Good day, and welcome to the Diploma's Q3 trading update conference call. For your information, this conference is being recorded. At this time, I would like to turn the conference over to Johnny Thomson, Chief Executive Officer of Diploma. Please go ahead, sir. Thank you very much. Good morning, everyone, and thank you for joining our call. I'm here, as usual, with Barbara Gibbes. I'm gonna talk you through over the next few minutes the highlights of the quarter and the year so far. Then, of course, we'll do some Q&A at the end. I'll start with a quick reminder of our strategy, which is to build high quality, scalable businesses for organic growth. We drive this organic growth through focused diversification of our business revenues. We position them behind structurally growing end markets. We penetrate further in core developed economies, and we extend our product ranges to expand addressable markets. This drives organic growth, it builds scale, and it increases our resilience. Alongside this, we develop our value-added business model and our management structures and capability to sustain customer service and strong margins at scale. In this context, quarter three performance was strong. Organic growth 13% in the quarter and year to date 15%. That's been driven by the organic revenue initiatives I've just mentioned, continued positive demand, and some pricing. Growth, of course, has moderated slightly in the quarter against tougher comparators, but we're still seeing encouraging trends within the sectors very similar to the first half. Reported revenue growth of 26% reflects the contribution from a number of high-quality acquisitions. Acquisitions are, of course, critical to our future organic growth strategy. A few words on two strategically significant ones that we did in the quarter, Accuscience and R&G Fluid Power, which we updated you on at the half year. R&G Fluid Power is a business with great organic growth potential, which gives us scale in U.K. Seals and evolves our product capability. It also gives the opportunity to add growth through small bolt-on acquisitions. We did two small ones at low multiples for GBP 4 million in quarter three as an example. Secondly, Accuscience joined the group in May, a great business which further builds out life sciences in Europe and increases exposure to the high-growth diagnostics segment. More broadly, the M&A environment. There's some signs of cooling. Still a lot of money chasing quality assets, so more important than ever that we retain our discipline, which of course, as you would expect, we are doing. That said, the pipeline remains very active. Our operating margin is strong and as expected, driven by the benefits of our value-add service model and of course, lots of hard work on pricing. There's some pockets of improvement in supply chain that we see, but labor remains challenging. Inflation's still high, but probably more recently shifted from product inflation more towards labor inflation. Overall, we feel well positioned to continue to deliver our margin. To the outlook, we've had a great third quarter. We're not complacent, of course. The trading environment is likely to become more challenging, but our business model is resilient, and the strategy is only increasing that resilience. That resilience is built on three fundamental tenets. First of all, our revenue diversification that I mentioned at the start has resulted in increasingly shallower troughs through historic cycles. The strategy of revenue diversification will only make us more resilient. Secondly, we continue to improve our value add service model. That drives customer loyalty and therefore retention, stickiness. It also drives pricing power and therefore margins. Again, through recent cycles, our margins have held up very well. Finally, on resilience, we have a strong cash flow generation and balance sheet. We're not complacent, and we're certainly not immune, but we feel very well positioned for any tougher times ahead. Concluding comments, we've got a strong performance in the first nine months, and it means we're very confident in our full year guidance, which as a reminder, is low double-digit organic growth and reported revenue growth over 20%, operating margin around the top end of 18%-19% range, strong cash generation to drive net debt to EBITDA of around 1.5 x. That's it. I'll open it up now for questions. Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. We are now taking the first question from David Brockton from Numis. Please go ahead. Your line is open. Good morning. Can I actually ask three, please? The first question, I just wonder if you can give us a bit more of a feel for the sort of split between pricing and volume benefit to the business through the period, given that the pricing has become a bigger part of distribution companies more broadly recently. That's the first question. The second question just relates to some of the accelerating trends that seem to be within the business. I just wonder if you can just touch on what's driven the sort of increase in International Controls and again, you know. Also, as we look into next year, what sort of backlog looks like in Life Sciences. Then the third question just relates to R&G. You've done two small bolt-ons there, and I just sort of very intrigued to understand what the pipeline looks like and does the Diploma's ownership sort of help accelerate their plans? Thank you. Okay, thank you. I'll take them in reverse order if I may, David. Thanks for the questions, and I'll let Barbara answer on price and volume in a second. Starting with R&G, look, I mean, I think first of all, more broadly, the market for