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

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 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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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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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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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 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

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

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ABOUT US CONTINUED

CHAIR’S STATEMENT

DAVID LOWDEN

CHAIR

DECENTRALISED

CUL TURE

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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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 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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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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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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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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CEO’S REVIEW CONTINUED

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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CEO’S REVIEW CONTINUED

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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CFO’S REVIEW

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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CFO’S REVIEW CONTINUED

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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TALENT REVIEW

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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TALENT REVIEW CONTINUED

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

DIPLOMA PLC ANNUAL REPORT 2024

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TALENT REVIEW CONTINUED

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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MARKET REVIEW

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

11%

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MARKET REVIEW CONTINUED

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

DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance Financial Statements

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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BUSINESS MODEL CONTINUED

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

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

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 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

DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance Financial Statements

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

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

DIPLOMA PLC ANNUAL REPORT 2024

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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 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

25 DIPLOMA PLC ANNUAL REPORT 2024

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OUR STRATEGY: SCALE

-7

+12

+15

538

787

1,013

1,200

1,363

2016.2

18.9

19.7

20.9

56.4

85.2

107.5

126.5

145.8

20113

103

100

101

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:

10% growth (at constant

currency)

Financial model:

20%+

Financial model:

Double-digit growth

Financial model:

90%

Financial model:

High teens

Five-year performance:

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

DIPLOMA PLC ANNUAL REPORT 2024

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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).

2227

2259

3.6

3.0

3.4

227,715

9,123

7,74 5

2260

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 CO

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

27 DIPLOMA PLC ANNUAL REPORT 2024

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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

28 DIPLOMA PLC ANNUAL REPORT 2024

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SECTOR REVIEW: CONTROLS

WHO

WE ARE:

WHAT

WE SELL:

WHERE

WE SELL:

WHO WE

SELL TO:

REVENUE BY PRODUCT

REVENUE BY GEOGRAPHY

INTERNATIONAL CONTROLS

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 WIRE

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

Industrial automation

Specialty adhesives

67%

North America

15%

United Kingdom

14%

Europe

Other

DIPLOMA PLC ANNUAL REPORT 2024

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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.

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%

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%

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.

DIPLOMA PLC ANNUAL REPORT 2024

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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.

31 DIPLOMA PLC ANNUAL REPORT 2024

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SECTOR REVIEW: CONTROLS CONTINUED

PEERLESS

AEROSPACE

A GREAT

STRATEGIC FIT

32 DIPLOMA PLC ANNUAL REPORT 2024

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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

DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance Financial Statements

SECTOR REVIEW: CONTROLS

CASE STUDY CONTINUED

HEADQUARTERS

Farmingdale,

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

34 DIPLOMA PLC ANNUAL REPORT 2024

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WHO

WE ARE:

WHAT

WE SELL:

WHERE

WE SELL:

WHO WE

SELL TO:

REVENUE BY BUSINESS

REVENUE BY GEOGRAPHY

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 SEALS

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 SEALS

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

DIPLOMA PLC ANNUAL REPORT 2024

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SECTOR REVIEW: SEALS CONTINUED

2024 HIGHLIGHTS

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%

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%

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.

DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance Financial Statements

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.

37 DIPLOMA PLC ANNUAL REPORT 2024

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SECTOR REVIEW: SEALS CONTINUED

DIPLOMA

AUSTRALIA SEALS

SOLVING

COMPLEX

CHALLENGES

38 DIPLOMA PLC ANNUAL REPORT 2024

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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

39 DIPLOMA PLC ANNUAL REPORT 2024

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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

40 DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance Financial Statements

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.

DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance Financial Statements

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

DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance Financial Statements

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.

43 DIPLOMA PLC ANNUAL REPORT 2024

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SECTOR REVIEW: LIFE SCIENCES CONTINUED

LIFE SCIENCES

AUSTRALASIA

LIFE SAVING

TECHNOLOGIES

44 DIPLOMA PLC ANNUAL REPORT 2024

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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

45 DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance 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

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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 disposals

(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.

DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate 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. 3 m 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 InformationCorporate 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

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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

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

Strategic Report Additional InformationCorporate 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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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.

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DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance 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

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

34%6%

51%

FY22: 198,882* CO

13%

25%9%

53%

FY23: 152,111 CO

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 acquisitions

. 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 CO

e 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 CO

e) 3,881 3,864 7,745

FY24 location-based (tonnes CO

e) 3,881 5,663 9,545

UK energy consumption: 3,181,062 kWh (total: 17,755,337 kWh).

