guidance
contained in the United Nations Guiding Principles on Business
and Human Rights.
Further detail can be
found on our website
Modern Slavery
Statement
The Group has a zero-tolerance approach to slavery in all forms,
including human trafficking, forced and child labour. The Board
has been assured that slavery is not taking place within the Group.
Further detail can be
found on our website
Whistleblowing
We have a Whistleblowing Policy that applies to all employees and
businesses and is monitored by the Audit Committee. The Policy is
made available to 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.
Further detail can be
found on our website
Supply chain
Our updated Supplier Code of Conduct outlines our commitment
to ethical and legal standards across the supply chain. Suppliers
must comply with laws on human rights, environmental impact,
anti-bribery, and health and safety. We are committed to promoting
fair competition, minimising environmental harm, and addressing
modern slavery, ensuring sustainable and responsible business
practices along our value chain.
Further detail can be
found on our website
and DVR on pages
50-53
FURTHER READING CAN BE FOUND ON OUR WEBSITE AT
WWW.DIPLOMAPLC.COM/ABOUT-US/GOVERNANCE/POLICIES/
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Corporate Governance
Financial Statements
NON-FINANCIAL AND SUSTAINABILITY
INFORMATION STATEMENT
GOVERNANCE
Compliance with the UK Corporate Governance Code
It is the Board’s view that for the financial year ended
30 September 2024, the Company has applied all of the
principles and has complied with all of the provisions set out
in the UK Corporate Governance Code 2018 (the Code).
PRINCIPLES OF THE UK CORPORATE GOVERNANCE CODE 2018
Board leadership and company purpose
READ MORE ON PAGES
2 AND 78-80
Composition, succession and evaluation
READ MORE ON PAGES
77-80 AND PAGES 90-95
Remuneration
READ MORE ON PAGES
96-119
Division of responsibilities
READ MORE ON PAGE
81
Audit, risk and internal control
READ MORE ON PAGES
54-60 AND 84-89
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Financial Statements
DAVID LOWDEN
CHAIR
Dear Shareholder,
It is with great pleasure that I
present, on behalf of the Board,
the Corporate Governance Report
for the year ended 30 September
2024. This report summarises
how Diploma’s leadership and
governance structures have
supported Diploma over the year
in seeking to achieve long-term
sustainable success.
Our governance practices have evolved over
decades to instil confidence in our investors
and create long-term value while enabling
our entrepreneurial businesses to thrive.
Alongside our financial success, our
governance practices champion long-term
sustainable growth, enabling accountability,
transparency and ensuring our entire Group
operates effectively and responsibly.
Throughout the past year, we have
continued to develop and embed our
Delivering Value Responsibly (DVR)
frameworks. Further information on our
sustainability programmes can be found
on pages 50-53. 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 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 pleased to experience this
in person during our visits this year to
Windy City Wire in the US and R&G,
Shoal Group, IS-Group and Clarendon
Specialty Fasteners in the UK.
Board succession
With the recently announced new
appointments to the Board, I am confident
that Diploma will continue to have the
effective and resilient leadership required
to fulfil our long-term growth ambitions.
Janice Stipp joined us in January 2024
and was appointed Chair of the Audit
Committee in July 2024, succeeding Anne
Thorburn, who stepped down from the
Board in September 2024 after nine years.
One area of focus was the review of our
Committee compositions, reflecting the
increased size and complexity of the Group.
The following changes will take effect from
1 January 2025. The Audit Committee will
comprise Janice Stipp (Chair), Dean Finch,
Katie Bickerstaffe and Ian El-Mokadem.
The Remuneration Committee will comprise
Jennifer Ward (Chair), Katie Bickerstaffe,
Geraldine Huse and David Lowden. The
Nomination Committee remains unchanged.
Looking ahead
The Board’s priorities for FY25 remain
consistent, with a continued focus on:
the implementation of the Group’s
strategy; succession planning, managing
risk and fostering an empowered and
positive culture.
Our AGM will be held on 15 January 2025.
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.
David Lowden
Chair
Additionally, Katie Bickerstaffe joined the
Board as Senior Independent Director on
1 October 2024, also succeeding Anne.
Jennifer Ward, who joined the Board last
year, has assumed the role of Chair of the
Remuneration Committee, following the
departure of Andy Smith in July 2024 after
nine years on the Board.
We announced in October 2024 that Ian
El-Mokadem will be joining the Board in the
first half of 2025. Ian brings with him a
wealth of experience and expertise that will
greatly contribute to the continued success
of the Group. We look forward to welcoming
him and working closely together in the
coming year.
The Board recognises the value of diversity
and inclusion, a key component of the
Group’s DVR programme. Having recently
completed a refresh of the Board,
enhancing diversity in skillset, gender and
ethnicity, we are confident that the Board is
well-positioned for the future. Further
information can be found in our Nomination
Committee Report on pages 90-95.
Board evaluation
This year, we undertook an externally
facilitated evaluation of our Board
and its committees. We engaged
an independent firm, BoardClic, to
ensure an objective perspective
and actionable recommendations. 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 95.
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Financial Statements
CHAIR’S INTRODUCTION TO GOVERNANCE
BOARD ACTIVITIES
Strategy
25%
Finance
20%
Operations
10%
Colleagues & culture
15%
Risk
15%
Governance
15%
Strategy
• 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
sustainability 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.
Finance
• Received updates on the Group’s
financial performance.
• Approved the FY25 budget; monitored
performance against the FY24 budget
through regular presentations from
the CFO.
• 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.
Governance
• Regular corporate governance and
regulatory updates from the Group
Company Secretary.
• Carried out the annual Board
effectiveness review, facilitated by
an external evaluator.
• Agreed and tracked actions from the
2023 internal evaluation of the Board’s
performance.
• Approved the appointments of
new Non-Executive Directors.
• Reviewed schedule of matters reserved
for the Board and Terms of Reference of
its Committees.
Operations
• Regular updates from the Group CEO.
• Monitored and discussed the regulatory
and political impacts on the Group’s
operations.
• Approval of the annual Modern
Slavery Statement.
• Sector presentations.
• Business visits.
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.
Colleagues & culture
• Reviewed Group Colleague
Engagement Survey results.
• Received reports on workforce
wellbeing throughout the year.
• UK and US site visits.
• Talent and succession update.
• Whistleblowing reports.
• Sector presentations.
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CHAIR’S INTRODUCTION TO GOVERNANCE CONTINUED
BOARD GENDER
BOARD ETHNICITY
FY24
Female
50%
Male
50%
FY24
White
100%
Ethnic minority
0%
EXECUTIVE
COMMITTEE GENDER
EXECUTIVE
COMMITTEE ETHNICITY
FY24
Female
25%
Male
75%
FY24
White
100%
Ethnic minority
0%
BOARD SKILLS OVERVIEW
62.5%
62.5%
62.5%
B2B, Industrial & Distribution Sectors
Financial and Risk Management
Operations
Customer Service
Health & Safety / Diversity, Equity & Inclusion
Strategy
M&A/Financing
Retail and FMCG Sectors
International Business
62.5%
75.0%
37.5%
75.0%
75.0%
87.5%
BOARD TENURE
2020
2021
2022
2023
2024
David Lowden
Katie Bickerstaffe
Janice Stipp
Geraldine Huse
Dean Finch
Jennifer Ward
2023/24
0-3 years
50%
3-6 years
50%
PEERLESS AEROSPACE
The Group completed
the acquisition of
Peerless, adding to our
position in aerospace
fasteners and
expanding our
capability in the US.
READ MORE
ON PAGES 32-33
BOARD ACTIVITY
Strategy & execution 25%
Finance
20%
Operations
10%
Colleagues & culture
15%
Risk
15%
Governance
15%
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GOVERNANCE AT A GLANCE
BOARD ATTENDANCE FY24 (AS AT 30 SEPTEMBER 2024)
Member
Board
DAVID LOWDEN
7/7
JOHNNY THOMSON
7/7
CHRIS DAVIES
7/7
ANNE THORBURN
7/7
ANDY SMITH1
3/4
GERALDINE HUSE
7/7
DEAN FINCH
7/7
JENNIFER WARD2
6/7
JANICE STIPP3
5/6
1 Andy Smith stepped down from the Board on
16 July 2024 and was unable to attend the May
meeting due to an unavoidable conflict.
2 Jennifer Ward was unable to attend the August
meeting as it was called on short notice.
3 Janice Stipp was appointed to the Board on
17 January 2024 and was unable to attend the
August meeting as it was called on short notice.
The Board comprises the Chair, Executive Directors and Independent Non-Executive Directors, and is responsible for the performance and
long-term success of the Group, including Health & Safety, leadership, strategy, values, standards, controls and risk management.
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.
EXECUTIVE DIRECTORS
Audit Committee
Chair: Janice Stipp
Oversees and monitors the Group's financial statements,
accounting processes, audit (internal and external),
internal controls systems and financial risk
management procedures.
READ MORE ON PAGES 84-89
Treasury Committee
Provides oversight of treasury activities in implementing
the treasury policies approved by the Board.
Nomination Committee
Chair: David Lowden
Reviews size and composition of the Board,
Committees, and its succession planning.
READ MORE ON PAGES 90-95
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.
Remuneration Committee
Chair: Jennifer Ward
Reviews and recommends the framework and policy
on Executive Director, senior leadership and wider
workforce remuneration.
READ MORE ON PAGES 96-119
Disclosure Committee
Oversees the disclosure of market
sensitive information.
David Lowden
Non-Executive Chair
Leads the Board and ensures its overall effectiveness in
discharging its duties.
Independent Non-Executive Directors
Ensure that no individual or small group of individuals
can dominate the Board’s decision making.
Katie Bickerstaffe
Senior Independent Director
Provides a sounding board for the Chair and serves as an
intermediary for other Directors and shareholders.
EXECUTIVE TEAM
The Executive Team provides strategic and operational leadership to the Group, ensuring that strategies are executed effectively.
EXECUTIVE DIRECTORS
The Group CEO and CFO lead the implementation of the Group’s strategy set by the Board.
SENIOR MANAGEMENT TEAM
The Senior Management 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 and leadership teams of the businesses and key Group functional roles.
OUR GOVERNANCE FRAMEWORK
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GOVERNANCE AT A GLANCE CONTINUED
DAVID LOWDEN
Board Chair & Nomination Chair
JOHNNY THOMSON
Group Chief Executive Officer
CHRIS DAVIES
Group Chief Financial Officer
KATIE BICKERSTAFFE
Senior Independent Director
JANICE STIPP
Independent Non-Executive
Director & Audit Chair
Joined: October 2021
Joined: February 2019
Joined: November 2022
Joined: October 2024
Joined: January 2024
Committee membership N R
Committee membership A N R
Committee membership A N R
Relevant skills and experience:
• Industrial and distribution sectors
• Financial and risk management
• Operations
• Strategy
• M&A and financing
• International business
Relevant skills and experience:
• B2B industrial
• Distribution and service sectors
• Financial and risk management
• Operations and customer service
• Strategy
• M&A and financing
• International business
Relevant skills and experience:
• Retail and FMCG sectors
• Financial and risk management
• Operations and customer service
• Strategy
• M&A and financing
• International business
Relevant skills and experience:
• Retail, services and FMCG sectors
• Sales and marketing
• Operations and customer service
• Strategy
• M&A and financing
• Organisational development
Relevant skills and experience:
• Industrial and services sectors
• Financial and risk management
• Strategy
• M&A and financing
• International business
• Organisational development
Current external appointments:
• Senior Independent Director,
Morgan Sindall plc
• Chair, Capita PLC
Current external appointments:
• None
Current external appointments:
• Non-Executive Director, Motability
Operations Group PLC
Current external appointments:
• Non-Executive Director and
Remuneration Committee Chair,
Barratt Developments Plc
• Non-Executive Director, abrdn plc
• Senior Independent Director of the
England and Wales Cricket Board
• Non-Executive Director at The Royal
Marsden NHS Foundation Trust
Current external appointments:
• Independent Board Member and
Audit Committee Chair, ArcBest
Corporation
• Non-Executive Director & Audit
Committee Chair, Rotork Plc
• Board Member, Michigan State
University Research Foundation
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
Past appointments:
• Group Finance Director,
Compass Group PLC
• Regional Managing Director, Latin
America, Compass Group PLC
Past appointments:
• Chief Financial Officer, National
Express Group PLC
• Group Financial Controller and
Treasurer (and Interim Group CFO),
Inchcape plc
• Chief Financial Officer for
North America, Diageo plc
Past appointments:
• Co-Chief Executive Officer, Marks
& Spencer Group Plc
• Executive Chair, SSE Energy Services
• CEO Designate, SSE Plc
• CEO UK & Ireland, Dixons
Carphone Plc
Past appointments:
• Independent Board Member,
Sappi Ltd
• Independent Board Member,
Commercial Vehicle Group Inc
• Independent Board Member, NN Inc
• Independent Board Member,
PlyGem Holdings Inc
COMMITTEE MEMBERSHIP
R Remuneration
A Audit
N Nomination
Chair
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BOARD OF DIRECTORS
COMMITTEE MEMBERSHIP
R Remuneration
A Audit
N Nomination
Chair
JENNIFER WARD
Independent Non-Executive
Director & Remuneration Chair
GERALDINE HUSE
Independent Non-Executive
Director
DEAN FINCH
Independent Non-Executive
Director
IAN EL-MOKADEM
Independent Non-Executive
Director
JOHN MORRISON
Group General Counsel &
Company Secretary
Joined: June 2023
Joined: January 2020
Joined: May 2021
To be appointed: First half of
2025
Joined: April 2020
Committee membership A N R
Committee membership A N R
Committee membership A N R
Relevant skills and experience:
• B2B industrial, services and retail
sectors
• Customer service
• Sales and marketing
• International business
• Organisational development
• Diversity, Equity & Inclusion
Relevant skills and experience:
• Retail and FMCG Sectors
• Customer service
• Sales and marketing
• International business
• Organisational development
• Diversity, Equity & Inclusion
Relevant skills and experience:
• B2B industrial, services and retail
sectors
• Financial and risk management
• Operations and customer service
• Strategy
• M&A and financing
• International business
• Health & Safety
Ian has a wealth of experience in
international, industrial and B2B
services businesses and a track
record in driving transformation
and performance improvement.
Ian is currently Chief Executive of
RWS Holdings plc and will stand
down in 2025. He is also a Non-
Executive Director at Serco Group
plc, where he is Chair of the Risk
Committee and a member of both
the Audit Committee and
Nomination Committee.
Ian previously held the roles of
Chief Executive at Exova Group plc
and was Chief Executive of
maritime services provider V.Group
for Advent International.
An experienced FTSE company
secretary and solicitor, John is
responsible for the Group’s global
legal, risk, compliance and
governance affairs. John provides
support and advice to the Executive
Directors, the Board and its
Committees. He brings rigour to
corporate governance and ensures
that Board procedures are fit for
purpose and adhered to.
Current external appointments:
• Executive Director and Chief Talent,
Culture and Communications
Executive, Halma Plc
Current external appointments:
• President, Procter & Gamble,
Canada
Current external appointments:
• Group Chief Executive,
Persimmon PLC
Past appointments:
• Senior Director, Human Resources,
PayPal Inc
• SVP Learning & Leadership
Development, Bank of America
Past appointments:
• Chief Executive Officer, P&G
Central Europe
• Chair of the Institute of Grocery
Distribution
Past appointments:
• Chief Executive Officer, National
Express Group plc
• Group Chief Executive, Tube Lines
• Group Finance Director & Group
Chief Operating Officer,
FirstGroup plc
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BOARD OF DIRECTORS CONTINUED
The Board is responsible to shareholders
for various matters including the Group’s
financial and operational performance,
risk management and culture. It is also
collectively responsible for promoting
the long-term success of the Group.
As part of this, the Board monitors
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 guides the
Board’s activities. The Board is assisted
by three principal committees (Audit,
Nomination and Remuneration), and two
administrative committees (Treasury and
Administrative) each of which is responsible
for reviewing and dealing with matters within
its own terms of reference.
ROLES AND RESPONSIBILITIES
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
• 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.
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DIVISION OF RESPONSIBILITIES
Successfully scaling up our value-add
distribution model requires constant
evolution, and our culture has a critical
role to play in supporting growth.
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. 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. During the year, the Board
has embedded and 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.
In reviewing the implementation of the
Group’s strategy, the Board ensures that
the objectives of our purpose are met
whilst also taking into account the risks
and opportunities facing the Group. For
example, when considering acquisition
strategies, cultural fit is an important area
of focus and discussion.
DIPLOMA PLC BOARD
The Board monitors and embeds culture through a variety of
methods, including strategy updates, reports from the CEO,
presentations by the Executives, Sector and functional leaders,
employee engagement surveys, and site visits.
AUDIT COMMITTEE
Has oversight of internal controls and
continuous access to external and 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.
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.
EXECUTIVE COMMITTEE
Integrates our core principles into the Group's strategic framework, ensuring that every decision reflects
our values. Regularly reviews Group's performance and strategy to identify areas of opportunity.
BUSINESS MDS
Ensures our core values and behaviours are reflected in every aspect of our operations, daily interactions and
decision-making processes. Responsible for implementing engagement survey action plans for their respective
businesses and monitoring progress against these plans.
OUR FRAMEWORK FOR EMBEDDING AND MONITORING VALUES AND BEHAVIOURS
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HOW DIPLOMA EMBEDS AND MONITORS
GROUP VALUES AND BEHAVIOURS
BOARD SITE VISITS
Shared values and behaviours in
a decentralised model
Our decentralised model means that culture
is embedded in our businesses, each of
which has its own unique attributes. We
believe this is critical to the accountability
and empowerment that underpins the
Group’s success.
Whilst remaining decentralised and
maintaining their own unique identity,
our businesses also benefit from shared
values; shared best practices, intercompany
networks and exceptional leadership teams.
Employee engagement
The Board 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 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:
• Updates to the Board at 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 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 of 87% and engagement index score
of 79%; the full results of the survey are
detailed on page 51.
One of the ways the Board experiences and evaluates the culture is
through meeting with colleagues across our businesses.
Visit to R&G in Lincoln
During a site visit to R&G in the UK in March
2024, the Board engaged directly with
employees and management to gather
valuable insights that inform our strategic
decisions. This provided a unique
opportunity to understand the nuances
of our workplace culture and employee
engagement firsthand.
The Board gained a deeper appreciation
of the challenges and successes
experienced on the ground. The feedback
obtained during this visit and other site
visits throughout the year will play a role
in shaping our policies and initiatives,
ensuring our decision-making is aligned
with the needs of our workforce.
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HOW DIPLOMA EMBEDS AND MONITORS
GROUP VALUES AND BEHAVIOURS CONTINUED
JANICE STIPP
CHAIR OF THE AUDIT COMMITTEE
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 risk
management and internal control, the
performance of internal and external
audit functions, as well as the behaviour
expected of the Group’s employees
through the Whistleblowing Policy and
the Group's Code of Conduct. This is in
line with the FRC's Minimum Standard
where relevant, as described in the Audit
Committee Report. 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 WWW.DIPLOMAPLC.COM/ABOUT-US/
GOVERNANCE/
Member
Meetings
attended
during FY24
Joined
JANICE STIPP1
(Chair)
January 2024
ANNE
THORBURN2
September 2015
ANDY SMITH3
February 2015
GERALDINE
HUSE
January 2020
DEAN FINCH
May 2021
JENNIFER
WARD
June 2023
1 Janice Stipp was appointed to the Board on 17 January
2024 and was appointed as Chair of the Audit
Committee on 16 July 2024.
2 Anne Thorburn stepped down as Chair of the Audit
Committee on 16 July 2024 and stepped down from
the Board on 30 September 2024.
3 Andy Smith was unable to attend the May meeting due
to an unavoidable conflict. Andy stepped down from
the Board on 16 July 2024.
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Financial Statements
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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 Half Year and Year End
announcements received reports from
the external auditor on the key accounting
issues and areas of significant judgement.
Reviewed the Annual Report and Accounts
and received reports from the Group CFO
and the external auditor on the key
accounting issues and areas of significant
judgement.
Reviewed the effectiveness of the
Group’s risk management and internal
control and, where appropriate, made
recommendations to the Board on
areas for improvement.
Reviewed the report on compliance with
the UK Corporate Governance Code 2018
and reports on the provision of information
to the auditor.
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 revisions to the UK
Corporate Governance Code and what this
means for the Group’s risk internal control
framework as well as future reporting
under section 172 Companies Act 2006.
Received regular updates from the external
auditor on reporting developments.
Reviewed the report from the CFO on the
controls in place to mitigate fraud risks.
Approved the Going Concern and
Viability Statements.
Continued to monitor developments in
audit reform and changing best practice.
Reviewed trading updates.
Approved the Committee work
programme for 2025.
Dear Shareholder
I am delighted to write to you as the
new Chair of the Audit Committee
for Diploma. I was appointed to the
Board in January 2024 and became
Chair of the Audit Committee in July
2024, and it is with great enthusiasm
that I step into this role.
The role of the Audit Committee is vital to
ensuring the integrity and transparency of
our financial reporting and internal controls,
and I am fully committed to upholding the
highest standards in these areas.
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.
As part of the Group’s year-end reporting
process, the Committee has thoroughly
reviewed and challenged management's
approach, analysis, and recommendations,
incorporating the perspectives of the
external auditor to finalise the Annual Report
and Accounts. Additionally, the Committee
has continuously assessed and monitored
the Group's principal and emerging risks
on an ongoing basis.
Long-term value
creation is
sustained by
fostering a culture
of integrity and
transparency.
Throughout the year, we have dedicated
significant time and resources to preparing
for much-anticipated governance reforms.
This involved continued development and
implementation of our redesigned internal
control framework, aimed at enhancing
the robustness of our internal controls,
audit processes, and financial reporting
standards, ensuring greater transparency
and accountability within the Group.
Although the Government has decided to
withdraw the secondary legislation that
would have formalised some of these
governance changes, they continue to move
forward with plans to establish the Audit,
Reporting and Governance Authority (ARGA)
as the successor to the Financial Reporting
Council (FRC).
Looking forward, I am enthusiastic about the
opportunities we have to further strengthen
our governance practices and enhance our
oversight functions. To that end, I am
committed to engaging closely with our
external audit partner to ensure a thorough
and effective audit process and with our
Head of Internal Audit to support a robust
internal audit program. By maintaining an
ongoing dialogue and alignment on audit
priorities, we aim to identify and address any
risks promptly and effectively, ensuring that
our internal controls are not only effective
but also continuously improving.
I am excited about the journey ahead
and committed to working closely with all
stakeholders to ensure Diploma remains
well-positioned for continued success.
I look forward to meeting shareholders
at the AGM on 15 January 2025 and will be
happy to respond to any questions relating
to the activities of the Audit Committee.
Janice Stipp
Chair of the Audit Committee
19 November 2024
In anticipation of these changes, we have
proactively continued our internal planning
efforts, ensuring that we are well-positioned
to meet the new compliance requirements
when they come into effect. This will remain
a recurring item on the Committee’s agenda
in the coming year, as we work to embed
this into our operational framework.
As Audit Chair, I am committed to having
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. PwC has
now completed its seventh full annual cycle,
with Richard Porter leading since FY23.
I am pleased to report that again there have
been no significant control deficiencies or
accounting irregularities reported to the
Committee this year.
The Committee plans to commence a
retender process for the audit during FY27
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.
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Financial Statements
AUDIT COMMITTEE REPORT CONTINUED
AUDIT
COMMITTEE
The Committee is chaired by Janice Stipp
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.
Janice 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 2024 and up to the date
of this report.
Accounting for acquisitions and disposals
The Committee reviewed the accounting
for acquisitions completed during the year,
in particular the acquisitions of Peerless
Aerospace and PAR Group. The acquisitions
were material for the FY24 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:
a) the Purchase Price Allocation (PPA);
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 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 five smaller
acquisitions is appropriate.
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.
Financial reporting and significant
financial judgements and estimates
The Committee considered and assessed:
• the Full Year and Half Year Results, and
trading updates for recommendation
to the Board;
• the appropriateness of accounting
policies and practices, as well as critical
accounting estimates and key
judgements; and
• whether the Annual Report and Accounts,
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.
