REG - Diploma PLC - Half-year Report
16/05/2022 07:00
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RNS Number : 5316L Diploma PLC 16 May 2022
DIPLOMA PLC 10-11 CHARTERHOUSE SQUARE, LONDON EC1M 6EE
TELEPHONE: +44 (0)20 7549 5700
FACSIMILE: +44 (0)20 7549 5715
FOR IMMEDIATE RELEASE
16 May 2022
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2022
Strong results.
Successfully executing our strategy for organic growth.
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2022
Strong results.
Successfully executing our strategy for organic growth.
HY 2022 HY 2021 Y/y change
Revenue £448.5m £365.2m +23%
Underlying revenue growth((1)) 16% 2%
Adjusted operating profit((2)) £82.5m £66.6m +24%
Adjusted operating margin((2)) 18.4% 18.2% +20bps
Statutory operating profit £58.2m £46.3m +26%
Free cash flow((3)) £37.7m £34.3m +10%
Free cash flow conversion((3)) 64% 72%
Adjusted earnings per share((2)) 47.0p 38.4p +22%
Basic earnings per share 28.6p 25.5p +12%
Interim dividend per share 15.0p 12.5p +20%
ROATCE 17.5% 16.5% +100bps
(1) Adjusted for acquisition and disposal contribution and currency effects;
(2) Before acquisition related charges and acquisition related finance
charges; (3) Before cash flows on acquisitions, disposals and dividends. All
alternative performance measures are defined in note 2 to the condensed
Consolidated Financial Statements
Strong half year financial performance
· Underlying revenue growth of 16%, driven by organic revenue
initiatives, positive demand and pricing.
· Pass-through of higher year-on-year copper prices has added ca. 5% to
underlying revenue growth.
· Reported revenue growth of 23% with a positive contribution from high
quality acquisitions.
· Adjusted operating margin +20bps to 18.4%. Continuing to successfully
navigate supply chain challenges, labour pressures and inflation,
demonstrating the resilience of our value-added service model.
· 22% growth in adjusted EPS and 20% increase in interim dividend.
Growth strategy: business revenue diversification activity driving growth,
building scale and increasing resilience
· Controls +28%: excellent contribution from Windy City Wire ("WCW");
strong growth at International Controls driven by business diversification
activity.
· Seals +15%: accelerated market share gains in North American
Aftermarket; very positive International Seals performance, benefiting from
organic revenue initiatives.
· Life Sciences -7%: underlying growth ca. 2% excluding last year's
COVID-related revenues. Short-term growth affected by Canadian/Australian
lockdowns this year. Expect to return to growth during H2.
Delivering our strategy sustainably: disciplined portfolio development
· Strategy: building high quality, scalable businesses for organic
growth.
· Three high quality businesses acquired for a combined consideration
of £172m.
· LJR Electronics acquired in January for £21m, expanding our Controls
presence into the large, attractive and growing US interconnect market.
· R&G Fluid Power Group ("R&G") acquired in April for £100m to
build scale in UK Seals:
o Value-added aftermarket distributor of a diverse range of industrial,
hydraulic and pneumatic products (including seals and gaskets).
o Excellent strategic fit, adding scale in the UK and broadening Seals product
portfolio to expand addressable markets.
o Impressive track record with significant organic and inorganic growth
potential.
· Accuscience, a market-leading life sciences and med-tech distributor
in Ireland for £51m:
o Increases exposure to the high growth diagnostics segment.
o Adds scale to Life Sciences in Ireland, and continues to build out the
Sector's European pillar.
o Purchase price represents a multiple of ca. 9.5x EBIT, expected to
contribute annualised revenue of ca. £35m.
· Acquisition pipeline is active. We remain highly disciplined, with
ROATCE increasing to 17.5% (2021: 16.5%).
· Disposal of a1-envirosciences in May for £11m, in line with our
disciplined approach to portfolio development.
Delivering Value Responsibly ("DVR"): ESG framework building momentum
· Continuing to make progress across our five focus areas.
· DVR being embedded into commercial and operational strategy.
· On track to set targets from the next financial year.
Strong free cash flow and deleveraging giving balance sheet flexibility
· Strong free cash flow conversion of 64% (2021: 72%) despite
incremental inventory investment to ensure product availability and support
market share gains.
· Cash flow generation providing balance sheet flexibility to continue
to invest in growth: net debt £209.5m at 31 March 2022 (1.2x EBITDA).
Positive and unchanged outlook
· The second half has started well.
· Full year outlook is unchanged, confident in our materially upgraded
April guidance:
o Low double digit underlying revenue growth, well ahead of our model. Expect
growth to moderate in Q3 as the comparators get tougher
o Reported revenue growth a little over 20%.
o New acquisition, Accuscience, expected to deliver annualised revenue of ca.
£35m.
o Operating margin at the top end of the 18-19% guidance range.
o Strong cash generation expected to result in net debt/EBITDA of ca. 1.5x by
year end.
· Whilst the wider geopolitical and macroeconomic outlook is uncertain,
our resilience is underpinned by our increasing revenue diversification,
value-added model and strong balance sheet.
Commenting on the results, Johnny Thomson, Diploma's Chief Executive said:
"I am delighted with our performance and strategic progress in the last six
months. Thank you to my brilliant colleagues. Our organic growth and margins
have been strong, and we have also welcomed three important businesses to the
Group. We are executing our strategy by diversifying our business revenues for
organic growth, scale and resilience. We are also continuously improving our
value-add model for sustainable scale. We are not complacent about the
economic outlook, but the second half has started really well and we are
confident in our upgraded full year guidance."
Notes:
1. Diploma PLC uses alternative performance measures as key financial
indicators to assess the underlying performance of the Group. These include
adjusted operating profit, adjusted profit before tax, adjusted earnings per
share, free cash flow, net debt to EBITDA and ROATCE. All references in this
Announcement to "underlying" revenues refer to reported results on a constant
currency basis, and after adjusting for any contribution from acquired or
disposed businesses. The narrative in this Announcement is based on these
alternative measures and an explanation is set out in note 2 to the condensed
consolidated financial statements in this Announcement.
2. Certain statements contained in this Announcement constitute
forward-looking statements. Such forward-looking statements involve risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Diploma PLC, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such statements. Such risks, uncertainties and other
factors include, among others, exchange rates, general economic conditions and
the business environment.
There will be a presentation of the results to analysts and investors at
9:00am this morning via audio conference call and webcast. Conference call
dial in details:
· Dial in: +44 (0)330 165 4012
· Participant access code: 972388
Register your attendance for the webcast at:
https://webcasting.brrmedia.co.uk/broadcast/626173b167e322082fa890b4
(https://webcasting.brrmedia.co.uk/broadcast/626173b167e322082fa890b4)
This presentation will be available after the conference call at:
https://www.diplomaplc.com/investors/financial-presentations/
(https://www.diplomaplc.com/investors/financial-presentations/) .
A replay of the audio will be available on the same link after the event.
For further information please contact:
Diploma PLC - +44 (0)20 7549 5700
Johnny Thomson, Chief Executive Officer
Barbara Gibbes, Chief Financial Officer
Kellie McAvoy, Head of Investor Relations
Tulchan Communications - +44 (0)20 7353 4200
Martin Robinson
Olivia Peters
NOTE TO EDITORS:
Diploma PLC is an international group supplying specialised products and
services to a wide range of end segments in our three Sectors of Life
Sciences, Seals and Controls.
Diploma's businesses are focused on supplying essential products and services
which are critical to customers' needs, providing recurring income and stable
revenue growth.
Our businesses then design their individual business models to closely meet
the requirements of their customers, offering a blend of high-quality customer
service, deep technical support and value adding activities. By supplying
essential solutions, not just products, we build strong long-term
relationships with our customers and suppliers, which support attractive and
sustainable margins. Finally, we encourage an entrepreneurial culture in our
businesses through our decentralised management structure. We want our
managers to feel that they have the freedom to run their own businesses, while
being able to draw on the support and resources of a larger group. These
essential values ensure that decisions are made close to the customer and that
the businesses are agile and responsive to changes in the market and the
competitive environment. The Group employs ca. 2,700 employees and its
principal operating businesses are located in the UK, Northern Europe, North
America and Australia.
Over the last ten years, the Group has grown adjusted earnings per share at an
average of ca. 12% p.a. through a combination of organic growth and
acquisitions. Diploma is a member of the FTSE 250 with a market capitalisation
of ca. £3.25bn.
Further information on Diploma PLC can be found at www.diplomaplc.com
(http://www.diplomaplc.com)
LEI: 2138008OGI7VYG8FGR19
HALF YEAR REVIEW TO 31 MARCH 2022
Strong half year performance
The Group has enjoyed a successful six months, reflecting the benefits of our
strategy, value-added proposition and decentralised model. These, together
with the outstanding commitment of our colleagues to excellent customer
service, have enabled us to deliver double-digit underlying growth at high
teens margins, all while successfully navigating inflationary pressures and
supply chain challenges.
Revenues in the first half of 2022 were significantly higher, up 23% to
£448.5m (2021: £365.2m). Underlying growth was 16%, driven by our revenue
diversification initiatives, positive demand and pricing. Growth in the half
also benefited from the pass through of higher copper prices, which added ca.
