Good day, and welcome to the Diploma Q1 trading update call. Today's conference is being recorded. I will now hand over to Johnny Thomson, Chief Executive. Please go ahead. Good morning, everyone, thanks for joining us on our quarter one update call. I'm here with Chris Davies, our CFO. The agenda for this morning, I'll say about five minutes worth of comments on our strategy on the quarter one performance, a few words on the outlook at the end, of course, we'll do questions after that. To start with a quick reminder of our strategy, which is to build high quality, scalable businesses for sustainable organic growth. We do that by focusing on diversifying our specialized business revenues to drive organic growth, to build scale and increase resilience. That diversification strategy entails driving great exposure to high growth end segments, penetrating further our core geographies, and expanding addressable markets with new product. Alongside that, we're also progressing our scaling journey. We're developing the business's operating models so they can execute their value add customer proposition at scale. That value add model drives for us customer loyalty, and therefore share of wallet. It drives for us reputation and therefore market share potential, and of course it drives for us pricing power and margins. At the same time, we're building the structure, the capability and culture of the group for sustainable delivery. Together, the strategy therefore will continue to deliver in the future on the group's long-term excellent track record of compounding 15% EPS growth. Now the first quarter. We're very pleased with another strong quarter for us. Organic growth was 10%. The demand environment remains largely positive. We're seeing encouraging trends across all the sectors, similar to what we saw in the old year. We continue to drive the organic revenue diversification initiatives I've just been talking about. We come into quarter two, continuing to see very, very good trading. We feel very positive about growth, organic growth. Reported revenue growth was 30%. Another very good, a very good number reflecting, again, the contribution from the high quality acquisitions we did last year, particularly R&G and Accuscience. We've got some FX tailwind in there too. A few words on the M&A environment. As we said in November, market conditions mean it's more important than ever for us that we retain our discipline, and we have done. We don't feel under pressure to acquire businesses because of the great organic growth potential we have. Having said that, we continue to do the small stuff, the Diploma style deals which support organic growth. We did 5 in the second half of last year, if you remember from our November update. In quarter two, we did two small, GBP 7 million, but very, very attractive valuations. We want to expand this small deal approach across more of our business lines in the future. The immediate pipeline for the next few months looks encouraging. Actually, as we step out of that and into slightly bigger medium-sized deals for us, the pipeline is also surprisingly active. Our operating margin in the quarter is strong and consistent with the guidance. As we've said to you before, we continue to see the benefits to margin of scale. We continue to drive performance activity, which helps us to see off operational disruption and inflation. As per our margin formula, we reinvest some of those upsides into the scaling activity to sustain the model that I talked about a little earlier. A very strong quarter, and we're pleased with it. In terms of the outlook, you know, it's been a strong start to the year, but we're not complacent about the potential for a tougher environment ahead. We feel the model is resilient, and the strategy makes us more so. Continued revenue diversification, of course, brings with it resilience. The value add servicing components to our model supports pricing power and margins through cycles. We have very strong cash flow dynamics as well. We feel the model is resilient. As I said, it's early days, but a strong first quarter performance underpins our confidence in the full year guidance that we set out in November, which is double-digit revenue growth, mid-single digit organic, half 1 weighted +6%-ish from acquisitions, and a strong operating margin in the range of 18%-19%. A good start and reinforcing our guidance for the full year. I'll take your questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question from the queue, it's star two. Again, please press star one to ask a question over the phone. We will pause for just a moment to allow everyone to signal for questions. We will take our first question from James Rose from Barclays. Please go ahead. Hi there. Good morning, everyone. Just two for me, please. First of all, could you give us an indication of volume and price within that 10% organic, please? Secondly, could you talk through Controls in a bit more detail? Presumably, volume's still very strong in Windy City despite the tougher comps. Thank you. Volume and price. Well, the 10% is mostly