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 2024. 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.
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 commercial and trading-related
matters 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.
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 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.
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AUDIT COMMITTEE REPORT CONTINUED
ENGAGEMENT OF THE
EXTERNAL AUDITOR
Other audit matters
The Committee also considered other
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 aware of
the UK High Court legal ruling in June 2023
between Virgin Media Limited and NTL
Pension Trustees II Limited that was
subsequently upheld by the Court of Appeal
on 25 July 2024 in which certain historic rule
amendments were invalid if they were not
accompanied by actuarial certifications. The
Committee understands that this judgment
will need to be reviewed for its relevance
to the Diploma Holdings PLC UK Pension
Scheme and due to the recency of this,
the Pension Scheme advisers have not yet
completed any analysis and no adjustments
have been made to the consolidated
financial statements as at 30 September
2024. 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 severe but plausible
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 downside scenario.
The external auditor, led by audit partner
Richard Porter, is engaged to express an
opinion on the financial statements of
the Group. 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.
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.
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Financial Statements
AUDIT COMMITTEE REPORT CONTINUED
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 72.
Further details on Going Concern can
be found on page 168.
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.
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.
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.
In conjunction with the upcoming
requirements of the UK Corporate
Governance Code 2024, the risk
management and internal control framework
was revitalised. This framework will provide
a structured approach to ensure that
significant financial and reporting,
operational and cybersecurity, compliance
and strategic risks are sufficiently mitigated
by clearly defined key controls. The
Committee is confident of management's
plan to implement this framework, which will
also enable the Board to execute its duty in
compliance with the requirements of the
new UK Corporate Governance Code 2024.
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 exceeding predefined
amounts must be supported by a paper
prepared by management.
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 (£80,900). Included within this
is access to PwC's Viewpoint technical
subscription service.
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 27 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 risk
management and internal control on
pages 54 to 60.
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Financial Statements
AUDIT COMMITTEE REPORT CONTINUED
The Committee has reviewed the
effectiveness of the Group’s risk
management and internal control systems
for the period from 1 October 2023 to the
date of this report. Taking into account the
matters set out on pages 57 to 60 relating
to principal risks and uncertainties and the
reports from the Group Head of Internal
Audit, 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. The department comprises a
Group Head of Internal Audit and three
Group Internal Auditors.
The Committee received, considered and
approved the 2024 Internal Audit plan which
was developed using a risk-based approach
considering the Group's control environment
and principal risks. The audit plan was
developed based on the premise that all
businesses are audited at least once every
three years. In 2024, the Group Head of
Internal Audit also commissioned a
speciality Operational Technology review
conducted by an external specialist.
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.
During the year, a new web-based audit
system was implemented which allows
documentation of audit testing, reporting
and recording and live tracking of audit
issues. The Group Head of Internal Audit
monitors progress on the resolution of
issues and regularly engages with Sector
management to ensure engagement on
resolution is maintained at all levels.
The Group Head of Internal Audit formally
reports to the Committee on the results of
the 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 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.
At the end of the year, the CFO conducted
an internal review of the effectiveness of the
Internal Audit function. The feedback was
positive overall with the function considered
to have operated effectively.
The Committee also 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.
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, which
are available to all businesses. 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
and 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.
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Financial Statements
AUDIT COMMITTEE REPORT CONTINUED
DAVID LOWDEN
NOMINATION COMMITTEE CHAIR
1 Andy Smith stepped down from the Board
on 16 July 2024.
2 Anne Thorburn stepped down from the Board
on 30 September 2024.
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/ABOUT-US/
GOVERNANCE/
KEY MATTERS
DISCUSSED
Succession planning for the Board and
Audit Committee.
Consideration of the contributions and
effectiveness of the Non-Executive
Directors seeking re-election at the FY24
Annual General Meeting, prior to giving
recommendations to the Board and
shareholders for their re-elections.
Recruitment of Janice Stipp, Katie
Bickerstaffe and Ian El-Mokadem.
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.
Keeping the Group’s leadership and
succession requirements under
active review.
Member
Meetings
attended
during FY24
Joined
DAVID LOWDEN
(Chair)
October 2021
GERALDINE HUSE
January 2020
DEAN FINCH
May 2021
JENNIFER WARD
June 2023
JANICE STIPP
January 2024
ANDY SMITH1
February 2015
ANNE THORBURN2
September
2015
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Financial Statements
NOMINATION COMMITTEE REPORT
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 FY24 and
into FY25, the composition of the Board has
continued to change reflecting the
continued evolution of the Board, the
Company and the Group.
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 and composition, primarily the
search for the Senior Independent Director
and an additional director to bring additional
skills and experience to the Board following
the departures of directors.
Ensuring the right
mix of skills and
experience to
deliver long-term
value for our
stakeholders.
Demand for talent amongst UK listed
companies in this regard is high and it is
therefore acknowledged that the search for
suitable candidates to join the Board, having
regard to the individual’s skills, experience
and knowledge and requirements of the
Board, took longer than envisaged when I
wrote to you last year. We are confident that,
following the recent refresh of the Board's
composition, the Board is well-positioned
for the future.
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 51) 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 a diverse range
of 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 of 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
19 November 2024
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 Group. This allows us to
identify where further focus is needed in
the coming years and beyond.
We are mindful of the importance of
improving diversity and inclusion, together
with the targets set by the Hampton-
Alexander Review and the Parker Review.
The Board sees increasing diversity at the
Board level as an essential element in
attaining our strategic objectives and
achieving sustainable and balanced
development for the Group. At the end of
the financial year, four out of eight Directors
(50%) were women but we had no Board
members from an ethnic minority
background, and therefore did not meet
the target ethnic minority representation.
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Financial Statements
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.
READ MORE ON OUR WEBSITE
WWW.DIPLOMAPLC.COM
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
2024, 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 and
talent management update to the Board
in January 2024.
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
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
David Lowden
Katie Bickerstaffe
Janice Stipp
Geraldine Huse
Dean Finch
Jennifer Ward
Potential length of term
Current term:
0-3 years
3-6 years
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NOMINATION COMMITTEE REPORT CONTINUED
PROCESS FOR BOARD APPOINTMENTS
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
International Seals.
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.
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 functional leadership, 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 country of residence of the
particular Director. 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.
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 and
Accounts published following the search.
In due course, a tailored induction
programme is developed for the
new Director.
During the year we engaged Korn Ferry in
connection with the recruitment of Janice
Stipp and Katie Bickerstaffe. Russell
Reynolds Associates were engaged in
connection with the appointment of Ian
El-Mokadem. Neither Korn Ferry or
Russell Reynolds Associates have any
other connection to the Group, other
than providing executive
search services.
IAN EL-MOKADEM
INDEPENDENT NON-EXECUTIVE DIRECTOR
BOARD SUCCESSION PLANNING
ESTABLISHING
THE ROLE
REQUIREMENTS
The Committee
reviews and approves
an outline brief and
role specification
and appoints a search
agent to facilitate
the search
IDENTIFYING
CANDIDATES
A Committee member
discusses the
specification with
the independent
search agent, who
prepares an initial
longlist of candidates
PROCESS
The Committee then
defines a shortlist of
candidates and we
hold interviews
RECRUITMENT
The Committee
makes a
recommendation
to the Board for
its consideration
APPOINTMENT
Following Board
approval, the
appointment is
announced in line with
the requirements of
the FCA’s Listing Rules
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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
2024 (being the reference date selected
by the Board for the purposes of this
disclosure) the Company had fully complied
with the gender diversity targets of Listing
Rule 6.6.6.R(9) and the FTSE Women
Leaders Review.
The Committee notes the Parker Review and
the ethnicity diversity targets of Listing Rule
6.6.6R(9) and acknowledged 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 2024 the Company did
not meet the Listing Rule 6.6.6R(9) ethnicity
target for Board members of at least one
individual on its Board from a minority ethnic
background. However, following the
appointment of Ian El-Mokadem in 2025,
the Company will satisfy this requirement.
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
Number of Board
Members
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number
in executive
management
Percentage
of
management
Men
4
50%
3
6
75%
Women
4
50%
1
2
25%
Board and Executive Management Ethnic Identity
Number of Board
Members
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number
in executive
management
Percentage
of executive
management
White British or
other White
(including minority-
white groups)
8
100%
4
8
100%
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NOMINATION COMMITTEE REPORT CONTINUED
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 2024, the evaluation of the
Board as a whole and of its committees
was externally facilitated by BoardClic.
This was the Board's first collaboration
with BoardClic, a leading provider of board
evaluation services. BoardClic's approach
is aligned with international best practice
for board reviews, including the Corporate
Governance Institute's Code of Practice,
ensuring a robust and effective review
process. Board members completed
questionnaires regarding the operation
and effectiveness of the Board and its
Committees.
The below recommendations were made
following last year's Board performance
evaluation.
Findings were collated by BoardClic to form
the basis of interviews with each director,
the Company Secretary and key executives
who regularly interacted with the Board.
The results of the 2024 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, but there was
scope for improvement reflecting the
increased size as well as the increasing
complexity incumbent upon the Group.
Directors operated in an atmosphere of
open and constructive debate with a
good breadth of skills, experience, and
viewpoints. Following the evaluation, a
number of recommendations were made
which are outlined in the table opposite.
Recommendation
Progress made
Board and Committee
structures
Committee structures and schedules were deemed appropriate
for FY24 and changes to the Audit and Remuneration Committee
compositions will be implemented in FY25 to reflect the increased
size and complexity of the Group.
Enhanced risk management
Continued to develop our risk management processes and focus
on climate-related and emerging risks.
Stakeholders
Improved understanding of key stakeholders, including
customers, during Board business visits and with additional
deep-dive sessions as appropriate.
KEY AREAS FOR DEVELOPMENT
The below recommendations were made following this year's externally facilitated
Board performance evaluation. The Company expects to update shareholders on the
progress made in relation to the matters identified below in its 2025 Annual Report
and Accounts.
RECOMMENDATION
ACTION
Board and Committee
structures
Establish revised Committee structures from 1 January 2025
and enhance the onboarding process for new Directors.
Enhanced risk management
Continue to develop risk management processes with an
increased focus on climate-related and emerging risks,
in line with our overall strategy.
Role of the Board on
strategy
Take the following actions to evolve strategy discussions: (i)
Sector presentations to the Board to include strategy and
market opportunities and (ii) ensure big issues such as
disruptors, trends and opportunities are captured during
the Board's strategy day.
Talent & Succession
To increase focus on talent and succession planning at
the General Manager level.
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NOMINATION COMMITTEE REPORT CONTINUED
JENNIFER WARD
REMUNERATION COMMITTEE CHAIR
1 Jennifer Ward was appointed as Chair of the
Remuneration Committee on 16 July 2024.
2 Andy Smith stepped down from the Board and from
the role of Chair of the Remuneration Committee
on 16 July 2024.
3 Anne Thorburn stepped down from the Board
on 30 September 2024.
4 Geraldine Huse was unable to make a meeting
due to an unavoidable conflict.
5 Janice Stipp was appointed to the Board
on 17 January 2024.
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/ABOUT-US/
GOVERNANCE/
KEY MATTERS
DISCUSSED
Approved Remuneration Committee work
programme for 2024.
Confirmed the vesting percentages for
the PSP awards made in November 2021,
which crystallised in 2024.
Reviewed the AGM 2024 votes on the
2023 Remuneration Committee Report.
Reviewed Executive Directors’ salaries,
pensions, and benefits.
Reviewed and proposed the new Directors’
Remuneration Policy.
Reviewed the fees of the Chair and
Non-Executive Directors.
Approved annual performance bonus
targets and the subsequent bonus
awards for 2024.
Reviewed remuneration framework for
Executive Team and senior management
in the operating businesses.
Approved new Performance Share Plan
(PSP) awards for Executive Directors and
Group senior management.
Reviewed workforce remuneration
framework.
Approved the 2024 Remuneration
Committee Report.
Member
Meetings
attended
during FY24
Joined
JENNIFER
WARD1
(Chair)
June 2023
DAVID LOWDEN
May 2021
ANDY SMITH2
February 2015
ANNE
THORBURN3
September
2015
GERALDINE
HUSE4
January 2020
DEAN FINCH
May 2021
JANICE STIPP5
January 2024
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REMUNERATION COMMITTEE REPORT
Dear Shareholder
I was delighted to join the Diploma
Board in June 2023 and accept the
role of Chair of the Remuneration
Committee with effect from
July 2024. My heartfelt thanks
to my predecessor, Andy Smith
for his support in ensuring a
seamless transition.
As the Chair of the Remuneration
Committee, I am pleased to present
our Directors’ Remuneration Report (DRR)
for the year ended 30 September 2024.
Performance, business growth
and context
It is a pleasure to present my first DRR as
Remuneration Committee Chair with such
positive outcomes to report. Diploma has
delivered exceptional performance under
the Executive Directors’ leadership. Since
the appointment of Johnny Thomson as
CEO, the Group has grown total revenue
by 150% to £1,363m, with a strong average
annual organic growth of 7%. It has
accelerated adjusted earnings per
share (EPS) by 127% to 145.8p, and
effectively deployed £1.3bn of capital
on 41 complementary acquisitions, at
an average return on capital of 17%. This
consistently strong performance has been
achieved because of a focused growth and
scaling strategy, with exceptional execution.
Diploma has grown in both scale and
complexity in this period. We have
further penetrated our core geographies;
successfully diversified our portfolio to build
revenue resilience through end markets and
product expansion; and have grown the size
of our workforce by 75%.
Ensuring that we are nurturing our growing
workforce is an issue close to my heart and
a responsibility of the Committee that I do
not take lightly. Since joining the Board it has
been encouraging to observe a clear focus
on employee engagement and culture as
part of our Delivering Value Responsibly
(DVR) strategy.
The Group’s strong performance has driven
total shareholder returns (TSR) of 278% in
the period since Johnny Thomson became
CEO (February 2019), compared to a FTSE
100 average of 46%. Over the same period,
market capitalisation has grown to £5.9bn,
from £1.5bn, with Diploma’s position in the
FTSE rising from 197 to 61 over the same
time period.
The Board recognises the pivotal role of
exceptional leadership in delivering this
strong performance at increased scale and
complexity, within a decentralised Group.
Our Group reward philosophy is to drive and
reward high performance and we’re focused
on ensuring that the Executive Director
Remuneration Policy and pay frameworks
across the organisation are aligned to this.
Performance and pay outcomes for 2024
In the past year, Diploma has delivered
another strong performance and the
organisation is well positioned to deliver
sustainable quality compounding into
the future.
Bonus outcomes for FY24
The FY24 bonus was based on 50%
adjusted operating profit, 25% revenue
and 25% free cash flow, with operating
profit and revenue agreed by the
Committee to be assessed on a constant
currency basis, consistent with previous
years. On a constant currency basis,
the Group’s adjusted operating profit in
2024 was £293m exceeding the maximum
target of £279m and revenue was £1,398m,
exceeding the maximum target of £1,372m.
Reported free cash flow was £198m,
exceeding the maximum target of £176m.
Against this backdrop of exceptional
business performance in FY24, I am pleased
to report that the formulaic outturn of the
bonus plan for the year is 100% of maximum
opportunity, having exceeded the stretching
maximum target level for all bonus
performance measures.
This results in full bonus payments for
Johnny Thomson and Chris Davies,
respectively, representing 125% of salary
for both. For Chris, 50% of his bonus will
be deferred into shares until he meets his
minimum shareholding requirement (250%)
in line with the Policy; Johnny’s shareholding
far exceeds the minimum shareholding
requirement so his bonus is not required to
be deferred by the Policy and will be paid
entirely in cash.
2021 PSP Award Vesting
The 2021 Performance Share Plan (PSP)
award came to the end of its three-year
performance period on 30 September
2024. This award was calculated with 50%
based on growth in adjusted EPS and 50%
on TSR outcomes. Return on adjusted
trading capital employed (ROATCE)
performance underpins the plan.
Diploma’s three-year CAGR for adjusted
EPS performance was 19.6%, exceeding
the maximum target of 12% CAGR and our
three-year TSR growth performance was
50.9%, compared to the upper quartile of
the FTSE 250 (excluding investment trusts)
peer group of 26.3%, placing Diploma at
the 87th percentile when compared to the
comparator group. Finally, our ROATCE
was 19.1%, which is in line with the Group’s
financial model and Board’s expectation.
As a result of this superior performance over
the period, the PSP has vested at maximum
for all PSP participants including the
Executive Directors.
The Committee considered both the FY24
bonus and 2021 PSP outturns within the
wider business and economic context,
and agreed unanimously that they are
a fair reflection of the business’s
performance and fair reward for
participants of these plans. Therefore no
Committee discretion will be exercised to
alter the formulaic outcomes.
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Financial Statements
REMUNERATION COMMITTEE REPORT CONTINUED
Remuneration policy review
This year the Committee conducted a
comprehensive review of the existing
Policy to ensure that it remains fit for
purpose. It is imperative the Company
can retain and attract the talent that has
delivered the shareholder value creation
to date and in the future. The Remuneration
Committee and the Board believe it remains
critical that remuneration keeps pace with
the growth and scaling of the Group.
Against this backdrop of exceptional
growth, the Board decided to expedite
this Remuneration Policy review by one year.
Over the summer, we conducted
extensive consultation with our shareholders
representing 53% of our register as well as
all three proxy agencies. Feedback from
these sessions was very helpful to the
Committee in shaping the final proposals
outlined below. We were pleased to hear
from our shareholders that they were
supportive of the changes outlined and
understood the rationale and requirements
of the Company in ensuring remuneration
remains aligned to the market and retentive
to our high-performing executives as the
business continues to grow and deliver
market-leading shareholder returns.
We are proposing to update the Policy for
our Executive Directors to reflect that:
• The Group has delivered exceptional
performance over the last five years, with
ca. 127% adjusted EPS growth, taking the
Group from FTSE 197 to FTSE 61 with a
strong trajectory to continue this track
record
• Competitive and attractive remuneration
is key to retaining a high-performing CEO
and CFO who have been instrumental in
delivering performance to date
• The Group’s strategy remains ambitious to
deliver sustainable quality compounding
for the long term
• In addition to moving up the FTSE, the
Group has grown in scale and complexity
and requires exceptional leadership to
continue to execute its growth strategy
The proposed Policy and implementation
changes would:
• Increase bonus policy maximum and base
salaries to keep pace with growth and
market
• Introduce a non-financial metric to the
bonus to ensure a critical focus on
colleague engagement as we grow
and scale
• Ensure continued Committee review
of performance targets to ensure they
remain appropriately stretching as the
business continues to grow and scale
Specifically on bonus we are proposing to
increase the opportunity under the bonus
plan for Executive Directors which, at 125%
of salary, currently sits below the lower
quartile of the FTSE 51-100. The Committee
is proposing increasing this value to a
maximum of 200% for CEO, and to 180%
for CFO, implemented immediately –
aligning both roles with the median of the
FTSE 51-100 peer set (with Diploma
currently positioned at FTSE 61).
We will also introduce a single non-financial
measure in our bonus to reflect a key aspect
of our DVR strategy. The measure, weighted
at 5%, will be employee engagement to
recognise the importance of a highly
motivated workforce within a decentralised
and fast-growing service business. The
maturity of our Diploma employee survey
will enable reliable, rigorous reporting.
To ensure base salaries keep pace with the
growth of the Group, are competitive and
recognise the additional complexity within
leadership roles, the Board has also
awarded a CEO salary increase of 12%
reflecting Johnny’s position in relation to
the relevant FTSE 51-100 market benchmark
and his continued performance in role. The
CFO will receive a salary increase of 4%, in
line with the increase rate provided to the
wider Diploma workforce.
The sum of these changes would place our
CEO’s total compensation just below
median of the FTSE 100 on a target basis –
in line with Diploma’s positioning at FTSE 61.
Executive remuneration for 2025 –
implementation
Subject to shareholder approval of the
proposed policy, the following remuneration
will be implemented in 2025 for
Executive Directors.
Fixed pay
In line with the proposed salary increases as
explained above, Johnny Thomson’s 2025
base salary will be £918,400 and Chris
Davies’ will be £530,400 per annum. There
will be no change to the cash allowance in
lieu of pension contribution for Executive
Directors, which remains at 4% of base
salary, aligned to the wider workforce
average contribution level.
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REMUNERATION COMMITTEE REPORT CONTINUED
Annual Bonus
The 2025 annual bonus will see the
implementation of a new performance
measure focused on the DVR strategy.
Namely, the 2025 bonus will comprise
50% adjusted operating profit, 20%
revenue, 25% free cash flow and 5%
employee engagement. Targets will be
based on the Board approved budget and
the Committee will ensure there is sufficient
rigour and stretch in target setting to
support the high-performance track record
and culture. The maximum opportunity will
be 200% of base salary for Johnny Thomson
and 180% of base salary for Chris Davies,
in line with the new policy proposals.
PSP
The 2024 PSP award will operate
consistently with the previous year.
Performance measures remain unchanged
for the 2024 PSP grant; 75% of the total
award will be based on adjusted EPS growth
and 25% will be based on TSR relative to the
FTSE 100 (excluding investment trusts), with
an underpin on ROATCE. The award levels
will also remain the same, these are 300%
of base salary for Johnny Thomson and
250% of base salary for Chris Davies.
A focus on wider workforce pay
and conditions
The success of Diploma and its superior
value creation is founded upon our unique
culture, and our colleagues are core to this.
The Committee is assured that we have an
engaged and healthy workforce, and that
colleagues are fairly and well-rewarded.
Retaining top talent in the highly competitive
and increasingly global talent market within
which we operate is critical.
We are pleased to report that our employee
engagement continues to be high at 79%.
However, we know that this can be a
challenge as a decentralised business
and are conscious of maintaining an acute
focus on this as we continue to scale, hence
including this as a performance metric in
this coming year’s executive bonus plan.
Given our decentralised model, we take
the approach of empowering our business
leaders to make remuneration decisions
locally to appropriately account for different
market conditions. As a Committee, we are
sure to maintain oversight so we can make
executive remuneration decisions that are
cognisant of the wider workforce’s pay
and conditions.
Some key ways that we have sought to
further support, incentivise and reward
our colleagues during the year:
• We became an accredited Real Living
Wage employer across our UK businesses
(with the exception of R&G, where we are
currently working towards accreditation)
• We have increased remuneration through
base salary and annual bonus for senior
management to align with the Group’s
increased scale and complexity
• We have built an ambitious capability
agenda, with focus on roles with increased
complexity, to upgrade capability and
intensify personal development. This is
complemented by competitive and
motivating reward.
Non-executive directors
Non-Executive Director fees were reviewed
in the year in the context of increased
responsibilities, time and skill requirements,
as well as market data, now that Diploma is
firmly established as a FTSE 100 business.
Non-Executive Director fees continue to lag
our new size and scale in market comparison
and increases are proposed to address this.
The increases are laid out on page 115. The
Committee agreed these increases were
important to recognise the increase in
expectation of the Board and to ensure we
can retain and appoint directors with the
requisite skills to provide critical governance
and oversight of the business in the face of
an increasingly complex landscape, driven
by supply chain, labour, geopolitical and
technological disruptions.
Conclusion
In closing, I would like to thank shareholders
for their meaningful engagement and
support over the year as we consulted on
the new Remuneration Policy proposals.
I would also like to thank my fellow Board
members for welcoming me onto the Board
and helping me transition into the role of
Remuneration Committee Chair. I am
energised by the culture, high performance
and growth trajectory of the business and
confident in the Policy we have proposed to
shareholders to support this. We very much
look forward to receiving your support at
the AGM on the 15 January 2025.
Jennifer Ward
Chair of the Remuneration Committee
19 November 2024
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Financial Statements
REMUNERATION COMMITTEE REPORT CONTINUED
REMUNERATION AT
A GLANCE
Our remuneration approach aligns to our
business model, focusing on delivering
exceptional growth and sustainable returns.
Diploma continues to deliver market leading
returns for shareholders.