5% to underlying growth. Acquisitions net of two small disposals contributed
7% to reported revenue while foreign exchange translation was broadly neutral.
We are very pleased with our operating margin performance, with adjusted
operating profit increasing 24% to £82.5m (2021: £66.6m) and the adjusted
operating margin up 20 basis points to 18.4% (2021: 18.2%). All of our
businesses have worked hard to mitigate inflationary impacts on customers and,
where this has not been possible, our value-add model has enabled us to
successfully pass on cost inflation and protect our margins. Other factors
influencing the operating margin included positive operational leverage on
higher volumes, partially offset by continued investment in growth. Statutory
operating profit rose 26% to £58.2m (2021: £46.3m).
Free cash flow conversion of 64% (2021: 72%) has been strong despite
incremental investment in inventory to ensure product availability and support
market share gains. At 31 March 2022, net debt was £209.5m or 1.2x EBITDA (30
September 2021: £181.4m and 1.1x). After the period end, we invested an
additional ca. £151m in R&G and Accuscience (discussed further below) and
realised proceeds of £11m from the disposal of a1-envirosciences. We expect
continued strong free cash flow generation to drive deleveraging in the second
half and provide flexibility to continue to invest in growth.
Diploma has a progressive dividend policy, targeting dividend cover of 2x on
an adjusted EPS basis. In light of the strong H1 performance and confidence in
the Group's prospects, the Directors have declared a 20% increase in the
interim dividend to 15.0p per share (2021: 12.5p). The dividend is payable on
10 June 2022 to shareholders on the register on 27 May 2022 with a
corresponding ex-dividend date of 26 May 2022.
Revenue diversification strategy driving organic growth
The Group's strategy is to build high quality, scalable businesses for organic
growth. Our businesses are focused on revenue diversification to deliver
growth, build scale and increase resilience. Consistent with the Group
strategy, all of our businesses have their own individual plans and
initiatives aimed at capitalising on structurally growing end markets,
increasing penetration of core geographies and expanding addressable markets
through product range extension.
As a diverse Group, no single initiative or end market is sufficiently large
to materially impact Diploma as a whole, but the collective success of our
Sectors' growth initiatives combined with a positive end market environment
and pricing translated into underlying growth of 16%, with strong trading
momentum sustained throughout the first half.
Revenue £m Underlying growth
H1 22 H1 21 Change H1 22 H1 21
Controls 224.0 152.8 +47% +28% (1)%
Seals 137.4 123.8 +11% +15% (2)%
Life Sciences 87.1 88.6 (2)% (7)% +14%
Group 448.5 365.2 +23% +16% +2%
Some examples of how our businesses are delivering underlying growth are set
out below.
Positioning to take advantage of structurally growing end markets: some of our
strongest growth in the first half was driven by structurally growing end
markets. This is also well-aligned with our ESG framework, which is embedding
positive impact into our commercial strategy. At Windy City Wire, strong
double-digit volume growth reflects the business's exposure to data centres,
distribution centres and digital antenna systems. International Controls is
also enjoying success in energy and emerging markets in space and urban air
mobility. Recent acquisitions are well positioned, including LJR Electronics
where over 50% of revenues relate to end markets linked to electrification and
material handling/e-commerce.
In Seals, the outlook for US infrastructure spending underpins a positive
outlook for North American Aftermarket while International Seals has a strong
pipeline for new, larger wind turbines. The structural growth drivers for Life
Sciences of ageing populations and increasing healthcare spend remain very
strong. Post-pandemic, elective surgical backlogs and increasing spend on
diagnostics will be key growth drivers.
End market diversification: having successfully captured growth in medical
last year, International Seals has retained new customers in this sector while
also pivoting to capitalise on positive momentum in industrial markets.
International Controls has been a diversification success story, with
businesses like Speciality Fasteners reducing reliance on civil aerospace
through expanding in areas such as high-performance vehicles, energy,
industrial and infrastructure.
Penetration of core developed economies: over the last six months we have made
significant progress in the US and Europe. In particular, the acquisition of
LJR Electronics adds scale to Interconnect in the US, improving the Controls
Sector's access to the developed world's largest interconnect market. The
potential for geographic expansion in North American Aftermarket Seals is
hugely exciting and already delivering revenue growth; we expect Louisville to
drive market share gains in the US for many years to come. In Europe, the
recent acquisition of R&G has materially added scale in UK Seals while we
continue to build out our European pillar in Life Sciences with the
acquisition of Accuscience in Ireland.
Product range extension: forms an ongoing component of most businesses'
organic growth strategies, including at International Seals in product
adjacencies such as cylinders and gaskets. The acquisition of Techsil at the
end of last year has created an entry into an exciting new business line and
the team are providing great insight and input into our M&A plans in the
adhesives space. The acquisition of R&G in April marks a major step
forward, broadening the Seals' Sector product capability in the UK, with
potential to take this to other markets.
Strategically important acquisitions to accelerate growth
Acquisitions are an integral part of our growth strategy, with a disciplined
focus on acquiring value-added businesses, with great management teams, to
accelerate our organic growth. So far in FY2022, we have acquired three high
quality businesses for a total of ca. £172m.
In January, we acquired LJR, a value-added distributor of connectors in the US
for ca. £21m. Now part of Interconnect within the Controls Sector, LJR
Electronics has expanded our presence into the large, attractive and growing
US interconnect market. The business is expected to generate annualised
revenue of ca. £14m.
In mid-April, we announced the exciting addition of R&G to build scale in
Seals in the UK. R&G is a value-added aftermarket distributor supplying a
diverse range of industrial, hydraulic and pneumatic products (including seals
and gaskets). Its value-added proposition is based on responsive customer
service, technical advice, breadth of stock and product customisation. Over
time, its management team has built a platform with extensive reach across the
UK. This has included consolidating a number of regional distributors to
extend geographic and product reach. The R&G historic growth track record,
organic and inorganic, has been impressive.
R&G has significant organic growth potential, including developing the
aftermarket e-commerce channel, continued regional expansion in the UK, and
further product cross-selling and diversification. The business gives the
Seals Sector scale in the UK and the ability to drive revenue synergies with
existing UK Seals businesses. We are also excited by the broadening of the
Seals product capability, in line with our strategy to expand addressable
markets through product extension, with the potential to take this to other
markets in the future. An active pipeline also positions R&G well to
continue to deliver on acquisition growth. Acquired for ca. £100m (plus
deferred consideration of up to ca. £7.5m), R&G is expected to contribute
annualised revenue of ca. £65m.
More recently, in early May, we completed the acquisition of Accuscience, a
market-leading life sciences and med-tech distributor in Ireland. Accuscience
has a diverse, high quality supplier portfolio which includes several tier one
manufacturers. The business also has a proven ability to identify, attract,
develop and grow best in class suppliers. This has translated into a strong
track record on growth and excellent scale across the island of Ireland. The
business's growth prospects are exciting, underpinned by recent wins and a
strong product pipeline. The acquisition increases our exposure to the high
growth diagnostics segment and further diversifies our product portfolio while
also consolidating our position in the attractive Irish market, and continuing
to build out the Life Sciences' European pillar. Acquired for ca. £51m,
Accuscience is expected to contribute annualised revenue of ca.£35m.
We remain disciplined in our approach to acquisitions, and our pipeline is
encouraging.
Portfolio focus
At a Group level, we are focusing our growth around scalable business lines
within the Sectors. As part of a disciplined approach to portfolio management,
in early May, we disposed of a1-envirosciences, formerly part of the Life
Sciences Sector, for ca. £11m. In November last year, we also disposed of
Kentek in Russia for £10m.
Delivering our model at scale: investing in our Core Competencies and
Capability
Growth is only one component of our strategy; it is equally important that we
support our businesses on their journey to scale. There is no 'one-size fits
all'; our approach is pragmatic and incremental as our businesses become more
strategic, systematic and process-oriented.
Our businesses share a common set of Core Competencies which underpin their
value-add. Our operational strategy is focused on continuous improvement of
these competencies to maintain great customer service at scale, and therefore
sustain our pricing power and attractive margins.
The last two years has emphasised the importance of the Route to Market
competency to support our diversification and growth as well as Supply Chain
management. Against the wider market backdrop of supply chain challenges,
inflation and labour pressures, our colleagues have worked tirelessly to
maintain high levels of customer service. The trading environment has also
underlined the importance of our focus on developing our Supply Chain
competency and rolling out our Supply Chain Code (see below) to ensure a
supply chain that is resilient, responsible and ethical. Commercial
Discipline - or pricing - has come to the fore - our value-added solutions
give us pricing power, and the integration of pricing into everyday life has
enabled us to protect our margins in an inflationary environment.
Developing these Core Competencies also requires investment in capability -
Talent, Technology and Facility. Talent is a key component of our DVR agenda,
particularly colleague engagement and retention in tight labour markets. We
are investing across the Group in commercial, operational and functional
roles. In January, we welcomed Ted Messmer as Sector CEO for North American
Seals, an appointment which completes the Executive Leadership Team. In
Technology, our approach is measured, with a number of small projects to
upgrade capabilities ongoing at any one time, from ERP upgrades and
implementations to barcoding and webstore development and improvement. The
same is true of Facility - Louisville is our largest recent project, but we
are also investing in a number of other sites including in our Life Sciences
Sector in Australia, which is now completed, as well as a new facility which
is underway for Simonsen & Weel in Denmark.