acquisitions, as I said a bit earlier, is probably valuations are cooling a little, I would say, from what we can see, which is obviously a good thing. And our pipeline looks very active. But as you can imagine, I'll just emphasize the fact that in an environment that we're in, and with the prospects ahead, we're obviously being incredibly disciplined in the way we approach acquisitions. R&G, more specifically, I think is a great example of what I hope we can do more of. You know, they have a great organic growth story and potential, and in fact, their organic growth since they joined the group has been fantastic. They are also able to to complement that with small regional product acquisitions that can complement that organic growth strategy in the future. If they can do these roll-ups, then it adds great value to the Diploma group. I mentioned, I think we've done now five since we bought them, two in this quarter, of around GBP 4 million at a very, very low multiple, 3x-4x, and complementing their organic growth strategy. If they can continue to do that, roll these businesses up at very low multiples and drive future organic growth, I think that adds great value to the group. Actually, we can see that start to happen in maybe some of our other businesses too. That roll-out strategy, I think is an exciting part of our overall acquisition strategy in the future. Your second question was about, I think accelerating trends. Look, I think, you know, as you can see from the nine months, we've had some great performances across sectors. International Controls, we've been working on diversifying for some time, and it's getting more into renewable sustainability, into technology spaces, into infrastructure spaces, and that's helping to support organic growth along with the recovery in civil aerospace, which has been pretty encouraging over the last six months or so. We continue, obviously, with International Controls also to build out their geographical presence. We did some acquisitions in the U.S. for them in the last month. Indeed, they've been building out their European platform organically too. Geographically, the trends in International Seals are really encouraging. They continue to add products as well. Back to my three buckets of a diversification, end market, geography and products, International Seals has been great. Windy City, as you know, continues to be a fantastic story. Copper has moderated somewhat, but volume has still been very good, margins very good and performance excellent. You know, great performance from International Controls and Controls more broadly. Seals, again, pretty exciting. We've seen some acceleration in infrastructure investment, particularly in the U.S., which has been great. We've also seen the benefits of our new facility in Louisville continuing to sustain market share gains in North America and therefore driving good growth. The R&G acquisition in International Seals is driving great organic growth. You know, there's some great trends across Seals, which we're really encouraged about as well. Again, in my three buckets of end market, geography and product. Life sciences, obviously, is slightly softer this year, as we talked about before. There's some fairly short-term reasons for that. Last year's ventilator sales, this year, healthcare systems are suffering from staff shortages. That's just held us back a little bit. We will be back into growth in quarter four. We're confident of that. More importantly, we're very, very excited about the future for life sciences. I mean, you know, I've said many times, we've got a big elective surgical backlog, which one way or another, public and private healthcare systems are going to have to work through. We've got increased investment into diagnostics, which we can already see happening. There's some great long-term trends there. Of course, on top of that, we can complement it with our own work on geographical and product extension, which we continue to do. Life sciences is a bit softer in the year, but equally as exciting as the others for the future. I think obviously we have to be aware of the outlook for next year. Clearly the kind of underlying trends across all of our sectors are very, very encouraging. I'll pass over to Barbara to talk about price and volume. Hi, David. Our organic growth rate was 15% for the nine months, and you can see that includes a moderating impact from the copper price as we are lapping year-on-year numbers, which are much closer to where they are now. That means that our sort of r emaining underlying organic revenue growth is double-digit, which is primarily driven by volume. There is price in there, but the main driver is the volume growth. Thank you very much, both. Thank you. We take our next question from Tom Truckle with Jefferies. Please go ahead. Your line is open. Yes. Hi all. Thank you. One question from me, which is really focusing on margins next year are expected to decline slightly, and they appear very strong for this year. I was wondering if you could just talk about why the margins are going backwards there. Appreciate there is operating leverage that should come through if there is indeed organic growth next year. As to behind that, is there any sort of investment that is causing that to go backwards beyond what the operational leverage should provide? Thank you. Hi, Tom. The margins are very strong, as you say, in the current financial year, and we expect those to come out the top end of the 18%-19% range that we have given. Now, at this trading update, I wasn't going to go out with our full year expectations for 2023. You also may want to bear in mind that some acquisitions, there's