Fixed salary
Basic salary, pensions
and benefits
Fixed remuneration that
reflects the Executive's
responsibilities and can
attract and retain the
talent that has delivered
shareholder value
creation
Total
pay
Short‑term incentive
Annual bonus
Incentives that focus Executives to
achieve stretching and rigorous annual
targets that support the high-
performance track record and culture
and medium term strategy
Short‑term incentive
Adjusted
operating profit
Ensures growth is sustainable
Revenue
Re-inforces the Group's strategy
to prioritise Growth through a
mixture of acquisitions and
organic growth
Free cash flow
Ensures a focus on both
operational efficiency and
sustainable growth whilst
allowing flexibility for future
investments
Maximum award:
Group Chief Executive and Chief Financial Officer
2024: 125% of salary
Long‑term incentive
Executive Share Plan
Incentives that focus Executives to deliver
market leading shareholder returns and
sustainable performance over a three
year period
Long‑term incentive
Adjusted EPS
(ROATCE
underpin)
EPS growth ensures a focus on
shareholder value creation. Using
a ROATCE underpin reinforces a
focus on financial discipline
Relative TSR
Relative TSR provides a focus on
delivering market-leading returns
for our shareholders
Maximum award:
Group Chief Executive 2024: 300% of salary
Chief Financial Officer 2024: 250% of salary
ELEMENTS OF PAY
Our performance
metrics
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DIPLOMA PLC ANNUAL REPORT 2024
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Additional Information
Corporate Governance
Financial Statements
REMUNERATION AT A GLANCE
The following chart sets out the aggregate emoluments earned
by the executive Directors in the year ended 30 September 2024.
ACTUAL PERFORMANCE COMPARED TO TARGETS
EXECUTIVE DIRECTORS’ EARNINGS IN 2024
Long‑term incentive
Executive Share Plan
Short‑term incentive
Annual bonus
Metric
Weighting
Threshold1
Maximum
Outcome achieved
(% of maximum)
Adjusted
operating
profit
50%
£252.5m
£279.1m 100%
Revenue
25%
£1,292.2m
£1,372.2m 100%
Free cash flow 25%
£158.8m
£175.6m 100%
Overall annual bonus outcome (% of max)
100%
Element
Johnny Thomson
Chris Davies
Fixed
salary
Salary
Taxable
benefits
Pension
£820,000
£30,020
4% contribution
£510,000
£20,177
4% contribution
Short‑term
incentive
Annual bonus
£1,025,000
£637,500
Long‑term
incentive
Incentive
plans and
share-based
remuneration
£2,550,892
£344,283
Metric
Weighting
Threshold
Maximum
Outcome achieved
(% of maximum)
EPS (ROATCE
underpin)
50%
5%
12% 100%
Relative TSR
50%
Median
Upper Quartile 100%
Overall annual bonus outcome (% of max)
100%
1 Figures are stated at the exchange rates used to set the FY24 targets.
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Corporate Governance
Financial Statements
REMUNERATION AT A GLANCE CONTINUED
This section sets out the Directors’
Remuneration Policy proposed for approval
by shareholders at the Company’s AGM on
15 January 2025. The Company’s current
Remuneration Policy was approved by
shareholders at the AGM on 17 January
2024 and the updated policy, subject
to shareholder approval is intended to
remain in effect for three years from
the AGM in 2025.
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.
Component
Purpose and
link to strategy
Operation
Maximum opportunity
Performance metrics
Change from 2023
Base salary
To attract and retain people of
the calibre and experience
needed to develop and
execute the Company’s
strategy.
Salaries are reviewed annually, with changes
normally effective from 1 October.
There is no maximum limit set. Salaries
will be market competitive to retain
skilled executive talent and attract
new talent as required.
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 change
Pensions
Designed to be fair.
Pension contributions can either be paid directly
into a pension savings scheme or taken as a
separate cash allowance.
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.
No performance metric.
No change
Executive Directors
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REMUNERATION POLICY
Component
Purpose and
link to strategy
Operation
Maximum opportunity
Performance metrics
Change from 2023
Benefits
To provide a competitive
package of benefits.
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.
No maximum limit is prescribed, but
the Committee monitors annually the
overall cost of the benefit provision.
No performance metric.
No change
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.
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.
Maximum of 200% 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.
Non-financial, personal or strategic
objectives, if used, will account for
no more than 20% of the bonus.
Change from
maximum of
125% of base
salary
Change to
provide flexiblity
and clarity
around the
inclusion of
non-financial
metrics in the
policy
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REMUNERATION POLICY CONTINUED
Component
Purpose and
link to strategy
Operation
Maximum opportunity
Performance metrics
Change from 2023
Performance
Share Plan
(PSP)
Incentivise Executive Directors
to achieve superior returns and
long-term value growth.
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’.
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.
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.
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.
No change
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REMUNERATION POLICY CONTINUED
Component
Purpose and
link to strategy
Operation
Maximum opportunity
Performance metrics
Change from 2023
Chair and
Non-
Executive
Directors’
fees
To attract and retain a Chair and
Independent Non-Executive
Directors of the required
calibre and experience.
Paid either monthly or 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).
The Chair’s and Non-Executive Directors’
fees are determined by reference to the
time commitment and relevant benchmark
market data.
No performance metric.
No change
Chair and Non-Executive Directors
Setting the policy
The Remuneration Committee is responsible
for setting the overall remuneration policy
and is conscious to consider all stakeholders
and perspectives in doing so. The
Committee seeks independent advice
and takes care to mitigate any conflicts of
interest by ensuring that no Director makes
decisions relating to their own remuneration
and by working with the Audit Committee
to ensure there is an appropriate balance
between incentives to drive performance
in line with strategic goals and risk
management. The Committee considers
market data and developments regularly
to inform policy and its implementation
each year.
The sections below outline how
performance measures are selected and
how we have considered both shareholder
views through meaningful shareholder
consultation and the workforce perspective.
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 FY25 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 FY25 and the
rationale behind the selection can be found
in the Annual Report on Remuneration.
Illustration of application of Policy
Pay-for-performance: Executive Directors’ potential value of 2025 remuneration packages.
JOHNNY THOMSON
£985,000
£3,281,000
£5,577,000
£6,955,000
Minimum
Target
Maximum
Stretch2
4%
42%
28%
49%
33%
59%
26%
96%
29%
1%
17%
1%
14%
1%
CHRIS DAVIES
£572,000
£1,712,000
£2,853,000
£3,516,000
Minimum
Target
Maximum
Stretch2
4%
39%
28%
47%
33%
56%
27%
96%
32%
1%
19%
1%
16%
1%
Fixed:
Base salary and benefits
Pension
Variable:
Annual performance bonus
Long-term incentive plans
1 Base salary is as at 1 October 2024; benefits are as set out on page 111.
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.
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REMUNERATION POLICY CONTINUED
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. 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.
A thorough consultation was conducted for
this policy review as explained on page 98.
Employee Consultation
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.
Differences in remuneration policy
for other employees
The Company reviews compensation
arrangements including base salaries for the
wider employee population annually. Similar
to the Executive Directors, 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. In
line with the Group’s decentralised model,
compensation is agreed locally, with
governance and guidance provided
by 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.
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:
Contract
date
Unexpired
term
Notice
period
Compensation
payable upon early
termination
Johnny Thomson
15 Jan 2019
Rolling
1 year
1 year
Chris Davies
25 October 2022
Rolling
1 year
1 year
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REMUNERATION POLICY CONTINUED
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.
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.
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REMUNERATION POLICY CONTINUED
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
500% of salary for the CEO and 450%
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 9.3.2 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 as well as
setting of 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;
• 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.
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REMUNERATION POLICY CONTINUED
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 104, 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 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.
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REMUNERATION POLICY CONTINUED
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.
Example: variable pay for Executive Directors is
a simple Annual Bonus Plan and a Performance
Share Plan.
Our remuneration arrangements for Executive
Directors, as well as those throughout the
organisation, are simple in nature and well
understood by participants.
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.
Example: variable pay maximums are set out
in 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.
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.
Example: one of the Diploma values is
continuous improvement; continuous
improvement is required each year to
reach remuneration targets.
The variable incentive schemes and performance
measures are designed to be consistent with the
Group’s purpose, values and strategy.
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Additional Information
Corporate Governance
Financial Statements
REMUNERATION POLICY CONTINUED
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 2024.
All of the information set out in this section of the Report has been audited, unless
indicated otherwise.
Executive Directors (audited)
Total remuneration in 2024 and 2023
Johnny Thomson
Chris Davies
2024
£000
2023
£000
2024
£000
2023
£000
Salary
820
754
510
413
Taxable benefits1
30
26
20
18
Pension
33
41
20
17
Total fixed
883
821
550
448
Annual performance bonus
1,025
943
638
516
Long-term incentive plans – dividend
equivalent (cash)2
90
107
12
–
Long-term incentive plans –
performance element
1,777
1,725
220
–
Long-term incentive plans – share
appreciation element3
684
534
112
–
Long-term share-based remuneration
2,551
2,366
344
–
Other4
–
–
–
395
Total variable
3,576
3,309
982
911
Single total figure
4,459
4,130
1,532
1,359
1 Taxable benefits comprises cash allowance in lieu of a car, private medical, life assurance and income protection.
2 Dividend equivalents are included in long-term share-based remuneration and total variable pay.
3 As the share price date is currently unknown, the value shown is estimated using the average share prive over the
three months to 30 September 2024 of 4,317p. For the award vesting for the year ended 30 September 2023, these
figures have been updated from last year's report to reflect the actual share price of the vesting date, as has been
done for the prior year comparatives.
4 In line with the Remuneration Policy, during 2023 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 12 November 2024, the Committee approved a 12% increase in base salary for the CEO
and a 4% 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 96 to 99.
Salary
backdated to
1 October
2024
£000
Salary from
1 October
2023
£000
Increase in
salary
Johnny Thomson
918
820
12.0%
Chris Davies
530
510
4.0%
Pension (audited)
The Executive Directors receive a cash allowance in lieu of pension contributions from the
Company. During 2023 and 2024, both Executive Directors took this as a cash allowance.
None of the Executive Directors have a right to a Company Defined Benefit pension plan.
2024
2023
Contribution
rate % of
base salary
Pension
allowance
paid as cash
£000
Contribution
rate % of
base salary
Pension
allowance
paid as cash
£000
Johnny Thomson
4
33
10/4
41
Chris Davies
4
20
4
17
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DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
ANNUAL REPORT ON REMUNERATION
Annual performance bonus (audited)
Bonus payout for year ended 30 September 2024
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 2024. The following table summarises the performance assessment
by the Committee in respect of 2024 with regard to the Group financial objectives and the
bonus awarded to each of the Executive Directors:
Performance measure
Targets for 2024
Overall assessment against targets1
Adjusted operating profit
(calculated on a constant
currency basis)
50% of bonus opportunity
Minimum: £252.5m
On-target: £265.8m
Maximum: £279.1m
Adjusted operating profit for FY24 was
£293m at exchange rates consistent
with the FY24 targets. The maximum
threshold was met and the maximum
award is payable.
Revenue (calculated on a
constant currency basis)
25% of bonus opportunity
Minimum: £1,292.2m
On-target: £1,332.2m
Maximum: £1,372.2m
Revenue for FY24 was £1,398m at
exchange rates consistent with the
FY24 targets. The maximum threshold
was met and the maximum award is
payable.
Free cash flow (reported)
25% of bonus opportunity
Minimum: £158.8m
On-target: £167.2m
Maximum: £175.6m
Free cash flow for the year was £198m.
The maximum threshold was met and
the maximum award is payable.
1 All figures for FY24 are stated at the exchange rates that were used to set the FY24 targets.
Bonus awarded to each of the Executive Directors for year ended 30 September 2024
Base
salary
2024 actual bonus – as a percentage of 2024 base salary
2024
bonus
£000
Minimum
On-target
Maximum
Financial
objectives
Total
bonus
£000
Johnny Thomson
820
5%
63%
125%
125%
125%
1,025
Chris Davies
510
5%
63%
125%
125%
125%
638
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
2024 bonus for Chris Davies will be paid as cash and 50% net of tax 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 2025
In the financial year beginning 1 October 2024, the Annual Performance Bonus Plan will be
based on the following metrics: 50% will be based on adjusted operating profit, 20% will be
based on revenue (both metrics measured on a constant currency basis), 25% will be based
on free cash flow and the remaining 5% will be based on colleague engagement scores. The
bonus maximum will increase to 200% for Johnny Thomson and 180% for Chris Davies. The
financial performance targets set for the Annual Performance Bonus Plan for this year will be
disclosed in next year’s Annual Report and Accounts, due to their commercial sensitivity.
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 2024 (PSP 2021), 2025 (PSP 2022), 2026 (PSP 2023) and 2027 (PSP 2024).
Vesting of the PSP 2021 award is based 50% on growth in adjusted EPS and 50% on relative
TSR performance. Vesting of the PSP 2022, PSP 2023 and PSP 2024 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 29.6 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)
% of awards
vesting
13% p.a. (PSP 2022) (PSP 2023) (PSP 2024)
100
12% p.a. (PSP 2021)
100
5% p.a.
25
Below 5% p.a.
Nil
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DIPLOMA PLC ANNUAL REPORT 2024
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Additional Information
Corporate Governance
Financial Statements
ANNUAL REPORT ON REMUNERATION CONTINUED
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 29.3 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 2021 used the FTSE 250 Index (excluding Investment
Trusts), as will also be the case for PSP awards 2022. PSP awards 2023 and 2024 will use
the FTSE 100 Index (excluding Investment Trusts) which follows the Company’s promotion
to the FTSE 100 Index in August 2023. The performance targets are as follows:
Adjusted EPS growth (over three years)
% of awards
vesting
Upper quartile
100
Median
25
Below median
Nil
Where the Company’s TSR performance is between these percentage bands, vesting of the
award is calculated based on ranking.
Awards vesting in 2024 (audited)
The PSP award granted on 29 November 2021 (PSP 2021) to Johnny Thomson, was subject
to the performance conditions as set out on page 104 and independently assessed over a
three-year period ended 30 September 2024. The outcome of this award is presented in
the table below:
Adjusted earnings per share
Base EPS
EPS at
30 Sep 2024
CAGR
in EPS
Maximum
target
Maximum
award
Vested
award
PSP (2021)
85.2p
145.8p
19.6%
12%
50%
50%
The Committee has reviewed the ROATCE outturn and concluded that 19.1% is in line with
expectations. 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)
TSR at
30 Sep 2024
Median
Upper
quartile
Maximum
award
Vested
award
PSP (2021)
50.9% p.a.
-5.1% p.a.
26.3% p.a.
50%
50%
Set out below are the shares which vested to Johnny Thomson and Chris Davies at
30 September 2024 in respect of this award1.
Share price
at date of
grant
pence
Average
share price
for the
quarter
ending 30
Sept 2024
pence
Proportion
of award
vesting
Shares
vested
number
Performance
element2
£000
Share
appreciation
element3
£000
Total
£000
Johnny Thomson
PSP (2021)
3,118
4,317
100%
57,007
1,777
684
2,461
Chris Davies
PSP (2021)
2,8624
4,317
100%
7,694
220
112
332
1 Details of the PSP (2021) shares which vested to Barbara Gibbes at 30 September 2024 are explained on page 115
as payment for past Directors.
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 2024. As
the share price date is currently unknown, the value shown is estimated using the average share price over the three
months to 30 September 2024 of 4,317p. As the award vests after the publication of the 2024 annual results, figures
will be restated for the actual vesting value in next year's Annual Report.
4 In line with the Remuneration Policy, Chris Davies was granted 7,694 shares in the prior year as part of the PSP (2021)
award to replace share-based payment arrangements forgone in order to join the Group.
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DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
ANNUAL REPORT ON REMUNERATION CONTINUED
Dividend equivalent payments (audited)
Dividend equivalent payments of £89,900 (2023: £106,895) are payable to Johnny Thomson
and £12,133 (2023: nil) are payable to Chris Davies in respect of the PSP (2021) award at the
time of vesting. 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 2023 award on 27 November
2023 respectively in the form of nil-cost options. This award was based on a share price
of 3,342p, 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 2023 award for Johnny
Thomson was 300% of base salary and for Chris Davies was 250% of base salary.
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 113.
Outstanding share-based performance awards (audited)
Set out is a summary of the share-based awards outstanding at 30 September 2024,
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) of base salary to Johnny Thomson and
a face value of 250% of base salary (200% of base salary for PSP 2022, 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 113 are satisfied.
Diploma plc 2020 (as amended) performance share plan (audited)
Market price
at date of
award1
Face value of
the award at
date of grant
£000
End of
performance
period
Shares over
which awards
held at
1 Oct 2023
Shares over
which awards
granted during
the year
Vested during
the period
Lapsed during
the period
Shares over
which awards
held at
30 Sep 2024
Johnny Thomson
PSP (2021)
3,118p
1,777
30 Sep 2024
57,007
–
57,007
–
–
PSP (2022)
2,848p
2,262
30 Sep 2025
79,424
–
–
–
79,424
PSP (2023)
3,342p
2,460
30 Sep 2026
–
73,608
–
–
73,608
Chris Davies
PSP (2021)2
2,862p
220
30 Sep 2024
7,694
–
7,694
–
–
PSP (2022)
2,862p
823
30 Sep 2025
28,773
–
–
–
28,773
PSP (2023)
3,342p
1,275
30 Sep 2026
–
38,150
–
–
38,150
1 The market price is the mid-market share price at the close of business on the day before the grant date as disclosed above.
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 foregone 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 2024 are set out later in this report.
Payments for loss of office (audited)
No payments were made in the year.
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Additional Information
Corporate Governance
Financial Statements
ANNUAL REPORT ON REMUNERATION CONTINUED
Payments for past Directors (audited)
In line with the approved Remuneration Policy as disclosed in the 2022 Annual Report,
during 2024, Barbara Gibbes received £294,808 (6,829 shares granted at a share price of
3,118p and at the average share price for the quarter ending 30 September 2024 of 4,317p)
in connection with 100% vesting of her PSP (2021) award, which included a share
appreciation benefit of £81,880. Dividend equivalent payments of £10,769 are payable to
Barbara in respect of the PSP (2021) award. As at 30 September 2024, Barbara has no
outstanding share-based awards.
Chair and non-executive directors’ remuneration (audited)
Individual remuneration for the year ended 30 September was as follows:
Total fees
2024
£000
2023
£000
David Lowden
307
289
Andy Smith1
58
70
Anne Thorburn2
83
80
Geraldine Huse
61
57
Dean Finch
61
57
Jennifer Ward3
64
19
Janice Stipp3
46
–
1 The fee for Andy Smith was prorated in 2024 following his resignation on 16 July 2024.
2 The fee for Anne Thorburn was prorated in 2024 having stepped down as Chair of the Audit Committee
on 16 July 2024 and from the board on 30 September 2024.
3 Jennifer Ward was appointed on 1 June 2023 and was appointed as Chair of the Remuneration Committee
on 16 July 2024.
4 Janice Stipp was appointed on 17 January 2024.
The Non-Executive Directors received a basic annual fee of £60,750 (2023: £57,250) during
the year and additional fees are paid of £13,250 (2023: £12,500) for chairing a Committee
of the Board or £11,500 (2023: £10,500) 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
2024, there has been a 12.8% increase to the Non-Executive Director annual fee to £68,550
and a 18.9% increase to the Chair’s annual fee to £364,875. The additional fee for chairing a
Committee of the Board has increased by 13% to £15,000 per annum and the additional fee
for acting as Senior Independent Director has increased by 30.4% to £15,000 per annum.
There were no taxable employment benefits for Non-Executive Directors in 2024 and 2023.
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 2024 and the movements in the number
of shares during the year are as follows:
Year of
vesting
Options
as at
1 Oct
2023
Exercised
in year
Vested
during
the year
Options
unexercised
as at
30 Sep
2024
Exercise
price3
Earliest
normal
exercise
date
Expiry date
Johnny
Thomson1,2
2023
74,804
74,804
–
–
£1
Nov 2023
Nov 2030
2024
–
–
57,007
57,007
£1
Nov 2024
Nov 2031
Chris
Davies
2024
–
–
7,694
7,694
£1
Nov 2024
Nov 2031
1 Johnny Thomson exercised 74,804 options on 20 November 2023 at a market price of 3,020p per share and the
total proceeds before tax was £2,259,081 less the exercise price of £1.
2 On 20 November 2023, the aggregate number of shares received by the participant was reduced by 35,158 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 All awards have a notional exercise price of £1 per award.
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DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
ANNUAL REPORT ON REMUNERATION CONTINUED
Directors’ interests in ordinary shares
As at 30 Sep 2024
As at 30 Sep 2023
Ordinary
shares
Other
unvested
options
Options with
performance
measures
Ordinary
shares
Other
unvested
options
Options with
performance
measures
Johnny Thomson
166,270
57,007
153,032
148,624
74,804
136,431
Chris Davies
8,798
7,694
66,923
4,974
–
36,467
The minimum shareholding requirement (MSR) is 300% for the CEO and 250% for the CFO.
As of 30 September 2024, Johnny Thomson’s shareholding was 1,033% of salary and
therefore he has met his MSR. Chris Davies’ shareholding was 109% 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 19 November 2024, there have been no changes to these interests in ordinary shares
of the Company.
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:
Interest in ordinary shares
As at
30 Sep 2024
As at
30 Sep 2023
David Lowden
2,896
2,896
Andy Smith
7,941
7,941
Anne Thorburn
5,441
5,441
Geraldine Huse
2,441
2,441
Dean Finch
1,036
1,036
Jennifer Ward
–
–
Janice Stipp2
–
–
As of 19 November 2024 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 2024.
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 2024, 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
Method
25th percentile
pay ratio
Median pay
ratio
75th percentile
pay ratio
2024
Option A
156:1
127:1
90:1
2023
Option A
155:1
126:1
89:1
2022
Option A
156:1
129:1
93:1
2021
Option A
228:1
180:1
126:1
2020
Option A
44:1
35:1
24:1
Base salary
Ratio of base
pay to CEO
base pay
Total pay and
benefits
CEO
£820,000
n/a
£4,458,712
25th percentile
£25,955
32:1
£28,669
Median
£31,668
26:1
£35,172
75th percentile
£42,000
20:1
£49,388
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
wider workforce pay and conditions is contained on page 106. The CEO is remunerated
predominantly on performance-related elements (bonus and share awards), which have
delivered strong returns.
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Strategic Report
Additional Information
Corporate Governance
Financial Statements
ANNUAL REPORT ON REMUNERATION CONTINUED
The median CEO pay ratio has remained at a similar level to prior year (2024: 127:1; 2023:
126:1). CEO pay has increased due to a base pay increase and higher share price
appreciation whilst median total compensation for the UK workforce has also increased by
8% and median base pay has also increased by 7% on prior year. In addition, this year we
became an accredited Real Living Wage employer across our UK businesses (with the
exception of R&G, where we are currently working towards accreditation).
Aligning pay with performance (unaudited)
The graph below shows the TSR performance of Diploma PLC for the ten-year period ended
30 September 2024 against the FTSE 100 Index (excluding Investment Trusts). The FTSE 100
(excluding Investment Trusts) was chosen because this is a recognised broad equity market
index of which the Company was a member of throughout 2024.
GROWTH IN THE VALUE OF A HYPOTHETICAL £100 HOLDING OVER TEN YEARS
0
100
200
300
400
500
600
800
700
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
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
Name
CEO single
figure of total
remuneration
(£000)
Annual bonus
against
maximum
opportunity
Actual share
award vesting
against
maximum
opportunity
Annual
growth
in TSR
2024
Johnny Thomson
4,459
100%
100%
+50%
2023
Johnny Thomson
4,130
100%
100%
+32%
2022
Johnny Thomson
4,164
100%
100%
-17%
2021
Johnny Thomson
5,687
100%
100%
+32%
2020
Johnny Thomson
999
25%
–
+34%
2019
Johnny Thomson2
1,079
72%
–
+20%
2019
John Nicholas1
62
–
–
+20%
2018
John Nicholas1
14
–
–
+36%
2018
Richard Ingram2
235
–
–
+36%
2018
Bruce Thompson2
3,842
100%
99%
+36%
2017
Bruce Thompson
2,258
100%
89%
+24%
2016
Bruce Thompson
1,634
95%
45%
+36%
2015
Bruce Thompson
1,139
51%
25%
-1%
2014
Bruce Thompson
1,846
65%
61%
+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.