Alongside this, we continue to develop a shared Diploma culture and identity,
with the Group acting as a conduit for knowledge and best practice sharing.
This includes our DVR agenda (see below). Louisville has also provided an
opportunity to share learnings on automation and successful execution of a
facility move. Finally, we are all looking forward to our second ever
in-person leadership gathering in Chicago as an opportunity for our leaders to
build their internal networks and share experiences that will be of benefit as
they take their businesses on the journey to scale.
Embedding Delivering Value Responsibly in our growth and operations
We are very pleased with the progress our businesses are making with
Delivering Value Responsibly ("DVR"), our ESG programme. Operating within our
Group framework, colleagues are implementing improvement initiatives tailored
to their businesses, and which will support the delivery of their DVR plans.
In keeping with the evolution of a Diploma identity that fosters knowledge and
best practice sharing, we are running Group-wide workshops and training,
helping to drive engagement, raise awareness and provide colleagues with tools
to deliver their DVR objectives.
For Colleagues, we have continued with our focus on learning & development
and engagement. Potential hazard reporting and training are enhancing our
Health & Safety culture, while increasing awareness and workshops are also
helping to further our Diversity, Equity & Inclusion agenda. Our
businesses are at varying stages of engagement with their Supply Chains on our
Supplier Code. From an Environment perspective, waste has been a key area of
focus with widespread actions to switch waste providers, increase recycling
and use more recycled/recyclable materials. We are also working on our carbon
footprint, with new facilities offering greater energy efficiency and
businesses installing LED lighting and electric vehicle charging points.
DVR is not a standalone concept - we are embedding it into all of our
strategic priorities, from growth to supply chain and operational excellence.
Having defined our priorities and KPIs for our five material focus areas last
year, our DVR metrics are fully embedded into our internal reporting and
business reviews. We are now focused on collecting data and developing our
baseline in order to set targets from the start of the next financial year.
Full year outlook unchanged
The Group has delivered a strong first half performance as we continue to
successfully execute our strategy for long-term organic growth. We continue to
manage inflation, supply chain disruption and labour pressures. The second
half has started well, and we are confident in our materially upgraded
guidance provided in April:
· Low double-digit underlying revenue growth, well ahead of our
model. We continue to expect growth to moderate in Q3 as the comparators get
tougher.
· Reported revenue growth a little over 20%.
· Accuscience, acquired in May, is expected to deliver annualised
revenue of ca. £35m.
· Operating margin at the top end of the 18-19% guidance range.
· Cash conversion in line with financial model (ca.90%).
· Net debt/EBITDA currently expected to be ca. 1.5x by year end.
Notwithstanding wider macroeconomic uncertainties, our resilience is
underpinned by our value-added model, increasing diversification and strong
balance sheet. We remain confident in our long-term prospects for continued
growth at sustainably high margins, in line with our financial model.
SECTOR REVIEW: CONTROLS
The Controls Sector businesses supply specialised wiring, cable, connectors,
fasteners, control devices and adhesives for a range of technically demanding
applications.
Half Year
2022 2021 Change
Revenue £224.0m £152.8m +47%
Underlying revenue growth +28% (1)%
Adjusted operating profit £47.0m £31.2m +51%
Adjusted operating margin 21.0% 20.4% +60bps
H1 2022 highlights
· International Controls up 17% off the back of revenue diversification
initiatives.
· Continued excellent WCW contribution; underlying growth 42%, strong
double-digit volume growth.
· Strategic acquisition of LJR Electronics builds scale and gives
improved access to the large, growing US interconnect market.
Sector financial performance
Controls Sector revenues during the first six months of the year were
materially higher, up 47% to £224.0m (2021: £152.8m). This consisted of
underlying revenue growth of 28% and a 19% contribution from acquisitions;
currency was largely neutral.
Adjusted operating profit also increased significantly, 51% higher at £47.0m
(2021: £31.2m) reflecting both revenue growth and a 60bps year-on-year
increase in the adjusted operating margin to 21.0% (2021: 20.4%). Both WCW and
International Controls contributed to the overall expansion of the margin,
with positive operating leverage more than offsetting the pass through of
higher copper prices and investment in growth.
International Controls (51% of Controls Sector revenue) started 2022 very
well, with underlying growth of 17% reflecting the success of our revenue
initiatives and a positive demand environment.
Interconnect delivered double-digit underlying growth against a resilient H1
2021 comparator with strength in Germany in energy and medical, and in the UK
in energy and motorsport. While chip shortages held back our more
automotive-focused French business, the actions being taken to further
diversify revenues will underpin greater mid-term resilience and growth. The
strategic acquisition of LJR in the US allows us to build scale in the largest
developed interconnect market in the world, cross-sell Interconnect products
and also gives our existing operation in Indianapolis the ability to leverage
the LJR supply chain.
Shoal Group performed well against a strong comparator, supported by new
product introductions and e-commerce; the addition of SWA has also provided
improved access to the electrical wholesale market. Speciality Fasteners had
an excellent first half, with revenue diversification actions translating into
strong growth, particularly in end markets such as high-performance vehicles
and space. The business is also taking share in recovering aerospace markets,
having been specified onto new programmes and winning business in new parts of
the aircraft, including galleys. The addition of AHW at the end of last year
has added scale in the US and we are making good progress with plans for
revenue and cost synergies.
Finally, Techsil, our adhesives business line continues to go from strength to
strength while Fluid Controls also enjoyed a very good first half off the back
of continued recovery in demand in its key hospitality end markets.
Windy City Wire ("WCW") (49% of Controls Sector revenue) continues to deliver,
with underlying revenue growth of 42% in the period. This was driven by a
combination of high-teens volume growth and the pass through of higher
year-on-year copper prices. The impact of copper moderated towards the end of
H1 as we started to lap stronger comparators.
Volume growth reflects share gains in all markets as a result of the
compelling WCW customer proposition and product availability. All key end
segments have had a strong first half - technology changes to combat cyber
threats have benefited security access; digital antenna systems are
increasingly becoming a requirement in locations across the US, driving
continued growth; and audio visual is also performing very well, with WCW's
excellent customer service and product offering driving share gains.
Additionally, the business has enjoyed continued success in winning more
specified positions with large, blue chip names, supporting current and future
growth.
Sector review: SEALS
The Seals Sector businesses supply a range of seals, gaskets, cylinders,
components and kits used in heavy mobile machinery and specialised industrial
equipment with Aftermarket, OEM and MRO applications.
Half Year
2022 2021 Change
Revenue £137.4m £123.8 +11%
Underlying revenue growth +15% (2)%
Adjusted operating profit £25.8m £20.7m +25%
Adjusted operating margin 18.8% 16.7% +210bps
H1 2022 highlights
· Accelerated growth in North American Aftermarket; Louisville driving
market share gains.
· Very positive International Seals performance with underlying growth
8% against a resilient prior year comparator driven by revenue
diversification.
· Exciting addition of R&G Fluid Power Group in April builds scale
in UK Seals.
Sector financial performance
Seals Sector revenues rose 11% to £137.4m (2021: £123.8m), reflecting strong
underlying growth of 15% partially offset by the disposal of Kentek in
November 2021. Currency was largely neutral.
Adjusted operating profit outperformed revenue growth, increasing 25% to
£25.8m (2021: £20.7m) with a 210bps year-on-year increase in the adjusted
operating margin to 18.8% (2021: 16.7%). This was primarily due to a step up
in the North American margin which benefited from the end of dual-running
costs and improved efficiency at Louisville, positive operating leverage and
the disposal of the lower margin Kentek business.
For North American Seals (65% of Sector revenue), underlying growth of 19%
reflects strength in all markets - North American Aftermarket, US Industrial
OEM and MRO all delivered double-digit underlying growth. We are particularly
pleased with the performance of North American Aftermarket, with 20%
underlying growth against a resilient comparator. The investment in our
Aftermarket facility in Louisville, Kentucky is paying off, delivering
accelerated growth and market share gains, particularly in Western states,
against a backdrop of positive demand in key US construction markets.
Elsewhere, US Industrial OEM also delivered double-digit underlying growth
while at MRO, a later cycle business, underlying growth was exceptionally
strong, particularly in transportation but also in the industrial sector. New
sales hires and growth initiatives are translating into market share gains,
with VSP winning new customers and growing sales of new products. As a
business whose value-add lies in a highly technical sale, the ending of
lockdowns and ability to get out into the field has been an added positive.
International Seals (35% of Sector revenue) delivered underlying growth of 8%
against a very resilient comparator (H1 2021: +5%). Our UK Seals businesses
are benefiting from initiatives to diversify into product adjacencies and new
end markets, while the higher oil price had led to improving demand in that
sector. Kubo delivered double-digit underlying growth; the business has shown
great agility and, having pivoted to capture growth in medical last year, it
is now capitalising on returning industrial demand. Product availability has
also been a key differentiator for Kubo, supporting market share gains. MSeals
had a slower start to the half against a strong comparator. The business is
winning share and growing well in the food and pharmaceuticals sectors; while
automotive in Sweden and wind have been quieter, a promising pipeline means we
expect increased demand for seals for wind turbines in the second half. In
Australia, our PumpNSeal business delivered double digit growth and while FITT
Resources has been impacted by COVID lockdowns in Eastern Australia, a strong
backlog underpins the outlook for the rest of the year.