volume, a little bit of mix and a little bit of price in there as well, obviously. I feel like most of our significant pricing increases from a supply chain and products perspective were quite a long time ago now, and we're kind of lapping beyond that. Price is becoming a lower component of our growth, albeit with still some price to cover wage inflation. What's really encouraging therefore is that we're still seeing very, very good volume growth, which I think is partly supported by an encouraging demand environment. But I think mostly driven by the activity that we're driving across the sectors to diversify and scale up the businesses. We feel really, really encouraged about that. From a Controls perspective, look, I mean, last year's organic growth in Controls was 24%, which was, you know, an exceptional performance. It's not growing in the first quarter by quite that amount, not because anything has changed from a, you know, from a trading perspective, you know, maybe just a little bit tougher comparators. The trading is still very, very strong in Controls. Windy City Wire, consistent with the way it finished last year, which is really, really encouraging, of course. Also, you know, as we've said to you before, one of the advantages to the diversification is that, you know, we've got some great end segment exposures. The international Controls business continues to benefit from the likes of exposure to energy, to aerospace, to defense, and even, as I said, in November, to electrification and some of these newer, end segments we're looking at. There's great structural growth trends which are supporting, you know, consistently high growth across the Controls businesses. Very clear. Thank you. The next question comes from Sylvia Barker from J.P. Morgan. Thank you. Hi, morning, everyone. A similar question to Controls. I guess if you can just talk about the other two businesses, maybe relative to how they did last year and what you're seeing by region as well within those. Thank you. Okay. We'll talk about, you know, I think I've just talked about Controls. We're talking about the other two. I mean, Seals, very, very similar. I mean, last year, you have to remember we're only two months on from when we last talked to you, so not a lot has changed really. Last year, we did organic growth in Seals of 14%, so, you know, a very, very pleasing number. We're still seeing very, very high growth rates in Seals, which is fantastic. The work that we've done in North America with Louisville to transition to a new distribution facility is continuing to support market share gains in North America. Our new acquisition in the U.K., I say new, a year ago, R&G, has seen fantastic organic growth since it came into the group in April-May time, that continues to flourish into the quarter. We're seeing pretty strong performances across the rest of Seals. Still very good growth rates there. Life Sciences, as we've as we've talked about, was slower last year, mainly driven by or entirely driven by much fewer surgical procedures across international healthcare systems. I think, as I said in November, we expected a quarter or two of continued sluggishness, let's say. You know, Life Sciences has been broadly flattish in the first quarter, as absolutely as we expected. What we do expect now is to see that starting to tick up. The surgical procedures are improving. They're not at pre-COVID levels yet, but they are improving, which is encouraging. Therefore, our growth rates coming into quarter two are starting to tick up. I would expect by the time we get into certainly the second half, that Life Sciences will be a fantastic contributor to the group's full-year growth. Don't forget also, longer term, we're very excited about it because of the backlog of surgical procedures, which we'll have to unwind over the coming years. But also because importantly of the increased investment into the diagnostics space, which supports the other half of our, of our healthcare businesses. You know, I think we're starting to get into a place now where Life Sciences is gonna be a big contributor to growth, short and long term. Very helpful, thank you. Just my second one, could you maybe provide a rough picture, I guess, broadly, for the various impacts on the margin year-on-year in full year 2023 versus 2022 in those buckets, if we think about, I guess, any potential negative impact year-on-year from pricing becoming just a little bit less prominent, compared to operating leverage, compared to, I guess, the small drag from your reinvest as well? Well, okay. I mean, we're dancing on the head of a pin a little bit here. We've done two years' worth of just under 19% margin. Through those two years, of course, with the extremities of particularly supply chain and products inflation, we've managed to maintain our margin through our pricing activity. Our pricing activity is supported, of course, by the value add proposition and what that gives us in terms of customer loyalty, therefore supporting our ability to be able to pass on price. My comment about less price is not a factor of the