Relative importance of Executive Director remuneration (unaudited)
2024
£m
2023
£m
Change
£m
Total employee remuneration
234.8
210.0
24.8
Total dividends paid
76.8
70.5
6.3
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 and
annual performance bonus of the Board and the Group’s senior managers. Senior managers
is a defined group of ca. 150 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.
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Additional Information
Corporate Governance
Financial Statements
ANNUAL REPORT ON REMUNERATION CONTINUED
Base salary/fee change (%)¹
Taxable benefits change (%)
Bonus change (%)
2024 vs
2023
2023 vs
2022
2022 vs
2021
2021 vs
2020
2020 vs
2019
2024 vs
2023
2023 vs
2022
2022 vs
2021
2021 vs
2020
2020 vs
2019
2024 vs
2023
2023 vs
2022
2022 vs
2021
2021 vs
2020
2020 vs
2019
Executive Directors
Johnny Thomson2
+9
+6
+3
No change
+3
+16
+2
+2
+4
No change
+9
+6
+3
+300
-64
Chris Davies3
+24
n/a
n/a
n/a
n/a
+11
n/a
n/a
n/a
n/a
+24
n/a
n/a
n/a
n/a
Non-Executive Directors4
David Lowden5
+6
+40
n/a
No change
n/a
Andy Smith6
-16
+4
+3
No change
No change
Anne Thorburn7
+3
+4
+6
+11
+3
Geraldine Huse
+6
+4
+3
No change
n/a
Dean Finch
+6
+4
+185
n/a
n/a
Jennifer Ward8
+233
n/a
n/a
n/a
n/a
Janice Stipp9
n/a
n/a
n/a
n/a
n/a
Employees of the Parent Company10
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
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 and his remuneration for 2023 was prorated. The like-for-like increase in base salary and bonus is +13%.
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 Andy Smith stepped down from the Board on 16 July 2024.
7 The fee for Anne Thorburn was prorated in 2024 having stepped down as Chair of the Audit Committee on 16 July 2024 and from the board on 30 September 2024.
8 Jennifer Ward was appointed on 1 June 2023 and was appointed as Chair of the Remuneration Committee on 16 July 2024.
9 Janice Stipp was appointed on 17 January 2024.
10 There are no employees of the Parent Company.
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DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
ANNUAL REPORT ON REMUNERATION CONTINUED
Governance
Remuneration Committee
The Committee is chaired by Jennifer Ward and comprises the five Independent Non-
Executive Directors; David Lowden, Dean Finch, Geraldine Huse and Janice Stipp; served
on the Committee throughout the year. 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 appointed Willis Towers Watson (WTW) following a tender process in 2021
and has continued to receive its remuneration advice from 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
Appointed by
Services provided
to the Committee
Other services provided
to the Company
Fees (£)
Willis Towers Watson
Committee
Remuneration advice
None
214,410
Shareholder voting at previous annual general meeting (unaudited)
The Directors’ Remuneration Policy was last approved by shareholders at the AGM held on
18 January 2023 and the Remuneration Committee’s Annual Report (Report) for the year
ended 30 September 2023 was approved by shareholders at the AGM held on 17 January
2024, with the following votes being cast:
2023 Report
Votes for
103,761,729
94.22%
Votes against
6,365,795
5.78%
Withheld
4,882
–
Directors' Remuneration Policy
Votes for
104,603,292
96.18%
Votes against
4,158,730
3.82%
Withheld
683,816
-
At the AGM in January 2024, the 2023 DRR was approved with 94.22% of votes in favour.
Given the positive voting outcome there was no immediate need for shareholder follow up.
Consultation was conducted during 2024 on the 2024 DRR. During consultation there was
an opportunity to check with shareholders if they had any outstanding issues from 2023
and none were raised.
119
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
ANNUAL REPORT ON REMUNERATION CONTINUED
DIRECTORS’
REPORT
This section comprises information
which the Directors are required by
law and regulation to include within
the Annual Report and Accounts.
The Directors who held office
during the year are set out on
pages 79 and 80.
Overview of information required
to be disclosed
The table opposite outlines the relevant
disclosures required to be reported. For
further details on each disclosure, please
refer to the specified page references in
the Annual Report and Accounts where you
can read more about the Group's financial
performance, governance practices, and
other key information.
Disclosure
Reported in
Page reference
Our employees
Delivering Value Responsibly
Page 51
Environmental matters
Delivering Value Responsibly
Page 53
Health and safety
Delivering Value Responsibly
Page 52
Greenhouse gas emissions
Delivering Value Responsibly
Page 53
Climate-related disclosures
TCFD statement
Pages 61-67
Human Rights
Non-financial and sustainability information statement
Page 73
Charitable donations
Delivering Value Responsibly
Page 52
Business ethics, corruption and bribery
Non-financial and sustainability information statement
Page 73
Modern Slavery
Non-financial and sustainability information statement
Page 73
Community
s172 and stakeholder engagement
Page 71
Business Model
Business model
Page 19
Principal risks and how they are managed or mitigated
Risk management and internal control
Pages 57-60
Non-financial key performance indicators
Key performance indicators
Page 27
Employee engagement
Delivering Value Responsibly
Page 51
Stakeholder engagement
s172 and Stakeholder Engagement
Page 68-71
120
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
DIRECTORS’ REPORT
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 134,176,207 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
73, 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, 15 January
2025 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.
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.
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.
Substantial shareholdings
At 30 September 2024, 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):
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.
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.
Percentage of
ordinary shares
(September 2024)
Percentage of ordinary
share capital
(November 2024)
Capital Research Global Investors
12.86
No change
Norges Bank
3.02
No change
Mawer Investment Management Limited
4.99
No change
Royal London Group
4.95
No change
The Vanguard Group, Inc
3.42
No change
Mondrian Investment Partners Limited
3.14
No change
BlackRock Inc
Below 5%
No change
121
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
DIRECTORS’ REPORT CONTINUED
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
17 January 2024.
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 17 January 2024. In the year to
30 September 2024, 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 6.6.1
To comply with Listing Rule 6.6.1 the
following table provides the information
to be disclosed by the Company in respect
of Listing Rule
Listing Rule
The Trustees of the Diploma PLC
Employee Benefit Trust waived
dividends on all shares.
6.6.1 (11)R
and 6.6.1(12)R
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 73 that would
otherwise be required to be disclosed in this
Directors’ Report.
Financial
Results and dividends
The profit for the financial year attributable
to shareholders was £129.3m (2023: £117.7m).
The Directors recommend a final dividend of
42.0p (2023: 40.0p) per ordinary share, to
be paid, if approved, on 31 January 2025.
This, together with the interim dividend of
17.3p (2023: 16.5p) per ordinary share,
amounts to 59.3p for the year (2023: 56.5p).
The results are shown more fully in the
audited consolidated financial statements
on pages 132 to 178 and summarised in the
Financial Review on pages 46 to 49.
Independent Auditors
Each of the persons who is a Director at
the date of approval of this Annual Report
and 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
15 January 2025.
Directors’ assessment of going concern
The Directors continue to adopt the going
concern basis in preparing the Annual
Report and Accounts. Their assessment in
reaching this conclusion is set out in the
notes to the consolidated financial
statements on page 168.
Statement of Directors’ responsibilities
for preparing the financial statements
The Directors are responsible for preparing
the Annual Report and 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 UK-adopted
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).
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Additional Information
Corporate Governance
Financial Statements
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 UK-adopted
International Accounting Standards have
been followed for the Group financial
statements and United Kingdom
Accounting Standards, comprising
FRS 101 have been followed for the
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.
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.
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.
Directors’ confirmations
The Directors consider that the Annual
Report and 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 give a true and fair view of the
assets, liabilities, financial position and
profit of the Group;
• 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:
• 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 Strategic Report and the Directors’
Report were approved by the Board of
Directors on 19 November 2024 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
123
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
DIRECTORS’ REPORT CONTINUED
REPORT ON THE AUDIT OF
THE FINANCIAL STATEMENTS
Opinion
In our opinion:
• Diploma PLC’s Group financial statements and Parent Company financial statements
(the “financial statements”) give a true and fair view of the state of the Group’s and of
the Parent Company’s affairs as at 30 September 2024 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 Parent 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
2024 (the “Annual Report”), which comprise: the Consolidated and Parent Company
Statements of Financial Position as at 30 September 2024; the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income, the Consolidated
and Parent Company Statements of Changes in Equity and the Consolidated Cash Flow
Statement for the year then ended; the Group and Parent Company Accounting Policies;
and the notes to the financial statements.
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 27 to the Group
Financial Statements, we have provided no non-audit services to the Parent 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 80% (2023: 69%) of consolidated adjusted profit before tax and
73% (2023: 68%) of consolidated revenue.
Key audit matters
• Valuation of the acquired intangibles for the Peerless and PAR Group acquisitions (Group)
• Carrying value of investments in subsidiaries and recoverability of intercompany
receivables (Parent Company)
Materiality
• Overall Group materiality: £12.3m (2023: £10.8m) based on approximately 5% of adjusted
profit before tax.
• Overall Parent Company materiality: £9.9m (2023: £6.1m) based on approximately 1% of
total assets.
• Performance materiality: £9.2m (2023: £8.1m) (Group) and £7.4m (2023: £4.6m) (Parent
Company).
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.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DIPLOMA PLC
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DIPLOMA PLC ANNUAL REPORT 2024
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Additional Information
Corporate Governance
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 acquired intangibles for the
Peerless and PAR Group acquisitions (Group)
Refer to page 175 Significant accounting
estimates and critical judgements (Acquisition
accounting) and Note 22 (Acquisitions and
disposals of businesses) within the Group
financial statements.
The Group acquired Peerless and PAR Group
for a combined consideration of £269.5m (net
of cash acquired). Acquired intangible assets
of £75.2m 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.
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:
−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.
Key audit matter
How our audit addressed the key audit matter
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
including discount rates, forecast revenue
growth rates, and customer attrition rates.
In considering such assumptions, there is
an inherent level of estimation uncertainty
and subjectivity.
−Forecast revenue growth rates: We
compared the assumptions in respect of
forecast revenue growth rates to historical
trading experience and the actual trading
performance of the businesses subsequent
to the acquisition. In addition, we compared
the forecasts used in the valuations to the
Board approved budgets, comparable
companies and industry reports.
−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
is materially appropriate.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DIPLOMA PLC CONTINUED
125
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
Key audit matter
How our audit addressed the key audit matter
Carrying value of investments in subsidiaries
and recoverability of intercompany
receivables (Parent Company)
Refer to the Parent Company Statement of
Financial Position and Note D (“Investments”)
within the Parent Company financial
statements.
At the balance sheet date, the Parent
Company had investments in subsidiaries of
£700.5m (2023: £372.4m) and intercompany
receivables of £289.1m (2023: £246.9m).
The Parent Company’s accounting policy for
investments and intercompany receivables is
to hold them at cost less any accumulated
impairment. Impairment of the intercompany
receivables is calculated in accordance with
IFRS 9 (Financial Instruments). Investments in
subsidiaries are assessed for impairment in line
with IAS 36 (Impairment of Assets). Given the
inherent judgement in assessing both the
carrying value of a subsidiary company and
the expected credit loss of intercompany
receivables, this was identified as a key
audit matter.
In assessing whether the carrying value of the
Parent 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 evaluated whether
other areas of our audit work identified any
indicators of impairment concerning the
recoverability of the carrying value of those
investments as of 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 audited
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 Parent 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 components which are consolidated by Group management.
The Group 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 21 financial reporting components across nine countries for which we
determined that full scope audits would need to be performed. Through our full scope
audits, the audit of the consolidation and other audit procedures performed at a Group
level, we have achieved coverage of 80% of the Group’s adjusted profit before tax and
73% of the Group’s revenue, giving us the evidence we needed for our opinion on the Group
financial statements as a whole. The reporting components, excluding those audited by the
Group engagement team, were audited by twelve component teams.
Certain Parent Company account balances were included in scope for the audit of the
Group financial statements. However, we determined that the Parent Company did not
require a full scope audit of its complete financial information for the purposes of the
audit of the Group financial statements.
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 Parent Company and one UK component.
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.
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.
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Financial Statements
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 with the financial statements and our knowledge from our audit.
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 - Parent Company
Overall materiality
£12.3m (2023: £10.8m).
£9.9m (2023: £6.1m).
How we
determined it
Based on approximately 5%
of adjusted profit before tax
Based on approximately 1% of total
assets
Financial statements - Group
Financial statements - Parent Company
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.
This is a typical measure used by
shareholders in assessing the
performance of a holding Parent
Company and a generally accepted
auditing benchmark.
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 £450,000 and £10.5m. 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%
(2023: 75%) of overall materiality, amounting to £9.2m (2023: £8.1m) for the Group financial
statements and £7.4m (2023: £4.6m) for the Parent 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 £612,500 (Group audit) (2023: £537,500) and £495,000
(Parent Company audit) (2023: £305,000) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
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Corporate Governance
Financial Statements
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group's and the Parent 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 severe but plausible scenario 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 Parent 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 Parent 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.
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 2024
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 Parent 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.
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Corporate Governance
Financial Statements
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
Parent 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, included within the Corporate
Governance section of the Annual Report 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 Parent 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 Parent 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 Parent
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.
Our review of the directors’ statement regarding the longer-term viability of the Group and
Parent 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 Parent 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 Parent 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 Parent 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 Parent 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 Parent
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.
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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.
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 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 Parent
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.
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Financial Statements
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 Parent 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 Parent 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 seven years, covering the years ended 30 September 2018 to
30 September 2024.
OTHER MATTER
The Parent Company is required by the Financial Conduct Authority Disclosure Guidance
and Transparency Rules to include these financial statements in an annual financial report
prepared under the structured digital format required by DTR 4.1.15R - 4.1.18R and filed on
the National Storage Mechanism of the Financial Conduct Authority. This auditors’ report
provides no assurance over whether the structured digital format annual financial report
has been prepared in accordance with those requirements.
Richard Porter (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
19 November 2024
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Financial Statements
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Corporate Governance
Financial Statements
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2024
Note
Adjusted1
2024
£m
Adjustments1
£m
Total
2024
£m
Adjusted1
2023
£m
Adjustments1
£m
Total
2023
£m
Revenue
3,4
1,363.4
−
1,363.4
1,200.3
−
1,200.3
Operating expenses
2
(1,078.4)
(77.6)
(1,156.0)
(963.3)
(53.7)
(1,017.0)
Operating profit
285.0
(77.6)
207.4
237.0
(53.7)
183.3
Financial expense, net
6
(27.0)
(3.8)
(30.8)
(20.4)
(7.3)
(27.7)
Profit before tax
258.0
(81.4)
176.6
216.6
(61.0)
155.6
Tax expense
7
(61.9)
15.3
(46.6)
(52.0)
14.7
(37.3)
Profit for the year
196.1
(66.1)
130.0
164.6
(46.3)
118.3
Attributable to:
Shareholders of the Company
195.4
(66.1)
129.3
164.0
(46.3)
117.7
Minority interests
21
0.7
–
0.7
0.6
−
0.6
196.1
(66.1)
130.0
164.6
(46.3)
118.3
Earnings per share (p)
Adjusted/Basic earnings
9
145.8p
96.5p
126.5p
90.8p
Adjusted/Diluted earnings
9
145.3p
96.1p
125.9p
90.4p
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 notes on pages 137 to 175 form part of these consolidated financial statements.
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Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2024
Note
2024
£m
2023
£m
Profit for the year
130.0
118.3
Items that will not be reclassified to the Consolidated Income Statement
Actuarial loss on the defined benefit pension schemes
26
(7.0)
(0.9)
Deferred tax on items that will not be reclassified
7,14
1.8
0.2
(5.2)
(0.7)
Items that may be reclassified to the Consolidated Income Statement
Exchange differences on translation of foreign operations
(65.7)
(46.3)
Exchange differences on translation of net investment hedge
19
7.2
−
Net changes to fair value of cash flow hedges transferred to the Consolidated Income Statement
19
(1.3)
1.8
Losses on fair value of cash flow hedges
19
(2.3)
(3.8)
Deferred tax on items that may be reclassified
7,14
0.7
0.5
(61.4)
(47.8)
Total Other Comprehensive Income
(66.6)
(48.5)
Total Comprehensive Income for the year
63.4
69.8
Attributable to:
Shareholders of the Company
62.7
69.3
Minority interests
0.7
0.5
63.4
69.8
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Financial Statements
Note
Share
capital
£m
Share
premium
£m
Translation
reserve
£m
Hedging
reserve
£m
Retained
earnings
£m
Shareholders’
equity
£m
Minority
interests
£m
Total
equity
£m
At 1 October 2022
6.3
188.6
88.8
3.2
375.1
662.0
6.2
668.2
Total Comprehensive Income
–
–
(46.3)
(1.5)
117.1
69.3
0.5
69.8
Issue of share capital
0.5
231.6
–
–
–
232.1
–
232.1
Share-based payments
5
–
–
–
–
4.1
4.1
–
4.1
Tax on items recognised directly in equity
7
–
–
–
–
0.5
0.5
–
0.5
Notional purchase of own shares
–
–
–
−
(1.9)
(1.9)
–
(1.9)
Dividends
8,21
–
–
–
–
(70.5)
(70.5)
(0.3)
(70.8)
At 30 September 2023
6.8
420.2
42.5
1.7
424.4
895.6
6.4
902.0
Total Comprehensive Income
–
–
(58.5)
(2.9)
124.1
62.7
0.7
63.4
Share-based payments
5
–
–
–
–
7.1
7.1
–
7.1
Tax on items recognised directly in equity
7
–
–
–
–
1.7
1.7
–
1.7
Notional purchase of own shares
–
–
–
–
(2.3)
(2.3)
–
(2.3)
Dividends
8,21
–
–
–
–
(76.8)
(76.8)
(0.4)
(77.2)
At 30 September 2024
6.8
420.2
(16.0)
(1.2)
478.2
888.0
6.7
894.7
The notes on pages 137 to 175 form part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2024
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Corporate Governance
Financial Statements
Note
2024
£m
2023
£m
Non-current assets
Goodwill
10
541.1
439.1
Acquisition intangible assets
11
507.8
520.1
Other intangible assets
11
2.6
4.2
Property, plant and equipment
12
63.4
59.2
Leases – right-of-use assets
13
65.9
71.5
Retirement benefit assets
26
1.5
6.8
Deferred tax assets
14
0.9
0.2
1,183.2
1,101.1
Current assets
Inventories
15
280.1
232.7
Trade and other receivables
16
206.9
193.1
Assets held for sale
23
46.4
–
Cash and cash equivalents
18
55.5
62.4
588.9
488.2
Current liabilities
Borrowings
25
–
(0.3)
Trade and other payables
17
(204.4)
(191.9)
Liabilities held for sale
23
(22.0)
–
Current tax liabilities
7
(22.9)
(16.6)
Other liabilities
20
(8.8)
(12.7)
Lease liabilities
13
(13.1)
(15.0)
(271.2)
(236.5)
Net current assets
317.7
251.7
Total assets less current liabilities
1,500.9
1,352.8
Note
2024
£m
2023
£m
Non-current liabilities
Borrowings
25
(479.8)
(316.8)
Trade and other payables
17
(1.1)
–
Lease liabilities
13
(59.2)
(65.2)
Other liabilities
20
(16.6)
(9.9)
Retirement benefit obligations
26
–
(0.3)
Deferred tax liabilities
14
(49.5)
(58.6)
(606.2)
(450.8)
Net assets
894.7
902.0
Equity
Share capital
6.8
6.8
Share premium
420.2
420.2
Translation reserve
(16.0)
42.5
Hedging reserve
(1.2)
1.7
Retained earnings
478.2
424.4
Total shareholders’ equity
888.0
895.6
Minority interests
21
6.7
6.4
Total equity
894.7
902.0
The consolidated financial statements on pages 132 to 175 were approved by the Board of
Directors on 19 November 2024 and signed on its behalf by:
JD Thomson
Chief Executive Officer
C Davies
Chief Financial Officer
The notes on pages 137 to 175 form part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2024
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Corporate Governance
Financial Statements
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2024
Note
2024
£m
2023
£m
Operating profit
207.4
183.3
Acquisition related and other charges
77.6
53.7
Non-cash items and other
3.2
24.5
Increase in working capital
(8.5)
(4.2)
Cash flow from operating activities
24
279.7
257.3
Interest paid, net (including borrowing fees)
(23.2)
(26.7)
Tax paid
(58.4)
(41.4)
Net cash inflow from operating activities
198.1
189.2
Cash flow from investing activities
Acquisition of businesses (net of cash acquired)
(270.5)
(258.5)
Acquisition related deferred (payments)/receipts, net
(10.3)
(12.3)
Proceeds from sale of business (net of cash disposed)
–
21.5
Purchase of property, plant and equipment
12
(18.9)
(21.6)
Purchase of other intangible assets
11
(0.8)
(1.5)
Proceeds from sale of property, plant and equipment
5.7
1.5
Net cash used in investing activities
(294.8)
(270.9)
Note
2024
£m
2023
£m
Cash flow from financing activities
Proceeds from issue of share capital
–
236.1
Share issue costs
–
(4.2)
Dividends paid to shareholders
8
(76.8)
(70.5)
Dividends paid to minority interests
21
(0.4)
(0.3)
Notional purchase of own shares on exercise of share options
(2.3)
(1.9)
Proceeds from borrowings
694.9
579.5
Repayment of borrowings
(509.1)
(617.3)
Principal elements of lease payments
(16.0)
(13.9)
Net cash inflow from financing activities
90.3
107.5
Net (decrease)/increase in cash and cash equivalents
(6.4)
25.8
Cash and cash equivalents at beginning of year
62.4
41.7
Effect of exchange rates on cash and cash equivalents
4.2
(5.1)
Cash and cash equivalents held in disposal groups
23
(4.7)
–
Cash and cash equivalents at end of year
18
55.5
62.4
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Additional Information
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024
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 19 November 2024. 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 and Accounts on pages 176 to 178. A full list of subsidiary and other related
undertakings is set out on pages 180 to 182.
2. ANALYSIS OF OPERATING EXPENSES
Adjusted
2024
£m
Adjustments
£m
Total
2024
£m
Adjusted
2023
£m
Adjustments
£m
Total
2023
£m
Cost of inventories sold
730.1
4.4
734.5
652.1
5.9
658.0
Employee costs (note 5)
230.9
3.9
234.8
206.2
3.8
210.0
Depreciation of property, plant and equipment (note 12)
14.6
–
14.6
12.8
–
12.8
Depreciation of right-of-use assets (note 13)
16.3
–
16.3
14.8
–
14.8
Amortisation (note 11)
1.3
59.4
60.7
1.0
52.9
53.9
Net impairment movements on trade receivables (note 16)
(0.6)
–
(0.6)
2.5
–
2.5
Other operating expenses/(income)
85.8
9.9
95.7
73.9
(8.9)
65.0
Operating expenses
1,078.4
77.6
1,156.0
963.3
53.7
1,017.0
The adjustments to operating expenses are made in relation to acquisition related and other charges, as defined in note 29.2, totalling £77.6m (2023: £53.7m) and comprises of £59.4m
(2023: £52.9m) of amortisation of acquisition intangible assets, £4.4m (2023: £5.9m) of fair value adjustments to inventory acquired through acquisitions recognised in cost of
inventories sold, £10.2m of acquisition related expenses (2023: £6.3m), £3.6m of restructuring costs (2023: £nil) and no disposal of businesses during the year (2023: £12.2m net gain).
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: Controls, Seals and Life Sciences. 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 28 to 45. 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.
138
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Corporate Governance
Financial Statements
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.