7.6

5.7

FY22 FY23 FY24

1000 tonnes CO

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DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance Financial Statements

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

54 DIPLOMA PLC ANNUAL REPORT 2024

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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.

55 DIPLOMA PLC ANNUAL REPORT 2024

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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

Health and safety

Inventory

obsolescence

Key systems

failure

M&A activity

Cybersecurity

Talent &

capability

Product liability

Failure to deliver

major projects

Strategic

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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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

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

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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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

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

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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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.

b) Impact of these CRROs on business, strategy,

and financial planning.

c) Strategy resilience under various climate

scenarios

Risk management a) Processes for identifying and assessing

climate-related risks.

b) How we manage these risks.

c) Integration of these processes into overall

risk management.

Metrics and targets a) Metrics used to assess CRROs.

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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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.

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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DISCLOSURES (TCFD) CONTINUED

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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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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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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Strategic Report Additional InformationCorporate Governance 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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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

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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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 INVESTORSOUR 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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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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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/

DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate 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 PAGES

54-60 AND 84-89

74 DIPLOMA PLC ANNUAL REPORT 2024

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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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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

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.

ON PAGES 32-33

BOARD ACTIVITY

Strategy & execution 25%

Finance 20%

Operations 10%

Colleagues & culture 15%

Risk 15%

Governance 15%

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

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%

87.5%

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.

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GOVERNANCE AT A GLANCE

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 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

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

Remuneration

Audit

Nomination

Chair

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BOARD OF DIRECTORS

COMMITTEE MEMBERSHIP

Remuneration

Audit

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

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

THORBURN

September 2015

ANDY SMITH

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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AUDIT COMMITTEE REPORT

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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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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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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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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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

DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance 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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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

DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance Financial Statements

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

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

DIPLOMA PLC ANNUAL REPORT 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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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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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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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 Threshold

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 £6 37,50 0

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.

101

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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

Stretch

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

Stretch

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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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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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-ta rget: £ 1 67.2m

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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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

vested

number

Performance

element2

£000

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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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.

114 DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate 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

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.

115

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Strategic Report Additional InformationCorporate Governance Financial Statements

ANNUAL REPORT ON REMUNERATION CONTINUED

Directors’ interests in ordinary shares

As at 30 Sep 2024 As at 30 Sep 2023

Ordinary

Other

unvested

options

Options with

performance

measures

Ordinary

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.

116 DIPLOMA PLC ANNUAL REPORT 2024

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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

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.

117 DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate 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.

118

DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate 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 InformationCorporate 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 InformationCorporate 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

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 InformationCorporate 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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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

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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.

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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.

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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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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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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 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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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.

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DIPLOMA PLC CONTINUED

130 DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance 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

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DIPLOMA PLC CONTINUED

131 DIPLOMA PLC ANNUAL REPORT 2024

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CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2024

132 – DIPLOMA PLC ANNUAL REPORT 2024

		Adjusted 1	1	Total	Adjusted 1		Total
		2024	Adjustments	2024	2023	Adjustments 1	2023
	Note	£m	£m	£m	£m	£m	£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)	2 0 7. 4	237 .0	(53.7)	183.3
Financial expense, net	6	(2 7. 0)	(3.8)	(30.8)	(20.4)	(7. 3)	(2 7. 7)
Proﬁt before tax		258.0	(81.4)	17 6.6	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.

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2024

133 DIPLOMA PLC ANNUAL REPORT 2024

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 SEPTEMBER 2024

133 – DIPLOMA PLC ANNUAL REPORT 2024

		2024	2023
	Note	£m	£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)	(4 7. 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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 SEPTEMBER 2024

134 DIPLOMA PLC ANNUAL REPORT 2024

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134 – DIPLOMA PLC ANNUAL REPORT 2024

		Share	Share	Translation	Hedging	Retained	Shareholders’	Minority	Total
		capital	premium	reserve	reserve	earnings	equity	interests	equity
	Note	£m	£m	£m	£m	£m	£m	£m	£m
At 1 October 2022		6.3	188.6	88.8	3.2	37 5 .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)	12 4.1	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)	(7 7. 2)
At 30 September 2024		6.8	420.2	(16.0)	(1.2)	478.2	888.0	6.7	89 4.7