fact that we're gonna under recover. It's just the fact that inflation is going down. You know. There will be less inflation, but that does. Less pricing, but that doesn't mean that that has an effect on our margin. Actually, we've, I think, quoted here 18%-19%, so broadly, we're expecting consistent margins, strong margins going into the year ahead. You know, perhaps you're a little newer to our story, so, you know, just to reiterate the margin formula, of course, we see off inflation with price. But longer term, the formula says that the benefits of scaling our business will flow to margin. The performance improvement from our action will flow to margin, but we will incrementally and quietly reinvest those upsides into the longer term development of our businesses as they scale. And therefore, we seek to maintain high margins over the long term. And that's really the way we see margin. I don't think there's anything different in this year's margin from that longer term perspective. Perfect. Thank you very much. As a reminder, to ask a question, please press star one. We'll take the next question from David Brockton from Numis. Good morning. Can I ask a couple around acquisitions, please? Firstly, I think you touched on the fact that you want to expand the small deal approach across the business. I guess you were sort of referring to how successful R&G is performing there. Are there any other businesses that sort of could naturally replicate that and any changes you need to make elsewhere across the business? That's the first question. Thanks. Yeah, that's a great question, and we're quite excited about it really, because I guess it's about as the businesses get bigger, they build the capability to be able to do the very, very small stuff for themselves, stuff that may be at a Diploma PLC level, we wouldn't necessarily see or have the resource to get to. That means, as those businesses build capability, it gives us access to those smaller deals, and allows them to accelerate their growth strategy. Generally speaking, it allows us to do at very, very low multiples and therefore, fantastic returns. RNG have come with a track record of being able to do that and have bought a number of very small businesses since we acquired RNG in April, so that's exciting. We've been doing it, or say we have been doing it. We've done one, I think, in TECHSiL, our specialty adhesive business. If you remember, that was a product adjacency that we're building out in Controls, and therefore, to be able to add to it is exciting. They've got more in their pipeline that they can do. There are, I think, I can think of the top of my head, there are two or three other businesses that over the next six months, I think can replicate that. Of course, over time, we would carefully like to expand that capability into more of our businesses. It's something, of course, that we have to do with some care, some caution, and some oversight to make sure that we have the capability to get it right. you know, we'll build out gradually over time, but I think it would be great for us if, you know, that level of very small deals could just increase in volume over time. That would be a huge value driver for the group's future. Great. Thank you. The second question sort of almost relates to that. Presumably, as you develop that capability, the sort of competition for these deals is less. But I just wondered more broadly, if you could just talk about, you know, how the sort of competitive landscape for M&A is looking at the moment... Yeah. given the sort of the changes in interest rates, et cetera. Thank you. Yes, yes. Well, at that very small level, I mean, generally, you know, we're talking about deals in the GBP 5 million sort of bracket, maybe between GBP 0 and GBP 10. We're talking about very, very small stuff, and they will almost entirely be exclusive, you know, one-on-one processes. That's that. You know, to your broader question, you know, I suppose, you know, we talked about it a bit in November, you know, debt markets, et cetera. Will it affect valuations? Will there be less deal processes, et cetera? I think the answer to that is, you know, there probably has been a little bit less, but I suppose we've been quite surprised by how much activity there still is. You know, our pipeline in that kind of, I guess, I don't know the right words, but medium-size for us, let's say GBP 0-100 million or something around that, GBP 0-150 million. In that kind of medium-size sweet spot, the pipeline is surprisingly active. You know, one of the challenges here is that everyone automatically relates debt markets must equal cheaper deals. The reality is that, you know, yes, there might be a turn or maybe two here and there, but great businesses are not gonna go on the cheap. I'm not gonna sit and promise that we'll do deals, and they'll be half the multiple because I think that would be churlish. Might they be a little cheaper than they were a year ago? I would hope so. I think it's more about the pipeline of activity. As I say, I've been surprised that the pipeline is as active as it