Controls
Seals
Life Sciences
Corporate
Group
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Revenue – existing1
595.3
568.4
478.6
419.0
221.9
212.9
–
–
1,295.8
1,200.3
Revenue – acquisitions1
57.1
–
10.5
–
–
–
–
–
67.6
–
Revenue
652.4
568.4
489.1
419.0
221.9
212.9
–
–
1,363.4
1,200.3
Cost of inventories sold – existing1
(347.7)
(332.4)
(234.0)
(205.7)
(122.6)
(119.9)
–
–
(704.3)
(658.0)
Cost of inventories sold – acquisitions1
(25.6)
–
(4.6)
–
–
–
–
–
(30.2)
–
Cost of inventories sold
(373.3)
(332.4)
(238.6)
(205.7)
(122.6)
(119.9)
–
–
(734.5)
(658.0)
Adjusted operating profit – existing1
144.0
136.6
87.1
79.0
46.8
43.2
(22.4)
(21.8)
255.5
237.0
Adjusted operating profit – acquisitions1
25.9
–
3.6
–
–
–
–
–
29.5
–
Adjusted operating profit
169.9
136.6
90.7
79.0
46.8
43.2
(22.4)
(21.8)
285.0
237.0
Acquisition related and other charges
(37.6)
(23.7)
(28.5)
(23.2)
(11.5)
(6.8)
–
–
(77.6)
(53.7)
Operating profit
132.3
112.9
62.2
55.8
35.3
36.4
(22.4)
(21.8)
207.4
183.3
Operating assets
301.6
214.9
262.9
264.1
94.2
75.2
–
–
658.7
554.2
Goodwill
265.3
167.3
179.1
169.4
96.7
102.4
–
–
541.1
439.1
Acquisition intangible assets
268.4
258.2
183.4
195.4
56.0
66.5
–
–
507.8
520.1
835.3
640.4
625.4
628.9
246.9
244.1
–
–
1,707.6
1,513.4
Unallocated assets:
– Deferred tax assets
0.9
0.2
0.9
0.2
– Cash and cash equivalents
55.5
62.4
55.5
62.4
– Acquisition related assets
1.8
3.0
1.8
3.0
– Retirement benefit assets
1.5
6.8
1.5
6.8
– Corporate assets
4.8
3.5
4.8
3.5
Total assets
835.3
640.4
625.4
628.9
246.9
244.1
64.5
75.9
1,772.1
1,589.3
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
Controls
Seals
Life Sciences
Corporate
Group
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Operating liabilities
(120.7)
(96.1)
(119.2)
(119.6)
(52.1)
(43.3)
–
–
(292.0)
(259.0)
Unallocated liabilities:
– Deferred tax liabilities
(49.5)
(58.6)
(49.5)
(58.6)
– Retirement benefit obligations
–
(0.3)
–
(0.3)
– Acquisition related liabilities
(25.4)
(22.6)
(25.4)
(22.6)
– Corporate liabilities
(30.7)
(29.7)
(30.7)
(29.7)
– Borrowings
(479.8)
(317.1)
(479.8)
(317.1)
Total liabilities
(120.7)
(96.1)
(119.2)
(119.6)
(52.1)
(43.3)
(585.4)
(428.3)
(877.4)
(687.3)
Net assets/(liabilities)
714.6
544.3
506.2
509.3
194.8
200.8
(520.9)
(352.4)
894.7
902.0
1 Prior year’s segmental acquisition amounts have been incorporated into the existing segmental amounts for better comparability.
Other Sector information
Controls
Seals
Life Sciences
Corporate
Group
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Capital expenditure
5.7
5.9
4.7
9.0
9.2
7.9
0.1
0.3
19.7
23.1
Depreciation and amortisation
5.0
4.6
6.1
5.0
4.5
4.0
0.3
0.2
15.9
13.8
Revenue recognition
– immediately on sale
642.2
563.0
465.3
399.6
207.3
198.9
–
–
1,314.8
1,161.5
– over a period of time
10.2
5.4
23.8
19.4
14.6
14.0
–
–
48.6
38.8
652.4
568.4
489.1
419.0
221.9
212.9
–
–
1,363.4
1,200.3
Accrued income (“contract assets”) at 30 September 2024 of £0.8m (2023: £1.0m) and deferred revenue (“contract liabilities”) of £2.8m at 30 September 2024 (2023: £3.1m) are
included in trade and other receivables (note 16) and trade and other payables (note 17), respectively.
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Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
4. GEOGRAPHIC SEGMENT ANALYSIS BY ORIGIN
Revenue
Adjusted operating profit
Non-current
assets1
Trading capital employed
Capital expenditure
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
United Kingdom2
273.0
267.1
23.3
28.8
242.4
207.3
229.3
195.0
4.9
9.3
Rest of Europe
267.8
210.3
53.9
34.5
264.9
308.1
321.4
354.1
2.3
1.6
USA
626.1
537.6
165.5
132.2
566.9
470.0
698.2
567.9
3.6
4.3
Rest of world
196.5
185.3
42.3
41.5
106.6
106.3
136.1
111.2
8.9
7.9
1,363.4
1,200.3
285.0
237.0
1,180.8
1,091.7
1,385.0
1,228.2
19.7
23.1
1 Non-current assets excludes deferred tax assets, derivative assets and retirement benefit assets.
2 United Kingdom includes the UK related corporate segment.
5. GROUP EMPLOYEE COSTS
Average number of employees
2024
2023
Controls
1,110
1,026
Seals
1,824
1,496
Life Sciences
463
450
Corporate
42
38
Number of employees – average
3,439
3,010
Number of employees – year end
3,597
3,319
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Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
Group employee costs, including key management
2024
£m
2023
£m
Wages and salaries
200.8
183.2
Social security costs
18.5
15.1
Other pension costs
8.4
7.6
Share-based payments
7.1
4.1
234.8
210.0
Key management short-term remuneration, including Directors
2024
£m
2023
£m
Salaries and short-term employee benefits
7.2
5.4
Pension costs
0.2
0.2
Share-based payments
5.2
3.0
12.6
8.6
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 96 to 119 in the Remuneration Committee Report. The charge for share-
based payments of £5.2m (2023: £3.0m) relates to the Group’s PSP, described in the
Remuneration Committee Report.
Directors’ short-term remuneration
2024
£m
2023
£m
Non-Executive Directors
0.7
0.6
Executive Directors
3.1
2.7
3.8
3.3
6. FINANCIAL EXPENSE, NET
2024
£m
2023
£m
Interest expense/(income) and similar charges
– bank facility and commitment fees
1.7
1.6
– interest income on short-term deposits
(0.6)
(0.4)
– interest expense on borrowings
22.2
16.6
– notional interest income on the defined benefit pension scheme
(note 26)
(0.3)
(0.4)
– amortisation of capitalised borrowing fees
0.1
0.2
– interest on lease liabilities (note 13)
3.9
2.8
Net interest expense and similar charges
27.0
20.4
– acquisition related finance charges, net
3.8
7.3
Financial expense, net
30.8
27.7
Acquisition related finance charges as adjusted in the Consolidated Income Statement
includes fair value movement and unwind of discount on acquisition liabilities of £3.2m
charge (2023: £0.4m charge), £0.9m charge (2023: £5.9m charge) for the amortisation
and write-off of capitalised borrowing fees on acquisition related borrowings, fair value
remeasurements of put options for future minority interest purchases of £0.1m income
(2023: £1.8m charge), and net income from interest and settlement of acquisition and
disposal related items of £0.2m (2023: £0.8m net income). Acquisition related finance
charges are adjusted due to their consistent nature with acquisition related and other
charges, as defined in note 29.2.
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
7. TAX EXPENSE
2024
£m
2023
£m
Current tax
The tax charge is based on the profit for the year and comprises:
UK corporation tax
15.2
10.4
Overseas tax
40.1
31.2
55.3
41.6
Adjustments in respect of prior year:
UK corporation tax
(0.2)
1.2
Overseas tax
0.4
0.1
Total current tax
55.5
42.9
Deferred tax
The net deferred tax credit based on the origination and reversal
of timing differences comprises:
United Kingdom
(1.2)
(2.7)
Overseas
(7.7)
(2.9)
Total deferred tax
(8.9)
(5.6)
Total tax on profit for the year
46.6
37.3
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 £2.5m was recognised in the Consolidated Statement of Comprehensive
Income (2023: £0.7m credit). A further £1.7m was credited (2023: £0.5m credit) to the
Consolidated Statement of Changes in Equity.
Factors affecting the tax charge for the year
The difference between the total tax charge calculated by applying the effective rate of
UK corporation tax of 25.0% to the profit before tax of £176.6m and the amount set out
above is as follows:
2024
£m
2023
£m
Profit before tax
176.6
155.6
Tax on profit at UK effective corporation tax rate of 25.0% (2023: 22.0%)
44.2
34.2
Effects of:
overseas tax rates
0.4
3.8
adjustments in respect of UK and Overseas corporation tax in prior years
0.2
1.3
other permanent differences
1.8
(2.0)
Total tax on profit for the year
46.6
37.3
Tax effect on adjusting items
15.3
14.7
Adjusted tax expense
61.9
52.0
The tax adjustment in the Consolidated Income Statement of £15.3m (2023: £14.7m)
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 statutory tax rate for
UK corporation tax in respect of the year ended 30 September 2024 was 25.0%
(2023: 22.0%) and this rate has been used for tax on profit in the above reconciliation.
The Group’s effective tax rate on adjusted profit remains consistent with the prior year at
24% (2023: 24%). This is reflective of the geographic mix of profits and the statutory tax
rates in the jurisdictions in which we operate. The UK deferred tax assets and liabilities at
30 September 2024 have been calculated by reference to the UK corporation tax rate of
25.0% (2023: 25.0%).
At 30 September 2024, the Group had outstanding tax liabilities of £22.9m
(2023: £16.6m). These amounts are expected to be paid within the next financial year.
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
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.
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.
The OECD has issued guidance on safe harbours and penalty relief. This includes a
Transitional Country-by-Country Safe Harbour (‘TCSH’), which allows multinationals to
avoid detailed calculations for a jurisdiction if they meet certain criteria. Based on these
rules, the most recently filed country-by-country report and the effective tax rates in most
jurisdictions in which the Group operates being above 15% we do not expect the Pillar Two
legislation to have a material effect on the financial statements of the Group.
8. DIVIDENDS
2024
pence
per share
2023
pence
per share
2024
£m
2023
£m
Interim dividend, paid in June
17.3
16.5
23.2
22.1
Final dividend of the prior year, paid in February
40.0
38.8
53.6
48.4
57.3
55.3
76.8
70.5
The Directors have proposed a final dividend in respect of the current year of 42.0p per
share (2023: 40.0p), which will be paid on 31 January 2025 subject to approval by
shareholders at the Annual General Meeting (AGM) on 15 January 2025. The total dividend
for the current year, subject to approval of the final dividend, will be 59.3p per share
(2023: 56.5p).
The Diploma PLC Employee Benefit Trust holds 60,708 (2023: 67,431) shares, which are
ineligible for dividends.
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 134,020,566 (2023: 129,675,581) and
the profit for the year attributable to shareholders of £129.3m (2023: £117.7m). Basic
earnings per share is 96.5p (2023: 90.8p). Diluted earnings per share is 96.1p (2023: 90.4p)
and is based on the average number of ordinary shares (which includes any potentially
dilutive shares) of 134,494,807 (2023: 130,260,868).
Further description of the Company’s share capital is set out in note (F) to the Parent
Company Financial Statements on page 178.
Adjusted earnings per share
Adjusted EPS, which is defined in note 29.3, is 145.8p (2023: 126.5p).
2024
pence
per share
Basic
2024
pence
per share
Diluted
2023
pence
per share
Basic
2023
pence
per share
Diluted
2024
£m
2023
£m
Profit before tax
176.6
155.6
Tax expense
(46.6)
(37.3)
Minority interests
(0.7)
(0.6)
Earnings for the year
attributable to shareholders
of the Company
96.5
96.1
90.8
90.4
129.3
117.7
Acquisition related and other
charges and acquisition
related finance charges, net
of tax
49.3
49.2
35.7
35.5
66.1
46.3
Adjusted earnings
145.8
145.3
126.5
125.9
195.4
164.0
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DIPLOMA PLC ANNUAL REPORT 2024
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Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
10. GOODWILL
Controls
£m
Seals
£m
Life
Sciences
£m
Total
£m
At 1 October 2022
140.9
125.2
106.2
372.3
Acquisitions
39.5
48.1
1.3
88.9
Disposals
(4.3)
–
–
(4.3)
Exchange adjustments
(8.8)
(3.9)
(5.1)
(17.8)
At 30 September 2023
167.3
169.4
102.4
439.1
Acquisitions
118.1
27.0
–
145.1
Transfers to Held for Sale Assets
(0.6)
(11.8)
–
(12.4)
Exchange adjustments
(19.5)
(5.5)
(5.7)
(30.7)
At 30 September 2024
265.3
179.1
96.7
541.1
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: Controls, Seals, and Life Sciences.
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 FY25, 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; Controls 9.7% (2023: 10.1%), Seals 10.1% (2023: 10.2%)
and Life Sciences 9.4% (2023: 10.1%). The equivalent post-tax discount rates for FY24
are: Controls 9.6% (2023: 10.0%), Seals 10.0% (2023: 10.1%) and Life Sciences 9.3%
(2023: 10.0%).
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 analyses 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.
11. ACQUISITION AND OTHER INTANGIBLE ASSETS
Customer
relationships
and order
backlog
£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 2022
547.9
30.9
53.7
–
632.5
9.3
Additions
–
–
–
–
–
1.5
Acquisitions
137.3
–
6.2
0.8
144.3
–
Disposals
(1.1)
–
–
–
(1.1)
(0.1)
Transfers
–
–
–
–
–
(0.3)
Exchange adjustments
(30.2)
(1.6)
(4.4)
(0.1)
(36.3)
(0.2)
At 30 September 2023
653.9
29.3
55.5
0.7
739.4
10.2
Additions
–
–
–
–
–
0.8
Acquisitions
83.7
–
–
–
83.7
–
Disposals
–
–
–
–
–
(0.4)
Transfers to Held for Sale
Assets
(17.5)
(1.4)
–
–
(18.9)
(1.5)
Exchange adjustments
(41.4)
(1.5)
(4.3)
–
(47.2)
(0.6)
At 30 September 2024
678.7
26.4
51.2
0.7
757.0
8.5
145
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Additional Information
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
Customer
relationships
and order
backlog
£m
Supplier
relationships
£m
Trade
names,
brands and
databases
£m
Technology
£m
Total
acquisition
intangible
assets
£m
Other
intangible
assets
£m
Amortisation
At 1 October 2022
140.1
24.6
12.8
–
177.5
5.2
Acquisitions
4.1
–
0.2
–
4.3
–
Charge for the year
41.4
1.7
5.5
–
48.6
1.0
Disposals
(1.1)
–
–
–
(1.1)
–
Exchange adjustments
(7.8)
(1.2)
(1.0)
–
(10.0)
(0.2)
At 30 September 2023
176.7
25.1
17.5
–
219.3
6.0
Acquisitions
4.0
–
–
–
4.0
–
Charge for the year
47.7
1.7
5.9
0.1
55.4
1.3
Disposals
–
–
–
–
–
(0.3)
Transfers to Held for Sale
Assets
(13.8)
(1.4)
–
–
(15.2)
(0.8)
Exchange adjustments
(11.3)
(1.3)
(1.7)
–
(14.3)
(0.3)
At 30 September 2024
203.3
24.1
21.7
0.1
249.2
5.9
Net book value
At 30 September 2024
475.4
2.3
29.5
0.6
507.8
2.6
At 30 September 2023
477.2
4.2
38.0
0.7
520.1
4.2
Acquisition intangible assets relate to items acquired through business combinations
which are fair-valued and amortised over their useful economic lives.
Economic life
Customer relationships
5–16 years
Supplier relationships
8–10 years
Trade names, brands and databases
5–11 years
Technology
5 years
Order backlog
3 years
Customer relationships principally relate to: Windy City Wire (£136.0m – 12 years useful life
remaining), DICSA (£83.5m – 15 years useful life remaining), Peerless (£50.2m – 11 years
remaining) and R&G (£31.2m – 8 years useful life remaining). Trade names and brands
principally relate to Windy City Wire (£22.5m – 8 years useful life remaining) and DICSA
(£5.2m – 9 years useful life remaining). Technology relates to DICSA (4 years useful life
remaining). Order backlog relates to Peerless (£5.2m – 3 years useful life remaining).
Other intangible assets comprise computer software that is separately identifiable from IT
equipment and includes software licences.
Other intangible assets includes £0.2m (2023: £nil) of assets under construction.
146
DIPLOMA PLC ANNUAL REPORT 2024
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Additional Information
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
12. PROPERTY, PLANT AND EQUIPMENT
Freehold
properties
£m
Leasehold
improvements
£m
Plant and
equipment
£m
Hospital
field
equipment
£m
Total
£m
Cost
At 1 October 2022
3.6
13.2
61.2
19.7
97.7
Additions
0.3
4.3
9.5
7.5
21.6
Acquisitions of businesses
–
1.8
4.3
0.1
6.2
Disposals
(0.6)
(0.9)
(2.5)
(1.1)
(5.1)
Exchange adjustments
(0.2)
(0.8)
(5.2)
(1.3)
(7.5)
At 30 September 2023
3.1
17.6
67.3
24.9
112.9
Additions
0.2
1.7
9.7
7.3
18.9
Acquisitions of businesses (note 22)
4.1
4.9
0.3
–
9.3
Disposals
(0.8)
(1.5)
(3.2)
(1.1)
(6.6)
Transfers to Held for Sale Assets
–
(0.4)
(7.5)
–
(7.9)
Exchange adjustments
(0.2)
(1.6)
(5.6)
(2.1)
(9.5)
At 30 September 2024
6.4
20.7
61.0
29.0
117.1
Depreciation
At 1 October 2022
1.1
5.2
32.7
9.1
48.1
Charge for the year
0.1
1.0
7.9
3.8
12.8
Disposals
(0.3)
(0.3)
(1.7)
(0.5)
(2.8)
Exchange adjustments
(0.1)
(0.3)
(3.3)
(0.7)
(4.4)
At 30 September 2023
0.8
5.6
35.6
11.7
53.7
Charge for the year
0.1
1.6
9.1
3.8
14.6
Disposals
(0.7)
(0.3)
(2.3)
(0.5)
(3.8)
Transfers to Held for Sale Assets
–
(0.1)
(4.8)
–
(4.9)
Exchange adjustments
–
(0.5)
(4.4)
(1.0)
(5.9)
At 30 September 2024
0.2
6.3
33.2
14.0
53.7
Net book value
At 30 September 2024
6.2
14.4
27.8
15.0
63.4
At 30 September 2023
2.3
12.0
31.7
13.2
59.2
Assets under construction is included in leasehold improvements of £0.1m (2023: £3.2m)
and plant and equipment of £0.9m (2023: £nil).
Land included within freehold properties above which is not depreciated is £1.3m (2023:
£1.0m). Capital commitments contracted, but not provided, were £0.1m (2023: £2.2m).
Freehold properties include ca. 150 acres of land at Stamford that comprises mostly farm
land and former quarry land. In the Directors’ opinion, the current fair value of its land at
30 September 2024 is £1.0m (2023: £1.0m) with a book value of £nil (2023: £nil).
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
Total
£m
Cost
At 1 October 2022
81.1
0.8
8.3
1.7
91.9
Additions
24.8
0.1
2.7
0.5
28.1
Disposals
(1.3)
(0.1)
(1.0)
(0.1)
(2.5)
Exchange adjustments
(3.7)
–
(0.1)
(0.1)
(3.9)
At 30 September 2023
100.9
0.8
9.9
2.0
113.6
Additions
16.9
0.2
3.2
0.1
20.4
Disposals
(5.3)
(0.1)
(1.6)
–
(7.0)
Transfers to Held for Sale Assets
(8.4)
–
(0.7)
–
(9.1)
Exchange adjustments
(8.3)
–
(2.0)
(0.9)
(11.2)
At 30 September 2024
95.8
0.9
8.8
1.2
106.7
147
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
Land &
buildings
£m
Plant &
machinery
£m
Motor
vehicles
£m
IT & office
equipment
£m
Total
£m
Depreciation
At 1 October 2022
25.3
0.3
3.0
0.9
29.5
Charge for the year
12.3
0.1
2.0
0.4
14.8
Disposals
(0.7)
(0.1)
(0.5)
–
(1.3)
Exchange adjustments
(0.9)
–
–
–
(0.9)
At 30 September 2023
36.0
0.3
4.5
1.3
42.1
Charge for the year
13.7
0.2
2.2
0.2
16.3
Disposals
(4.3)
(0.1)
(1.4)
–
(5.8)
Transfers to Held for Sale Assets
(2.7)
–
(0.4)
–
(3.1)
Exchange adjustments
(6.5)
–
(1.4)
(0.8)
(8.7)
At 30 September 2024
36.2
0.4
3.5
0.7
40.8
Net book value
At 30 September 2024
59.6
0.5
5.3
0.5
65.9
At 30 September 2023
64.9
0.5
5.4
0.7
71.5
Right-of-use assets represent those assets held under leases which IFRS 16 requires
to be capitalised.
Lease liabilities
The movement on lease liabilities are set out below:
2024
£m
2023
£m
At 1 October
80.2
69.1
Additions
21.2
29.7
Disposals
(1.3)
(0.8)
Lease repayments
(19.9)
(16.7)
Interest on lease liabilities
3.9
2.8
Transfers to Held for Sale Assets
(8.7)
–
Exchange movements
(3.1)
(3.9)
At 30 September
72.3
80.2
Analysed as:
£m
£m
Repayable within one year
13.1
15.0
Repayable after one year
59.2
65.2
Leases of low-value assets and short-term leases are accounted for applying paragraph 6
of IFRS 16. Lease costs of £1.6m (2023: £1.7m) 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 other operating expenses. The total cash outflow in respect
of leases was £21.5m (2023: £18.4m).
148
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Additional Information
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
14. DEFERRED TAX
The movement on the net deferred tax liability is as follows:
2024
£m
2023
£m
At 1 October
(58.4)
(38.2)
Credited to the income statement (note 7)
8.9
5.6
Acquisitions and disposals (note 22)
(5.3)
(26.9)
Accounted for in Other Comprehensive Income or directly in Equity
2.5
0.7
Transfers to Held for Sale Assets
1.2
–
Exchange adjustments
2.5
0.4
At 30 September
(48.6)
(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.
Assets
Liabilities
Net
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Property, plant and
equipment
–
–
(7.4)
(7.4)
(7.4)
(7.4)
Goodwill and intangible
assets
–
–
(60.8)
(63.4)
(60.8)
(63.4)
Retirement benefit
assets/obligations
0.1
0.1
(0.4)
(1.4)
(0.3)
(1.3)
Inventories
5.8
3.4
(0.3)
(0.1)
5.5
3.3
Share-based payments
3.8
2.0
–
–
3.8
2.0
Leases
1.7
1.6
–
−
1.7
1.6
Other temporary differences
9.3
7.1
(0.4)
(0.3)
8.9
6.8
20.7
14.2
(69.3)
(72.6)
(48.6)
(58.4)
Deferred tax offset
(19.8)
(14.0)
19.8
14.0
–
−
0.9
0.2
(49.5)
(58.6)
(48.6)
(58.4)
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 £227.9m (2023:
£208.7m) was £11.5m (2023: £10.5m).
15. INVENTORIES
2024
£m
2023
£m
Finished goods at 30 September
280.1
232.7
Inventories are stated net of impairment provisions of £29.9m (2023: £26.7m). During the
year £9.9m (2023: £4.3m) was recognised as a charge against cost of inventories sold,
comprising the write-down of inventories to net realisable value.
16. TRADE AND OTHER RECEIVABLES
2024
£m
2023
£m
Trade receivables
204.5
185.3
Less: loss allowance
(11.1)
(10.1)
193.4
175.2
Other receivables
4.7
9.3
Prepayments and accrued income
8.8
8.6
At 30 September
206.9
193.1
The maximum exposure to credit risk for trade receivables at 30 September,
by currency, was:
2024
£m
2023
£m
UK sterling
40.8
43.7
US dollars
94.2
73.9
Canadian dollars
22.3
13.1
Euros
30.5
36.9
Other
16.7
17.7
204.5
185.3
14. DEFERRED TAX
The movement on the net deferred tax liability is as follows:
2024
£m
2023
£m
At 1 October
(58.4)
(38.2)
Credited to the income statement (note 7)
8.9
5.6
Acquisitions and disposals (note 22)
(5.3)
(26.9)
Accounted for in Other Comprehensive Income or directly in Equity
2.5
0.7
Transfers to Held for Sale Assets
1.2
–
Exchange adjustments
2.5
0.4
At 30 September
(48.6)
(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.