Sector review: LIFE SCIENCES
The Life Sciences Sector businesses supply a range of medical devices,
consumables, instrumentation and related services to Healthcare and
Environmental end markets.
Half Year
2022 2021 Change
Revenue £87.1m £88.6m (2)%
Underlying revenue growth (7)% +14%
Adjusted operating profit £19.6m £21.3m (8)%
Adjusted operating margin 22.5% 24.0% (150)bps
H1 2022 highlights
· Underlying revenue -7%: +2% excluding last year's COVID-related
revenues; short-term growth also impacted by Australian and Canadian
lockdowns.
· Exciting mid- to longer-term outlook; encouraging underlying trends,
expect to return to underlying growth during H2.
· Strategic acquisition of Accuscience in Ireland increases exposure to
high growth diagnostics segment and continues to build out European pillar.
· Disciplined portfolio management: disposal of a1-envirosciences in
May.
Sector financial performance
Revenues for the Life Sciences Sector fell 2% to £87.1m (2021: £88.6m),
including a 7% underlying decline. Acquisitions net of disposals contributed
6%, with the incremental contribution from Simonsen & Weel and Kungshusen
more than offsetting the disposal of a1-CBISS. Foreign exchange reduced
reported revenues by 1%.
Adjusted operating profit was 8% lower at £19.6m (2021: £21.3m). The
adjusted operating margin was 22.5% (2021: 24.0%). Last year's operating
margin was untypically high; the first six months of 2022 have also seen a
controlled return of variable costs.
Excluding last year's non-recurring COVID-related ventilator sales, underlying
revenues increased 2%. Lockdowns in key Australian and Canadian markets
together with hospital staff shortages also impacted H1 growth. Underlying
momentum was particularly positive in testing and diagnostics, with strong
revenue growth at businesses such as TPD in Ireland and Abacus in Australia.
Last year's Scandinavian acquisitions are now settled into the Group, and
giving rise to cross-selling opportunities, with Kungshusen winning an
important new supplier through an existing Canadian relationship.
The Sector's mid- to longer-term prospects are exciting. All businesses have
continued to make good progress with bringing new products into the pipeline.
Elective surgical backlogs will take time to unwind, particularly given
capacity constraints and staffing shortages in hospitals, helping to underpin
mid-term growth at the Sector. We also expect increasing investment in testing
and diagnostics (ca. 45% of Sector revenue); COVID has reshaped healthcare
systems' view of the importance of diagnostic capabilities, with increasing
emphasis on early diagnostics and intervention - a trend which is already in
evidence in our businesses.
FINANCE
Income statement
Reported revenues increased by 23% to £448.5m (2021: £365.2m) with
underlying growth of 16% and a 7% contribution from acquisitions net of two
small disposals. Foreign currency movements were broadly neutral.
Adjusted operating profit increased by 24% to £82.5m (2021: £66.6m)
reflecting higher revenues and a 20bps year-on-year improvement in the
adjusted operating margin to 18.4% (2021: 18.2%). Statutory operating profit
increased 26% to £58.2m (2021: £46.3m).
Adjusted profit before tax increased 24% to £78.6m (2021: £63.2m). There was
an increase in the net interest expense to £3.9m (2021: £3.4m), due to
increased borrowings used to finance acquisitions.
Statutory profit before tax was 23% higher year-on-year at £52.3m (2021:
£42.5m) reflecting the increased revenues and margin improvements, partly
offset by the higher interest charges discussed above.
The Group's adjusted effective rate of tax on adjusted profit before tax was
25.1% (September 2021: 25.4%) broadly in line with the FY2021 rate.
Adjusted earnings per share increased by 22% to 47.0p, compared with 38.4p in
H1 2021.
Free cash flow
Free cash flow represents cash available for acquisitions and distributions to
shareholders. The Group generated free cash flow of £37.7m (2021: £34.3m)
with the increase in operating profits being partly offset by an increased
working capital investment. Free cash flow benefited from fixed asset proceeds
of £9.3m.
Operating cash flow increased by 15% to £64.0m (2021: £55.5m) with the
stronger adjusted operating profit and current year benefit of a one-off
pension contribution in the prior half year being partly offset by an
increased investment in working capital.
The investment in working capital of £27.3m (2021: £14.5m) was £12.8m more
than in the prior half year. The increase in inventories (£19.2m) is due to
incremental, targeted investment to support market share gains, ensure product
availability and help manage supply chain constraints. The increase in
receivables (£16.3m) is reflective of the robust trading activity especially
towards the end of the first half. We expect strong cash generation in the
second half of the year in line with our historical trends.
The Group's metric of working capital to revenue increased to 17.7% (2021:
16.0%), driven by increased investment into inventories and higher trade
receivables.
Tax payments in the first half of the year increased by £7.4m to £19.9m
(2021: £12.5m). The underlying cash tax rate increased to 23% (2021: 20%) due
to timing of tax payments with the prior half year being impacted by
COVID-related payment deferrals. The Group also funded the Company's Employee
Benefit Trust with £2.8m (2021: £0.6m) in connection with the Company's long
term incentive plan.
Capital expenditure increased by £3.1m against the comparable period last
year to £5.7m (2021: £2.6m) largely consisting of ongoing investment in new
field equipment in the Healthcare businesses (£2.9m), with a similar level of
investment expected to continue in the second half.
Net acquisition expenditure of £19.5m (2021: £399.4m) principally comprises
of the spend for LJR (£21.3m) and acquisition fees (£1.8m), partly offset by
the proceeds received in respect of the disposal of Kentek (£4.2m).
The Group paid £37.7m (2021: £37.6m) in dividends to ordinary and minority
interest shareholders. The prior year payment included the catch up of the
FY2020 interim dividend which had been deferred in May 2020 due to the
uncertainty created by COVID-19 at that time.
Net bank debt
The Group has a debt facility agreement ("SFA") originally entered into on 13
October 2020. At 31 March 2022, the SFA comprised of an amortising term loan
for an aggregate principal of £106.7m ($140.8m), a bullet term loan for an
aggregate principal of £50.0m ($66.0m) and a committed multi-currency
revolving credit facility for an aggregate principal of £255.0m. The SFA is
due to expire in December 2024 and there is an option to extend for a further
12-month period.
The Group continues to maintain a robust balance sheet with net bank debt of
£209.5m (2021: £191.1m) comprised of borrowings of £342.0m (2021:
£216.9m), less cash funds of £132.5m (2021: £25.8m). The increased cash
funds held at 31 March 2022 were utilised shortly after the period end to fund
the acquisition of R&G for £100m.
At 31 March 2022, net bank debt of £209.5m represented 1.2x EBITDA against a
banking covenant of 3x EBITDA. We expect this to return to ca. 1.5x EBITDA by
year end despite the acquisitions of R&G which completed in April 2022 and
Accuscience, which completed in May.
Going concern
The Directors have assessed the relevant factors surrounding going concern.
The Group has carried out an assessment of its projected trading for the
18-month period through to the year ending 30 September 2023. This assessment
incorporated a downside scenario which demonstrates that the Group has
sufficient liquidity, resources and covenant headroom to continue in operation
for the foreseeable future. The Directors confirm there are no material
uncertainties which may cast significant doubt on the Group's ability to
continue as a going concern and these condensed consolidated financial
statements have therefore been prepared on a going concern basis.
Exchange rates
A significant proportion of the Group's revenues (ca. 80%) are derived from
businesses located outside the UK, principally in the US, Canada, Australia
and Northern Europe. Since 30 September 2021, UK sterling has weakened against
some of the major currencies in which the Group operates, in particular the
US, Canadian, and Australian dollar, whilst strengthening against the Euro and
Danish krone. Compared with the first half of last year, the average UK
sterling exchange rate is also weaker against the US and Canadian dollars,
though stronger than the Euro, Danish krone, and Australian dollar. The impact
from translating the results of the Group's overseas businesses into UK
sterling has led to a reduction in Group revenues of ca. £0.4m and an
increase in the Group's adjusted operating profit of ca. £0.1m, compared with
the same period last year.
The Group continues with its policy of mitigating transactional currency
exposures across all of the Group's businesses by purchasing currency hedging
contracts to meet up to 80% of its currency commitments for periods up to 18
months, where it is considered appropriate.
RISKS AND UNCERTAINTIES
The principal risks and uncertainties which may have the largest impact on
performance in the second half of the year are the same as those described in
detail in pages 28-33 of the 2021 Annual Report & Accounts. In summary
these are:
· Strategic risks - downturn/instability in major markets, supplier
concentration/loss of key suppliers, customer concentration/loss of key
customers, unsuccessful acquisitions and geopolitical disruptions;
· Operational risks - health and safety, cybersecurity/information
technology/business interruption, loss of key personnel, product liability and
supply chain disruptions;
· Financial risks - foreign currency and tax compliance; and
· Accounting risk - inventory obsolescence.