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2024

135 DIPLOMA PLC ANNUAL REPORT 2024

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135 – DIPLOMA PLC ANNUAL REPORT 2024

		2024	2023
	Note	£m	£m
Non-current assets
Goodwill	10	541.1	4 39 .1
Acquisition intangible assets	11	507. 8	52 0.1
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

		2024	2023
	Note	£m	£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		89 4.7	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		89 4.7	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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2024

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CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2024

136 – DIPLOMA PLC ANNUAL REPORT 2024

		2024	2023
	Note	£m	£m
Operating proﬁt		2 0 7. 4	183.3
Acquisition related and other charges		7 7. 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	2 5 7. 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	18 9.2
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		(2 94.8)	(270.9)

		2024	2023
	Note	£m	£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	57 9.5
Repayment of borrowings		(50 9.1)	(617.3)
Principal elements of lease payments		(16.0)	(13.9)
Net cash inﬂow from ﬁnancing activities		90.3	1 0 7. 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

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2024

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2024

137 – DIPLOMA PLC ANNUAL REPORT 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		Total	Adjusted		Total
	2024	Adjustments	2024	2023	Adjustments	2023
	£m	£m	£m	£m	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30

SEPTEMBER 2024

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138 – DIPLOMA PLC ANNUAL REPORT 2024

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	2023	2024	2023	2024	2023	2024	2023	2024	2023
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue – existing 1	595.3	568.4	478.6	419.0	221.9	212.9	–	–	1,295.8	1,200.3
Revenue – acquisitions 1	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 – existing 1	(347.7)	(332.4)	(234.0)	(205.7)	(122.6)	(119.9)	–	–	(704.3)	(658.0)
Cost of inventories sold – acquisitions 1	(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 – existing 1	144.0	136.6	87.1	79.0	46.8	43.2	(22.4)	(21.8)	255.5	237.0
Adjusted operating proﬁt – acquisitions 1	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 202

CONTINUED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED

139 – DIPLOMA PLC ANNUAL REPORT 2024

	Controls		Seals		Life Sciences		Corporate		Group
	2024	2023	2024	2023	2024	2023	2024	2023	2024	2023
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£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	2023	2024	2023	2024	2023	2024	2023	2024	2023
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR

ENDED 30 SEPTEMBER 2024

CONTINUED

140 DIPLOMA PLC ANNUAL REPORT 2024

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED

140 – DIPLOMA PLC ANNUAL REPORT 2024

4. GEOGRAPHIC SEGMENT ANALYSIS BY ORIGIN

					Non-current
	Revenue		Adjusted operating proﬁt		assets 1		Trading capital employed		Capital expenditure
	2024	2023	2024	2023	2024	2023	2024	2023	2024	2023
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
United Kingdom 2	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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

CONTINUED

141 DIPLOMA PLC ANNUAL REPORT 2024

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED

141 – DIPLOMA PLC ANNUAL REPORT 2024

Group employee costs, including key management

	2024	2023
	£m	£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	2023
	£m	£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	2023
	£m	£m
Non-Executive Directors	0.7	0.6
Executive Directors	3.1	2.7
	3.8	3.3

6. FINANCIAL EXPENSE, NET

	2024	2023
	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

CONTINUED

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142 – DIPLOMA PLC ANNUAL REPORT 2024

7. TAX EXPENSE

	2024	2023
	£m	£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	2023
	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

CONTINUED

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143 – DIPLOMA PLC ANNUAL REPORT 2024

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	2023
	pence	pence	2024	2023
	per share	per share	£m	£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	2024	2023	2023
	pence	pence	pence	pence
	per share	per share	per share	per share	2024	2023
	Basic	Diluted	Basic	Diluted	£m	£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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

CONTINUED

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144 – DIPLOMA PLC ANNUAL REPORT 2024

10. GOODWILL

			Life
	Controls	Seals	Sciences	Total
	£m	£m	£m	£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		Trade		Total
	relationships		names,		acquisition	Other
	and order	Supplier	brands and		intangible	intangible
	backlog	relationships	databases	Technology	assets	assets
	£m	£m	£m	£m	£m	£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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

CONTINUED

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145 – DIPLOMA PLC ANNUAL REPORT 2024

	Customer		Trade		Total
	relationships		names,		acquisition	Other
	and order	Supplier	brands and		intangible	intangible
	backlog	relationships	databases	Technology	assets	assets
	£m	£m	£m	£m	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

CONTINUED

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12. PROPERTY, PLANT AND EQUIPMENT

