Investor presentation June 2020 discoverIE Group plc discoverIE - PowerPoint PPT Presentation

Investor presentation June 2020 discoverIE Group plc discoverIE Group plc June 2020

Introduction to discoverIE We Design, Manufacture & Supply customised  electronic components for industry  Highly differentiated products Fibre Optics Electromechanical, Cabling &  Customers are Original Equipment Manufacturers (OEMs) Switches  Essential products  Supplying growth markets with increasing electronic content Renewables, medical, transportation, industrial & connectivity  Microsystems Sensors Revenue of £466m, operating profit (1) of £37.1m & interface   Operating across 23 countries  Acquisitive  Fragmented market X-ray Power & Magnetics Detection 1. Underlying profit for y/e 31 Mar 20. discoverIE Group plc discoverIE Group plc June 2020 2

SALES (1 ) Growth Company We aim to provide investors with Returns of 15 – 20% pa   A progressive dividend FY1 3 FY1 4 FY1 5 FY1 6 FY1 7 FY1 8 FY1 9 FY20 From FY13 to FY18: Sales (1) up > 2x   Underlying EPSup > 2x  Operating profits up > 4x  Share price growth 19% CAGR (2) 7.6% CAGR (3)  Dividend growth From 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 discoverIE Group plc discoverIE Group plc discoverIE Group plc June 2020 3

Consistent, proven strategy  Sales growth well ahead of GDP over the economic cycle  Move up the value chain into higher margin products  Acquire D&M businesses with attractive growth prospects and strong operating margins  Further internationalise the business  Generate strong cash flows and long term sustainable returns discoverIE Group plc discoverIE Group plc June 2020 4

Our engineering led sales model  Customer needs  Helping customers solve their technical challenges to create more efficient, productive and sustainable equipment and comply with increasingly stringent environmental, health, safety and performance requirements.  Enduring customer relationships  Our model gains a unique understanding of customers’ needs and builds long term relationships that last for many years.  Engineering led solutions  By applying our extensive technical knowledge of applications and design our engineers create unique products for customers’ specific needs  Recurring revenues  Our designs are specified into our customers’ system designs for production, leading to multiple years of repeated monthly demand, creating stable, recurring revenue streams  Regional manufacturing  Manufacturing locations in Europe, Asia and the Americas provides regional supply for customers, reducing transit times, costs and environmental impact as well as reducing risk of disruption discoverIE Group plc discoverIE Group plc June 2020 5

Focused on sustainable growth markets Renewable Industrial & Transportation Medical Energy Connectivity 70% of growth in global Smart transportation market Medical electronics to grow Industrial market for electricity production (2017- to grow 18.7% CAGR globally 8% CAGR (2018 -2024) Semiconductors to grow 10.8% 23) will be into renewable (2019-24) TechSci Research CAGR (2018-22); IoT market to energy Research & Markets grow 18.7% CAGR 2019-24 International Energy Agency Markets-and-Markets  Global trends driving structural growth  Product development driven by technology  Increasing electronic content  Essential products  Markets aligned with UN SDG* discoverIE Group plc discoverIE Group plc June 2020 6 * UN SDG United Nations Sustainable Development Goals

Case study: Our unique solutions for Renewable energy  Strong and trusted customer relationships across supply chain Providing innovation-led, bespoke solutions to essential customer requirements  Multi-year design cycles provide strong visibility & recurring revenues   Complementary technologies create cross-selling opportunities Pitch controller Airflow measurement Power inductors discoverIE Group plc discoverIE Group plc June 2020 7

Our customers & the European ‘Mittelstand’ discoverIE Group plc discoverIE Group plc June 2020 8

Design & Manufacturing division  64% Group Revenues D&M clusters  6% Organic CAGR over last 5 years Revenue share  22% Generating 84% of FY20 Group profit contribution  13% operating margin Power 41%  2ppts improvement in last 5 years Magnetics  14 acquisitions completed since 25% Components 2011 Systems 12%  Increasing specialist capability and international reach  Capital light model with capex c.2%/rev  R&D investment c. 2%/rev  Customer specific development  27 manufacturing sites in 17 countries discoverIE Group plc discoverIE Group plc June 2020 9