is. Thank you very much. The next question comes from Daniel Cowan from HSBC. Good morning, everyone. I just have a question about, I guess, the how you sort of see the U.S. construction outlook. You know, there's a lot of talk about some slowdowns in some areas, but there's huge amounts of investment coming through in, in other areas in non-non-residential construction. How do the guys at Windy City Wire think about that? Are they licking their lips at the prospect of some of these big infrastructure projects coming through? Is it not relevant at all? You know, could you just perhaps give us an idea of how we should think about what's going on in the U.S. and with all of these various government-driven investment programs and how that might help you in both Controls and I guess also in Seals? Yeah. I mean, I guess it's quite a challenging one to call, isn't it, just from a market perspective. Mm. I mean, increasingly, we read more positive news than negative about the U.S. economy in general. You know, I'm no economist, just to make this clear, but I suppose the kind of There seems to be a bit more talk about softer landings than harder landings in recent times. From a construction perspective, you know, I hear people talking about residential being slower versus commercial still being very, very, very strong. I think the point for us is really, it's a little bit Windy City. Although Windy City tends to be a bit more into refurbishment of, you know, automated office facilities. From a pure construction perspective, it's a bit more about our Seals business in the U.S. The Seals business is still growing very, very well. You know, will the residential market cool off a little bit, and could that have an effect on mobile machinery repair? Maybe. To your point, we still see very, very good levels of activity within the repair shop market, very strong. Mm-hmm. We feel that there has to be, and there is already starting to be some impact from the projects driven out of the Infrastructure Bill. It's quite difficult for us to see through the repair shop into what the end market is actually doing. We certainly feel that there are some benefits to that. That particular business in North America is still growing very, very strongly. You know, I don't know what the cycle is gonna look like, but I do think there are some favorable market aspects like that Infrastructure Bill, which can keep the end market buoyant. Don't forget, on top of that, we've got our own activity to keep driving growth as well, particularly the market share gains that we can drive in across different regions of the U.S. Gotcha. Thanks so much. The next question comes from Kean Marden from Jefferies. Thanks. Morning, all. I've got a couple of quick ones on Life Sciences, if I may. I appreciate it can be a lumpy business, and this is just one quarter. If you can give a bit of insight into how much the delayed shipments impacted the organic revenue growth for that business in the first quarter and just confirm that, you know, that all came back in January, that would be helpful. Johnny, Sodexo have flagged that their retail sales in hospitals picked up in their November quarter, which suggests at least for their business that maybe surgical procedures or visits to hospitals has been picking up. Is there a reason why you wouldn't necessarily be seeing that in your Life Sciences business at the moment, and why it may be delayed by a quarter or two? Then just a quick question on headcount. With labor markets easing a little bit, are there any parts of the business where you feel that resourcing constraints are now lifting, and that's being helpful for you? Thanks. I'm gonna take them in reverse order, if that's okay. Sure. From a headcount perspective, I mean, I think what we've seen is last summer was really for us, where we felt the tightest labor markets, most difficult to attract and retain, around about last summer. I think as the year progressed into the fall, into autumn, we saw that easing quite a bit. I suppose for us, and, you know, again, I'm no economist, but, you know, savings rate dropped quite a bit, cost of living going up, people coming back into the workforce post-COVID, et cetera, et cetera, particularly U.S., I'm talking about now. We just saw quite a significant easing. We haven't felt any headcount pressures, or labor challenges, I would say, for four or five months. Clearly, there is cost of living and therefore wage inflation pressure, but that's a slightly different thing. We are currently passing that on with the appropriate pricing activity as you would expect. There's no pressure on headcount at the moment from our perspective. The surgical procedures, but yeah, I think I said, I mean, you know, you're making quite a jump there between Sodexo and food service and surgical procedures. You know, put it this way, their business could be jumping up because there's more people going into hospital with flu and COVID, which doesn't help surgical procedures. It could be the opposite. As I said a minute ago, actually, we are seeing surgical procedures more