Assets
Liabilities
Net
2024
£m
2023
£m
2024
£m
2023
£m
2024
£m
2023
£m
Property, plant and
equipment
–
–
(7.4)
(7.4)
(7.4)
(7.4)
Goodwill and intangible
assets
–
–
(60.8)
(63.4)
(60.8)
(63.4)
Retirement benefit
assets/obligations
0.1
0.1
(0.4)
(1.4)
(0.3)
(1.3)
Inventories
5.8
3.4
(0.3)
(0.1)
5.5
3.3
Share-based payments
3.8
2.0
–
–
3.8
2.0
Leases
1.7
1.6
–
−
1.7
1.6
Other temporary differences
9.3
7.1
(0.4)
(0.3)
8.9
6.8
20.7
14.2
(69.3)
(72.6)
(48.6)
(58.4)
Deferred tax offset
(19.8)
(14.0)
19.8
14.0
–
−
0.9
0.2
(49.5)
(58.6)
(48.6)
(58.4)
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 £227.9m (2023:
£208.7m) was £11.5m (2023: £10.5m).
15. INVENTORIES
2024
£m
2023
£m
Finished goods at 30 September
280.1
232.7
Inventories are stated net of impairment provisions of £29.9m (2023: £26.7m). During the
year £9.9m (2023: £4.3m) was recognised as a charge against cost of inventories sold,
comprising the write-down of inventories to net realisable value.
16. TRADE AND OTHER RECEIVABLES
2024
£m
2023
£m
Trade receivables
204.5
185.3
Less: loss allowance
(11.1)
(10.1)
193.4
175.2
Other receivables
4.7
9.3
Prepayments and accrued income
8.8
8.6
At 30 September
206.9
193.1
The maximum exposure to credit risk for trade receivables at 30 September,
by currency, was:
2024
£m
2023
£m
UK sterling
40.8
43.7
US dollars
94.2
73.9
Canadian dollars
22.3
13.1
Euros
30.5
36.9
Other
16.7
17.7
204.5
185.3
149
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
Trade receivables at 30 September, before loss allowance, are analysed as follows:
2024
£m
2023
£m
Not past due
149.2
143.5
Past due
44.2
31.7
Receivables impaired
11.1
10.1
204.5
185.3
The ageing of trade receivables classified as past due, with no loss allowance, as at 30
September is as follows:
2024
£m
2023
£m
Up to one month past due
31.3
25.6
Between one and two months past due
8.2
4.0
Between two and four months past due
3.1
2.1
Over four months past due
1.6
–
44.2
31.7
The movement in the loss allowance for impairment of trade receivables is as follows:
2024
£m
2023
£m
At 1 October
10.1
7.2
(Credited)/charged against profit, net
(0.6)
2.5
Set up on acquisition
2.1
0.9
Utilised by write-off
(0.5)
(0.5)
At 30 September
11.1
10.1
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 2024, the Group had £9.9m (2023: £9.8m) of trade receivables that
were covered by credit insurance in relation to DICSA.
17. TRADE AND OTHER PAYABLES
2024
£m
2023
£m
Trade payables
108.6
94.4
Other payables
17.6
31.8
Other taxes and social security
12.3
11.8
Accruals and deferred income
67.0
53.9
At 30 September
205.5
191.9
Analysed as:
Payable within one year
204.4
191.9
Payable after one year
1.1
–
The maximum exposure to foreign currency risk for trade payables at 30 September, by
currency, was:
2024
£m
2023
£m
UK sterling
23.0
24.7
US dollars
54.0
36.9
Canadian dollars
1.4
1.7
Euros
25.4
22.9
Other
4.8
8.2
108.6
94.4
Trade receivables at 30 September, before loss allowance, are analysed as follows:
2024
£m
2023
£m
Not past due
149.2
143.5
Past due
44.2
31.7
Receivables impaired
11.1
10.1
204.5
185.3
The ageing of trade receivables classified as past due, with no loss allowance, as at 30
September is as follows:
2024
£m
2023
£m
Up to one month past due
31.3
25.6
Between one and two months past due
8.2
4.0
Between two and four months past due
3.1
2.1
Over four months past due
1.6
–
44.2
31.7
The movement in the loss allowance for impairment of trade receivables is as follows:
2024
£m
2023
£m
At 1 October
10.1
7.2
(Credited)/charged against profit, net
(0.6)
2.5
Set up on acquisition
2.1
0.9
Utilised by write-off
(0.5)
(0.5)
At 30 September
11.1
10.1
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 2024, the Group had £9.9m (2023: £9.8m) of trade receivables that
were covered by credit insurance in relation to DICSA.
17. TRADE AND OTHER PAYABLES
2024
£m
2023
£m
Trade payables
108.6
94.4
Other payables
17.6
31.8
Other taxes and social security
12.3
11.8
Accruals and deferred income
67.0
53.9
At 30 September
205.5
191.9
Analysed as:
Payable within one year
204.4
191.9
Payable after one year
1.1
–
The maximum exposure to foreign currency risk for trade payables at 30 September, by
currency, was:
2024
£m
2023
£m
UK sterling
23.0
24.7
US dollars
54.0
36.9
Canadian dollars
1.4
1.7
Euros
25.4
22.9
Other
4.8
8.2
108.6
94.4
150
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
18. CASH AND CASH EQUIVALENTS
UK
£m
US$
£m
C$
£m
Euro
£m
Other
£m
2024
Total
£m
UK
£m
US$
£m
C$
£m
Euro
£m
Other
£m
2023
Total
£m
Cash at bank
16.1
12.9
4.2
8.4
7.5
49.1
10.6
12.6
3.2
14.9
10.4
51.7
Short-term deposits
2.5
0.6
0.1
2.5
0.7
6.4
1.0
0.5
0.1
8.6
0.5
10.7
At 30 September
18.6
13.5
4.3
10.9
8.2
55.5
11.6
13.1
3.3
23.5
10.9
62.4
The short-term deposits and cash at bank are both interest bearing at rates linked to the UK base rate, or equivalent rate.
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 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.
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.
151
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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The Group’s maximum exposure to credit risk was as follows:
Carrying amount
2024
£m
2023
£m
Trade receivables (note 16)
193.4
175.2
Other receivables (note 16)
4.7
9.3
Cash and cash equivalents (note 18)
55.5
62.4
At 30 September
253.6
246.9
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
60 months ended 30 September 2024 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.
The Group has a multi-currency revolving credit facility agreement (RCF) with an
aggregate principal amount of £555.0m. In July 2024, the Group exercised the first of
two 12-month extension options for the RCF, which was accepted by banks committing
£515.0m of the aggregate total. The RCF is now contractually due to expire across July
2028 (£40.0m) and July 2029 (£515.0m). A 24-month extension option in respect of
£40.0m and a second 12-month extension option in respect of £515.0m can be exercised
in July 2025.
During the year, the Group issued US private placement notes for an aggregate principal
amount of £207.9m (€250.0m) with maturities of 7 years (€75.0m), 10 years (€100.0m)
and 12 years (€75.0m) and for an aggregate principal amount of £111.9m ($150.0m) with
maturities of 8 years ($100.0m) and 11 years ($50.0m).
Additionally, compliance with debt covenants is monitored regularly and during 2024 all
debt covenant tests were complied with. The applicable financial covenants are interest
cover and leverage, whereby EBITDA must be at least 4x net finance charges; and the ratio
of net debt to EBITDA must not exceed 3.5x (as defined by the relevant debt agreement).
The Group’s debt facilities are subject to interest at a mix of fixed and variable rates.
As at 30 September 2024 fixed rate debt was 66% of total debt.
The undrawn committed facilities available at 30 September are as follows:
2024
£m
2023
£m
Expiring within one year
–
–
Expiring after one year (note 25)
389.9
234.1
152
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
The Group’s financial liabilities at 30 September are as follows:
2024
£m
2023
£m
Trade payables (note 17)
108.6
94.4
Other payables (note 17)
17.6
31.8
Lease liabilities (note 13)
72.3
80.2
Other liabilities (note 20)
25.4
22.6
Borrowings (note 25)
479.8
317.1
703.7
546.1
The maturities of the contractual undiscounted financial liabilities are as
follows:
Less than one year
169.3
155.2
One to two years
37.9
20.5
Two to five years
256.9
350.9
More than five years
418.4
32.3
882.5
558.9
c) Currency risk
The Group’s principal currency risk comprises translational and transactional risk from its
exposure to movements in US dollars, Canadian dollars, Australian 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, Canadian dollar,
Australian dollar, Euro and UK Sterling. These forward foreign exchange contracts are
classified as cash flow hedges and are stated at fair value. The notional value of forward
exchange contracts used as hedges as at 30 September 2024 was £66.5m (2023:
£68.6m). The net fair value of forward exchange contracts used as hedges at 30
September 2024 was £1.2m liability (2023: £0.1m 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 £0.5m debit (2023: £1.3m debit). The change in the fair
value of cash flow hedges taken to Other Comprehensive Income during the year was
£0.8m debit (2023: £0.1m credit).
For foreign currency translational exposures, the Group employs net investment hedge
accounting where appropriate to mitigate these risks. The Group has designated US
private placement notes denominated in USD and EUR, with carrying values of $150m
(2023: $nil) and €250m (2023: €nil) respectively, as net investment hedges for foreign
currency net assets. The hedge ratio was 1:1. Ineffectiveness may arise if the hedge ratio is
not adjusted to reflect changes in the relationship between the hedged item and the
hedging instrument. The change in the carrying value of borrowings as a result of
exchange rate differences that was recognised in Other Comprehensive Income during
the year was a gain of £7.2m (2023: £nil).
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:
2024
£m
2023
£m
Decrease in adjusted operating profit (at average rates)
US dollar: UK sterling
16.4
13.1
Canadian dollar: UK sterling
2.6
2.8
Euro: UK sterling
4.1
2.5
Decrease in total equity (at spot rates)
US dollar: UK sterling
12.7
11.3
Canadian dollar: UK sterling
14.7
14.2
Euro: UK sterling
8.4
7.0
153
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
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 used interest rate swaps to hedge a proportion of external borrowings until 31
March 2024. These interest rate swaps were designated as cash flow hedges and stated
at fair value. The swaps matured before 30 September 2024 and the notional amount was
therefore £nil (2023: £163.9m). Similarly, the net fair value of these swaps as at 30
September 2024 was £nil (2023: £2.3m asset). The interest rate swaps matured during the
year and the amount removed from Other Comprehensive Income and taken to the
Consolidated Income Statement during the year was £1.8m debit (2023: £2.5m debit).
The change in fair value of cash flow hedges taken to Other Comprehensive Income during
the year was £0.5m debit (2023: £1.7m credit).
The Group’s financial assets that are subject to interest rate fluctuations are cash deposits
held in the UK and overseas. These are held on a short-term basis at floating rates or
overnight rates and are 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.
The Group’s financial liabilities that are subject to interest rate fluctuations are overdrafts
and the Group’s RCF that bear interest at market rates according to the currency of
the borrowing.
Longer-term funding is provided by the Group’s US private placement notes, completed
in March 2024 and August 2024 and bear interest at fixed rates as described in note 25.
A movement of 1% in interest rates would have a ca. £1.7m (2023: £2.4m) 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
under IFRS 7 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.
Trade and other receivables/payables
The book value of trade and other receivables/payables is deemed to reflect the
fair value.
Borrowings
The fair value of borrowings under the RCF equates to the book value.
The fair value of the Group’s US private placement notes is estimated to be £337.5m.
The fair value is estimated by discounting the future contracted cash flows using readily
available market data and represents a level 2 measurement (in the ‘fair value hierarchy’).
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’).
154
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
f) Capital management risk
The Group’s capital structure comprises the retained earnings reserve (£478.2m), cash
funds (£60.2m) and medium and long-term borrowing facilities (£479.8m). 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.
20. OTHER LIABILITIES
2024
£m
2023
£m
Future purchases of minority interests
9.0
9.2
Deferred consideration
16.4
13.4
At 30 September
25.4
22.6
Analysed as:
Due within one year
8.8
12.7
Due after one year
16.6
9.9
The movement in the liability for future purchases of minority interests is as follows:
2024
£m
2023
£m
At 1 October
9.2
7.4
Exchange movements
(0.1)
−
Fair value remeasurements
(0.1)
1.8
At 30 September
9.0
9.2
At 30 September 2024, 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 2024, 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 2024.
This led to a remeasurement of the options and the liability decreased by £0.2m (2023:
£1.8m increase) reflecting a revised estimate of the future performance of these
businesses and foreign exchange. In aggregate, £0.2m has been credited to the
Consolidated Income Statement (2023: £1.8m debit).
Deferred consideration comprises the following:
1 Oct 2023
£m
Additions
£m
Discount
unwind
£m
Payments
£m
Revaluation
£m
Foreign
Exchange
£m
30 Sep
2024
£m
AHW
4.9
–
0.2
(3.5)
0.2
(0.4)
1.4
R&G
0.8
–
–
(1.0)
0.2
–
–
AMG Sealing
0.4
–
–
(0.2)
–
–
0.2
Hydraproducts
0.3
–
–
(0.3)
–
–
–
Eurobond
0.2
–
–
(0.2)
–
–
–
ITG
0.2
–
–
(0.2)
–
–
–
Fluid Power
Services
0.8
–
0.1
(0.2)
(0.2)
–
0.5
Hedley
1.3
–
0.1
(0.6)
–
–
0.8
Valves Online
0.6
–
–
(0.7)
0.1
–
–
GP&S
1.4
–
–
(0.6)
–
(0.1)
0.7
GM Medical
0.4
–
–
(1.6)
1.2
–
–
Hex
1.8
–
0.1
(0.4)
(0.4)
(0.1)
1.0
Lantech
0.3
–
–
(0.2)
(0.1)
–
–
PTFE
–
1.2
–
(0.7)
–
–
0.5
Fast Gaskets
–
0.6
–
(0.3)
–
–
0.3
CTS
–
0.9
0.1
–
0.4
(0.1)
1.3
Abbey Hose
–
0.9
0.2
(0.2)
0.2
–
1.1
PAR
–
2.9
0.1
(1.6)
–
–
1.4
Peerless
–
5.6
0.5
–
1.6
(0.5)
7.2
13.4
12.1
1.4
(12.5)
3.2
(1.2)
16.4
At 30 September 2024, 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 2024.
155
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
21. MINORITY INTERESTS
£m
At 1 October 2022
6.2
Share of profit
0.6
Dividends paid
(0.3)
Exchange adjustments
(0.1)
At 30 September 2023
6.4
Share of profit
0.7
Dividends paid
(0.4)
At 30 September 2024
6.7
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.
22. ACQUISITIONS AND DISPOSALS OF BUSINESSES
Acquisition of Plastic and Rubber Group Holdings Limited
On 30 April 2024, the group completed the acquisition of 98% of the shares in Plastic and
Rubber Group Holdings Limited (PAR Group), a supplier of specialist seals and gaskets.
The total investment, net of cash acquired, was £36.7m.
The provisional fair value of PAR Group's net assets acquired excluding acquisition
intangibles, related deferred tax and cash is £4.9m following net fair value adjustments of
£1.1m. The principal fair value adjustments relate to a net increase in inventory of £0.3m,
fair value uplift of property, plant and equipment of £1.0m and recognition of previously
unrecognised liabilities of £0.2m.
Acquisition expenses of £0.7m have been recognised in respect of this transaction in the
financial year.
From the date of acquisition to 30 September 2024, PAR Group contributed £5.3m to
revenue and £2.2m to adjusted operating profit. Had it been acquired at the beginning of
the financial year, it would have contributed on a pro forma basis £12.7m to revenue and
£5.2m to adjusted operating profit. However, these amounts should not be viewed as
indicative of the results that would have occurred if PAR Group had been completed at
the beginning of the year.
Acquisition of Peerless Aerospace Fastener LLC
On 01 May 2024, the Group completed the acquisition of 100% of the shares in Peerless
Aerospace Fastener LLC (Peerless), a value-add supplier of specialty fasteners to the
Aerospace and Defence markets in the US and Europe. The total investment, net of cash
acquired, was £243.3m. The provisional fair value of Peerless' net assets acquired
excluding acquisition intangibles, related deferred tax and cash is £63.5m following net
fair value adjustments of £4.2m. The goodwill represents the technical expertise of the
acquired workforce and the opportunity to leverage any revenue synergies through cross-
selling within other businesses. The principal fair value adjustments relate to a fair value
uplift related to property, plant and equipment of £5.2m, net increase in inventory of
£15.2m, increase in provisions held against trade receivables of £1.6m and a recognition of
previously unrecognised liabilities of £14.6m. The fair value of acquired trade receivables is
£17.7m, of which the gross contractual amount due is £19.7m, with a loss allowance of
£2.0m recognised on acquisition.
Acquisition expenses of £3.1m have been recognised in respect of this transaction in the
financial year. From the date of acquisition to 30 September 2024, Peerless contributed
£54.1m to revenue and £25.0m to adjusted operating profit. Had it been acquired at the
beginning of the financial year, it would have contributed on a pro forma basis £129.9m to
revenue and £59.9m to adjusted operating profit. However, these amounts should not be
viewed as indicative of the results that would have occurred if Peerless had been
completed at the beginning of the year.
Other acquisitions
The Group completed five other acquisitions in the year. This comprised the trade and
assets of Cable and Tubing Solutions Limited (CTS) (20 November 2023) and 100% of the
share capital of Technisil GMBH (Technisil) (28 February 2024) and 98% of the share capital
of Fast Gaskets and Parts Limited (Fast Gaskets) (04 October 2023), Abbey Hose
Company Limited (Abbey Hose) (22 December 2023) and PTFEFLEX Ltd (PTFE)
(10 May 2024). The combined initial consideration for these acquisitions was £9.7m,
net of cash acquired of £1.3m. Deferred consideration with a fair value of £3.6m is payable
based largely on the performance of the businesses in the period subsequent to
their acquisitions.
Acquisition expenses of £0.3m have been recognised in respect of these transactions
completed in the financial year.
The provisional fair value of the total net assets acquired excluding intangibles, related
deferred tax and cash is £1.1m.
156
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
Fair Value of net assets acquired
The fair value of net assets acquired during the year, particularly the fair value of inventory, acquired intangible assets and goodwill for PAR Group and Peerless are provisional, subject
to reviews up to the end of the measurement period of each acquisition.
The following table summarises the consideration paid for the acquisitions completed in the year and fair value of assets acquired and liabilities assumed.
PAR Group
Peerless Aerospace
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
Acquisition intangible assets1
–
12.9
–
62.3
–
8.5
–
83.7
Deferred tax
–
(3.6)
–
–
–
(1.7)
–
(5.3)
Property, plant and equipment
2.1
3.1
0.9
6.1
0.1
0.1
3.1
9.3
Inventories
1.3
1.6
50.4
65.6
1.2
1.2
52.9
68.4
Trade and other receivables
2.1
2.1
19.5
17.9
1.4
1.4
23.0
21.4
Trade and other payables
(1.7)
(1.9)
(11.5)
(26.1)
(1.3)
(1.6)
(14.5)
(29.6)
Net assets acquired
3.8
14.2
59.3
125.8
1.4
7.9
64.5
147.9
Goodwill
–
22.5
–
117.5
–
5.4
–
145.4
Minority interests
–
–
–
–
–
–
–
–
Cash paid
41.4
242.2
11.0
294.6
Cash acquired
(7.6)
(4.5)
(1.3)
(13.4)
281.2
Deferred consideration
2.9
5.6
3.6
12.1
Total investment
36.7
243.32
13.3
293.3
1 On the acquisitions completed in the current year, acquired intangibles relate entirely to customer relationships and order backlog (£83.7m).
2 The total investment in Peerless amounts to £243.3m (being cash paid (net of cash acquired) of £237.7m and deferred consideration of £5.6m). Of the initial cash paid, the vendor directed £10.5m to settle transaction fees and
personnel expenses relating to the acquisition.
£m
Total Investment
243.3
Acquisition and personnel expenses
(10.5)
Net Consideration
232.8
157
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
Acquisitions revenue and adjusted operating profit
From the date of acquisition to 30 September 2024, each acquired business1 contributed the following to Group revenue and adjusted operating profit:
Acquisition date
Revenue
£m
Adjustments2
£m
Pro forma
revenue
£m
Adjusted
operating
Profit
£m
Adjustments2
£m
Pro forma
adjusted
operating
Profit
£m
Fast Gaskets
04-Oct-23
0.8
–
0.8
0.2
–
0.2
CTS
20-Nov-23
3.0
0.6
3.6
0.9
0.2
1.1
Abbey Hose
22-Dec-23
3.6
1.2
4.8
0.9
0.3
1.2
PAR Group
30-Apr-24
5.3
7.4
12.7
2.2
3.0
5.2
Peerless
01-May-24
54.1
75.8
129.9
25.0
34.9
59.9
PTFE
10-May-24
0.8
1.1
1.9
0.3
0.5
0.8
67.6
86.1
153.7
29.5
38.9
68.4
1 Technisil has been excluded from the above table as it had immaterial revenue and adjusted operating profit in the year.
2 Pro forma revenue and adjusted operating profit has been extrapolated (as prescribed under UK-adopted International Accounting Standards) 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 2023. 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.
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
23. ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
As at 30 September 2024, the Group classified the assets and liabilities of Kubo Tech AG
and its subsidiary Kubo Tech GmbH (Kubo), Pneumatic Services Limited and its subsidiary
Pennine Pneumatic Services Limited (Pennine) and Gremtek SAS (Gremtek) as held
for sale.
On 31 October 2024, the Group disposed of its entire interest in Kubo to a third party for a
total consideration of ca. CHF31.3m (ca. £28.1m), Pennine to a third party for a total
consideration of ca. £12.0m, and Gremtek to a third party for a total consideration of ca.
€5.5m (ca. £4.6m), respectively. All disposals were on a cash-free and debt-free basis.
The major classes of assets and liabilities comprising the operations classified as held for
sale are as follows:
2024
£m
Assets held for sale
Goodwill
12.4
Acquisition intangible assets
3.7
Other intangible assets
0.7
Property, plant and equipment
3.0
Leases – right-of-use assets
6.0
Inventories
7.0
Trade and other receivables
8.9
Cash and cash equivalents
4.7
Total assets held for sale
46.4
Liabilities held for sale
Trade and other payables
(10.1)
Current tax liabilities
(1.0)
Lease liabilities
(8.7)
Retirement benefit obligations
(1.0)
Deferred tax liabilities
(1.2)
Total liabilities held for sale
(22.0)
Total net assets held for sale
24.4
No gain or loss was recognised in the Consolidated Income Statement on classification of
the above assets and liabilities held for sale.
The Group expects to reclassify a cumulative foreign exchange difference from Other
Comprehensive Income to the Consolidated Income Statement upon the disposal of the
assets and liabilities classified as held for sale.