The Directors confirm that the principal risks and uncertainties and the
processes for managing them have not changed since the publication of the 2021
Annual Report & Accounts and that they remain relevant for the second half
of the financial year.
Johnny Thomson
Chief Executive
Officer
16 May
2022
Responsibility Statement of the Directors in respect of the Half Year Report
2022
We confirm that to the best of our knowledge:
· the condensed consolidated financial statements have been
prepared in accordance with UK-adopted International Accounting Standard 34,
'Interim Financial Reporting'; and
· the Half Year Report includes a fair review of the information
required by:
a) DTR4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of the important events that have occurred during the first six
months of the financial year and their impact on the condensed set of interim
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
b) DTR4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last Annual Report &
Accounts that could do so.
The Directors of Diploma PLC and their respective responsibilities are listed
in the Annual Report & Accounts for 2021 and on the Company's website at
www.diplomaplc.com (http://www.diplomaplc.com) .
By Order of the Board
JD Thomson B Gibbes
Chief Executive Officer Chief Financial Officer
16 May 2022 16 May 2022
Condensed Consolidated Income Statement
For the six months ended 31 March 2022
Unaudited Unaudited Audited
31 March 31 March 30 Sept
Note 2022 2021 2021
£m £m £m
Revenue 3 448.5 365.2 787.4
Cost of sales (284.6) (231.3) (499.0)
Gross profit 163.9 133.9 288.4
Distribution costs (14.9) (10.7) (23.9)
Administration costs (90.8) (76.9) (160.2)
Operating profit 3 58.2 46.3 104.3
Financial expense, net 4 (5.9) (3.8) (7.7)
Profit before tax 52.3 42.5 96.6
Tax expense 5 (16.4) (10.5) (26.9)
Profit for the period 35.9 32.0 69.7
Attributable to:
Shareholders of the Company 35.6 31.7 69.8
Minority interests 0.3 0.3 (0.1)
35.9 32.0 69.7
Earnings per share
Basic earnings 6 28.6p 25.5p 56.1p
Diluted earnings 28.5p 25.4p 55.9p
Alternative Performance Measures (note 2) 31 March 2022 31 March 2021 30 Sept
2021
Note £m £m £m
Operating profit 58.2 46.3 104.3
Add: Acquisition related charges 9 24.3 20.3 44.4
Adjusted operating profit 3 82.5 66.6 148.7
Deduct: Net interest expense and similar charges 4 (3.9) (3.4) (6.8)
Adjusted profit before tax 78.6 63.2 141.9
Adjusted earnings per share 6 47.0p 38.4p 85.2p
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 March 2022
Unaudited Unaudited Audited
31 March 31 March 30 Sept 2021
2022 2021
£m £m £m
Profit for the period 35.9 32.0 69.7
Items that will not be reclassified to the Consolidated Income Statement
Actuarial gain/(losses) in the defined benefit pension scheme - - 7.4
Deferred tax on items that will not be reclassified - - (0.8)
- - 6.6
Items that may be reclassified to the Consolidated Income Statement
Exchange rate gains/(losses) on foreign currency net investments
15.7 (24.8) (16.2)
Exchange loss on translation of foreign operations recycled to income
statement on disposal
(2.0) - -
(Losses)/gains on fair value of cash flow hedges (0.5) (1.3) 0.4
Net changes to fair value of cash flow hedges transferred to the Consolidated
Income Statement
- - 0.1
Deferred tax on items that may be reclassified 0.2 0.5 (0.1)
13.4 (25.6) (15.8)
Total Comprehensive Income for the period 49.3 6.4 60.5
Attributable to:
Shareholders of the Company 49.1 6.4 60.8
Minority interests 0.2 - (0.3)
49.3 6.4 60.5
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 March 2022
Share capital Share premium Translation reserve Hedging reserve Retained earnings Share Minority Total
-holders' equity interests equity
£m £m £m £m £m £m £m £m
At 1 October 2020 (audited) 6.3 188.6 28.3 (0.3) 304.1 527.0 3.7 530.7
Total comprehensive income - - (24.5) (0.8) 31.7 6.4 - 6.4
Share-based payments - - - - 0.7 0.7 - 0.7
Tax on items recognised directly in equity - - - - - - - -
Purchase of own shares - - - - (0.6) (0.6) - (0.6)
Minority interest issued - - - - - - 0.7 0.7
Dividends - - - - (37.3) (37.3) (0.3) (37.6)
At 31 March 2021 (unaudited) 6.3 188.6 3.8 (1.1) 298.6 496.2 4.1 500.3
Total comprehensive income - - 8.3 1.3 44.8 54.4 (0.3) 54.1
Share-based payments - - - - 1.1 1.1 - 1.1
Tax on items recognised directly in equity - - - - 1.0 1.0 - 1.0
Notional purchase of own shares - - - - 0.1 0.1 - 0.1
Acquisition of business - - - - - - 0.9 0.9
Minority interest put option - - - - (0.9) (0.9) - (0.9)
Dividends - - - - (15.6) (15.6) - (15.6)
At 30 September 2021 (audited) 6.3 188.6 12.1 0.2 329.1 536.3 4.7 541.0
Total comprehensive income - - 13.8 (0.3) 35.6 49.1 0.2 49.3
Share-based payments - - - - 1.4 1.4 - 1.4
Tax on items recognised directly in equity - - - - - - - -
Notional purchase of own shares - - - - (2.8) (2.8) - (2.8)
Disposal of minority interest - - - - - - (1.3) (1.3)
Disposal of minority interest put option - - - - 1.2 1.2 - 1.2
Dividends - - - - (37.5) (37.5) (0.2) (37.7)
At 31 March 2022 (unaudited) 6.3 188.6 25.9 (0.1) 327.0 547.7 3.4 551.1
Condensed Consolidated Statement of Financial Position
As at 31 March 2022
Unaudited Unaudited Audited
31 March 31 March 2021 30 Sept
2022 2021
Note £m £m £m
Non-current assets
Goodwill 9 269.9 243.5 260.7
Acquisition intangible assets 9 342.2 320.9 344.9
Other intangible assets 3.5 3.2 3.4
Property, plant and equipment 36.4 44.1 35.4
Leases - right of use of assets 11 53.8 42.0 44.9
Deferred tax assets 0.3 0.7 0.4
706.1 654.4 689.7
Current assets
Inventories 165.1 121.1 139.8
Trade and other receivables 135.4 115.0 117.8
Assets held for sale 2.9 - 11.3
Cash and cash equivalents 8 132.5 25.8 24.8
435.9 261.9 293.7
Current liabilities
Borrowings 8 (21.4) (14.9) (18.0)
Trade and other payables (138.0) (109.1) (127.0)
Current tax liabilities (9.1) (4.4) (10.0)
Other liabilities 12 (5.6) (10.6) (11.7)
Lease liabilities 11 (10.1) (9.9) (9.7)
(184.2) (148.9) (176.4)
Net current assets 251.7 113.0 117.3
Total assets less current liabilities 957.8 767.4 807.0
Non-current liabilities
Retirement benefit obligations (4.9) (12.5) (4.9)
Borrowings 8 (320.6) (202.0) (188.2)
Lease liabilities 11 (50.2) (35.0) (38.6)
Other liabilities 12 (12.1) (0.7) (12.0)
Deferred tax liabilities (18.9) (16.9) (22.3)
Net assets 551.1 500.3 541.0
Equity
Share capital 6.3 6.3 6.3
Share premium 188.6 188.6 188.6
Translation reserve 25.9 3.8 12.1
Hedging reserve (0.1) (1.1) 0.2
Retained earnings 327.0 298.6 329.1
Total shareholders' equity 547.7 496.2 536.3
Minority interests 3.4 4.1 4.7
Total equity 551.1 500.3 541.0
Condensed Consolidated Cash Flow Statement
For the six months ended 31 March 2022
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2022 2021 2021
Note £m £m £m
Cash flow from operating activities 7 64.0 55.5 145.9
Interest paid, net (2.7) (2.3) (5.6)
Tax paid (19.9) (12.5) (24.2)
Net cash from operating activities 41.4 40.7 116.1
Cash flow from investing activities
Acquisition of businesses (net of cash acquired) (21.9) (397.3) (451.4)
Deferred consideration paid 12 (5.4) (6.1) (6.6)
Proceeds from sale of business 4.2 - 11.0
Purchase of property, plant and equipment (5.2) (2.0) (4.9)
Purchase of other intangible assets (0.5) (0.6) (1.3)
Proceeds from sale of property, plant and equipment 9.3 0.2 4.8
Net cash used in investing activities (19.5) (405.8) (448.4)
Cash flow from financing activities
Proceeds from issue of share capital (net of fees) - (0.6) (0.6)
Dividends paid to shareholders 13 (37.5) (37.3) (52.9)
Dividends paid to minority interests (0.2) (0.3) (0.3)
Proceeds from minority interests - 0.7 0.7
Lease repayments 11 (6.3) (5.5) (9.5)
Purchase of own shares by Employee Benefit Trust - - -
Notional purchase of own shares on exercise of options (2.8) (0.6) (0.6)
Proceeds from borrowings 8 141.7 226.0 215.3
Repayment of borrowings 8 (9.7) (6.3) (12.4)
Net cash from financing activities 85.2 176.1 139.7
Net increase/(decrease) in cash and cash 8 107.1 (189.0) (192.6)
equivalents
Cash and cash equivalents at beginning of period 24.8 206.8 206.8
Effect of exchange rates on cash and cash equivalents 0.6 8.0 10.6
Cash and cash equivalents at end of period 132.5 25.8 24.8
Alternative Performance Measures (note 2) 31 March 31 March 30 Sept
2022 2021 2021
£m £m £m
Net increase/(decrease) in cash and cash equivalents 107.1 (189.0) (192.6)
Add: Dividends paid to shareholders and minority interests 37.7 37.6 53.2
Proceeds from minority interests - (0.7) (0.7)
Acquisition/disposal of businesses (including net expenses) 19.5 399.4 444.6
Deferred consideration paid 5.4 6.1 6.6
Proceeds from issue of share capital (net of fees) - 0.6 0.6
Proceeds from bank borrowings, net (132.0) (219.7) (202.9)
Free cash flow 37.7 34.3 108.8
Cash and cash equivalents 132.5 25.8 24.8
Bank borrowings (342.0) (216.9) (206.2)
Net bank debt (209.5) (191.1) (181.4)
Notes to the Condensed Consolidated Financial Statements
For the six months ended 31 March 2022
1. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
Diploma PLC (the "Company") is a public limited company registered and
domiciled in England and Wales. The condensed set of consolidated financial
statements (the "financial statements") for the six months ended 31 March 2022
comprise the Company and its subsidiaries (together referred to as "the
Group").