				Hospital
	Freehold	Leasehold	Plant and	ﬁeld
	properties	improvements	equipment	equipment	Total
	£m	£m	£m	£m	£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 &	Plant &	Motor	IT & office
	buildings	machinery	vehicles	equipment	Total
	£m	£m	£m	£m	£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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

CONTINUED

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	Land &	Plant &	Motor	IT & office
	buildings	machinery	vehicles	equipment	Total
	£m	£m	£m	£m	£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	2023
	£m	£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).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

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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)

Goodwill and intangible

assets

–

(60.8)

(63.4)

(60.8)

(63.4)

Retirement beneﬁt

assets/obligations

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

CONTINUED

148 – DIPLOMA PLC ANNUAL REPORT 2024

14. DEFERRED TAX

The movement on the net deferred tax liability is as follows:

	2024	2023
	£m	£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	2023	2024	2023	2024	2023
	£m	£m	£m	£m	£m	£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	2023
	£m	£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	2023
	£m	£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	2023
	£m	£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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

CONTINUED

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FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED

149 – DIPLOMA PLC ANNUAL REPORT 2024

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)

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE

YEAR ENDED 30 SEPTEMBER 2024

CONTINUED

149 – DIPLOMA PLC ANNUAL REPORT 2024

Trade receivables at 30 September, before loss allowance, are analysed as follows:

	2024	2023
	£m	£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	2023
	£m	£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	2023
	£m	£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	2023
	£m	£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	2023
	£m	£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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE

YEAR ENDED 30 SEPTEMBER 2024

CONTINUED

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FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED

150 – DIPLOMA PLC ANNUAL REPORT 2024

18. CASH AND CASH EQUIVALENTS

						2024						2023
	UK	US$	C$	Euro	Other	Total	UK	US$	C$	Euro	Other	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

CONTINUED

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151 – DIPLOMA PLC ANNUAL REPORT 2024

The Group’s maximum exposure to credit risk was as follows:

	Carrying amount
	2024	2023
	£m	£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	2023
	£m	£m
Expiring within one year	–	–
Expiring after one year (note 25)	389.9	234.1

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2024

CONTINUED

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED

152 – DIPLOMA PLC ANNUAL REPORT 2024

The Group’s ﬁnancial liabilities at 30 September are as follows:

	2024	2023
	£m	£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	2023
	£m	£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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30

SEPTEMBER 2024

CONTINUED

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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’).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2024

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154 – DIPLOMA PLC ANNUAL REPORT 2024

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	2023
	£m	£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	2023
	£m	£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:

			Discount			Foreign	30 Sep
	1 Oct 2023	Additions	unwind	Payments	Revaluation	Exchange	2024
	£m	£m	£m	£m	£m	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30

SEPTEMBER 2024

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155 – DIPLOMA PLC ANNUAL REPORT 2024

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

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156 – DIPLOMA PLC ANNUAL REPORT 2024

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	Fair value	Book value	Fair value	Book value	Fair value	Book value	Fair value
	£m	£m	£m	£m	£m	£m	£m	£m
Acquisition intangible assets 1	–	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		243.3 2		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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

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157 – DIPLOMA PLC ANNUAL REPORT 2024

Acquisitions revenue and adjusted operating proﬁt

From the date of acquisition to 30 September 2024, each acquired business

contributed the following to Group revenue and adjusted operating proﬁt:

							Pro forma
					Adjusted		adjusted
				Pro forma	operating		operating
		Revenue	Adjustments 2	revenue	Proﬁt	Adjustments 2	Proﬁt
	Acquisition date	£m	£m	£m	£m	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

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158 – DIPLOMA PLC ANNUAL REPORT 2024

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	2023
	£m	£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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

CONTINUED

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159 – DIPLOMA PLC ANNUAL REPORT 2024

25. NET DEBT

The movement in net debt during the year is as follows:

	2024	2023
	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE

YEAR ENDED 30 SEPTEMBER 2024

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160 – DIPLOMA PLC ANNUAL REPORT 2024

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	2023
	£m	£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	2023
	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

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161 – DIPLOMA PLC ANNUAL REPORT 2024

a) Pension asset included in the Consolidated Statement of Financial Position

	2024	2023
	£m	£m
Market value of Scheme assets:
Gilts	–	24.5
Insured Assets 1	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	2023
	£m	£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	2023
	£m	£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	2023
	£m	£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	2023
	£m	£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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

