Further Strong Growth 24 th June 2020 Preliminary results FY20 24 th - PowerPoint PPT Presentation

Preliminary results Year ended 31 st March 2020 Strategy Delivering Further Strong Growth 24 th June 2020 Preliminary results FY20 – 24 th June 2020 discoverIE Group plc

A good year with excellent cash generation Group sales up 6%, organic +2% ◼ ◼ D&M organic +5% Underlying operating profit +21% ◼ Underlying EPS +11% ◼ Excellent cash conversion: 106% of operating profits ◼ Three acquisitions in the year for £74m ◼ ◼ Integrating well Record order book +13% ◼ COVID-19 arrives in Q4 in China, subsequently spreading internationally ◼ Preliminary results FY20 – 24 th June 2020 discoverIE Group plc 1

Sustainable growth Company SALE SA LES (1) We aim m to provide inve vestors with Returns of 15 – 20% pa ◼ A progressive dividend ◼ From m FY13 3 to FY18: Sales (1) up > 2x ◼ Underlying EPS up > 2x ◼ FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Operating profits up > 4x ◼ Share price growth 19% CAGR (2) ◼ Dividend growth 7.6% CAGR (3) ◼ From m FY19 our aim has been to double underlying EPS in 5 years FY19 + FY20 op profits up 51% ◼ FY19 + FY20 EPS up 35% ◼ (1) Group revenue, excluding disposed businesses (2) Growth from April 2012 (FY13) to March 2018 (3) Growth from FY13 to FY18 Preliminary results FY20 – 24 th June 2020 discoverIE Group plc discoverIE Group plc 2

FINANCIAL REVIEW Preliminary results FY20 – 24 th June 2020 discoverIE Group plc

Financial Review Strong growth in returns and cash generation CER FY20 FY19 Growth Growth £466.4m £438.9m Revenue +6% +8% £37.1m £30.6m Underlying operating profit (1) +21% +23% £32.8m £27.2m Underlying profit before tax (1) +21% Underlying EPS (1) 30.2p 27.2p +11% ◼ Increasin ing operatin ing margin in ◼ Up 1.0ppt to 8.0% ◼ Excellent cash h performance ce ◼ Operating cash flow up 37% to £39.3m ◼ 106% operating cash conversion ◼ Growin ing ROCE CE (2) ◼ Up 0.6ppts to 16.0% (1) Underlying measures exclude acquisition-related costs (see Appendices I and III) (2) ROCE is underlying operating profit (annualised for Sens-Tech) as a percentage of net assets plus net debt Preliminary results FY20 – 24 th June 2020 discoverIE Group plc 4

Financial Review Ongoing revenue growth Grow owth FY20 Organic (1) 2% Acq 6% CER 8% Currency -2% Actual 6% Revenue up 120% in 6 years ( 14% CAGR) (1) Organic sales growth excludes the first 12 months of acquisitions. Preliminary results FY20 – 24 th June 2020 discoverIE Group plc 5

Financial Review Growing profit and margin ◼ Unde derlyin ing operatin ing profit it (1) 1) of £37.1m 1m ◼ Up £6.5m on FY19 (+21% reported & +23% CER) ◼ 23% CAGR in last 3 years ◼ Unde derlyin ing operatin ing margin in of 8.0% ◼ Up 1.0ppts on FY19 ◼ Up 4.6ppts in 6yrs ◼ Sens-Tech increases pro forma margin to 8.5% = mid term target (2) (1) Underlying measures exclude acquisition-related costs and exceptional items (see Appendices I and III). (2) Prior mid-term target was Nov 21. New target of 12.5% in the next 5 years. Preliminary results FY20 – 24 th June 2020 discoverIE Group plc 6

Financial Review Earnings enhanced by acquisition contribution ◼ Unde derlyin ing operatin ing profit it up 23% CER ◼ Organic revenue growth of 2% ◼ Gross margin up 0.6ppts to 33.6% ◼ Reduced 0.4ppts organically ◼ Opex at 25.6% of sales, the lowest level since strategy began. ◼ Continued investment in D&M offset by savings in CS ◼ Acquisition contributions from Cursor Controls, Hobart, Positek & Sens-Tech ◼ Organic EBIT reduced £1.0m; includes £1.4m investment in D&M future growth initiatives ◼ Offset by £8m benefit from acquisitions (1) Underlying measures exclude acquisition-related costs and exceptional items (see Appendices I and III). Preliminary results FY20 – 24 th June 2020 discoverIE Group plc 7

Financial Review D&M continuing to drive Group performance… £m FY20 FY19 (CER) Revenue growth EBIT (1) growth EBIT (1) EBIT (1) Organic (2) Revenue % Revenue % Actual CER % D&M 297.9 38.1 12.8% 263.0 29.4 11.2% 12% 13% 5% 30% Custom Supply 168.5 7.3 4.3% 170.8 8.5 5.0% (2%) (1%) (4%) (14%) Unallocated (8.3) (7.8) Total (CER) 466.4 37.1 8.0% 433.8 30.1 6.9% 6% 8% 2% 23% FX 5.1 0.5 Total (reported) 466.4 37.1 8.0% 438.9 30.6 7.0% DESIGN & CUSTO TOM MANUFACT CTURI RING SUPPLY Operatin ing profit it up £8.7m 7m CER Operatin ing profit it reduce ced d £1.2m CER ◼ Profits up 30% CER ◼ Margin down 0.7ppts to 4.3%. ◼ Margin up 1.6pts CER to 12.8% (1) EBIT is underlying operating profit (2) Organic growth excludes the first 12 months of acquisitions. Preliminary results FY20 – 24 th June 2020 discoverIE Group plc 8