generally stepping up. It's gradual because healthcare systems globally don't necessarily solve a massive staff shortage overnight. We were just reviewing the Life Sciences businesses yesterday, and the general view is that across the patch, we're at about 85%-90% of pre-COVID surgical levels. That's encouraging. That means the performance of Life Sciences is stepping up. As I said, we expect quarter two to be a little better. I'm giving ourself a bit of breathing space by saying half two, we expect to be back to really good growth. Not forgetting, of course, that we've got fabulous diagnostics businesses which are also firing on all cylinders. I don't really, you know, I don't really get the delayed shipments point. I mean, you know, I think there is an aspect in Life Sciences right now, which is very, very particular from a supply chain perspective, which is, you know, post-COVID, demand is starting to come back and that whole investment into research, testing, development and investment moving out of COVID and into other areas of healthcare, which has put a bit of pressure, demand pressure onto some of the suppliers. Therefore, you know, there is a bit of an extension in the lead times. I don't think it's anything more than some months worth, some months worse before it, before it unwinds. I certainly think that it won't be anything which will significantly or materially derail our second half growth. Thanks, Johnny. We will take the next question from Ben Ward from Deutsche Bank. Hi. Good morning, everyone. Thanks for taking my question, Johnny and Chris. A quick question just on inventories. At full year results, you flagged an inventory buildup and we can see that taking place across the industry. Are you unwinding that buildup now? How quickly can it be unwound? Are you seeing the wider inventory buildup have any effects on the wider market? Thanks. Hi, Ben, it's Chris. Let me take that. In our own inventory, as we said at the full year, look, it's a little higher than we'd ideally like. You know, we've got plans in place that we're actioning to bring that down. There's not a material change required, but we've got to just tighten up around the edges, which we're doing, and that's fine. In the wider demand environment, you know, are we seeing people suddenly slowing down orders to, you know, to sell from stock? No. You know, as we said at the full year, is it likely there is, you know, a slightly elevated inventory picture out there somewhere? Look, it still probably is. That is not materially changing order books, order backlogs or order patterns at the moment. Thanks. That was all for me. Just remembering on the inventory, you know, I mean, I think we do customer fulfillment is important to us, so we do put a bit more money into inventory, and that's still, we still support that as the right thing to do. We have to be cautious about this because, you know, we wanna as, you know, perhaps demand looks it creeps off in a fraction over the coming months, we, of course, we want to bring it down in line with that. We're still growing at 10%, you know. The last thing we want to do is to get in the way of either customer fulfillment or growth. Sure. Just a second question following up on that demand point. Obviously, you're flagging this morning that the demand environment remains very strong, and we can see that in the prints this morning. Thinking forward to the second half, where there seems to remain to be a degree of caution on your commentary, how do we get from this very strong demand environment currently to a potentially weaker demand environment in the second half, and how much visibility do you have on that over the coming months? Look, if you were in my position, what would you do? Look, I mean, you know, everyone's out there talking about a tougher market ahead. Everyone's out there calling things down. Everyone's out there talking about data points and indicators. Do you think we're gonna be overly bullish about a second half? I mean, six months out is, in this environment right now is a long way, right? Might we do better than that? I bloody well hope so. You know, quite honestly, I don't think we're the ones that are gonna be calling out the second half until we get closer to and see the way that, you know, macroeconomics play out. There's nothing more scientific than that. There is nothing in our numbers today which suggests that half 2 is gonna be, you know, very, very hard. I think we all have to anticipate that, you know, there's been a very buoyant demand environment for some time, and that's not gonna continue forever. Sure. Understood. Thank you very much. That will conclude today's Q&A session. I would now like to hand back to Johnny for closing remarks. Yeah, not much to say, really. Strategy is clear, we feel it's progressing. Quarter one, strong performance. We've got a, you know, a very, very positive outlook for the full year. We feel like we can continue to deliver Diploma's track record of compounding very, very strong EPS growth. Thank you very much for joining the call. Look forward to seeing you soon.