• Earnings Growth: 23% increase with 19% returns in the half.

• Organic Growth: 9% in the half.

• Total Revenue Growth: Up 14% overall.

• Operating Margin: Increased by nearly 2 percentage points to 21.5%.

• EPS Growth: 23% increase to 18.2p.

• Cash Conversion: 78% conversion rate.

• Leverage: 1.1 times.

• Return on Capital: Improved to 19.1%.

• Operating Profit Growth: 25% increase to GBP157 million.

• Net Interest Expense: Increased to GBP14 million.

• Adjusted Profit Before Tax: Increased by 24% to GBP143 million.

• Dividend Increase: Proposed 5% increase to 18.2p per share.

• Free Cash Flow: GBP84 million.

• Net Debt: Decreased to GBP374 million.

• ROATCE: Achieved 19.1%, adding 110 basis points versus the first half of '24.

• Controls Organic Growth: 16% increase.

• Life Sciences Organic Growth: 6% increase.

• Seals Performance: Flat overall with modest improvement in Q2.

• Warning! GuruFocus has detected 3 Warning Sign with DPLMF.

Release Date: May 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Diploma PLC (DPLMF) reported a strong earnings growth of 23% with a return on capital of 19.1%, demonstrating effective compounding credentials.

• The company achieved 9% organic growth and a total revenue increase of 14%, driven by market share gains in aerospace, defense, energy, and data center markets.

• Operating margin improved by nearly 2 percentage points to 21.5%, contributing to a 23% increase in EPS.

• The company has a disciplined performance with 78% cash conversion and significant balance sheet headroom, with leverage at 1.1 times.

• Diploma PLC (DPLMF) upgraded its full-year expectations, forecasting 8% organic growth and a 22% operating margin, reflecting strong momentum into the second half.

Negative Points

• The Seals segment experienced flat growth due to ongoing market softness, particularly in manufacturing and construction sectors.

• Working capital increased by GBP38 million, primarily due to increased inventory following the acquisition of Peerless.

• Net interest expense rose to GBP14 million, driven by increased average debt from self-funded acquisitions.

• The tax rate increased to 24.5%, slightly higher than the previous year, impacting net earnings.

• The company faces challenges in the European market, particularly in the UK, with tough conditions in construction and agriculture sectors.

Q & A Highlights

Q: Can you discuss the impact of recent political changes in the US on customer activity and the outlook for your North American sales business? A: Jonathan David Thomson, CEO: We remain very positive about the US market, particularly in sectors like data centers and aerospace. We've seen some improvement in the trading environment, even in industrial markets. The potential for more business onshore in the US could benefit us, especially in North American Seals. The US remains our largest and most promising market.