some mix impact in that. R&G is quite material. That's in Seals, and that will have some impact. We obviously like to have the flexibility to invest something in margin in order to accelerate our organic growth. We're not giving sort of fundamental guidance for the 2023 outlook at this update. Okay. Thank you. Sorry, just to follow up on that, are you able to say where that investment will be directed? Will that be in headcount or otherwise, or is it too early to say? Thanks. Look, overall, as we've talked about, we continue to develop our value add business model for scale. That means continuous investments over time, incremental investments over time in talent, in technology, in upgraded facilities, et cetera. That happens around the group incrementally over time, and they'll no doubt continue to be a little bit of that going into next year. I think you're getting a bit hung up on decimal points on a margin, you know, a year out from now. Quite frankly, our margins are incredibly strong. They're well above our financial model. The kind of guidance that's out there at the moment suggests that next year will be too. Let's not get too hung up about a few decimal points here and there. Overall, I think our margins are in good shape. Okay. Very clear. Thank you. Thank you. We take our next question from Henry Carver with Peel Hunt. Please go ahead. Your line is open. Thanks. Yeah, morning, guys. Just a quick one on the sort of organic revenue initiatives. Obviously they're, you know, they're bearing fruit this year. I just wondered how they evolve going forward. Is that something where you're picking relatively low-hanging fruit now, and we could expect them not to play as, sort of, significant a part in future years? Or is it something that is a continuous improvement project or, you know, gathers pace even as we go forward? Just any color on that will be great. Thanks. Yeah. I mean, you know, the more time goes on, Henry, thanks for your question, the more time goes on, actually, the more excited I get about it because, you know, the opportunities are not tactical or limited in any way. They're structural and long term. You know, you can think about it. Sorry. Hang on. It's still on mute, Jonathan. Sorry about that, everyone. Fire alarm here at our end. So yeah, I was just saying that I think the revenue diversification initiatives are structural and longer term. You know, look at the end markets type of exposure we're trying to get to. Trying to get more involved with, you know, whether it be infrastructure investment over decades, I guess, in places like the U.S. You know, data center, digital antenna rollouts, electrification rollout, these are long-term trends. Diagnostics investment, they're long-term trends. There's many more of these type of end market exposures that our businesses are getting involved with at a detailed level, which I'm really excited about. Geographically, you know, I still think we're really small in the bigger markets. That has no I don't see any, you know, medium-term horizon on that, whether it's the U.S., whether it's Germany and France, where we've got practically nothing. There's still masses of potential for us there in core home economies. Products, again, there's masses of scope. We've done some work on extending strategically into product ranges like specialty adhesives or with R&G, pneumatics and hydraulics. You know, we look at things, and we write down lists of product groupings that we think are suitable for us, and it's a long list. Look, I feel really excited about it. Whether it's end market, whether it's geography or whether it's products, all of our businesses have fantastic opportunities across all three. I think this is a real long-term sustainable organic growth story. That's great. Very clear. Thanks, John. Thank you. We take our next question from James Rose with Barclays. Please go ahead. Your line is open. Hi there. Good morning. I've got two, please. Which businesses do you have more forward visibility in? Are you seeing any pockets of slowdown anywhere at all? Secondly, the moderation you've seen in copper, given the recent copper price moves, does it become more of a drag in the fourth quarter and going into next year? Is it a potential drag on pricing or can Windy City hold on to it? Thank you. Okay. I'll let Barbara do copper in a second. Where do we have most visibility? Even though, you know, generalizing, we, you know, what do I look at? I look at some businesses on their run rates. You know, perhaps slightly more transactional value add businesses, Windy City Wire or North American Seals Aftermarket. We look at their daily run rates to see trends. I guess on the other side, I also look at order books in our, I guess, more OEM-based businesses or even Life Sciences, longer-term contract type businesses. These are the two kind of main data points that I look at. Obviously, the order books in OEM and Life Sciences give us a bit further visibility further out. You know, I look through January to the end of the quarter we just reported, things were very strong. As we come into July, there's nothing that we're seeing and that's of note that materially changes that. Now, you know, it doesn't mean we're complacent. Of course, at some point I would expect that things will slow a fraction. You know, the mood music would suggest so. At the moment, we continue to see decent trends across the business. As I've just been talking about with Henry's question, you know, we can continue to drive organic growth through our own diversification initiatives, too. No immediate signs as yet. Not complacent about future markets, but, you know, very positive about what