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162 – DIPLOMA PLC ANNUAL REPORT 2024

f) Analysis of movements in the present value of the Scheme assets

	2024	2023
	£m	£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	Members are assumed to take 0% of their
lump sum on retirement:	maximum cash sum (based on current
The weighted average duration of the deﬁned	commutation factors)
beneﬁt obligation is around 14 years (2023: 13
years)

Sensitivities

The sensitivities of the 2024 pension liabilities to changes in assumptions are as follows:

			Impact on pension liabilities
		Estimated	Estimated
		increase	increase
Factor	Assumption	%	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

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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	2023
	£m	£m
Assets of the Kubo Scheme 1	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	2023
	£m	£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	2023
	£m	£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	2023
	£m	£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)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

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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
		Estimated	Estimated
		increase	increase
Factor	Assumption	%	£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	2023
	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

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165 – DIPLOMA PLC ANNUAL REPORT 2024

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	1,200.3
Disposals / Exchange Rates impacts)
Acquisitions and Disposals 1	115.8	10
Basis for organic growth impact	1,316.1
Organic growth 2	81.7	6
Exchange rates 3	(34.4)	(3)
September 2024 Reported revenue	11,,336 63 3..44

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:

		2024	2023
	Note	£m	£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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

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166 – DIPLOMA PLC ANNUAL REPORT 2024

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.

		2024	2023
	Note	£m	£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 earnings 1	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.

		2024	2023
	Note	£m	£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 adjustments 1		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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30

SEPTEMBER 2024

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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.

		2024	2023
	Note	£m	£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 202

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 202

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.

GROUP ACCOUNTING POLICIES

FOR THE YEAR ENDED 30 SEPTEMBER 202

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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.

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175 – DIPLOMA PLC ANNUAL REPORT 2024

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 202

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PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2024

176 – DIPLOMA PLC ANNUAL REPORT 2024

Note

2024

£m

2023

£m

Fixed assets

Investments

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

(318.7)

–

Net assets

667.7

617.7

Capital and reserves

Share capital

6.8

Share premium

420.2

Retained earnings

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

capital

£m

premium

£m

Retained

earnings

£m

Total

shareholders’

equity

£m

At 1 October 2022

6.3

188.6

138.1

333.0

Total Comprehensive Income

–

122.8

Shares Issued

0.5

231.6

–

232.1

Dividends paid

–

(70.5)

Settlement of LTIP awards

–

0.3

At 30 September 2023

6.8

420.2

190.7

617.7

Total Comprehensive Income

–

126.8

Dividends paid

–

(76.8)

At 30 September 2024

6.8

420.2

240.7

667.7

PARENT COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 202

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 202

PARENT COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2024

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NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2024

177 – DIPLOMA PLC ANNUAL REPORT 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.

PARENT COMPANY ACCOUNTING POLICIES

FOR THE YEAR ENDED 30 SEPTEMBER 202

178 DIPLOMA PLC ANNUAL REPORT 2024

Strategic Report Additional InformationCorporate Governance Financial Statements

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2024 CONTINUED

178 – DIPLOMA PLC ANNUAL REPORT 2024

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

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.

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 202

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

Strategic Report Additional InformationCorporate 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 Seals AB

(90% owned)

M Seals UK (Technical Distribution) Limited

Diploma (Tianjin) Trading Co. Limited V

FPE Seals Limited

M Seals UK (Engineered Seals Division) Limited

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 Limited

2 & (98% owned)

R&G Investments Limited

2 & (98% owned)

One Stop Fluid Power Limited

2 & (98% owned)

Pearson Hose & Hydraulics Limited

2 & (98% owned)

Northern Hose & Hydraulics Limited

1 & (98% owned)

Exeter Hose & Hydraulics Limited

2 & (98% owned)

North Devon Hose & Hydraulics Limited

2 & (98% owned)

Pressurelines Hose & Hydraulics Limited

2 & (98% owned)

Somerset Hose & Hydraulics Limited

2 & (98% owned)

West Cornwall Hose & Hydraulics Limited

2 & (98% owned)

Pearson Hydraulics Limited (previously Hose & Hydraulics

Group Limited)

2 & (98% owned)

Henry Gallacher Limited

2 & (98% owned)

Registered office address*

Fluidair Power Limited

2 & (98% owned)

GHS Limited

2 & (98% owned)

Global Hydraulic Services Limited

2 & (98% owned)

Pennine Pneumatic Services Limited

2 & (93.1% owned)

