Diploma PLC has released its preliminary results for the year ended September 30, 2023. The company reported a 19% increase in revenue, reaching £1,200.3 million, with organic revenue growth of 8%. Adjusted operating profit rose by 24% to £237.0 million, and adjusted operating margin increased by 80 basis points to 19.7%. Statutory operating profit reached £183.3 million, a 27% increase from the previous year. Free cash flow also saw significant growth, rising by 36% to £163.8 million, with a conversion rate of 100%. Adjusted earnings per share increased by 18% to 126.5p, while basic earnings per share rose by 19% to 90.8p. The company reduced its leverage to 0.9x and increased its total dividend per share by 5% to 56.5p. The return on average total capital employed (ROATCE) increased by 80 basis points to 18.1%.
Diploma PLC achieved excellent financial performance, driven by strong organic growth, disciplined cost management, and accretive acquisitions. The company invested £280 million in 12 quality acquisitions, supporting reported revenue growth of 19%. The adjusted operating margin improvement was attributed to the company's value-add proposition, operational leverage, and disciplined cost management. Diploma PLC demonstrated discipline in its financial performance, achieving a free cash flow conversion rate of 100%, reducing leverage, and increasing ROATCE. The company is confident in its guidance for FY24, expecting growth in line with its financial model and consistently high margins.
Diploma PLC's revenue diversification strategy contributed to its organic growth and increased resilience. The Controls segment saw an 11% growth, driven by international controls benefiting from structural tailwinds and market share gains in civil aerospace, defense, and energy markets. The Seals segment experienced a 5% growth, led by international seals and aftermarket performance in North America. The Life Sciences segment achieved 8% growth, with good growth resuming in the second half as hospital staffing and surgical procedures recovered.
The company's complementary acquisitions are expected to drive future organic growth. Diploma PLC made 10 small bolt-on acquisitions for £33 million, with an average EBIT multiple below 5x and accretive EBIT margins. Two strategic platform acquisitions were also made, addressing white space and providing strong organic growth potential. The company continues to practice portfolio management discipline, disposing of a non-core, lower-margin heating control business. Diploma PLC has a pipeline of potential acquisitions worth approximately £1 billion, diversified by sector, size, and geography.
Diploma PLC is scaling effectively for sustainable growth, making focused investments in talent, technology, and new facilities across its businesses. The company is evolving its structure, capability, and culture to support the development of the group. It has also delivered improvements against all its Delivering Value Responsibly targets.
Despite the challenging macro environment, Diploma PLC remains confident in its outlook for FY24. The company expects organic revenue growth of approximately 5%, with acquisitions announced to date adding approximately 6% to reported revenue growth. It anticipates a strong operating margin consistent with the previous year at around 19.7% and a free cash flow conversion rate of approximately 90%.