we can do into the next year. Barbara. On copper. Hi, James. As you know, we've seen impact of the movement of the year-on-year copper prices a tailwind to organic throughout this year, which we've been very transparent about and called it out. That is now really moderating because those prices year-on-year are pretty close to each other. It's important to remember that Windy City Wire is a high growth margin business with a strong value add, and that's what drives their pricing power. They're not a copper trader. It's a part of their input cost, but not the majority at all. They have discretion as to how they command their pricing and the timing of that. The recent volatility doesn't mean the prices get put up and down. What we've been calling out in terms of our organic growth rate is the year-on-year movements. If that stays within certain tramlines, it's not going to be very material on our group numbers at all. What's important to remember is what's driving the impressive profit performance of Windy City Wire is their volume growth, and their value add, and they're posting double digits of volume growth for the nine months to date, and we're seeing strong trends. Great. Very clear. Thank you both. Thank you. Ladies and gentlemen, as a reminder, please press star one to ask a question. Star one on your telephone keypad. Thank you. We are taking our next question from Oscar Wahl with JP Morgan. Please go ahead. Your line is open. Yes. Good morning, Johnny and Barbara. I have two quick questions. The first one on cost inflation and wage inflation. Could you quantify the level of wage inflation you're seeing in the business and how that's trended during the nine months? The second question is, again, a bit more color on Windy City Wire. You've just talked about seeing double-digit volume trends. Could you talk about the outlook you see in Windy City Wire? If we think about a slowdown in some end markets in the U.S. around construction, how you see Windy City Wire from here? Thank you. Yeah. I'll answer that question on Windy City, and then maybe Barbara, you want to do the cost inflation one, that would be great. You know, Barbara just mentioned the growth in Windy City in the first nine months has been exceptional. In fact, the growth over the last two years has been exceptional. Even if you strip out the effect of copper pricing, their volume growth has been well into double digits. It's been way better than we could have expected. They're first of all behind some great structurally growing end markets, technology data centers, digital antenna, as I said, and that supports their growth. They've got a great value proposition to customers, which differentiates them and drives market share gains. On top of that, I think in the last 6-12 months, although it's difficult to quantify, I think their control of their supply chain has also driven market share gains against a competitor set who largely import from the Far East. I've no doubt there's been some benefits from that too. You know, as we look forward, you know, we can't expect them to continue to grow at these phenomenal rates. I mean, that's just crazy on the size of business. You know, of course it's, you know, stripping out copper again, it will moderate naturally. However, you know, don't forget the fact that they are in structurally growing end markets. While some construction might slow, a lot of work that they do is actually refurbishment as well, office refurbishment, building automation upgrades, et cetera. It's not always about construction for them. You've got the digital antenna data center bit. You've got refurbishments versus construction. You've got their value proposition and their differentiated position in the market. Will they grow at the rate they've been growing in the last year or two? Probably not. I'm very sure that they're gonna grow more than most. I feel confident about the way that they'll deliver in a tougher environment next year, if indeed that's what happens. The labor cost inflation, Oscar, we've certainly seen labor cost inflation over the last few months, and we continue to see it, and that's across all of the businesses and their geographies. I guess what's really important is that the value add model and the pricing power that we have, I mean, that doesn't just cover input costs, but it also covers what we're seeing in our admin costs. Hence we continue to deliver, and we are confident that we can continue to deliver strong margins going forward. From a margin perspective, it's taken into account. What's even more important is that we look after our workforce properly. I mean, labor shortages are very, very important, and we have high employee engagement. We make sure that the comp is right at the right time, and that's what's really important to deliver our growth plans going forward. Okay, great. Thanks, Johnny. That was very useful color. Thanks, Barbara. You can't quantify the level of cost inflation you're seeing? Well, it differs. I mean, it's a little bit higher. Okay. in the US than it would be in Europe or the U.K. Okay. Thank you very much, both. Thank you. As we have no further questions at this time, I would like to turn the call back over to the speakers today for any additional and closing remarks. Thank you. Thank you everyone for joining. We're pleased with the performance so far this year. We're making good strategic progress and driving future organic growth. If markets do get tougher, we believe we've got a resilient business model to support us through the coming months and years. Thank you very much for joining us, and we'll see you soon. Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.