13 May 2024
Strong first half, full year upgrade
Chief Executive Officer, Johnny Thomson, gives an overview of the Group's performance.
Organic revenue growth of 5%, volume-led with good momentum going into the second half
Double-digit reported revenue growth includes 8% from acquisitions and an adverse 3% impact of foreign exchange translation
Adjusted operating margin up 80bps to 19.6%, reflecting our value-add proposition; operational leverage; disciplined cost management; and accretive acquisitions
Delivered with discipline: ROATCE up 20bps to 18.0%; free cash flow conversion up 6ppts to 76% and leverage at 0.9x
c.284m invested in six quality acquisitions, including Peerless for c.£236m and PAR Group for £38m, which completed after the period end
Upgrading guidance: we now expect FY24 constant currency revenue growth of c.16% (comprising 6% organic growth and 10% from acquisitions), and an operating margin of c.20.5%. Strong underlying performance and recent acquisitions contribute equally to the upgrade to operating margin
Read the full announcement:
“Thank you to all my brilliant colleagues for their continued dedication and passion for serving our customers and driving our performance. We’ve delivered another strong first half with good volume-led organic growth in a more challenging market environment. Our momentum is encouraging going into the second half, underpinning our upgrade to full year guidance.”
Revenue diversification driving organic growth and increasing resilience
Controls +7%: Strong growth in International Controls with structural tailwinds and market share gains. Windy City Wire delivered sustained, volume-led growth in line with the Group average
Seals +1%: Resilient performance against a backdrop of customer destocking. Normal ordering patterns are starting to resume and we expect a stronger second half
Life Sciences +5%: End market dynamics are now largely normalised post-pandemic, underpinning strong performances in Canada and Australia
Complementary acquisitions driving future organic growth
Acquisition of US-based Peerless Aerospace Fastener LLC (Peerless) for c.£236m, extending our established position in aerospace specialty fasteners and accelerating organic growth through product and geographic expansion. It is expected to deliver 15% ROATCE and 8% EPS accretion in year one
Acquisition of UK-based Plastic and Rubber Group Holdings Limited (PAR Group) for c.£38m adds scale to R&G’s Seals & Gaskets division. It is expected to deliver 14% ROATCE and 1% EPS accretion in year one
Four small bolt-ons for £10m; average EBIT multiple around 4x; £10m of annual revenue; and year one ROATCE of over 20%
Strong M&A pipeline diversified by Sector, size and geography. Strong cash flow and balance sheet provide capacity for disciplined acquisitive growth
Scaling effectively for sustainable growth
Expansion of the "Leadership at Scale" management development programme
Three new state-of-the-art facilities opened to support future growth in the UK and Europe
Delivered improvements against all our Delivering Value Responsibly targets
Strengthened balance sheet through the refinancing of the Group’s facilities with a structured revolving credit facility (RCF) and debut US private placement (USPP) providing c.£770m of committed facilities with a blend of maturities out to 2036
Upgrading full year 2024 guidance
The momentum in our underlying business, combined with the contribution from recent acquisitions, drives an upgrade to previous guidance for FY24:
Constant currency revenue growth of c.16%, up 5ppts from previous guidance, comprising c.6% organic revenue growth and growth from acquisitions of c.10%
Strong operating margin of c.20.5%, up 80bps from previous guidance. Strong underlying performance and recent acquisitions contribute equally to the upgrade
EPS growth of c.15%, reflecting strong underlying performance and the contribution of acquisitions
Free cash flow conversion of c.90% and leverage of 1.3x