Widespread D&M organic growth  Growth ahead of wider markets with lower cyclicality • Target markets – resilient • Slowing growth rates driven by non-target markets • COVID-19 impact in Q4 was £4m sales, £1.5m EBIT; H2 growth would have been 5%  Asia drives international growth • Western multinational customers (1) Sales destination discoverIE Group plc discoverIE Group plc June 2020 10

Target markets leading organic growth  Target market sales grew at 9% organically  Higher growth, less cyclical than wider market  Target markets account for 72% (PY: 66%) of D&M revenue  New design wins account for >90%, future growth driver discoverIE Group plc discoverIE Group plc June 2020 11

Acquisitions performing well  High quality acquisitions over 10 years Average EBIT ROI  14 D&M acquisitions, £268m spend, £135m new equity  Developed sustainable growth business ahead of market  Clear approach to acquisitions  Companies targeted by: - Product, Geography, Market  Must have discoverIE DNA  EBIT ROI 1 > 15% within 3 years  Average EBIT ROI of D&M acquisitions since acquisition of 17% (1) Average ROI defined as average operating profit attributable to the business since acquisition over acquisition cost (comprising up-front consideration, acquisition expenses, earn-out (once earned), and integration costs) (2) All D&M businesses included which were acquired more than 2yrs ago. Excludes recent acquisitions: Cursor Controls, Hobart Electronics, Positek and Sens-Tech. discoverIE Group plc discoverIE Group plc June 2020 12

Acquisition case study – MTC GmbH  Acquired Oct 2011 M TC 20 1 2-20  Products – Electromagnetic shielding & Revenue 17% CAGR thermally conductive components Operating profit 24% CAGR  Development since acquisition: Operating m argin 15%  24%  Organic growth, with operational leverage  Expanded product range & customer base No. of active custom ers Doub led  Established cross-selling through Acal BFi No. of products In creased 2.4x  Recruited new management  Invested in larger offices & expanded production No. of em ployees 22  49 capacity Sales into target m arkets 30 %  82%  Strong, local management have embraced:  The market opportunity Cross-selling 0 %  7%  discoverIE’s investment capability discoverIE Group plc discoverIE Group plc June 2020 13

Good progress towards targets Key Strategic Indicators M id term N ew FY14 FY15 FY16 FY17 FY18 FY19 FY20 Targets (2) Targets (3) 1 . Increase share of Group revenue from D&M (1 ) 1 8% 37% 48% 52% 57% 61 % 64% 75% > 75% 2. Increase underlying operating m argin 3.4% 4.9% 5.7% 5.9% 6.3% 7.0% 8.0% 8.5% 1 2.5% 3. Build sales beyond Europe (1 ) 5% 1 2% 1 7% 1 9% 1 9% 21 % 27% 30% 40% 4. Target Market Sales (1 ) n/d n/d n/d 56% 62% 66% 68% New 85% Key Perform ance Indicators FY14 FY15 FY16 FY17 FY18 FY19 FY20 Targets 1 . Sales grow th CER 1 7% 36% 1 4% 6% 1 1 % 1 4% 8% Well ahead D&M Organic 3% 9% 3% -1 % 1 1 % 1 0% 5% of GDP Group Organic 2% 3% 3% -1 % 6% 8% 2% £0.3m £0.9m £3.0m £4.6m £8.8m £1 0.6m £1 1 .4m £1 2m p.a. 2. Increase cross-selling 3. Underlying EPS grow th 20% 31 % 1 0% 1 3% 1 6% 22% 1 1 % >1 0% 4. Dividend grow th 1 0% 1 1 % 6% 6% 6% 6% n/a (4) Progressive 5. ROCE 1 5.2% 1 2.0% 1 1 .6% 1 3.0% 1 3.7% 1 5.4% 1 6.0% (5) >1 5% 6 Operating cash flow 1 00% 1 04% 1 0 0 % 1 36% 90% 93% 1 06% >85% of Op profit (1) As a percentage of Group revenue Revised targets for the next 5 years (2) Mid-term was a period to Nov 2020 (3) New targets for the five-year period to Mar 2025 (4) A final dividend has not been proposed due to COVID-19 (5) Includes an annualisation of the results of Sens-Tech acquired in Oct 2019 n/d – not previously disclosed discoverIE Group plc discoverIE Group plc June 2020 14

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 discoverIE Group plc discoverIE Group plc June 2020 15