24. RECONCILIATION OF OPERATING PROFIT TO CASH FLOW FROM OPERATING
ACTIVITIES
2024
£m
2023
£m
Operating profit
207.4
183.3
Acquisition related and other charges (note 2)
77.6
53.7
Adjusted operating profit
285.0
237.0
Depreciation or amortisation of tangible, other intangible assets and leases –
right-of-use assets (note 2)
32.2
28.6
Share-based payments expense (note 5)
7.1
4.1
Defined benefit pension scheme payment in excess of interest (note 26)
(0.5)
(0.6)
Profit on disposal of assets
(1.9)
(1.1)
Acquisition and disposal expenses paid
(30.2)
(6.0)
Other non-cash movements
(3.5)
(0.5)
Non-cash items and other
3.2
24.5
Operating cash flow before changes in working capital
288.2
261.5
(Increase)/decrease in inventories
(7.7)
10.8
Increase in trade and other receivables
(18.5)
(8.8)
Increase/(decrease) in trade and other payables
17.7
(6.2)
Increase in working capital
(8.5)
(4.2)
Cash flow from operating activities
279.7
257.3
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
25. NET DEBT
The movement in net debt during the year is as follows:
2024
£m
2023
£m
Net (decrease)/increase in cash and cash equivalents
(6.4)
25.8
Cash reclassified to assets held for sale
4.7
-
(Increase)/decrease in borrowings
(183.9)
43.8
(185.6)
69.6
Effect of exchange rates and other non-cash movements
20.7
4.6
(Increase)/decrease in net debt
(164.9)
74.2
Net debt at beginning of year
(254.7)
(328.9)
Net debt at end of year
(419.6)
(254.7)
Comprising:
Cash and cash equivalents
55.5
62.4
Cash and cash equivalents held in disposal groups
4.7
–
Bank borrowings:
– Revolving credit facility
(165.1)
(321.1)
– Overdraft facilities
–
(0.3)
– Private placement notes
(319.8)
–
– Capitalised borrowing fees
5.1
4.3
(479.8)
(317.1)
Net debt at end of year
(419.6)
(254.7)
Analysed as:
Repayable within one year
–
(0.3)
Repayable after one year
(479.8)
(316.8)
A summary of the maturities and rates of the private placement notes, with an aggregate
principal amount of £319.8m are as follows:
Face value
Rate
Maturity
75m EUR
4.18%
2031
100m EUR
4.27%
2034
75m EUR
4.38%
2036
100m USD
5.39%
2032
50m USD
5.52%
2035
The Group has a multi-currency revolving credit facility agreement (RCF) with an
aggregate principal amount of £555.0m. In July 2024, the Group exercised the first of
two 12-month extension options for the RCF, which was accepted by banks committing
£515.0m of the aggregate total. The RCF is now contractually due to expire across July
2028 (£40.0m) and July 2029 (£515.0m). A 24-month extension option in respect of
£40.0m and a second 12-month extension option in respect of £515.0m can be exercised
in July 2025.
Borrowings include capitalised borrowing fees of £5.1m (2023: £4.3m).
The RCF is subject to interest at variable rates while the private placement notes are at
fixed rates. At 30 September 2024, fixed rate debt was 66% of total debt.
As at 30 September 2024 the Group’s net debt is £419.6m (2023: £254.7m) and excludes
lease liabilities of £72.3m (2023: £80.2m).
At 30 September 2024, the Group’s Net Debt/EBITDA ratio is 1.3x, as illustrated in
note 29.5.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
26. RETIREMENT BENEFIT ASSETS 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 (DHPLC) 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, which is
included in liabilities held for sale, is a defined contribution-based scheme, which for
technical reasons, is required under UK-adopted International Accounting Standards 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:
2024
£m
2023
£m
Diploma Holdings PLC UK Pension Scheme
1.5
6.8
Kubo Pension Scheme
(1.0)
(0.3)
Pension scheme net asset
0.5
6.5
The amounts included in the Consolidated Income Statement in respect of these two
pension arrangements are:
2024
£m
2023
£m
Diploma Holdings PLC UK Pension Scheme
0.3
0.4
Kubo Pension Scheme
(0.3)
(0.5)
Amounts credited/(charged) to the Consolidated Income Statement
–
(0.1)
Defined contribution schemes operated by the Group’s businesses are not included in
these disclosures.
Diploma Holdings PLC UK Pension Scheme
The Scheme provides benefits based on final salary and length of service on retirement,
leaving service or death. Any defined contribution schemes operated by DHPLC are not
included in these disclosures.
The Scheme is managed by a board of Trustees appointed in part by DHPLC 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.
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.
On 26 March 2024, the Trustees completed a Buy-In of the remaining pensioner liabilities
in the Scheme with Just Retirement Limited. The Scheme paid £25.1m to Just Retirement
Limited to fund 100% of the Buy-In premium.
In accordance with the schedule of contributions currently in force following the Buy-In,
DHPLC does not expect to make any contributions in the year to 30 September 2025.
There were no plan amendments, curtailments or settlements during the period.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
a) Pension asset included in the Consolidated Statement of Financial Position
2024
£m
2023
£m
Market value of Scheme assets:
Gilts
–
24.5
Insured Assets1
25.6
7.0
Cash
1.7
0.1
27.3
31.6
Present value of Scheme liabilities
(25.8)
(24.8)
Pension scheme net asset
1.5
6.8
1 The Insured Assets were valued on the same basis as the underlying pensioner liabilities.
b) Amounts credited to the Consolidated Income Statement
2024
£m
2023
£m
Charged to operating profit
–
–
Interest cost on liabilities
(1.4)
(1.3)
Interest on assets
1.7
1.7
Credited to financial expense, net (note 6)
0.3
0.4
Amounts credited to the Consolidated Income Statement
0.3
0.4
c) Amounts recognised in the Consolidated Statement of Comprehensive Income
2024
£m
2023
£m
Investment loss on Scheme assets in excess of interest
(5.3)
(1.1)
Effect of changes in financial assumptions on Scheme liabilities
(1.1)
1.2
Effect of changes in demographic assumptions on Scheme liabilities
0.3
–
Experience adjustments on Scheme liabilities
–
(0.7)
Actuarial loss charged in the Consolidated Statement
of Comprehensive Income
(6.1)
(0.6)
The cumulative amount of actuarial losses recognised in the Consolidated Statement of
Comprehensive Income, since the transition to UK-adopted International Accounting
Standards, is £7.9m (2023: £1.8m).
d) Analysis of movement in the pension asset
2024
£m
2023
£m
Asset as at 1 October
6.8
6.4
Amounts credited to the Consolidated Income Statement
0.3
0.4
Contributions paid by employer
0.5
0.6
Net effect of remeasurements of Scheme assets and liabilities
(6.1)
(0.6)
Asset as at 30 September
1.5
6.8
e) Analysis of movements in the present value of the Scheme liabilities
2024
£m
2023
£m
At 1 October
24.8
25.5
Experience adjustments on Scheme liabilities
–
0.7
Interest cost on liabilities
1.4
1.3
Impact from changes in demographic assumptions
(0.3)
–
Impact from changes in actuarial assumptions
1.1
(1.2)
Benefits paid
(1.2)
(1.5)
At 30 September
25.8
24.8
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
f) Analysis of movements in the present value of the Scheme assets
2024
£m
2023
£m
At 1 October
31.6
31.9
Interest on assets
1.7
1.7
Return on Scheme assets
(5.3)
(1.1)
Contributions paid by employer
0.5
0.6
Benefits paid
(1.2)
(1.5)
At 30 September
27.3
31.6
The actual return on the Scheme assets (including interest on assets) during the year was a
loss of £3.6m (2023: £0.6m gain).
Assets
The Scheme’s assets are held in passive unit funds managed by Legal & General
Investment Management and at 30 September 2024, the major categories of assets
were as follows:
2024
%
2023
%
Cash
6
–
Gilts
–
78
Insured Assets
94
22
Principal actuarial assumptions for the Scheme at balance sheet dates
2024
%
2023
%
2022
%
2021
%
Inflation rate
– RPI
3.2
3.4
3.6
3.4
– CPI
2.8
3.0
3.2
3.0
Expected rate of pension increases
– CPI
2.7
3.0
3.2
3.0
Discount rate
5.1
5.6
5.3
2.0
Demographic assumptions
Mortality table used:
S3PA
Year the mortality table was published:
CMI 2021
Allowance for future improvements in longevity:
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:
The weighted average duration of the defined
benefit obligation is around 14 years (2023: 13
years)
Members are assumed to take 0% of their
maximum cash sum (based on current
commutation factors)
Sensitivities
The sensitivities of the 2024 pension liabilities to changes in assumptions are as follows:
Impact on pension liabilities
Factor
Assumption
Estimated
increase
%
Estimated
increase
£m
Discount rate
Decrease by 0.5%
6.6
1.7
Inflation
Increase by 0.5%
2.7
0.7
Life expectancy
Increase by one year
3.1
0.8
Risk mitigation strategies
Individual annuity policies are held in respect of some historic pensioners. As noted
above, the Scheme’s liabilities are now secured with an insurer. Therefore the key risk that
remains within the Scheme is the risk of insurer default (although this risk is expected
to be very low).
The Scheme has no other asset-liability strategies in place.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
The Group is aware of a UK High Court legal ruling in June 2023 between Virgin Media
Limited and NTL Pension Trustees II Limited, which decided that certain historic rule
amendments were invalid if they were not accompanied by actuarial certifications. The
ruling was subject to an appeal with a judgment delivered on 25 July 2024. The Court of
Appeal unanimously upheld the decision of the High Court and concluded that the pre-
April 2013 conditions applied to amendments to both future and past service. Whilst this
ruling was in respect of another scheme, this judgment will need to be reviewed for its
relevance to the Scheme. As the Court of Appeal has only just delivered its verdict, the
Scheme pension advisors have not yet completed any analysis and therefore no
adjustments have been made to the Consolidated Financial Statements as at 30
September 2024.
Effect of the Scheme on the Group’s future cash flows
DHPLC 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, DHPLC had agreed to contribute £0.6m in cash to the
Scheme annually increasing at 2% per year. The current year contribution was £0.5m and
ceased from April 2024 onwards following the completion of the purchase of the Buy-In
policy on 26 March 2024.
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 which has been included in liabilities
held for sale.
a) Pension deficit included in the Consolidated Statement of Financial Position
2024
£m
2023
£m
Assets of the Kubo Scheme1
14.9
14.3
Actuarial liabilities of the Kubo Scheme
(15.9)
(14.6)
Pension scheme net deficit
(1.0)
(0.3)
1 The assets of the Kubo Scheme are held as part of the employee funds managed by ASGA Pensionskasse.
b) Amounts charged to the Consolidated Income Statement
2024
£m
2023
£m
Service cost
(0.3)
(0.5)
Amount charged to operating profit in the Consolidated Income Statement
(0.3)
(0.5)
c) Analysis of movement in the pension deficit
2024
£m
2023
£m
At 1 October
(0.3)
–
Amounts charged to the Consolidated Income Statement
(0.3)
(0.5)
Contributions paid by employer
0.5
0.5
Net effect of remeasurements of Kubo Scheme assets and liabilities
(0.9)
(0.3)
At 30 September
(1.0)
(0.3)
d) Amounts recognised in the Consolidated Statement of Comprehensive Income
The actuarial loss charged to the Consolidated Statement of Comprehensive Income is
£0.9m (2023: £0.3m).
2024
£m
2023
£m
Investment gain on Scheme assets in excess of interest
0.8
0.3
Effect of changes in financial assumptions on Scheme liabilities
(1.9)
(0.9)
Experience adjustments on Scheme liabilities
0.2
(0.1)
Adjustment in respect of IFRIC 14
–
0.4
Actuarial loss charged in the Consolidated Statement of Comprehensive
Income
(0.9)
(0.3)
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
Principal actuarial assumptions for the Kubo Scheme at balance sheet dates
2024
2023
Expected rate of pension increase
0%
0%
Expected rate of salary increase
1.3%
1.3%
Discount rate
1.1%
2.0%
Interest credit rate
1.3%
1.5%
Mortality
BVG2020 BVG2020
Sensitivities
The sensitivities of the 2024 pension liabilities to changes in assumptions are as follows:
Impact on pension liabilities
Factor
Assumption
Estimated
increase
%
Estimated
increase
£m
Discount rate
Decrease by 0.25%
4.1
0.7
Life expectancy
Increase by one year
2.1
0.3
Effect of the Kubo Scheme on the Group’s future cash flows
The Kubo Scheme will no longer have any effect on the Group’s future cash flows
following the disposal of Kubo on 31 October 2024.
The weighted average duration of the defined benefit obligation is approximately 16 years
(2023: 15 years).
27. AUDITORS’ REMUNERATION
During the year the Group paid fees for the following services from the auditors:
2024
£m
2023
£m
Fees payable to the auditors for the audit of:
– the Company’s Annual Report and Accounts
1.5
1.3
– the Company’s subsidiaries
0.4
0.3
Audit fees
1.9
1.6
Non-audit fees of £80,900 (2023: £75,700) were paid to the Group’s auditors for carrying
out an interim review on the Half Year Announcement (which is unaudited), and
subscription costs for access to a market-wide technical accounting database.
28. EXCHANGE RATES
The exchange rates used to translate the results of the overseas businesses are as follows:
Average
Closing
2024
2023
2024
2023
US dollar (US$)
1.27
1.23
1.34
1.22
Canadian dollar (C$)
1.73
1.66
1.81
1.65
Euro (€)
1.17
1.15
1.20
1.15
Swiss franc (CHF)
1.12
1.13
1.13
1.12
Australian dollar (AUD)
1.92
1.85
1.93
1.89
29. ALTERNATIVE PERFORMANCE MEASURES
The Group reports under UK‑adopted International Accounting Standards (UK-adopted
IAS) 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, UK-adopted IAS
measures. The definitions of the alternative performance measures and the comparisons
to their closest UK-adopted IAS measures can be found on pages 183 to 184.
29.1 Revenue growth
As a multi-national group of businesses which trades in a large number of currencies, and
acquires and sometimes disposes of companies, organic growth is a key performance
measure and is referred to throughout our reporting. The Board believes that this allows
users of the financial statements to gain a better understanding of the Group’s
performance.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
A reconciliation of the movement in reported revenue compared to the prior year and the
calculation of organic growth is shown below:
£m
%
September 2023 Reported revenue (basis for Acquisitions and
Disposals / Exchange Rates impacts)
1,200.3
Acquisitions and Disposals1
115.8
10
Basis for organic growth impact
1,316.1
Organic growth2
81.7
6
Exchange rates3
(34.4)
(3)
September 2024 Reported revenue
1,363.4
1 The impact of acquisitions is the revenue of the acquiree prior to the acquisition by Diploma for the comparable
year at prior year exchange rates. The impact of disposals is the removal of the revenue of the disposed entity in
the comparable post disposal period at prior year exchange rates.
2 Organic growth measures the change in revenue compared to the prior year, at prior year exchange rates.
For acquisitions, this includes incremental revenues generated under Diploma’s ownership compared to the
revenue in the same period prior to acquisition, at prior year exchange rates.
3 Exchange rates movements are assessed by retranslating current year reported values at prior year
exchange rates.
29.2 Adjusted operating profit and adjusted operating margin
Adjusted operating profit is the operating profit before adjusting items that would
otherwise distort operating profit, 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 UK-adopted IAS and adjusted
operating profit is given below:
Note
2024
£m
2023
£m
Revenue
1,363.4
1,200.3
Operating profit as reported under UK-adopted IAS
207.4
183.3
Add: Acquisition related and other charges
77.6
53.7
Adjusted operating profit
2,3
285.0
237.0
Adjusted operating margin
20.9%
19.7%
29.3 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 134,020,566
(2023: 129,675,581), as set out in note 9. The Directors believe that adjusted EPS provides
an important measure of the earnings capacity of the Group.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
29.4 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, plant and equipment 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.
Note
2024
£m
2023
£m
Net (decrease)/increase in cash and cash equivalents
(6.4)
25.8
Add: Dividends paid to shareholders and minority interests
77.2
70.8
Acquisition/disposal of businesses (including net expenses)
300.7
243.0
Acquisition related deferred payments/receipts, net
10.3
12.3
Proceeds from issue of share capital (net of fees)
–
(231.9)
Net (proceeds from)/repayments of borrowings (including
borrowing fees)
(183.9)
43.8
Free cash flow
197.9
163.8
Adjusted earnings1
9
195.4
164.0
Free cash flow conversion
101%
100%
1 Adjusted earnings is shown on the face of the Consolidated Income Statement as profit for the year attributable
to shareholders of the Company.
29.5 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 facilities 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, as well as a key covenant metric.
Note
2024
£m
2023
£m
Cash and cash equivalents
18
55.5
62.4
Cash and cash equivalents held in disposal groups
23
4.7
–
Borrowings
25
(479.8)
(317.1)
Retranslation at average exchange rates
(3.5)
1.2
Net debt at average exchange rates
(423.1)
(253.5)
Adjusted operating profit
29.2
285.0
237.0
Depreciation and amortisation of tangible and other intangible
assets
2
15.9
13.8
IFRS 16 impact
(3.6)
(1.7)
Minority interest share of adjusted operating profit
(0.9)
(0.8)
Pro forma adjustments1
39.1
21.0
EBITDA
335.5
269.3
Leverage
1.3x
0.9x
1 Annualisation of adjusted EBITDA, including that of acquisitions and disposals in the year.
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29.6 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 retranslated 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.
Note
2024
£m
2023
£m
Net assets as reported under UK-adopted IAS
894.7
902.0
Add/(deduct):
– Deferred tax liabilities, net
14
48.6
58.4
– Retirement benefit assets, net
26
(1.5)
(6.5)
– Acquisition related liabilities/assets, net
23.6
19.6
– Net debt
25
419.6
254.7
Trading capital employed
1,385.0
1,228.2
– Historic goodwill and acquisition related charges, net of
deferred tax and currency movements
308.0
189.4
Adjusted trading capital employed
1,693.0
1,417.6
Adjusted operating profit
29.2
285.0
237.0
Pro forma adjustments
22
38.9
19.4
Pro forma adjusted operating profit
323.9
256.4
ROATCE
19.1%
18.1%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
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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 73. The financial position of the Group, its cash flows, liquidity position and borrowing
facilities are described in the Financial Review on pages 46 to 49. In addition, pages
150 to 154 of the Annual Report and 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 geopolitical and macroeconomic
uncertainties, 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 54 to 60.
Liquidity and financing position
The Group’s liquidity and funding arrangements are described in notes 25 and 29.5 to the
consolidated financial statements.
Financial modelling
The Group has modelled a base case and severe but plausible 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 the business operates. The severe but plausible 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 inquiries, 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 and 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
Effective 1 October 2023, in respect of hedge accounting the Group adopted IFRS 9
Financial Instruments, which replaces IAS 39 Financial Instruments: Recognition and
Measurement. IFRS 9 includes requirements for the classification and measurement of
financial instruments, impairment of financial assets and hedge accounting.
GROUP ACCOUNTING POLICIES
FOR THE YEAR ENDED 30 SEPTEMBER 2024
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An assessment was performed and the adoption of IFRS 9 has not had a material impact
on the financial results of the Group. The assessment included an analysis of the Group’s
hedge accounting policy and existing hedge accounting relationships, and it was
determined that those relationships designated under IAS 39 are still effective under IFRS
9. The Group has adopted the simplified approach to recognise lifetime expected credit
losses for trade receivables and contract assets as permitted by IFRS 9. The change in
approach has not had a material impact on the trade receivables provision.
There have been no other 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.
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 for services supplied to customers, as opposed to goods, is ca. 4%
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 Consolidated
Statement of Financial Position 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 liabilities of the Scheme – 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.
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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 Black-Scholes 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 Black-Scholes 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.
d) Long-term employee benefits: The Group provides long-term employee benefits in the
form of deferred remuneration to certain employees. Deferred remuneration is
recognised as an employee benefit expense in the period in which the employee
renders the related service.
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 expense and deferred tax expense.
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.
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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
Consolidated Statement of Financial Position 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 assets/liabilities 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.
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 improvements
– 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 operating expense.
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.
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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.
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.
1.13 FINANCIAL INSTRUMENTS
Financial assets and liabilities are recognised in the Group’s Consolidated Statement of
Financial Position 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.
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Bank overdrafts (where used) are presented net of cash and cash equivalents on the
Consolidated Statement of Financial Position, 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.
Where a derivative financial instrument is designated as a hedge of the variability in cash
flows of a highly probable forecasted transaction, the effective part of any gain or loss on
the derivative financial instrument is recognised in other comprehensive income and
presented in the cash flow hedges reserve. The associated gain or loss is removed from
equity and recognised in the Income Statement in the period in which the transaction to
which it relates occurs.
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.
The Group uses foreign currency denominated borrowings as a hedge against the
translation exposure on the Group’s net investment in overseas companies. Where the
hedge is fully effective at hedging, the variability in the net assets of such companies
caused by changes in exchange rates and the changes in value of the borrowings are
recognised in the Consolidated Statement of Comprehensive Income and accumulated in
the Translation reserve. The ineffective part of any change in value caused by changes in
exchange rates is recognised in the Consolidated Income Statement.
No derivative contracts have been designated as fair value 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.
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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 (F) 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 and net
investment hedges.
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.
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 ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
Non-current assets held for sale and disposal groups are presented separately in the
current section of the Consolidated Statement of Financial Position when the following
criteria are met: the Group is committed to selling the asset or disposal group, it is
available for immediate sale in its current condition, an active plan of sale has
commenced, and in the judgement of Group Management it is highly probable that the
sale will be completed within 12 months. Immediately before the initial classification of the
assets and disposal groups as held for sale, the carrying amounts of the assets (or all the
assets and liabilities in the disposal groups) are measured in accordance with the
applicable accounting policy. Assets held for sale and disposal groups are subsequently
measured at the lower of their carrying amount and fair value less costs of disposal. Assets
held for sale are no longer amortised or depreciated.
1.20 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 2024.
IFRS 16 – Lease Liability in a Sale and Leaseback;
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 7 – Statement of Cash Flows and IFRS 7 – Financial Instruments: Disclosures – Supplier
Finance Arrangements;
IAS 21 – Lack of Exchangeability, which will become effective in the consolidated Group
financial statements for the financial year ending 30 September 2026;
IFRS 9 – Financial Instruments and IFRS 7 – Financial Instruments: Disclosures –
Classification and measurement of financial instruments, which will become effective in
the consolidated Group financial statements for the financial year ending 30 September
2027, subject to UK endorsement;
IFRS 18 – Presentation and Disclosure in Financial Statements which will become effective
in the consolidated Group financial statements for the financial year ending 30 September
2028, subject to UK endorsement;
IFRS 19 – Subsidiaries without Public Accountability: Disclosures which will become
effective in the consolidated Group financial statements for the financial year ending 30
September 2028, subject to UK endorsement.
175
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Additional Information
Corporate Governance
Financial Statements
The Group does not anticipate that the adoption of these standards and interpretations
that are effective for the year ending September 2025 will have a material effect on its
financial statements.
1.21 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.
1.21.1 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 PAR Group and Peerless intangible assets, which
were acquired in the year, together with the sensitivity analysis, are set out below.
PAR Group
Peerless
Discount rate + 1% (all intangibles)
ca. £(0.5)m
ca. £(1.8)m
Discount rate - 1% (all intangibles)
ca. £0.6m
ca. £1.9m
Revenue growth rate +1% (all intangibles)
ca. £1.3m
ca. £1.8m
Revenue growth rate –1% (all intangibles)
ca. £(1.2)m
ca. £(1.7)m
Customer attrition rate +1% (customer relationships)
ca. £(0.5)m
ca. £(2.1)m
Customer attrition rate –1% (customer relationships)
ca. £0.6m
ca. £2.2m
Management is 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:
1.21.2 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.
1.21.3 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.
1.21.4 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 2024, all
members of the UK defined benefit pension scheme are covered by one of the Scheme’s
Buy-In policies. Therefore, with the exception of liabilities in respect of GMP equalisation,
the liabilities due are exactly matched by the policies held. The Kubo defined benefit
pension scheme is a net liability. Detail of the estimates and key sensitivities made in
calculating the defined benefit assets and obligations at 30 September 2024 are set out
in note 26 to the consolidated financial statements.