Compcon Limited

2 & (93.1% owned)

Norman Walker (Machinery) Limited

2 & (93.1% owned)

Rubberfast Limited

2 & (98% owned)

Rubberlast Group Limited

2 & (98% owned)

Hydraulic & Offshore Supplies Limited

2 & (98% owned)

Lancashire Hose and Fittings Limited

2 & (98% owned)

Hyphose Limited

2 & (98% owned)

AMG Sealing Limited

2 & (98% owned)

Hydraproducts Limited

2 & (98% owned)

Century Hose & Couplings Limited

2 & (98% owned)

Flexicon Industrial Supplies Limited

2 & (98% owned)

Integraflex Limited

2 & (98% owned)

Intrico Products

1 & (98% owned)

Grimsby Hydraulic Services Limited

2 & (98% owned)

Pneumatic Services Limited

2 & (93.1% owned)

AMG (Brighouse) Limited

2 & (98% owned)

Millennium Coupling Company Limited

2 & (98% owned)

Hydraulic Megastore Limited (previously Fluid Power

Products Limited)

1 & (98% owned)

Industrial Hose & Pipe Fittings Limited

2 & (98% owned)

Millennium Engineering (2012) Limited

2 & (98% owned)

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 Limited

2 & (98% owned)

Lantech Solutions Limited

2 & (98% owned)

Fluid Power Services Limited

2 & (98% owned)

Hedley DMB Limited

2 & (98% owned)

Registered office address*

Hedley Hydraulics (Holdings) Limited

2 & (98% owned)

Hedley Hydraulics Limited

2 & (98% owned)

Hedley Connectors Limited

1 & (98% owned)

Hex Technology, LLC AQ

Ecohydraulics Limited

1 & (98% owned)

Abbey Hose Company Limited

2 & (98% owned)

Aquarius Plastics Ltd

2 & (98% owned)

Fast Gaskets and Parts Limited

2 & (98% owned)

Mountford Rubber & Plastics Limited

2 & (98% owned)

Plastic and Rubber Group Holdings Limited

2 & (98% owned)

Plastic and Rubber Group Limited

2 & (98% owned)

R&G Bidco No1 Limited

2 & (98% owned)

PTFEFLEX Ltd

2 & (98% owned)

R&G Fluid Power Group (Hydraulics Division) Limited

(previously Pearson Hydraulics Limited)

2 & (98% owned)

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 InformationCorporate 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 Limited

Sommer GmbH G

Filcon Electronic GmbH H

Gremtek SAS O

Gremco UK Limited

Gremtek GmbH

Ascome SARL O

Cablecraft Limited

Krempfast Limited

IS Group (Europe) Limited

FS Cables Limited

FSC Global Limited

Shoal Group Limited A

Specialised Wiring Accessories Limited

M-Tec Limited

1 & (95% owned)

Techsil Limited

2 & (95% owned)

Glueline Limited

1 & (95% owned)

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

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) Limited

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 Limited

Diploma Asia Holdings Limited A

Diploma Australia Holdings Limited

Diploma Canada Holdings Limited

Diploma Overseas Limited A

Diploma Europe Holdings Limited A

Williamson, Cliff Limited

Diploma One Limited

Diploma Two Limited

Newlandglebe Limited

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 Limited

2 & (95% owned)

Techsil Holdings Limited

2 & (95% owned)

R&G Fluid Power Holdings Limited

R&G Fluid Power Group Limited

2 & (98% owned)

M Seals UK Limited

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

181

DIPLOMA PLC ANNUAL REPORT 2024

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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

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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

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

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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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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

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SHAREHOLDER INFORMATION

ADVISORS

CONTACT DETAILS

FIVE YEAR RECORD

1 – DIPLOMA PLC ANNUAL REPORT 2024

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 charges

(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

liabilities

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 ﬂow

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 earnings

145.8

126.5

107.5

85.2

56.4

Free cash ﬂow

147.7

126.3

96.7

87.4

64.0

Dividends

59.3

56.5

53.8

42.6

30.0

Total shareholders’ equity

662.2

668.2

531.2

430.5

423.1

Dividend cover

2.5

2.2

2.0

1.9

Ratios

Return on adjusted trading capital

employed (ROATCE)

19.1

18.1

17.3

17.4

19.1

Adjusted operating margin

20.9

19.7

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.

FIVE-YEAR RECORD

186 DIPLOMA PLC ANNUAL REPORT 2024

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