Financial Review … delivering 11% EPS growth ◼ Underlying PBT up 21% ◼ Finance costs up £0.9m ◼ Underlying EPS up 11% to 30.2p ◼ Up c.150% in 6yrs (17% CAGR) £m FY20 FY19 Growth Underlying operating profit (1) 37.1 30.6 21% ◼ Reported PBT/EPS impac acted by Finance costs (4.3) (3.4) acquisition volume ume ◼ £74m on acquisitions (inc £4m Underlying PBT (1) 32.8 27.2 21% expenses, 2 placings) Effective tax rate 20% 25% Underlying PAT (1) 26.2 20.5 28% Fully diluted shares (m) 86.9 75.4 15% Underlying EPS (1) (p) 30.2p 27.2p 11% Reported PBT 19.5 19.3 Reported EPS (2) (p) 16.5p 19.4p (1) Underlying measures exclude acquisition-related costs and exceptional items (see Appendices I and III) (2) Fully diluted EPS Preliminary results FY20 – 24 th June 2020 discoverIE Group plc 9

Financial Review Excellent cash generation ◼ Strong operating cash flow (1) £39.3m ◼ £39.3m for FY20, up 37% OPERATING CASH FLOW (1) ◼ 106% of underlying operating profit ◼ Consistently high conversion rate over the last 7 years. £28.6m £27.1m ◼ Net debt at 31 Mar 20 of £61.3m 3m £22.1m ◼ Gearing (2) of 1.25x from 1.6x proforma at H1. LT target range 1.5 – 2.0x £16.3m £13.9m ◼ Revo volvi ving credit facility of £180m m ◼ Plus £60m accordion £7.1m ◼ Term extended to June 24 ◼ Eligible in principle for BofE CCFF FY14 FY15 FY16 FY17 FY18 FY19 FY20 Target ◼ Not expected to be required. % Underlying 100% 104% 100% 136% 90% 93% 106% 85% Operating Profit (1) Operating cash flow defined as EBITDA less working capital, capex and IFRS 16 lease charges – see Appendix IV (2) Net debt at 31 Mar 20 as a ratio of adjusted EBITDA (Group underlying EBITDA adjusted for a full year of the underlying EBITDA from acquisitions) . Preliminary results FY20 – 24 th June 2020 discoverIE Group plc 10

Financial Review Increasingly cash generative, disciplined use of capital ◼ Free cash flow at 54% of EBITDA ◼ Increasing strongly in the last 2yrs ◼ 104% of underlying PAT (v 85% target) ◼ Increasing self funding capacity for acquisitions Preliminary results FY20 – 24 th June 2020 discoverIE Group plc 11

OPERATING REVIEW Preliminary results FY20 – 24 th June 2020 discoverIE Group plc

Operating Review Response to COVID-19 pandemic Priority has been employee & trading partner safety and cash preservation Decisive ve respons ponse: ◼ Balance ce sheet & liquidit idity ◼ Gearing of 1.25x with £180m facility and nearly £120m headroom ◼ Eligibility in principle for BoE CCFF - Not expected to be required ◼ Operation ional contin inuit ity main intain ined ◼ Each business enacting emergency operating plan ◼ Safe working conditions established ◼ Over 650 employees working from home ◼ Cash h conservation ion & cost reduct ction ions ◼ Deferral of non essential capex and other discretionary spend ◼ Deferral of bonuses & pay rises together with a new hiring freeze ◼ Final dividend not proposed ◼ 20% salary reduction for the Board and Group Executive for 3 months ◼ Continued focus on working capital efficiency ◼ Acquisitions deferred, but pipeline development continues Preliminary results FY20 – 24 th June 2020 discoverIE Group plc 13

Operating Review Status of operations during COVID-19 ▪ 27 manufact cturin ing facil ilit itie ies across 17 countrie ies ▪ All open, some with reduced but growing capacity ▪ Several sites granted essential supplier status ▪ 6 sites temporaril ily closed d by governme ment manda date (c. 1 mth mth) ) – all since reopened ▪ China (2 sites) shut from Chinese New Year, recovering quickly in March Sri Lanka closed end of March, re-opened late April ▪ ▪ India (2 sites) closed end of March, both re-opened by early May US (California) closed mid March, re-opened end of April ▪ Gradual re-opening to ensure safe working ▪ ▪ New operatin ing proce cedu dures with h safe workin ing condit dition ions establis ished ▪ ▪ Split shifts with no overlap Social distancing policies introduced ▪ by reconfiguring operations ▪ Enhanced cleaning procedures Closed canteens ▪ Face to face meetings replaced with ▪ video calls Business travel cancelled ▪ Preliminary results FY20 – 24 th June 2020 discoverIE Group plc 14

Operating Review Helping customers fight the virus Supporting customers’ rapid development and supply of essential components ▪ Over 60 customer projects: ▪ 24 ventilator projects ▪ 8 fluid / chemical analysers ▪ 7 temperature sensing projects ▪ 5 air purification projects ▪ 5 hospital beds ▪ Various other related projects Preliminary results FY20 – 24 th June 2020 discoverIE Group plc discoverIE Group plc 15