The condensed information presented for the financial year ended 30 September
2021 does not constitute full statutory accounts as defined in section 434 of
the Companies Act 2006. Those statutory accounts have been reported on by the
Company's auditor and delivered to the Registrar of Companies. The report of
the auditor was (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006. Except where otherwise stated, the
figures for the six months ended 31 March 2021 were extracted from the 2021
Half Year Report, which was unaudited.
The Group's audited consolidated financial statements for the year ended 30
September 2021 are available on the Company's website (www.diplomaplc.com
(http://www.diplomaplc.com) ) or upon request from the Company's registered
office at Diploma PLC, 10-11 Charterhouse Square, London, EC1M 6EE.
1.1 Statement of compliance
The financial statements included in this Half Year Announcement for the six
months ended 31 March 2022 have been prepared on a going concern basis and in
accordance with UK-adopted International Accounting Standard 34, Interim
Financial Reporting and the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority. The financial statements do not include all of
the information required for full annual consolidated financial statements and
should be read in conjunction with the Group's audited consolidated financial
statements for the year ended 30 September 2021.
The Half Year financial statements were approved by the Board of Directors on
16 May 2022; they have not been audited by the Company's auditor.
1.2 Significant accounting policies
The accounting policies applied by the Group in this set of financial
statements are the same as those applied by the Group in its audited
consolidated financial statements for the year ended 30 September 2021, except
for the amount included in the Half Year Report in respect of taxation.
As in previous Half Year Announcements, taxation has been calculated by
applying the Directors' best estimate of the annual rates of taxation to
taxable profits for the period. In the audited consolidated financial
statements for the full year, the taxation balances are based on draft tax
computations prepared for each business within the Group.
1.3 Risk management
The Group's overall management of financial risks is carried out by a central
team under policies and procedures which are reviewed by the Board. 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 and how the Group manages them is included in the Annual Report
& Accounts for the year ended 30 September 2021. Further explanation of
the Group's principal risks and uncertainties and Going Concern are set out in
the narrative of this Half Year Report.
There is no material difference between the book value and fair value of the
Group's financial assets and financial liabilities as at 31 March 2022. The
basis for determining the fair value is as follows:
- Derivatives: Forward contracts and interest rate swaps are
designated as level 2 assets (in the fair value hierarchy) and fair-valued at
31 March 2022 with the gains and losses taken to equity. The fair value of the
forward contracts and interest rate swaps as at 31 March 2022 amounts to a
£0.1m liability (2021: £1.3m liability).
- Trade and other receivables: As the majority of the trade and other
receivables have a remaining life of less than 12 months, the book value is
deemed to be reflective of the fair value.
- Lease and other liabilities: The carrying amount represents the
discounted value of the expected liability which is deemed to reflect the fair
value.
1.4 Estimates and judgements
The preparation of these financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
The accounting estimates and judgements made by management in applying the
Group's accounting policies that have the most significant effect on the
amounts included within these consolidated financial statements, were the same
as those that applied to the Group's audited consolidated financial statements
for the year ended 30 September 2021 as set out on page 117 of the 2021 Annual
Report & Accounts.
2. ALTERNATIVE PERFORMANCE MEASURES
The Group uses a number of alternative (non-Generally Accepted Accounting
Practice ("non-GAAP")) financial measures which are not defined within IFRS.
The Directors use these measures for internal management reporting of key
performance indicators ("KPIs") in order to assess the operational performance
of the Group on a comparable basis against the Group's KPIs, as a key
constituent of the Group's planning process, as well as comprising targets
against which compensation is determined. As such these measures should be
considered alongside the IFRS measures. The following non-GAAP measures are
referred to in this Half Year Announcement:
2.1 Adjusted operating profit
At the foot of the Consolidated Income Statement, "adjusted operating profit"
is defined as operating profit before amortisation and impairment of
acquisition intangible assets or goodwill, acquisition expenses and
adjustments to deferred consideration (collectively, "acquisition related
charges"), the costs of a material restructuring or rationalisation of
operations and the profit or loss relating to the sale of businesses. The
Directors believe that adjusted operating profit is an important measure of
the operational performance of the Group. Adjusted operating margin is the
Group's adjusted operating profit divided by the Group's revenue.
2.2 Adjusted profit before tax
At the foot of the Consolidated Income Statement, "adjusted profit before tax"
is separately disclosed, being defined as adjusted operating profit, after
finance expenses (but before acquisition related finance charges) and before
tax. The Directors believe that adjusted profit before tax is an important
measure of the operational performance of the Group.
2.3 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. The Directors
believe that adjusted EPS provides an important measure of the earnings
capacity of the Group.
2.4 Free cash flow
At the foot of the Consolidated Cash Flow Statement, "free cash flow" is
reported, being defined as net cash flow from operating activities, after net
capital expenditure on tangible and intangible assets, and including proceeds
received from property disposals, but before expenditure on business
combinations/investments and proceeds from business disposals, borrowings
received to fund acquisitions and dividends paid to both minority shareholders
and the Company's shareholders. 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. Cash conversion is defined as free
cash flow over adjusted earnings after tax as per note 6.
2.5 Net debt to EBITDA
The Net debt to EBITDA ratio is an important metric for the Group and provides
a relevant measure of the gearing level of the Group. The Group's bank debt
covenants stipulate the methodology upon which the net debt to EBITDA ratio is
determined. Net debt is defined as total bank borrowings, net of cash. EBITDA
is defined as operating profit before adjusting items, depreciation and
amortisation and adjusted for the full year effect of acquisitions and
disposals in the preceding 12-month period.
2.6 Trading capital employed and ROATCE
Return on adjusted trading capital employed ("ROATCE") is defined as the
adjusted operating profit, divided by adjusted trading capital employed and
adjusted for the full year effect of acquisitions and disposals. "Trading
capital employed" is defined as net assets less cash and cash equivalents
("cash funds") and after adding back: borrowings (other than lease
liabilities); retirement benefit obligations; deferred tax; and acquisition
liabilities in respect of future purchases of minority interests and deferred
consideration. 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). The
Directors believe that ROATCE is an important measure of the profitability of
the Group.
3. BUSINESS SECTOR ANALYSIS
The Chief Operating Decision Maker ("CODM") for the purposes of IFRS 8 is the
Chief Executive Officer. The financial performance of the Sectors is reported
to the CODM monthly and this information is used to allocate resources on an
appropriate basis.
Sector information is presented in this Half Year Announcement in respect of
the Group's business Sectors, which is the primary basis of Sector reporting.
The business Sector reporting format reflects the Group's management and
internal reporting structure. The geographic sector reporting represents
results by origin. The Group's financial results have not, historically,
been subject to significant seasonal trends. In the year ended 30 September
2021, the Group earned 46.4% of its annual revenues and 44.8% of its annual
adjusted operating profits in the first six months of the year. This phasing
between the first and second half was partly impacted by the timing of
acquisitions which favoured the second half of the year.
Sector revenue represents revenue from external customers; there is no
inter-Sector revenue. Sector results, assets and liabilities include items
directly attributable to a Sector.
Revenue Adjusted operating profit
Operating profit
31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept
2022 2021 2021 2022 2021* 2021 2022 2021* 2021
£m £m £m £m £m £m £m £m £m
By Sector
Life Sciences 87.1 88.6 180.4 19.6 21.3 43.2 17.2 19.3 38.6
Seals 137.4 123.8 263.7 25.8 20.7 46.5 17.1 16.2 36.8
Controls 224.0 152.8 343.3 47.0 31.2 72.4 33.8 17.4 42.3
Corporate - - - (9.9) (6.6) (13.4) (9.9) (6.6) (13.4)
448.5 365.2 787.4 82.5 66.6 148.7 58.2 46.3 104.3
By Geographic Area
United Kingdom 84.0 67.1 142.5 5.6 5.8 10.5
Rest of Europe 79.8 79.7 166.5 15.4 15.4 31.9
North America 250.3 187.7 411.8 56.0 39.9 94.7
Rest of World 34.4 30.7 66.6 5.5 5.5 11.6
448.5 365.2 787.4 82.5 66.6 148.7
*Re-presented to include central corporate costs separately in line with
presentation at 31 March 2022 and at 30 September 2021. The corporate costs
are not considered to be an operating segment.