GROUP ACCOUNTING POLICIES
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
176
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Additional Information
Corporate Governance
Financial Statements
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2024
Note
2024
£m
2023
£m
Fixed assets
Investments
D
700.5
372.4
Debtors: amounts falling due within one year
2.2
–
Amounts owed by Group undertakings
289.1
246.9
Creditors: amounts falling due within one year
(5.4)
(1.6)
Creditors: amounts falling due after one year
E
(318.7)
–
Net assets
667.7
617.7
Capital and reserves
Share capital
F
6.8
6.8
Share premium
420.2
420.2
Retained earnings1
240.7
190.7
Total shareholders’ equity
667.7
617.7
1 Includes profit after tax for the year of £126.8m (2023: £122.8m).
The financial statements of Diploma PLC and the notes on 176 to 178, which form part of
these financial statements, company number 3899848, were approved by the Board of
Directors on 19 November 2024 and signed on its behalf by:
JD Thomson
Chief Executive Officer
C Davies
Chief Financial Officer
Note
Share
capital
£m
Share
premium
£m
Retained
earnings
£m
Total
shareholders’
equity
£m
At 1 October 2022
6.3
188.6
138.1
333.0
Total Comprehensive Income
A
–
–
122.8
122.8
Shares Issued
0.5
231.6
–
232.1
Dividends paid
G
–
–
(70.5)
(70.5)
Settlement of LTIP awards
–
–
0.3
0.3
At 30 September 2023
6.8
420.2
190.7
617.7
Total Comprehensive Income
A
–
–
126.8
126.8
Dividends paid
G
–
–
(76.8)
(76.8)
At 30 September 2024
6.8
420.2
240.7
667.7
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2024
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Additional Information
Corporate Governance
Financial Statements
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024
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 19
November 2024.
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, exchange
translation gains on private placement notes issued in EUR and USD, and interest payable
or receivable on intercompany balances at the UK base rate, plus 1.81% 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 £3,675
(2023: £3,500) were borne by a fellow Group undertaking.
178
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Additional Information
Corporate Governance
Financial Statements
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED
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 96 to
119 and note 5 to the consolidated financial statements on page 141. The Company had no
employees (2023: 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. The Company’s profit for the year was £126.8m
(2023: profit of £122.8m), before settlement of LTIP awards.
D) INVESTMENTS
2024
£m
2023
£m
Shares in Group undertakings held at cost
At 30 September
700.5
372.4
On 31 March 2024, the Company increased its investment in Diploma Holdings PLC for
consideration of £55,603,408.
On 31 March 2024, the Company increased its investment in Diploma Overseas Limited for
consideration of £158,953,033 ($200,000,000). On 28 August 2024, the Company
further increased its investment in Diploma Overseas Limited for consideration of
£113,507,378 ($150,000,000).
A full list of subsidiary and other related undertakings is set out on pages 179 to 181.
Investments in subsidiaries are reviewed annually for any indicators of impairment. No
indicators have been noted (2023: none).
E) CREDITORS: AMOUNTS FALLING DUE AFTER ONE YEAR
During the year, the Company issued private placement notes for an aggregate principal
amount of £207.9m (€250.0m) with maturities of 7 years (€75.0m), 10 years (€100.0m)
and 12 years (€75.0m) and for an aggregate principal amount of £111.9m ($150.0m) with
maturities of 8 years ($100.0m), and 11 years ($50.0m).
Certain subsidiaries of the Company have provided financial guarantees in respect of the
private placement notes issued.
Included in the long-term creditors amount is £1.1m of capitalised borrowing fees.
F) SHARE CAPITAL
2024
Number
2023
Number
2024
£m
2023
£m
Issued, authorised and fully paid ordinary shares of 5p
each
At 30 September
134,091,975 134,034,491
6.8
6.8
During the year, 64,207 ordinary shares in the Company (2023: 66,974) 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 2020 Long-Term Incentive
Plan, as set out in the Remuneration Committee Report.
A further 57,484 (2023: 63,372) shares were issued to the Trust during the year at 5p par
value, recognised as an increase to share capital of £2,874 (2023: £3,169).
At 30 September 2024, the Trust held 60,708 (2023: 67,431) ordinary shares in the
Company representing less than 0.1% of the called up share capital. The market value of
shares at 30 September 2024 was £2.7m (2023: £2.0m).
G) 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.
AGM
Annual General Meeting
ARGA
The Audit, Reporting and Governance Authority
The Board
The Board of Directors of the Company
CAGR
Compound annual growth rate
CBAM
Carbon border adjustment mechanism
CGU
Cash-generating unit
CODM
Chief operating decision maker
The Code
The UK Corporate Governance Code 2018
The Company
Diploma PLC
Consolidated
Financial
Statements
The Financial Statements for the Group from the
year ended 30 September 2024
Constant
Currency
Compares current period’s results with the prior
period’s results translated at the current period’s
exchange rates
CNC
computer numerical control
CRROs
Climate-related risks and opportunities
DAS
Diploma Australia Seals, a Seals Sector business
DEI
Diversity, equity and inclusion
DRR
Directors’ remuneration report
DVR
Delivering value responsibly – our sustainability
programme
DICSA
Distribuidora Internacional Carmen S.A.U.
Directors
The Directors of the Company
DTRs
The Financial Conduct Authority’s Disclosure
Guidance and Transparency Rules
EBITDA
Earnings before interest and tax plus
depreciation and amortisation
EBT
Employee Benefit Trust
EPS
Earnings per share
ERP
Enterprise resource planning
ESG
Environmental, social and governance
EV
Electric vehicle
Executive
Directors
The Executive Directors of the Company
FCA
Financial Conduct Authority
FRC
The Financial Reporting Council
FPS
Fluid Power Services Limited, a Diploma Seals
Sector business
GHG
Greenhouse gas emissions
GIA
General investment accounts
GM Medical
GM Medical Group A/S, a Diploma Life Sciences
Sector business
The Group
Diploma PLC and its subsidiaries
IFRS
International financial reporting standards
KPI
Key performance indicator
LTI
Lost time incident
LTIP
Long-term incentive plan
MD
Managing Director
MRO
Maintenance, repair and overhaul
MSR
Minimum shareholding requirement
Non-Executive
Directors
The Non-Executive Directors of the Company
OEM
Original equipment manufacturer
PAR Group
Plastic and Rubber Group, a Diploma Seals
Sector business
Peerless
Peerless Aerospace Fastener LLC, a Diploma
Controls Sector business
PILON
Payment in lieu of notice
PPA
Purchase price allocation
PSP
Performance share plan
PwC
PricewaterhouseCoopers LLP
R&G
R&G Fluid Power Group, a Diploma Seals Sector
business
RCF
Revolving credit facility
the Regulations EU Audit Directive and Audit Regulation 2014
ROATCE
Return on adjusted trading capital employed
s172
Section 172 of the Companies Act 2006
SBTi
Science-Based Targets initiative
The Scheme
The Diploma Holdings PLC UK Pension Scheme
SMT
Senior management team
TCFD
Task force on climate-related financial
disclosures
TDC
Total direct compensation
T.I.E.
Tennessee Industrial Electronics, a Diploma
Controls Sector business
TSR
Total shareholder return
VSP
Virginia Sealing Products, a Seals Sector
business
WTW
Willis Towers Watson
179
DIPLOMA PLC ANNUAL REPORT 2024
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Additional Information
Corporate Governance
Financial Statements
GLOSSARY
Registered office address*
Seals
HB Sealing Products, Inc.
D
HKX, Inc.
E
RTD Seals Corp.
C
VSP Technologies, Inc.
C
HB Sealing Products Limited
Q
M Seals A/S(90% owned)
M
M Seals AB(90% owned)
N
M Seals UK (Technical Distribution) Limited2
A
Diploma (Tianjin) Trading Co. Limited
V
FPE Seals Limited2
A
M Seals UK (Engineered Seals Division) Limited2
A
FPE Seals BV
J
Kubo Tech AG
K
Kubo Tech GmbH
L
PumpNSeal Australia Pty Limited
R
TotalSeal Group Australia Pty Limited
S
TotalSeal New Caledonia SAS
U
Fitt Management Pty Limited
AB
Fitt Resources Pty Limited
AB
Fitt Trading Pty Limited
AB
Merseyflex Limited2 & (98% owned)
A
R&G Investments Limited2 & (98% owned)
A
One Stop Fluid Power Limited2 & (98% owned)
A
Pearson Hose & Hydraulics Limited2 & (98% owned)
A
Northern Hose & Hydraulics Limited1 & (98% owned)
A
Exeter Hose & Hydraulics Limited2 & (98% owned)
A
North Devon Hose & Hydraulics Limited2 & (98% owned)
A
Pressurelines Hose & Hydraulics Limited2 & (98% owned)
A
Somerset Hose & Hydraulics Limited2 & (98% owned)
A
West Cornwall Hose & Hydraulics Limited2 & (98% owned)
A
Pearson Hydraulics Limited (previously Hose & Hydraulics
Group Limited)2 & (98% owned)
A
Henry Gallacher Limited2 & (98% owned)
A
Registered office address*
Fluidair Power Limited2 & (98% owned)
A
GHS Limited2 & (98% owned)
A
Global Hydraulic Services Limited2 & (98% owned)
A
Pennine Pneumatic Services Limited2 & (93.1% owned)
A
Compcon Limited2 & (93.1% owned)
A
Norman Walker (Machinery) Limited2 & (93.1% owned)
A
Rubberfast Limited2 & (98% owned)
A
Rubberlast Group Limited2 & (98% owned)
A
Hydraulic & Offshore Supplies Limited2 & (98% owned)
A
Lancashire Hose and Fittings Limited2 & (98% owned)
A
Hyphose Limited2 & (98% owned)
A
AMG Sealing Limited2 & (98% owned)
A
Hydraproducts Limited2 & (98% owned)
A
Century Hose & Couplings Limited2 & (98% owned)
A
Flexicon Industrial Supplies Limited2 & (98% owned)
A
Integraflex Limited2 & (98% owned)
A
Intrico Products1 & (98% owned)
A
Grimsby Hydraulic Services Limited2 & (98% owned)
A
Pneumatic Services Limited2 & (93.1% owned)
A
AMG (Brighouse) Limited2 & (98% owned)
A
Millennium Coupling Company Limited2 & (98% owned)
A
Hydraulic Megastore Limited (previously Fluid Power
Products Limited)1 & (98% owned)
A
Industrial Hose & Pipe Fittings Limited2 & (98% owned)
A
Millennium Engineering (2012) Limited2 & (98% owned)
A
Anti-Corrosion Technology Pty Limited
AH
Distribuidora Internacional Carmen, S.A.U.
AI
DICSA America LLC
AJ
Distribuidora Internacional Carmen SRL
AK
Gaskets, Packings & Seals Enterprises, LLC
AL
Valves Online Limited2 & (98% owned)
A
Lantech Solutions Limited2 & (98% owned)
A
Fluid Power Services Limited2 & (98% owned)
A
Hedley DMB Limited2 & (98% owned)
A
Registered office address*
Hedley Hydraulics (Holdings) Limited2 & (98% owned)
A
Hedley Hydraulics Limited2 & (98% owned)
A
Hedley Connectors Limited1 & (98% owned)
A
Hex Technology, LLC
AQ
Ecohydraulics Limited1 & (98% owned)
A
Abbey Hose Company Limited2 & (98% owned)
A
Aquarius Plastics Ltd2 & (98% owned)
A
Fast Gaskets and Parts Limited2 & (98% owned)
A
Mountford Rubber & Plastics Limited2 & (98% owned)
A
Plastic and Rubber Group Holdings Limited2 & (98% owned)
A
Plastic and Rubber Group Limited2 & (98% owned)
A
R&G Bidco No1 Limited2 & (98% owned)
A
PTFEFLEX Ltd2 & (98% owned)
A
R&G Fluid Power Group (Hydraulics Division) Limited
(previously Pearson Hydraulics Limited)2 & (98% owned)
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 on page 181
180
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
SUBSIDIARIES OF DIPLOMA PLC
Registered office address*
Controls
IS-Rayfast Limited
A
IS-Motorsport, Inc.
C
Clarendon Specialty Fasteners Limited
A
Clarendon Specialty Fasteners (Asia) Limited
X
Clarendon Specialty Fasteners, Inc.
B
Clarendon Speciality Fasteners GmbH
Y
Cabletec Interconnect Component Systems Limited1
A
Sommer GmbH
G
Filcon Electronic GmbH
H
Gremtek SAS
O
Gremco UK Limited1
A
Gremtek GmbH1
I
Ascome SARL
O
Cablecraft Limited1
A
Krempfast Limited2
A
IS Group (Europe) Limited1
A
FS Cables Limited1
A
FSC Global Limited1
A
Shoal Group Limited
A
Specialised Wiring Accessories Limited2
A
M-Tec Limited1 & (95% owned)
A
Techsil Limited2 & (95% owned)
A
Glueline Limited1 & (95% owned)
A
Windy City Wire Cable & Technology Products, LLC
Z
LJR Electronics, LLC
AG
Tennessee Industrial Electronics, LLC
AM
The Parker Group, Inc.
AN
Peerless Aerospace Fastener LLC
AR
Peerless (Beijing) Aerospace Fastener Commercial and
Trading Co. Ltd
AS
Technisil GmbH
G
Registered office address*
Life Sciences
Somagen Diagnostics Inc.
F
Acernis Medical Inc.
P
Big Green Surgical Company Pty Limited
R
Diagnostic Solutions Pty Limited
R
Sphere Surgical Pty Limited
R
Aspire Surgical Pty Limited
R
Big Green Surgical NZ Limited
T
Techno-Path (Distribution) Limited
W
Abacus dx Pty Limited
R
Abacus dx Limited
T
Simonsen and Weel A/S
AC
Simonsen and Weel AB
AA
Kungshusen Medicinska AB
AD
Accu-Science Ireland Limited
AF
Medilink Services (NI) Limited2
AE
GM Medical A/S
AO
GM Grondorf Medical AB
AT
GM Medical AS
AU
GM Medical Oy
AV
Registered office address*
Intermediate holding companies
Diploma Holdings PLC
A
Diploma Holdings, Inc.
C
Diploma UK Holdings Limited2
A
Diploma Asia Holdings Limited
A
Diploma Australia Holdings Limited2
A
Diploma Canada Holdings Limited2
A
Diploma Overseas Limited
A
Diploma Europe Holdings Limited
A
Williamson, Cliff Limited2
A
Diploma One Limited1
A
Diploma Two Limited1
A
Newlandglebe Limited2
A
Diploma Holding Germany GmbH
G
Diploma Canada Healthcare Inc.
F
Diploma Australia Healthcare Pty Limited
R
Diploma Australia Seals Pty Limited
R
Techsil Group Holdings Limited2 & (95% owned)
A
Techsil Holdings Limited2 & (95% owned)
A
R&G Fluid Power Holdings Limited2
A
R&G Fluid Power Group Limited2 & (98% owned)
A
M Seals UK Limited2
A
Diploma Iberia Holdings, SL
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 on page 181
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DIPLOMA PLC ANNUAL REPORT 2024
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Additional Information
Corporate Governance
Financial Statements
SUBSIDIARIES OF DIPLOMA PLC CONTINUED
Registered office address:
A
10-11 Charterhouse Square, London, EC1M 6EE, UK.
B
2180, Temple Avenue, Long Beach, California, 90804, USA.
C
919 North Market Street, Suite 950, Wilmington, DE 19801, USA.
D
420 Park Place Blvd, STE 100, Clearwater, FL 33759, USA.
E
4505 Pacific Highway East, Suite C2, Fife, WA 98424-2638, USA.
F
3400 First Canadian Centre, 350-7th Avenue SW, Calgary, Alberta
T2P 3N9, Canada.
G
Kraichgaustrasse 5, D-73765, Neuhausen, Germany.
H
Rotwandweg 5, D-82024, Taufkirchen/München, Germany.
I
20-24 Robert Bosch Strasse, 25451 Quickborn, Germany.
J
Industrieterrein Dombosch 1, Elftweg 38, 4941 VP Raamsdonksveer,
the Netherlands.
K
Im Langhag 5, 8307 Illnau-Effretikon, Switzerland.
L
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
46 Albert Street, Preston, Victoria, 3072, Australia.
S
72 Platinum Street, Crestmead, Queensland, 4132, Australia.
T
Office of Bendall & Cant Ltd, Southern Cross Building, 61 High Street,
Auckland, New Zealand.
U
22 Avenue des Géomètres Pionniers, ZAC PANDA – 98835, Dumbéa,
New Caledonia.
V
18 Fuyuandao Road, Wuqing Development Area, Tianjin, China.
W
Fort Henry Business Park, Ballina, Co. Tipperary, Ireland.
X
98/155 Soi Supapong 1 Yak 6, Srinakarin Road, Nongbon, Bangkok,
Thailand.
Y
Kriegackerstrasse 32, 72469 Messtetten, Germany.
Z
386 Internationale Drive Suite H Bolingbrook, IL 60440, USA.
AA
Sotra Avagen 21, 436 34, Askim, 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.
AR
141, Executive Blvd, Farmingdale, New York, 11735, USA
AS
Suite 1002, No. 1, No. 36 Xiaoyun Road, Choayang District, Beijing, China
AT
c/o Aleria Redovisning KB, Industrigatan 83, 252 32 Helsingborg, Sweden
AU
c/o Christian Nordhaug, Gronlivegen 29, Tromso, 9007, Norway
AV
9, Makituvantie, 01510, Finland
182
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
SUBSIDIARIES OF DIPLOMA PLC CONTINUED
Measure
Closest
UK-adopted
IAS measure
Definition and reconciliation
Purpose
Organic
growth
Reported
revenue
increase
Organic growth strips out
the effects of the movement
in exchange rates and of
acquisitions and disposals.
Allows users of the accounts 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
Operating
profit
Statutory operating profit
excluding separately disclosed
items and can be found on
the face of the Group Income
Statement in the Adjusted
column.
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
period-on-period trading
performance of the Group.
Adjusted
operating
margin
Operating
profit divided
by revenue
Adjusted operating profit/(loss)
divided by revenue.
Adjusted operating margin is
a measure used to assess and
compare profitability.
It also allows for ongoing
trends and performance of the
Group to be measured by the
Directors, management and
interested stakeholders.
Measure
Closest
UK-adopted
IAS measure
Definition and reconciliation
Purpose
Adjusted
earnings per
share
Basic earnings
per share
Adjusted earnings (being
adjusted profit after tax
attributable to equity
shareholders) for the period
attributable to shareholders
of the Group divided by the
weighted average number of
shares in issue, excluding those
held in the Employee benefit
trust which are treated as
cancelled.
A reconciliation of statutory
profit to adjusted profit for the
purpose of this calculation is
provided within the notes to
the financial statements.
Adjusted earnings per share
is widely used by external
stakeholders, particularly in
the investment community.
Return on
adjusted
trading
capital
employed
(ROATCE)
Operating
profit divided
by net assets
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 that are
consistent with the proforma
adjusted operating profit.
ROATCE gives an indication of
the Group’s capital efficiency
and is an element of a
performance measure
for the Executive Directors’
remuneration.
183
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
ALTERNATIVE PERFORMANCE MEASURES
Measure
Closest
UK-adopted
IAS measure
Definition and reconciliation
Purpose
Free cash
flow
Net cash
generated
from operating
activities
The cash flow equivalent
of adjusted profit after tax.
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
Borrowings
less cash
Cash and cash equivalents
(cash overnight deposits, other
short-term deposits) offset by
borrowings which compose of
bank loans, excluding lease
liabilities.
Net debt is the measure by
which the Group and interested
stakeholders assesses its level
of overall indebtedness.
Earnings
Before
Interest and
Tax plus
Depreciation
and
Amortisation
(EBITDA)
Operating
profit
EBITDA is calculated by taking
adjusted operating profit,
adding back depreciation and
amortisation and annualised for
acquisitions and disposals
made during the year.
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.
Measure
Closest
UK-adopted
IAS measure
Definition and reconciliation
Purpose
Leverage
No direct
equivalent
The ratio of net debt to EBITDA
over the last 12 months (with
net debt translated at the
average exchange rates that
are consistent with EBITDA),
after making the following
adjustments to EBITDA:
including any annualised EBITDA
for businesses acquired by the
Group during that financial
year; the reversal of IFRS 16
accounting; the exclusion
of any EBITDA of businesses
disposed by the Group during
that financial year; and the
exclusion of the profit or loss
attributable to minority interest.
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.
184
DIPLOMA PLC ANNUAL REPORT 2024
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Additional Information
Corporate Governance
Financial Statements
ALTERNATIVE PERFORMANCE MEASURES CONTINUED
FINANCIAL CALENDAR
Announcements (provisional dates)
Q1 Trading Update released
15 January 2025
Annual General Meeting (2024)
15 January 2025
Half Year Results announced
20 May 2025
Q3 Trading Update released
18 July 2025
Preliminary Results announced
18 November 2025
Annual Report posted to shareholders
5 December 2025
Annual General Meeting (2025)
14 January 2026
Dividends (provisional dates)
Interim announced
20 May 2025
Paid
June 2025
Final announced
18 November 2025
Paid (if approved)
February 2026
Annual Report and 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
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
Registered in England and Wales,
number 3899848.
Website
www.diplomaplc.com
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
185
DIPLOMA PLC ANNUAL REPORT 2024
Strategic Report
Additional Information
Corporate Governance
Financial Statements
SHAREHOLDER INFORMATION
ADVISORS
CONTACT DETAILS
FIVE YEAR RECORD
Year ended 30 September
2024
£m
2023
£m
2022
£m
2021
£m
2020
£m
Revenue
1,363.4
1,200.3
1,012.8
787.4
538.4
Adjusted operating profit
285.0
237.0
191.2
148.7
87.1
Net interest and similar charges
(27.0)
(20.4)
(11.6)
(6.8)
(2.7)
Adjusted profit before tax
258.0
216.6
179.6
141.9
84.4
Acquisition related and other charges1
(77.6)
(53.7)
(46.9)
(44.4)
(17.3)
Acquisition related finance charges, net
(3.8)
(7.3)
(3.2)
(0.9)
(0.4)
Profit before tax
176.6
155.6
129.5
96.6
66.7
Tax expense
(46.6)
(37.3)
(34.1)
(26.9)
(16.9)
Profit for the year
130.0
118.3
95.4
69.7
49.8
Capital structure
Equity shareholders’ funds
888.0
895.6
662.0
536.3
527.0
Minority interest
6.7
6.4
6.2
4.7
3.7
Add/(deduct): cash and cash equivalents
(55.5)
(62.4)
(41.7)
(24.8)
(206.8)
cash and cash equivalents
held in disposal groups
(4.7)
–
–
–
–
borrowings
479.8
317.1
370.6
206.2
–
retirement benefit
(asset)/obligations, net
(1.5)
(6.5)
(6.4)
4.9
18.3
net acquisition related
liabilities2
23.6
19.6
29.6
23.7
11.5
deferred tax, net
48.6
58.4
38.2
21.9
7.9
Reported trading capital employed
1,385.0
1,228.2
1,058.5
772.9
361.6
Add: historic goodwill and acquisition
related charges, net of deferred tax
308.0
189.4
99.6
129.6
99.4
Adjusted trading capital employed
1,693.0
1,417.6
1,158.1
902.5
461.0
Net change in net debt/funds
(185.6)
69.6
(113.8)
(395.5)
224.0
Cash reclassified to assets held for sale
(4.7)
–
–
–
–
Year ended 30 September
2024
£m
2023
£m
2022
£m
2021
£m
2020
£m
Add: dividends paid
77.2
70.8
56.4
53.2
23.4
acquisition of businesses (including
minority interests), net of disposals
311.0
255.3
177.8
450.5
14.9
proceeds from issue of share capital
(net of fees)
–
(231.9)
–
0.6
(189.8)
Free cash flow3
197.9
163.8
120.4
108.8
72.5
Per ordinary share (p)
Basic earnings
96.5
90.8
76.1
56.1
43.5
Adjusted earnings4
145.8
126.5
107.5
85.2
56.4
Free cash flow3
147.7
126.3
96.7
87.4
64.0
Dividends
59.3
56.5
53.8
42.6
30.0
Total shareholders’ equity5
662.2
668.2
531.2
430.5
423.1
Dividend cover6
2.5
2.2
2.0
2.0
1.9
Ratios
%
%
%
%
%
Return on adjusted trading capital
employed (ROATCE)7
19.1
18.1
17.3
17.4
19.1
Adjusted operating margin
20.9
19.7
18.9
18.9
16.2
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 29 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 29 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 29 to the consolidated
financial statements.
186
DIPLOMA PLC ANNUAL REPORT 2024
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Additional Information
Corporate Governance
Financial Statements
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