News Details

Resilient through-cycle performance with structural efficiencies and record operating margin

discoverIE Group plc (LSE: DSCV, “discoverIE” or “the Group”), a leading international designer and manufacturer of customised electronics to industry, today announces its interim results for the six month period ended 30 September 2024 (“H1 2024/25” or “the Period”).

Highlights

• Revenue down 4% CER, reflecting industry de-stocking and lead-time normalisation
  • Organic sales⁽³⁾ 10% lower (S&C division -5%, M&C -12%)
  • Organic orders up 1% (+8% CER), led by S&C division +20% (M&C -11%)
• Underlying operating profit up 4% CER from flexible operating structure and efficiencies
  • Record underlying operating margin of 13.8%, up 1.0ppt at CER, ahead of FY 2024/25 target
  • Underlying EPS reduced 4% due to higher interest rates
• Excellent free cash flow⁽⁴⁾ up 46% to £45m for last 12 months
  • Conversion rate of 126%, capacity for c.£70m of further acquisitions in the second half
• Further good progress towards other key targets
  • Well on track to achieve 15% underlying operating margin target in FY2027/28
  • ROCE⁽⁵⁾ of 15.2%, slightly ahead of target and last year
  • Carbon emissions reduced by c.50% in absolute terms since CY 2021⁽⁶⁾
• Record design wins (up 33% over 2 years) with significant further opportunities
• Group well positioned for growth
  • One bolt-on acquisition completed during the Period for an EBIT multiple of 6x
  • Period-end gearing⁽⁷⁾ of 1.45x, below the lower end of target range (1.5x to 2.0x)
• Growth drivers remain strong with the Group well positioned
  • Period end order book of £163m provides good forward visibility
  • High growth security market added as a fifth target market⁽⁸⁾
  • Strong pipeline of acquisition opportunities
  • Group will benefit from reducing interest rates
• On track to deliver full year underlying earnings in line with the Board’s expectations

Nick Jefferies, Group Chief Executive, commented:

“discoverIE delivered a resilient first half performance with a 4% increase in underlying operating profit, growth in operating margins to 13.8%, ahead of our near-term target, and excellent cashflow. This was in an environment of supply chain lead times returning to normal and widespread customer inventory reductions resulting in sales that were 4% lower.

Our flexible operating model allows us to control costs in response to lower production volumes, which along with ongoing efficiency initiatives and accretive acquisitions, has more than offset lower sales. This is a great strength of the business that has delivered improved underlying operating profits and margins in each of the last ten years (in-line in the covid year).

Orders increased by 5% sequentially, with a book to bill ratio of around 1.0. In the S&C division, orders grew by 20% organically as design wins converted into new orders whilst in the M&C division, orders were 11% lower as industrial destocking continued to work through.

Third quarter trading to date is in-line with our expectations with orders run rate ahead of sales and ahead of the second quarter.

We remain focused on generating above-market growth through the cycle and our design win pipeline remains strong. This, along with our acquisition opportunities, is our engine for growth and we remain on track to deliver full year underlying earnings in line with the Board’s expectations.”

Analyst and investor presentation:

A results briefing for sell side analysts and investors will be held today at 9.30am (UK time) at the offices of Peel Hunt. If you would like to join in person or via the live webinar, please contact Burson Buchanan at discoverie@buchanan.uk.com.

Enquiries:

discoverIE Group plc                                                                                       01483 544 500

Nick Jefferies                Group Chief Executive

Simon Gibbins               Group Finance Director

Lili Huang                     Head of Investor Relations

Buchanan                                                                                                        020 7466 5000

Chris Lane, Toto Berger, Jack Devoy

discoverIE@buchanan.uk.com

Notes:

(1)    ‘Underlying operating profit’, ‘Underlying operating margin’, ‘Underlying EBITDA’, ‘Underlying profit before tax’, ‘Underlying EPS’, ‘Underlying operating cash flow’ and ‘Free cash flow’ are non-IFRS financial measures used by the Directors to assess the underlying performance of the Group. These measures exclude acquisition and disposal related costs (amortisation of acquired intangible assets of £7.8m and acquisition and disposal expenses of £0.2m) totalling £8.0m. Equivalent underlying adjustments within the H1 2023/24 underlying results totalled £9.1m. ‘Underlying EBITDA’ also excludes non-cash share-based payments cost, and IAS19 pension cost in line with the Group’s banking covenant. For further information, see note 7 of the attached condensed consolidated interim financial statements.

(2)    Growth rates at constant exchange rates (“CER”). In calculating CER for the Period, the average Sterling rate of exchange strengthened 2% against the Euro compared with the average rates for last year, 2% against the US Dollar and 2% on average against the three Nordic currencies, resulting in an additional 1% sales reduction for the first Period.

(3)    Organic growth for the Group compared with last year is calculated at CER and is shown excluding the first 12 months of acquisitions post completion (Silvertel in August 2023, 2J Antennas Group (“2J”) in September 2023, Shape, DTI and IKN in Q4 2023/24 and Hivolt in August 2024) and excluding the disposal of the Santon solar business unit announced last year.  

(4)    Free cash flow is cash flow available for the payment of dividends and investment in acquisitions. Free cash flow conversion is free cash flow divided by underlying profit after tax. See definitions in note 7 of the attached interim financial statements.

(5)    ROCE is defined as annualised H1 2024/25 underlying operating profit including the annualisation of acquisitions, as a percentage of net assets excluding net debt, deferred consideration related to disposed businesses and legacy defined benefit pension asset/(liability).

(6)    CY 2025 target is to reduce scope 1 & 2 carbon emissions by 65% on an absolute basis (base year CY 2021).

(7)    Gearing ratio is defined as net debt divided by underlying EBITDA (excluding IFRS 16; annualised for acquisitions).             (8)    Target markets are medical, electrification of transportation, renewable energy, security and industrial automation & connectivity.

(9)    Unless stated, growth rates refer to the comparable prior year period. Sequential growth compares to the immediately preceding period e.g. H1 2024/25 would be compared to H2 2023/24 on an organic basis.

(10)  The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulation, Article 7 of EU Regulation 596/2014. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.

Notes to Editors:

About discoverIE Group plc

discoverIE Group plc is an international group of businesses that design and manufacture innovative electronic components for industrial applications.

The Group provides application-specific components to original equipment manufacturers (“OEMs”) internationally through its two divisions, Magnetics & Controls, and Sensing & Connectivity. By designing components that meet customers’ unique requirements, which are then manufactured and supplied throughout the life of their production, a high level of repeating revenue is generated with long-term, high quality customer relationships.

With a focus on key markets driven by structural growth, increasing electronic content and sustainability, namely medical, electrification of transportation, renewable energy, security and industrial automation & connectivity, the Group aims to achieve organic growth that is well ahead of GDP and to supplement that with complementary acquisitions. The Group is committed to reducing the impact of its operations on the environment in order to reach net zero. With its key markets aligned with a sustainable future, the Group has been awarded an ESG “AA” rating by MSCI and is Regional (Europe) Top Rated by Sustainalytics. The Group employs c.4,500 people across 20 countries with its principal operating units located in Continental Europe, the UK, China, Sri Lanka, India and North America.  

discoverIE is listed on the Main Market of the London Stock Exchange and is a member of the FTSE 250, classified within the Electrical Components and Equipment subsector.