Total assets Total liabilities
Net assets
31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept
2022 2021 2021 2022 2021 2021 2022 2021 2021
£m £m £m £m £m £m £m £m £m
By Sector
Life Sciences 187.2 169.1 179.8 (31.7) (32.5) (30.2) 155.5 136.6 149.6
Seals 250.8 251.9 244.8 (69.2) (57.4) (58.4) 181.6 194.5 186.4
Controls 579.1 471.1 531.4 (78.7) (56.6) (68.1) 500.4 414.5 463.3
Corporate assets/(liabilities) 124.9 24.2 27.4 (411.3) (269.5) (285.7) (286.4) (245.3) (258.3)
1,142.0 916.3 983.4 (590.9) (416.0) (442.4) 551.1 500.3 541.0
In the six months ended 31 March 2022, the Group acquired LJR Electronics
("LJR"), which contributed £2.5m to revenue and £0.3m to adjusted operating
profit. For full details of the pro-forma contribution, see note 10. The
results of LJR are included within the Controls Sector and reported within the
geographic area of North America. Sector assets exclude cash and cash
equivalents, deferred tax assets and corporate assets that cannot be allocated
on a reasonable basis to a business Sector. Sector liabilities exclude bank
borrowings, 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 that cannot be
allocated on a reasonable basis to a business Sector are shown collectively as
"corporate assets/(liabilities)".
Capital expenditure Depreciation
31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept
2022 2021 2021 2022* 2021 2021
£m £m £m £m £m £m
By Sector
Life Sciences 2.9 0.9 2.3 1.3 1.2 2.6
Seals 1.1 1.4 2.5 1.3 1.4 2.9
Controls 0.8 0.3 1.1 2.2 2.1 4.1
Corporate 0.9 - 0.3 0.1 - 0.1
5.7 2.6 6.2 4.9 4.7 9.7
*A further £6.0m (2021: £5.4m) of depreciation was incurred on right of use
assets (note 11).
4. FINANCIAL EXPENSE, NET
31 March 31 March 30 Sept
2022 2021 2021
£m £m £m
Interest expense and similar charges
- bank facility and commitment fees (0.4) (0.3) (0.5)
- interest expense on bank borrowings (2.1) (2.0) (4.1)
- notional interest expense on the defined benefit pension scheme (0.2) (0.2) (0.1)
- amortisation of capitalised borrowing fees (0.1) - (0.3)
- interest on lease liabilities (1.1) (0.9) (1.8)
Net interest expense and similar charges (3.9) (3.4) (6.8)
- acquisition related finance charges (2.0) (0.4) (0.9)
Financial expense, net (5.9) (3.8) (7.7)
Acquisition related finance charges includes fair value remeasurements of put
options for future minority purchases (£1.0m), unwind of discount on
acquisition liabilities (£0.4m), and the amortisation of capitalised
borrowing fees on acquisition related borrowings (£0.6m). Further detail on
the interest charged on lease liabilities is included in note 11.
5. TAXATION
31 March 31 March 30 Sept
2022 2021 2021
£m £m £m
UK corporation tax 1.2 1.0 5.7
Overseas tax 15.2 9.5 21.2
Total tax on profit for the period 16.4 10.5 26.9
Taxation on profits before tax has been calculated by applying the Directors'
best estimate of the annual rates of taxation to taxable profits for the
period. The Group's adjusted effective rate of tax on adjusted profit before
tax is 25.1% (September 2021: 25.4%).
6. EARNINGS PER SHARE
Basic earnings per share
Basic earnings per ordinary 5p share are calculated on the basis of the
weighted average number of ordinary shares in issue during the period of
124,520,917 (2021: 124,463,520) and the profit for the period attributable to
shareholders of £35.6m (2021: £31.7m). Basic earnings per share is 28.6p
(2021: 25.5p). Diluted earnings per share is 28.5p (2020: 25.4p) and is based
on the average number of ordinary shares (which includes any potentially
dilutive shares) of 124,932,661.
Adjusted earnings per share
Adjusted earnings per share, defined in note 2, is calculated as follows:
31 Mar 2022 31 Mar 2021 30 Sept
2021
pence pence pence 31 Mar 31 Mar 30 Sept
per share per share per share 2022 £m 2021 £m 2021 £m
Profit before tax 52.3 42.5 96.6
Tax expense (16.4) (10.5) (26.9)
Minority interests (0.3) (0.3) 0.1
Earnings for the period attributable to
shareholders of the Company 28.6 25.5 56.1 35.6 31.7 69.8
Acquisition related charges and acquisition related finance charges, net of
tax
18.4 12.9 29.1 22.9 16.0 36.3
Adjusted earnings 47.0 38.4 85.2 58.5 47.7 106.1
7. RECONCILIATION OF OPERATING PROFIT TO CASH FLOW FROM
OPERATING ACTIVITIES
31 March 31 March 30 Sept
2022 2021 2021
£m £m £m
Operating profit 58.2 46.3 104.3
Acquisition related charges (note 9) 24.3 20.3 44.4
Adjusted operating profit 82.5 66.6 148.7
Depreciation/amortisation of tangible, other intangible assets and right of
use assets
10.9 10.1 20.7
Share-based payments expense 1.4 0.7 1.8
Defined benefit scheme expense (0.2) (5.3) (5.8)
Profit on disposal of assets (1.5) - (2.8)
Acquisition expenses paid (1.8) (2.1) (4.2)
Other non-cash movements - - 0.1
Non-cash items and other 8.8 3.4 9.8
Increase in inventories (19.2) (1.7) (13.5)
Increase in trade and other receivables (16.3) (17.7) (16.3)
Increase in trade and other payables 8.2 4.9 17.2
Increase in working capital (27.3) (14.5) (12.6)
Cash flow from operating activities 64.0 55.5 145.9
8. (NET BANK DEBT)/CASH FUNDS
The movement in (net bank debt)/cash funds during the period is as follows:
31 March 31 March 2021 30 Sept
2022 £m 2021
£m £m
Net increase/(decrease) in cash and cash equivalents 107.1 (189.0) (192.6)
Increase in bank borrowings (132.0) (219.7) (202.9)
(24.9) (408.7) (395.5)
Effect of exchange rates (3.2) 10.8 7.3
Movement in net bank debt (28.1) (397.9) (388.2)
(Net bank debt)/ cash funds at beginning of period (181.4) 206.8 206.8
Net bank debt at end of period (209.5) (191.1) (181.4)
Comprising:
Cash and cash equivalents 132.5 25.8 24.8
Bank borrowings:
- Revolving credit facility (188.8) (101.7) (95.1)
- Term loan
(157.1)
(118.1)
(113.9)
- Capitalised debt fees 3.9 2.9 2.8
(342.0)
(216.9)
(206.2)
Net bank debt at end of period (209.5) (191.1) (181.4)
Analysed as: £m £m £m
Repayable within one year 21.4 14.9 18.0
Repayable after one year 320.6 202.0 188.2
The Group has a debt facility agreement ("SFA") originally entered into on 13
October 2020. At 31 March 2022 the SFA comprised of an amortising term loan
for an aggregate principal of $140.8m (2021: $161.5m), a bullet term loan for
an aggregate principal of $66.0m (2021: nil) and a committed multi-currency
revolving credit facility for an aggregate principal of £255.0m (2021:
£135.0m). The SFA is due to expire in December 2024 and there is an option to
extend for a further 12-month period. Interest on the SFA is payable between
125-275bps above the applicable interbank or risk-free rate, depending on the
ratio of net debt to EBITDA.
At 31 March 2022, the Group had utilised £188.8m of the RCF (2021: £101.7m),
comprising £16.0m ($21.0m) of US dollars, £30.4m (€36.0m) of Euros and
£142.4m of sterling.
Total debt is £269.8m (2021: £236.0m) comprising net bank debt of £209.5m
(2021: £191.1m) and lease liabilities of £60.3m (2021: £44.9m). Bank
covenants are tested against net bank debt only.
9. GOODWILL AND ACQUISITION INTANGIBLE ASSETS
Acquisition
intangible
Goodwill assets
£m £m
At 1 October 2020 159.0 87.2
Acquisitions 94.8 269.7
Amortisation charge - (15.8)
Exchange adjustments (10.3) (20.2)
At 31 March 2021 243.5 320.9
Acquisitions 22.8 37.1
Disposals (3.8) -
Reclassification to held for sale (4.7) (1.5)
Amortisation charge - (17.3)
Exchange adjustments 2.9 5.7
At 30 September 2021 260.7 344.9
Acquisitions 4.2 9.7
Amortisation charge - (18.8)
Exchange adjustments 5.0 6.4
At 31 March 2022 269.9 342.2
Goodwill represents the amount paid for future sales growth from both new
customers and new products, operating cost synergies and employee know-how.
The acquisition intangible assets primarily relate to supplier relationships,
customer relationships, brands and patents and these assets will be amortised
over five to fifteen years.
Acquisition related charges of £24.3m (2021: £20.3m) are charged to the
Consolidated Income Statement. These charges comprise £18.8m (2021: £15.8m)
of amortisation of acquisition intangible assets, £3.9m (2021: £4.5m) of
acquisition expenses, and a £1.6m charge principally relating to the
recycling of cumulative foreign currency translation losses arising on the
disposal of Kentek Oy ("Kentek").
10. ACQUISITION AND DISPOSAL OF SUBSIDIARIES
Acquisition of LJR Electronics LLC
On 2 February 2022, the Group acquired 100% of LJR Electronics LLC ("LJR"), a
value-add distributor of connectors in the US. The consideration was £21.3m
($28.9m).
The provisional fair value of LJR's net assets acquired excluding acquisition
intangibles, related deferred tax, and cash is £7.5m following fair value
adjustments of £1.1m. The principal fair value adjustments relate to an
increase in provisions held against inventory and trade receivables of £0.8m
and £0.1m.
From the date of acquisition to 31 March 2022, LJR contributed £2.5m to
revenue and £0.3m to adjusted operating profit. If it had been acquired at
the beginning of the financial year, it would have contributed on a pro-forma
basis £7.5m to revenue and £0.9m to adjusted operating profit. However,
these amounts should not be viewed as indicative of the results that would
have occurred, if LJR had been completed at the beginning of the year.
Disposal of Kentek Oy
On 16 November 2021, the Group disposed of its 90% interest in Kentek Oy
("Kentek") for proceeds of £10.0m.
Asset held for sale
Assets held for sale (£2.9m) relates to one Life Sciences business that was
sold on 3 May 2022, as described in note 16.
11. LEASES - RIGHT OF USE ASSETS AND LEASE LIABILITIES
Right of use assets
Land & buildings Plant & machinery Motor vehicles IT & office equipment Total
£m £m £m £m £m
At 1 October 2020 28.5 0.4 2.1 0.6 31.6
Additions 24.9 0.1 1.6 0.3 26.9
Disposals (1.6) - (0.2) - (1.8)
Reclassification to held for sale (0.3) - (0.1) - (0.4)
Exchange adjustments (0.5) - (0.1) - (0.6)
At 30 September 2021 51.0 0.5 3.3 0.9 55.7
Depreciation (9.0) (0.1) (1.4) (0.3) (10.8)
At 30 September 2021 42.0 0.4 1.9 0.6 44.9
Additions 13.4 0.1 0.7 0.3 14.5
Reclassification to held for sale (0.3) - (0.4) - (0.7)
Exchange adjustments 1.1 - - - 1.1
At 31 March 2022 56.2 0.5 2.2 0.9 59.8
Depreciation (5.0) (0.1) (0.7) (0.2) (6.0)
At 31 March 2022 51.2 0.4 1.5 0.7 53.8
Right of use assets represent those assets held under operating leases which
IFRS 16 requires to be capitalised.
Lease liabilities
The movement in lease liabilities is set out below:
£m
At 1 October 2020 33.7
Additions 26.9
Disposals (1.9)
Lease repayments (11.3)
Interest on lease liabilities 1.8
Reclassification to held for sale (0.3)
Exchange movement (0.6)
At 30 September 2021 48.3
Additions 16.8
Lease repayments (6.3)
Interest on lease liabilities 1.1
Reclassification to held for sale (0.7)
Exchange movements 1.1
At 31 March 2022 60.3
Analysed as: £m
Repayable within one year 10.1
Repayable after one year 50.2
12. OTHER LIABILITIES
31 March 31 March 30 Sept
2022 2021 2021
£m £m £m
Future purchases of minority interests 5.0 4.3 5.2
Deferred consideration 12.7 7.0 18.5
17.7 11.3 23.7
Analysed as:
Repayable within one year 5.6 10.6 11.7
Repayable after one year 12.1 0.7 12.0
The movement in the liability for future purchases of minority interests is as
follows:
31 March 31 March 30 Sept
2022 2021 2021
£m £m £m
At 1 October 5.2 4.2 4.2
Minority interest on acquisition of subsidiary - - 0.9
Disposal of minority interest subsidiary (1.2) - -
Fair value remeasurements 1.0 0.1 0.1
At end of period 5.0 4.3 5.2
At 31 March 2022, the Group retained put options to acquire minority interests
of 10% held in M Seals and 5% in Techsil. During the period the Group disposed
of Kentek, where the Group retained a put option to acquire 10%. At 31 March
2022, the estimate of the financial liability to acquire the 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 31 March 2022.
Deferred consideration comprises:
31 March 31 March 30 Sept
2022 2021 2021
£m £m £m
Sphere Surgical - 0.8 1.0
CR Systems - 0.4 -
HSP - - 0.1
PDI 0.8 0.7 0.7
S&W - 3.4 3.5
FITT Resources 0.7 1.7 2.2
Biospecifix 0.4 - 0.4
Kungshusen 5.4 - 5.4
Techsil 1.1 - 1.1
AHW 4.3 - 4.1
12.7 7.0 18.5
The movement on deferred consideration during the period is as follows:
1 Oct 2021 Payments Foreign exchange 31 March 2022
£m Discount unwind Revaluation £m £m £m
£m £m
Sphere Surgical 1.0 - - (0.9) (0.1) -
HSP 0.1 - - (0.1) - -
PDI 0.7 - - - 0.1 0.8
S&W 3.5 - (0.5) (2.8) (0.2) -
FITT Resources 2.2 - - (1.6) 0.1 0.7
Biospecifix 0.4 - - - - 0.4
Kungshusen 5.4 0.2 - - (0.2) 5.4
Techsil 1.1 - - - - 1.1
AHW 4.1 0.2 - - - 4.3
18.5 0.4 (0.5) (5.4) (0.3) 12.7
13. DIVIDENDS
31 Mar 2022 31 Mar 2021 30 Sept 31 Mar 2022 31 Mar 2021 30 Sept
2021 2021
pence pence pence
per share per per
share share £m £m £m
Final dividend of the prior year, paid in January 30.0 30.0 30.0 37.5 37.3 37.3
Interim dividend, paid in June 15.0 12.5 12.5 18.7 15.6 15.6
45.0 42.5 42.5 56.2 52.9 52.9
The Directors have declared an interim dividend of 15.0p per share (2021:
12.5p) which will be paid on 10 June 2022 to shareholders on the register on
27 May 2022. The total value of the dividend will be £18.7m (2021: £15.6m).
No liability has been recognised on the balance sheet at 31 March 2022 in
respect of the interim dividend (2021: same).
14. EXCHANGE RATES
The exchange rates used to translate the results of the overseas businesses
were as follows:
Average Closing
31 March 31 March 30 Sept 31 March 31 March 30 Sept
2022 2021 2021 2022 2021 2021
US dollar (US$) 1.34 1.36 1.37 1.32 1.38 1.35
Canadian dollar (C$) 1.69 1.74 1.73 1.64 1.73 1.71
Euro (€) 1.19 1.13 1.15 1.18 1.17 1.16
Swiss franc (CHF) 1.23 1.23 1.25 1.21 1.30 1.26
Australian dollar (A$) 1.84 1.81 1.83 1.75 1.81 1.87
15. RELATED PARTY TRANSACTIONS
There have been no changes to the related party arrangements or transactions
as reported in the 2021 Annual Report & Accounts.
Transactions between Group companies, which are related parties, have been
eliminated on consolidation and are therefore not disclosed. Other
transactions which qualify to be treated as related party transactions are:
those relating to the remuneration of key management personnel, which are not
disclosed in this Half Year Report, but will be disclosed in the Group's next
Annual Report & Accounts; and transactions between the Group and the
Group's defined benefit pension plan, which are disclosed within the
Consolidated Cash Flow Statement.
16. POST BALANCE SHEET EVENTS
Acquisition of R&G Fluid Power Group Limited
On 12 April 2022, the Group announced the acquisition of R&G Fluid Power
Group Limited ("R&G"), a value-added distributor of a diverse range of
industrial, hydraulic and pneumatic products (including seals and gaskets),
for consideration of £100m. R&G is headquartered in Preston, and has a
geographical presence across the UK.
The transaction has been funded through existing cash resources and debt
facilities.
An initial accounting and fair value exercise will be completed in the second
half of the year.
Acquisition of Accu-Science Ireland Limited and Medilink Services (NI) Limited
On 10 May 2022, the Group completed the acquisition of Accu-Science Ireland
Limited and Medilink Services (NI) Limited (together "Accuscience"), a
market-leading life sciences and med-tech distributor in Ireland, for
consideration of £51m.
The transaction has been funded through existing cash resources and debt
facilities.
An initial accounting and fair value exercise will be completed in the second
half of the year.
Disposal of a1-envirosciences GmbH and a1-envirosciences Limited
On 3 May 2022, the Group disposed of 100% of a1-envirosciences GmbH and
a1-envirosciences Limited (together "a1-envirosciences") for £11.0m. At 31
March 2022, the net assets of a1-envirosciences have been classified as held
for sale (£2.9m).
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